[Congressional Record (Bound Edition), Volume 146 (2000), Part 2]
[House]
[Pages 2531-2621]
[From the U.S. Government Publishing Office, www.gpo.gov]



                 WAGE AND EMPLOYMENT GROWTH ACT OF 1999

  Mr. ARCHER. Mr. Speaker, pursuant to House Resolution 434, I call up 
the bill (H.R. 3081) to increase the Federal minimum wage and to amend 
the Internal Revenue Code of 1986 to provide tax benefits for small 
businesses, and for other purposes, and ask for its immediate 
consideration in the House.
  The Clerk read the title of the bill.
  The SPEAKER pro tempore (Mr. Pease). Pursuant to House Resolution 
434, the bill is considered read for amendment.
  The text of H.R. 3081 is as follows:

                               H.R. 3081

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

     SECTION 1. SHORT TITLE; REFERENCES; TABLE OF CONTENTS.

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

Sec. 1. Short title; references; table of contents.

        TITLE I--AMENDMENTS TO FAIR LABOR STANDARDS ACT OF 1938

Sec. 101. Minimum wage.
Sec. 102. Exemption for computer professionals.
Sec. 103. Exemption for certain sales employees.
Sec. 104. Exemption for funeral directors.

[[Page 2532]]

                  TITLE II--SMALL BUSINESS PROVISIONS

Sec. 201. Deduction for 100 percent of health insurance costs of self-
              employed individuals.
Sec. 202. Increase in expense treatment for small businesses.
Sec. 203. Small businesses allowed increased deduction for meal 
              expenses.
Sec. 204. Increased deductibility of business meal expenses for 
              individuals subject to Federal limitations on hours of 
              service.
Sec. 205. Repeal of occupational taxes relating to distilled spirits, 
              wine, and beer.

                     TITLE III--PENSION PROVISIONS

                     Subtitle A--Expanding Coverage

Sec. 301. Increase in benefit and contribution limits.
Sec. 302. Plan loans for subchapter S owners, partners, and sole 
              proprietors.
Sec. 303. Modification of top-heavy rules.
Sec. 304. Elective deferrals not taken into account for purposes of 
              deduction limits.
Sec. 305. Repeal of coordination requirements for deferred compensation 
              plans of State and local governments and tax-exempt 
              organizations.
Sec. 306. Elimination of user fee for requests to IRS regarding pension 
              plans.
Sec. 307. Deduction limits.
Sec. 308. Option to treat elective deferrals as after-tax 
              contributions.
Sec. 309. Reduced PBGC premium for new plans of small employers.
Sec. 310. Reduction of additional PBGC premium for new and small plans.

                Subtitle B--Enhancing Fairness for Women

Sec. 321. Catchup contributions for individuals age 50 or over.
Sec. 322. Equitable treatment for contributions of employees to defined 
              contribution plans.
Sec. 323. Faster vesting of certain employer matching contributions.
Sec. 324. Simplify and update the minimum distribution rules.
Sec. 325. Clarification of tax treatment of division of section 457 
              plan benefits upon divorce.
Sec. 326. Modification of safe harbor relief for hardship withdrawals 
              from cash or deferred arrangements.

          Subtitle C--Increasing Portability for Participants

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

       Subtitle D--Strengthening Pension Security and Enforcement

Sec. 341. Repeal of 150 percent of current liability funding limit.
Sec. 342. Maximum contribution deduction rules modified and applied to 
              all defined benefit plans.
Sec. 343. Missing participants.
Sec. 344. Periodic pension benefits statements.
Sec. 345. Civil penalties for breach of fiduciary responsibility.
Sec. 346. Excise tax relief for sound pension funding.
Sec. 347. Excise tax on failure to provide notice by defined benefit 
              plans significantly reducing future benefit accruals.
Sec. 348. Protection of investment of employee contributions to 401(k) 
              plans.
Sec. 349. Treatment of multiemployer plans under section 415.
Sec. 350. Technical corrections to Saver Act.
Sec. 351. Model spousal consent language and qualified domestic 
              relations order.
Sec. 352. Elimination of ERISA double jeopardy.

                Subtitle E--Reducing Regulatory Burdens

Sec. 361. Modification of timing of plan valuations.
Sec. 362. ESOP dividends may be reinvested without loss of dividend 
              deduction.
Sec. 363. Repeal of transition rule relating to certain highly 
              compensated employees.
Sec. 364. Employees of tax-exempt entities.
Sec. 365. Clarification of treatment of employer-provided retirement 
              advice.
Sec. 366. Reporting simplification.
Sec. 367. Improvement of employee plans compliance resolution system.
Sec. 368. Substantial owner benefits in terminated plans.
Sec. 369. Modification of exclusion for employer provided transit 
              passes.
Sec. 370. Repeal of the multiple use test.
Sec. 371. Flexibility in nondiscrimination, coverage, and line of 
              business rules.
Sec. 372. Extension to international organizations of moratorium on 
              application of certain nondiscrimination rules applicable 
              to State and local plans.
Sec. 373. Notice and consent period regarding distributions.
Sec. 374. Annual report dissemination.
Sec. 375. Excess benefit plans.
Sec. 376. Benefit suspension notice.
Sec. 377. Clarification of church welfare plan status under State 
              insurance law.

                      Subtitle F--Plan Amendments

Sec. 381. Provisions relating to plan amendments.

  TITLE IV--EXTENSION OF WORK OPPORTUNITY CREDIT AND WELFARE-TO-WORK 
                                 CREDIT

Sec. 401. Work opportunity credit and welfare-to-work credit.

                       TITLE V--ESTATE TAX RELIEF

          Subtitle A--Reductions of Estate and Gift Tax Rates

Sec. 501. Reductions of estate and gift tax rates.

   Subtitle B--Unified Credit Replaced With Unified Exemption Amount

Sec. 511. Unified credit against estate and gift taxes replaced with 
              unified exemption amount.

     Subtitle C--Modifications of Generation-skipping Transfer Tax

Sec. 521. Deemed allocation of GST exemption to lifetime transfers to 
              trusts; retroactive allocations.
Sec. 522. Severing of trusts.
Sec. 523. Modification of certain valuation rules.
Sec. 524. Relief provisions.

                   Subtitle D--Conservation Easements

Sec. 531. Expansion of estate tax rule for conservation easements.

     TITLE VI--TAX RELIEF FOR DISTRESSED COMMUNITIES AND INDUSTRIES

           Subtitle A--American Community Renewal Act of 1999

Sec. 601. Short title.
Sec. 602. Designation of and tax incentives for renewal communities.
Sec. 603. Extension of expensing of environmental remediation costs to 
              renewal communities.
Sec. 604. Extension of work opportunity tax credit for renewal 
              communities.
Sec. 605. Conforming and clerical amendments.

                     Subtitle B--Timber Incentives

Sec. 611. Temporary suspension of maximum amount of amortizable 
              reforestation expenditures.

                   TITLE VII--REAL ESTATE PROVISIONS

         Subtitle A--Improvements in Low-Income Housing Credit

Sec. 701. Modification of State ceiling on low-income housing credit.
Sec. 702. Modification of criteria for allocating housing credits among 
              projects.
Sec. 703. Additional responsibilities of housing credit agencies.
Sec. 704. Modifications to rules relating to basis of building which is 
              eligible for credit.
Sec. 705. Other modifications.
Sec. 706. Carryforward rules.
Sec. 707. Effective date.

    Subtitle B--Provisions Relating to Real Estate Investment Trusts

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

Sec. 711. Modifications to asset diversification test.
Sec. 712. Treatment of income and services provided by taxable REIT 
              subsidiaries.
Sec. 713. Taxable REIT subsidiary.
Sec. 714. Limitation on earnings stripping.
Sec. 715. 100 percent tax on improperly allocated amounts.
Sec. 716. Effective date.

                       Part II--Health Care REITs

Sec. 721. Health care REITs.

      Part III--Conformity With Regulated Investment Company Rules

Sec. 731. Conformity with regulated investment company rules.

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

Sec. 741. Clarification of exception for independent operators.

           Part V--Modification of Earnings and Profits Rules

Sec. 751. Modification of earnings and profits rules.

              Subtitle C--Private Activity Bond Volume Cap

Sec. 761. Acceleration of phase-in of increase in volume cap on private 
              activity bonds.

 Subtitle D--Exclusion From Gross Income for Certain Forgiven Mortgage 
                              Obligations.

Sec. 771. Exclusion from gross income for certain forgiven mortgage 
              obligations.

[[Page 2533]]

                  TITLE VIII--MISCELLANEOUS PROVISIONS

Sec. 801. Credit for modifications to inter-city buses required under 
              the Americans with Disabilities Act of 1990.
Sec. 802. Certain educational benefits provided by an employer to 
              children of employees excludable from gross income as a 
              scholarship.
Sec. 803. Tax incentives for qualified United States independent film 
              and television production.

        TITLE I--AMENDMENTS TO FAIR LABOR STANDARDS ACT OF 1938

     SEC. 101. MINIMUM WAGE.

       (a) Increase.--Section 6(a)(1) of the Fair Labor Standards 
     Act of 1938 (29 U.S.C. 206(a)(1)) is amended to read as 
     follows:
       ``(1) except as otherwise provided in this section, not 
     less than--
       ``(A) $5.15 an hour beginning September 1, 1997,
       ``(B) $5.48 an hour during the year beginning April 1, 
     2000,
       ``(C) $5.81 an hour during the year beginning April 1, 
     2001, and
       ``(D) $6.15 an hour during the year beginning April 1, 
     2002.''.
       (b) Overtime.--Section 7(e) of such Act (29 U.S.C. 207(e)) 
     is amended by striking paragraph (1).

     SEC. 102. EXEMPTION FOR COMPUTER PROFESSIONALS.

       Section 13(a) of the Fair Labor Standards Act of 1938 (29 
     U.S.C. 213(a)) is amended by amending paragraph (17) to read 
     as follows:
       ``(17) any employee who is a computer systems, network, or 
     database analyst, designer, developer, programmer, software 
     engineer, or other similarly skilled worker--
       ``(A) whose primary duty is--
       ``(i) the application of systems or network or database 
     analysis techniques and procedures, including consulting with 
     users, to determine hardware, software, systems, network, or 
     database specifications (including functional 
     specifications);
       ``(ii) the design, configuration, development, integration, 
     documentation, analysis, creation, testing, securing, or 
     modification of, or problem resolution for, computer systems, 
     networks, databases, or programs, including prototypes, based 
     on and related to user, system, network, or database 
     specifications, including design specifications and machine 
     operating systems;
       ``(iii) the management or training of employees performing 
     duties described in clause (i) or (ii); or
       ``(iv) a combination of duties described in clauses (i), 
     (ii), or (iii) the performance of which requires the same 
     level of skills; and
       ``(B) who, in the case of an employee who is compensated on 
     an hourly basis, is compensated at a rate of not less than 
     $27.63 an hour.

     For purposes of paragraph (17), the term `network' includes 
     the Internet and intranet networks and the world wide web. An 
     employee who meets the exemption provided by paragraph (17) 
     shall be considered an employee in a professional capacity 
     pursuant to paragraph (1).''.

     SEC. 103. EXEMPTION FOR CERTAIN SALES EMPLOYEES.

       (a) Amendment.--Section 13(a) of the Fair Labor Standards 
     Act of 1938 (29 U.S.C. 213(a)) is amended by striking the 
     period at the end of paragraph (17) and inserting a semicolon 
     and by adding at the end the following:
       ``(18) any employee employed in a sales position if--
       ``(A) the employee has specialized or technical knowledge 
     related to products or services being sold;
       ``(B) the employee's--
       ``(i) sales are predominantly to persons or entities to 
     whom the employee's position has made previous sales; or
       ``(ii) position does not involve initiating sales contacts;
       ``(C) the employee has a detailed understanding of the 
     needs of those to whom the employee is selling;
       ``(D) the employee exercises discretion in offering a 
     variety of products and services;
       ``(E) the employee receives--
       ``(i) base compensation, determined without regard to the 
     number of hours worked by the employee, of not less than an 
     amount equal to one and one-half times the minimum wage in 
     effect under section 6(a)(1) multiplied by 2,080; and
       ``(ii) in addition to the employee's base compensation, 
     compensation based upon each sale attributable to the 
     employee;
       ``(F) the employee's aggregate compensation based upon 
     sales attributable to the employee is not less than 40 
     percent of one and one-half times the minimum wage multiplied 
     by 2,080;
       ``(G) the employee receives a rate of compensation based 
     upon each sale attributable to the employee which is beyond 
     sales required to reach the compensation required by 
     subparagraph (F) which rate is not less than the rate on 
     which the compensation required by subparagraph (F) is 
     determined; and
       ``(H) the rate of annual compensation or base compensation 
     for any employee who did not work for an employer for an 
     entire calendar year is prorated to reflect annual 
     compensation which would have been earned if the employee had 
     been compensated at the same rate for the entire calendar 
     year.''.
       (b) Construction.--The amendment made by subsection (a) may 
     not be construed to apply to individuals who are employed as 
     route sales drivers.

     SEC. 104. EXEMPTION FOR FUNERAL DIRECTORS.

       Section 13(a) of the Fair Labor Standards Act of 1938 (29 
     U.S.C. 213(a)) is amended by striking the period at the end 
     of paragraph (18) and inserting ``; or'' and by adding after 
     paragraph (18) the following:
       ``(19) any employee employed as a licensed funeral director 
     or a licensed embalmer.''.

                  TITLE II--SMALL BUSINESS PROVISIONS

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

       (a) In General.--Paragraph (1) of section 162(l) is amended 
     to read as follows:
       ``(1) Allowance of deduction.--In the case of an individual 
     who is an employee within the meaning of section 401(c)(1), 
     there shall be allowed as a deduction under this section an 
     amount equal to 100 percent of the amount paid during the 
     taxable year for insurance which constitutes medical care for 
     the taxpayer and the taxpayer's spouse and dependents.''.
       (b) Clarification of Limitations on Other Coverage.--The 
     first sentence of section 162(l)(2)(B) is amended to read as 
     follows: ``Paragraph (1) shall not apply to any taxpayer for 
     any calendar month for which the taxpayer participates in any 
     subsidized health plan maintained by any employer (other than 
     an employer described in section 401(c)(4)) of the taxpayer 
     or the spouse of the taxpayer.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2000.

      SEC. 202. INCREASE IN EXPENSE TREATMENT FOR SMALL 
                   BUSINESSES.

       (a) In General.--Paragraph (1) of section 179(b) (relating 
     to dollar limitation) is amended to read as follows:
       ``(1) Dollar limitation.--The aggregate cost which may be 
     taken into account under subsection (a) for any taxable year 
     shall not exceed $30,000.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     2000.

     SEC. 203. SMALL BUSINESSES ALLOWED INCREASED DEDUCTION FOR 
                   MEAL EXPENSES.

       (a) In General.--Subsection (n) of section 274 (relating to 
     only 50 percent of meal and entertainment expenses allowed as 
     deduction) is amended by adding at the end the following new 
     paragraph:
       ``(4) Special rule for small businesses.--
       ``(A) In general.--In the case of any taxpayer which is a 
     small business, paragraph (1) shall be applied by 
     substituting for `50 percent' with respect to expenses for 
     food or beverages--
       ``(i) `55 percent' in the case of taxable years beginning 
     in 2001, and
       ``(ii) `60 percent' in the case of taxable years beginning 
     after 2001.
       ``(B) Small business.--For purposes of this paragraph, the 
     term `small business' means, with respect to expenses paid or 
     incurred during any taxable year--
       ``(i) any C corporation which meets the requirements of 
     section 55(e)(1) for such year, and
       ``(ii) any S corporation, partnership, or sole 
     proprietorship which would meet such requirements if it were 
     a C corporation.''
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to taxable years beginning after December 31, 
     2000.

     SEC. 204. INCREASED DEDUCTIBILITY OF BUSINESS MEAL EXPENSES 
                   FOR INDIVIDUALS SUBJECT TO FEDERAL LIMITATIONS 
                   ON HOURS OF SERVICE.

       (a) In General.--Paragraph (3) of section 274(n) (relating 
     to only 50 percent of meal and entertainment expenses allowed 
     as deduction) is amended to read as follows:
       ``(3) Special rule for individuals subject to federal hours 
     of service.--In the case of any expenses for food or 
     beverages consumed while away from home (within the meaning 
     of section 162(a)(2)) by an individual during, or incident 
     to, the period of duty subject to the hours of service 
     limitations of the Department of Transportation, paragraph 
     (1) shall be applied by substituting `80 percent' for `50 
     percent'.''
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to taxable years beginning after December 31, 
     2000.

     SEC. 205. REPEAL OF OCCUPATIONAL TAXES RELATING TO DISTILLED 
                   SPIRITS, WINE, AND BEER.

       (a) Repeal of Occupational Taxes.--
       (1) In general.--The following provisions of part II of 
     subchapter A of chapter 51 of the Internal Revenue Code of 
     1986 (relating to occupational taxes) are hereby repealed:
       (A) Subpart A (relating to rectifier).
       (B) Subpart B (relating to brewer).
       (C) Subpart D (relating to wholesale dealers) (other than 
     sections 5114 and 5116).
       (D) Subpart E (relating to retail dealers) (other than 
     section 5124).
       (E) Subpart G (relating to general provisions) (other than 
     sections 5142, 5143, 5145, and 5146).
       (2) Nonbeverage domestic drawback.--Section 5131 is amended 
     by striking ``, on payment of a special tax per annum,''.
       (3) Industrial use of distilled spirits.--Section 5276 is 
     hereby repealed.

[[Page 2534]]

       (b) Conforming Amendments.--
       (1)(A) The heading for part II of subchapter A of chapter 
     51 and the table of subparts for such part are amended to 
     read as follows:

                  ``PART II--MISCELLANEOUS PROVISIONS

``Subpart A. Manufacturers of stills.
``Subpart B. Nonbeverage domestic drawback claimants.
``Subpart C. Recordkeeping by dealers.
``Subpart D. Other provisions.''
       (B) The table of parts for such subchapter A is amended by 
     striking the item relating to part II and inserting the 
     following new item:

``Part II. Miscellaneous provisions.''
       (2) Subpart C of part II of such subchapter (relating to 
     manufacturers of stills) is redesignated as subpart A.
       (3)(A) Subpart F of such part II (relating to nonbeverage 
     domestic drawback claimants) is redesignated as subpart B and 
     sections 5131 through 5134 are redesignated as sections 5111 
     through 5114, respectively.
       (B) The table of sections for such subpart B, as so 
     redesignated, is amended--
       (i) by redesignating the items relating to sections 5131 
     through 5134 as relating to sections 5111 through 5114, 
     respectively, and
       (ii) by striking ``and rate of tax'' in the item relating 
     to section 5111, as so redesignated.
       (C) Section 5111, as redesignated by subparagraph (A), is 
     amended--
       (i) by striking ``and rate of tax'' in the section heading,
       (ii) by striking the subsection heading for subsection (a), 
     and
       (iii) by striking subsection (b).
       (4) Part II of subchapter A of chapter 51 is amended by 
     adding after subpart B, as redesignated by paragraph (3), the 
     following new subpart:

                 ``Subpart C. Recordkeeping by Dealers

``Sec. 5121. Recordkeeping by wholesale dealers.
``Sec. 5122. Recordkeeping by retail dealers.
``Sec. 5123. Preservation and inspection of records, and entry of 
              premises for inspection.''
       (5)(A) Section 5114 (relating to records) is moved to 
     subpart C of such part II and inserted after the table of 
     sections for such subpart.
       (B) Section 5114 is amended--
       (i) by striking the section heading and inserting the 
     following new heading:

     ``SEC. 5121. RECORDKEEPING BY WHOLESALE DEALERS.'',

     and
       (ii) by redesignating subsection (c) as subsection (d) and 
     by inserting after subsection (b) the following new 
     subsection:
       ``(c) Wholesale Dealers.--For purposes of this part--
       ``(1) Wholesale dealer in liquors.--The term `wholesale 
     dealer in liquors' means any dealer (other than a wholesale 
     dealer in beer) who sells, or offers for sale, distilled 
     spirits, wines, or beer, to another dealer.
       ``(2) Wholesale dealer in beer.--The term `wholesale dealer 
     in beer' means any dealer who sells, or offers for sale, 
     beer, but not distilled spirits or wines, to another dealer.
       ``(3) Dealer.--The term `dealer' means any person who 
     sells, or offers for sale, any distilled spirits, wines, or 
     beer.
       ``(4) Presumption in case of sale of 20 wine gallons or 
     more.--The sale, or offer for sale, of distilled spirits, 
     wines, or beer, in quantities of 20 wine gallons or more to 
     the same person at the same time, shall be presumptive 
     evidence that the person making such sale, or offer for sale, 
     is engaged in or carrying on the business of a wholesale 
     dealer in liquors or a wholesale dealer in beer, as the case 
     may be. Such presumption may be overcome by evidence 
     satisfactorily showing that such sale, or offer for sale, was 
     made to a person other than a dealer.''
       (C) Paragraph (3) of section 5121(d), as so redesignated, 
     is amended by striking ``section 5146'' and inserting 
     ``section 5123''.
       (6)(A) Section 5124 (relating to records) is moved to 
     subpart C of part II of subchapter A of chapter 51 and 
     inserted after section 5121.
       (B) Section 5124 is amended--
       (i) by striking the section heading and inserting the 
     following new heading:

     ``SEC. 5122. RECORDKEEPING BY RETAIL DEALERS.'',

       (ii) by striking ``section 5146'' in subsection (c) and 
     inserting ``section 5123'', and
       (iii) by redesignating subsection (c) as subsection (d) and 
     inserting after subsection (b) the following new subsection:
       ``(c) Retail Dealers.--For purposes of this section--
       ``(1) Retail dealer in liquors.--The term `retail dealer in 
     liquors' means any dealer (other than a retail dealer in 
     beer) who sells, or offers for sale, distilled spirits, 
     wines, or beer, to any person other than a dealer.
       ``(2) Retail dealer in beer.--The term `retail dealer in 
     beer' means any dealer who sells, or offers for sale, beer, 
     but not distilled spirits or wines, to any person other than 
     a dealer.
       ``(3) Dealer.--The term `dealer' has the meaning given such 
     term by section 5121(c)(3).''
       (7) Section 5146 is moved to subpart C of part II of 
     subchapter A of chapter 51, inserted after section 5122, and 
     redesignated as section 5123.
       (8) Part II of subchapter A of chapter 51 is amended by 
     inserting after subpart C the following new subpart:

                     ``Subpart D. Other Provisions

``Sec. 5131. Packaging distilled spirits for industrial uses.
``Sec. 5132. Prohibited purchases by dealers.''
       (9) Section 5116 is moved to subpart D of part II of 
     subchapter A of chapter 51, inserted after the table of 
     sections, redesignated as section 5131, and amended by 
     inserting ``(as defined section 5121(c))'' after ``dealer'' 
     in subsection (a).
       (10) Subpart D of part II of subchapter A of chapter 51 is 
     amended by adding at the end thereof the following new 
     section:

     ``SEC. 5132. PROHIBITED PURCHASES BY DEALERS.

       ``(a) In General.--Except as provided in regulations 
     prescribed by the Secretary, it shall be unlawful for a 
     dealer to purchase distilled spirits from any person other 
     than a wholesale dealer in liquors who is required to keep 
     the records prescribed by section 5121.
       ``(b) Penalty and Forfeiture.--

  ``For penalty and forfeiture provisions applicable to violations of 
subsection (a), see sections 5687 and 7302.''

       (11) Subsection (b) of section 5002 is amended--
       (A) by striking ``section 5112(a)'' and inserting ``section 
     5121(c)(3)'',
       (B) by striking ``section 5112'' and inserting ``section 
     5121(c)'',
       (C) by striking ``section 5122'' and inserting ``section 
     5122(c)''.
       (12) Subparagraph (A) of section 5010(c)(2) is amended by 
     striking ``section 5134'' and inserting ``section 5114''.
       (13) Subsection (d) of section 5052 is amended to read as 
     follows:
       ``(d) Brewer.--For purposes of this chapter, the term 
     `brewer' means any person who brews beer or produces beer for 
     sale. Such term shall not include any person who produces 
     only beer exempt from tax under section 5053(e).''
       (14) The text of section 5182 is amended to read as 
     follows:
       ``For provisions requiring recordkeeping by wholesale 
     liquor dealers, see section 5112, and by retail liquor 
     dealers, see section 5122.''
       (15) Subsection (b) of section 5402 is amended by striking 
     ``section 5092'' and inserting ``section 5052(d)''.
       (16) Section 5671 is amended by striking ``or 5091''.
       (17)(A) Part V of subchapter J of chapter 51 is hereby 
     repealed.
       (B) The table of parts for such subchapter J is amended by 
     striking the item relating to part V.
       (18)(A) Sections 5142, 5143, and 5145 are moved to 
     subchapter D of chapter 52, inserted after section 5731, 
     redesignated as sections 5732, 5733, and 5734, respectively, 
     and amended by striking ``this part'' each place it appears 
     and inserting ``this subchapter''.
       (B) Section 5732, as redesignated by subparagaph (A), is 
     amended by striking ``(except the tax imposed by section 
     5131)'' each place it appears.
       (C) Subsection (c) of section 5733, as redesignated by 
     subparagraph (A), is amended by striking paragraph (2) and by 
     redesignating paragraph (3) as paragraph (2).
       (D) The table of sections for subchapter D of chapter 52 is 
     amended by adding at the end thereof the following:

``Sec. 5732. Payment of tax.
``Sec. 5733. Provisions relating to liability for occupational taxes.
``Sec. 5734. Application of State laws.''
       (E) Section 5731 is amended by striking subsection (c) and 
     by redesignating subsection (d) as subsection (c).
       (19) Subsection (c) of section 6071 is amended by striking 
     ``section 5142'' and inserting ``section 5732''.
       (20) Paragraph (1) of section 7652(g) is amended--
       (A) by striking ``subpart F'' and inserting ``subpart B'', 
     and
       (B) by striking ``section 5131(a)'' and inserting ``section 
     5111(a)''.
       (c) Effective Date.--The amendments made by this section 
     shall take effect on the date of the enactment of this Act, 
     but shall not apply to taxes imposed for periods before such 
     date.

                     TITLE III--PENSION PROVISIONS

                     Subtitle A--Expanding Coverage

     SEC. 301. INCREASE IN BENEFIT AND CONTRIBUTION LIMITS.

       (a) Defined Benefit Plans.--
       (1) Dollar limit.--
       (A) Subparagraph (A) of section 415(b)(1) (relating to 
     limitation for defined benefit plans) is amended by striking 
     ``$90,000'' and inserting ``$160,000''.
       (B) Subparagraphs (C) and (D) of section 415(b)(2) are each 
     amended by striking ``$90,000'' each place it appears in the 
     headings and the text and inserting ``$160,000''.
       (C) Paragraph (7) of section 415(b) (relating to benefits 
     under certain collectively bargained plans) is amended by 
     striking ``the greater of $68,212 or one-half the amount 
     otherwise applicable for such year under paragraph (1)(A) for 
     `$90,000' '' and inserting ``one-half the amount otherwise 
     applicable for

[[Page 2535]]

     such year under paragraph (1)(A) for `$160,000' ''.
       (2) Limit reduced when benefit begins before age 62.--
     Subparagraph (C) of section 415(b)(2) is amended by striking 
     ``the social security retirement age'' each place it appears 
     in the heading and text and inserting ``age 62''.
       (3) Limit increased when benefit begins after age 65.--
     Subparagraph (D) of section 415(b)(2) is amended by striking 
     ``the social security retirement age'' each place it appears 
     in the heading and text and inserting ``age 65''.
       (4) Cost-of-living adjustments.--Subsection (d) of section 
     415 (related to cost-of-living adjustments) is amended--
       (A) by striking ``$90,000'' in paragraph (1)(A) and 
     inserting ``$160,000'', and
       (B) in paragraph (3)(A)--
       (i) by striking ``$90,000'' in the heading and inserting 
     ``$160,000'', and
       (ii) by striking ``October 1, 1986'' and inserting ``July 
     1, 2000''.
       (5) Conforming amendment.--Section 415(b)(2) is amended by 
     striking subparagraph (F).
       (b) Defined Contribution Plans.--
       (1) Dollar limit.--Subparagraph (A) of section 415(c)(1) 
     (relating to limitation for defined contribution plans) is 
     amended by striking ``$30,000'' and inserting ``$40,000''.
       (2) Cost-of-living adjustments.--Subsection (d) of section 
     415 (related to cost-of-living adjustments) is amended--
       (A) by striking ``$30,000'' in paragraph (1)(C) and 
     inserting ``$40,000'', and
       (B) in paragraph (3)(D)--
       (i) by striking ``$30,000'' in the heading and inserting 
     ``$40,000'', and
       (ii) by striking ``October 1, 1993'' and inserting ``July 
     1, 2000''.
       (c) Qualified Trusts.--
       (1) Compensation limit.--Sections 401(a)(17), 404(l), 
     408(k), and 505(b)(7) are each amended by striking 
     ``$150,000'' each place it appears and inserting 
     ``$200,000''.
       (2) Base period and rounding of cost-of-living 
     adjustment.--Subparagraph (B) of section 401(a)(17) is 
     amended--
       (A) by striking ``October 1, 1993'' and inserting ``July 1, 
     2000'', and
       (B) by striking ``$10,000'' both places it appears and 
     inserting ``$5,000''.
       (d) Elective Deferrals.--
       (1) In general.--Paragraph (1) of section 402(g) (relating 
     to limitation on exclusion for elective deferrals) is amended 
     to read as follows:
       ``(1) In general.--
       ``(A) Limitation.--Notwithstanding subsections (e)(3) and 
     (h)(1)(B), the elective deferrals of any individual for any 
     taxable year shall be included in such individual's gross 
     income to the extent the amount of such deferrals for the 
     taxable year exceeds the applicable dollar amount.
       ``(B) Applicable dollar amount.--For purposes of 
     subparagraph (A), the applicable dollar amount shall be the 
     amount determined in accordance with the following table:

    ``For taxable years                                  The applicable
      beginning in                                       dollar amount:
      calendar year:
      2001.....................................................$11,000 
      2002.....................................................$12,000 
      2003.....................................................$13,000 
      2004.....................................................$14,000 
      2005 or thereafter....................................$15,000.''.

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

    ``For taxable years                                  The applicable
      beginning in                                       dollar amount:
      calendar year:
      2001.....................................................$11,000 
      2002.....................................................$12,000 
      2003.....................................................$13,000 
      2004.....................................................$14,000 
      2005 or thereafter.......................................$15,000.

       ``(B) Cost-of-living adjustments.--In the case of taxable 
     years beginning after December 31, 2005, the Secretary shall 
     adjust the $15,000 amount specified in the table in 
     subparagraph (A) at the same time and in the same manner as 
     under section 415(d), except that the base period shall be 
     the calendar quarter beginning July 1, 2004, and any increase 
     under this paragraph which is not a multiple of $500 shall be 
     rounded to the next lowest multiple of $500.''.
       (f ) Simple Retirement Accounts.--
       (1) Limitation.--Clause (ii) of section 408(p)(2)(A) 
     (relating to general rule for qualified salary reduction 
     arrangement) is amended by striking ``$6,000'' and inserting 
     ``the applicable dollar amount''.
       (2) Applicable dollar amount.--Subparagraph (E) of 
     408(p)(2) is amended to read as follows:
       ``(E) Applicable dollar amount; cost-of-living 
     adjustment.--
       ``(i) In general.--For purposes of subparagraph (A)(ii), 
     the applicable dollar amount shall be the amount determined 
     in accordance with the following table:

    ``For taxable years                                  The applicable
      beginning in                                       dollar amount:
      calendar year:
          2001..................................................$7,000 
          2002..................................................$8,000 
          2003..................................................$9,000 
          2004 or thereafter...................................$10,000.

       ``(ii) Cost-of-living adjustment.--In the case of a year 
     beginning after December 31, 2004, the Secretary shall adjust 
     the $10,000 amount under clause (i) at the same time and in 
     the same manner as under section 415(d), except that the base 
     period taken into account shall be the calendar quarter 
     beginning July 1, 2003, and any increase under this 
     subparagraph which is not a multiple of $500 shall be rounded 
     to the next lower multiple of $500.''.
       (3) Conforming amendments.--
       (A) Clause (I) of section 401(k)(11)(B)(i) is amended by 
     striking ``$6,000'' and inserting ``the amount in effect 
     under section 408(p)(2)(A)(ii)''.
       (B) Section 401(k)(11) is amended by striking subparagraph 
     (E).
       (g) Rounding Rule Relating to Defined Benefit Plans and 
     Defined Contribution Plans.--Paragraph (4) of section 415(d) 
     is amended to read as follows:
       ``(4) Rounding.--
       ``(A) $160,000 amount.--Any increase under subparagraph (A) 
     of paragraph (1) which is not a multiple of $5,000 shall be 
     rounded to the next lowest multiple of $5,000.
       ``(B) $40,000 amount.--Any increase under subparagraph (C) 
     of paragraph (1) which is not a multiple of $1,000 shall be 
     rounded to the next lowest multiple of $1,000.''.
       (h) Effective Date.--The amendments made by this section 
     shall apply to years beginning after December 31, 2000.

     SEC. 302. PLAN LOANS FOR SUBCHAPTER S OWNERS, PARTNERS, AND 
                   SOLE PROPRIETORS.

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

     SEC. 303. MODIFICATION OF TOP-HEAVY RULES.

       (a) Simplification of Definition of Key Employee.--
       (1) In general.--Section 416(i)(1)(A) (defining key 
     employee) is amended--
       (A) by striking ``or any of the 4 preceding plan years'' in 
     the matter preceding clause (i),
       (B) by striking clause (i) and inserting the following:
       ``(i) an officer of the employer having an annual 
     compensation greater than $150,000,'',
       (C) by striking clause (ii) and redesignating clauses (iii) 
     and (iv) as clauses (ii) and (iii), respectively, and
       (D) by striking the second sentence in the matter following 
     clause (iii), as redesignated by subparagraph (C).
       (2) Conforming amendment.--Section 416(i)(1)(B)(iii) is 
     amended by striking ``and subparagraph (A)(ii)''.
       (b) Matching Contributions Taken Into Account for Minimum 
     Contribution Requirements.--Section 416(c)(2)(A) (relating to 
     defined contribution plans) is amended by

[[Page 2536]]

     adding at the end the following: ``Employer matching 
     contributions (as defined in section 401(m)(4)(A)) shall be 
     taken into account for purposes of this subparagraph.''.
       (c) Distributions During Last Year Before Determination 
     Date Taken Into Account.--
       (1) In general.--Paragraph (3) of section 416(g) is amended 
     to read as follows:
       ``(3) Distributions during last year before determination 
     date taken into account.--
       ``(A) In general.--For purposes of determining--
       ``(i) the present value of the cumulative accrued benefit 
     for any employee, or
       ``(ii) the amount of the account of any employee,

     such present value or amount shall be increased by the 
     aggregate distributions made with respect to such employee 
     under the plan during the 1-year period ending on the 
     determination date. The preceding sentence shall also apply 
     to distributions under a terminated plan which if it had not 
     been terminated would have been required to be included in an 
     aggregation group.
       ``(B) 5-year period in case of in-service distribution.--In 
     the case of any distribution made for a reason other than 
     separation from service, death, or disability, subparagraph 
     (A) shall be applied by substituting `5-year period' for `1-
     year period'.''.
       (2) Benefits not taken into account.--Subparagraph (E) of 
     section 416(g)(4) is amended--
       (A) by striking ``last 5 years'' in the heading and 
     inserting ``last year before determination date'', and
       (B) by striking ``5-year period'' and inserting ``1-year 
     period''.
       (d) Definition of Top-Heavy Plans.--Paragraph (4) of 
     section 416(g) (relating to other special rules for top-heavy 
     plans) is amended by adding at the end the following new 
     subparagraph:
       ``(H) Cash or deferred arrangements using alternative 
     methods of meeting nondiscrimination requirements.--The term 
     `top-heavy plan' shall not include a plan which consists 
     solely of--
       ``(i) a cash or deferred arrangement which meets the 
     requirements of section 401(k)(12), and
       ``(ii) matching contributions with respect to which the 
     requirements of section 401(m)(11) are met.

     If, but for this subparagraph, a plan would be treated as a 
     top-heavy plan because it is a member of an aggregation group 
     which is a top-heavy group, contributions under the plan may 
     be taken into account in determining whether any other plan 
     in the group meets the requirements of subsection (c)(2).''.
       (e) Frozen Plan Exempt From Minimum Benefit Requirement.--
     Subparagraph (C) of section 416(c)(1) (relating to defined 
     benefit plans) is amended--
       (A) by striking ``clause (ii)'' in clause (i) and inserting 
     ``clause (ii) or (iii)'', and
       (B) by adding at the end the following:
       ``(iii) Exception for frozen plan.--For purposes of 
     determining an employee's years of service with the employer, 
     any service with the employer shall be disregarded to the 
     extent that such service occurs during a plan year when the 
     plan benefits (within the meaning of section 410(b)) no 
     employee or former employee.''.
       (f ) Elimination of Family Attribution.--Section 
     416(i)(1)(B) (defining 5-percent owner) is amended by adding 
     at the end the following new clause:
       ``(iv) Family attribution disregarded.--Solely for purposes 
     of applying this paragraph (and not for purposes of any 
     provision of this title which incorporates by reference the 
     definition of a key employee or 5-percent owner under this 
     paragraph), section 318 shall be applied without regard to 
     subsection (a)(1) thereof in determining whether any person 
     is a 5-percent owner.''.
       (g) Effective Date.--The amendments made by this section 
     shall apply to years beginning after December 31, 2000.

     SEC. 304. ELECTIVE DEFERRALS NOT TAKEN INTO ACCOUNT FOR 
                   PURPOSES OF DEDUCTION LIMITS.

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

     SEC. 305. REPEAL OF COORDINATION REQUIREMENTS FOR DEFERRED 
                   COMPENSATION PLANS OF STATE AND LOCAL 
                   GOVERNMENTS AND TAX-EXEMPT ORGANIZATIONS.

       (a) In General.--Subsection (c) of section 457 (relating to 
     deferred compensation plans of State and local governments 
     and tax-exempt organizations), as amended by section 211, is 
     amended to read as follows:
       ``(c) Limitation.--The maximum amount of the compensation 
     of any one individual which may be deferred under subsection 
     (a) during any taxable year shall not exceed the amount in 
     effect under subsection (b)(2)(A) (as modified by any 
     adjustment provided under subsection (b)(3)).''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to years beginning after December 31, 2000.

     SEC. 306. ELIMINATION OF USER FEE FOR REQUESTS TO IRS 
                   REGARDING PENSION PLANS.

       (a) Elimination of Certain User Fees.--The Secretary of the 
     Treasury or the Secretary's delegate shall not require 
     payment of user fees under the program established under 
     section 7527 of the Internal Revenue Code of 1986 for 
     requests to the Internal Revenue Service for determination 
     letters with respect to the qualified status of a pension 
     benefit plan maintained solely by one or more eligible 
     employers or any trust which is part of the plan. The 
     preceding sentence shall not apply to any request--
       (1) made after the 5th plan year the pension benefit plan 
     is in existence, or
       (2) made by the sponsor of any prototype or similar plan 
     which the sponsor intends to market to participating 
     employers.
       (b) Pension Benefit Plan.--For purposes of this section, 
     the term ``pension benefit plan'' means a pension, profit-
     sharing, stock bonus, annuity, or employee stock ownership 
     plan.
       (c) Eligible Employer.--For purposes of this section, the 
     term ``eligible employer'' has the same meaning given such 
     term in section 408(p)(2)(C)(i)(I) of the Internal Revenue 
     Code of 1986. The determination of whether an employer is an 
     eligible employer under this section shall be made as of the 
     date of the request described in subsection (a).
       (d) Effective Date.--The provisions of this section shall 
     apply with respect to requests made after December 31, 2000.

     SEC. 307. DEDUCTION LIMITS.

       (a) In General.--Section 404(a) (relating to general rule) 
     is amended by adding at the end the following:
       ``(12) Definition of compensation.--For purposes of 
     paragraphs (3), (7), (8), and (9), the term `compensation' 
     shall include amounts treated as participant's compensation 
     under subparagraph (C) or (D) of section 415(c)(3).''.
       (b) Conforming Amendment.--Subparagraph (B) of section 
     404(a)(3) is amended by striking the last sentence thereof.
       (c) Effective Date.--The amendments made by this section 
     shall apply to years beginning after December 31, 2000.

     SEC. 308. OPTION TO TREAT ELECTIVE DEFERRALS AS AFTER-TAX 
                   CONTRIBUTIONS.

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

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

       ``(a) General Rule.--If an applicable retirement plan 
     includes a qualified plus contribution program--
       ``(1) any designated plus contribution made by an employee 
     pursuant to the program shall be treated as an elective 
     deferral for purposes of this chapter, except that such 
     contribution shall not be excludable from gross income, and
       ``(2) such plan (and any arrangement which is part of such 
     plan) shall not be treated as failing to meet any requirement 
     of this chapter solely by reason of including such program.
       ``(b) Qualified Plus Contribution Program.--For purposes of 
     this section--
       ``(1) In general.--The term `qualified plus contribution 
     program' means a program under which an employee may elect to 
     make designated plus contributions in lieu of all or a 
     portion of elective deferrals the employee is otherwise 
     eligible to make under the applicable retirement plan.
       ``(2) Separate accounting required.--A program shall not be 
     treated as a qualified plus contribution program unless the 
     applicable retirement plan--
       ``(A) establishes separate accounts (`designated plus 
     accounts') for the designated plus contributions of each 
     employee and any earnings properly allocable to the 
     contributions, and
       ``(B) maintains separate recordkeeping with respect to each 
     account.
       ``(c) Definitions and Rules Relating to Designated Plus 
     Contributions.--For purposes of this section--
       ``(1) Designated plus contribution.--The term `designated 
     plus contribution' means any elective deferral which--
       ``(A) is excludable from gross income of an employee 
     without regard to this section, and
       ``(B) the employee designates (at such time and in such 
     manner as the Secretary may prescribe) as not being so 
     excludable.
       ``(2) Designation limits.--The amount of elective deferrals 
     which an employee may designate under paragraph (1) shall not 
     exceed the excess (if any) of--
       ``(A) the maximum amount of elective deferrals excludable 
     from gross income of the employee for the taxable year 
     (without regard to this section), over

[[Page 2537]]

       ``(B) the aggregate amount of elective deferrals of the 
     employee for the taxable year which the employee does not 
     designate under paragraph (1).
       ``(3) Rollover contributions.--
       ``(A) In general.--A rollover contribution of any payment 
     or distribution from a designated plus account which is 
     otherwise allowable under this chapter may be made only if 
     the contribution is to--
       ``(i) another designated plus account of the individual 
     from whose account the payment or distribution was made, or
       ``(ii) a Roth IRA of such individual.
       ``(B) Coordination with limit.--Any rollover contribution 
     to a designated plus account under subparagraph (A) shall not 
     be taken into account for purposes of paragraph (1).
       ``(d) Distribution Rules.--For purposes of this title--
       ``(1) Exclusion.--Any qualified distribution from a 
     designated plus account shall not be includible in gross 
     income.
       ``(2) Qualified distribution.--For purposes of this 
     subsection--
       ``(A) In general.--The term `qualified distribution' has 
     the meaning given such term by section 408A(d)(2)(A) (without 
     regard to clause (iv) thereof).
       ``(B) Distributions within nonexclusion period.--A payment 
     or distribution from a designated plus account shall not be 
     treated as a qualified distribution if such payment or 
     distribution is made within the 5-taxable-year period 
     beginning with the earlier of--
       ``(i) the first taxable year for which the individual made 
     a designated plus contribution to any designated plus account 
     established for such individual under the same applicable 
     retirement plan, or
       ``(ii) if a rollover contribution was made to such 
     designated plus account from a designated plus account 
     previously established for such individual under another 
     applicable retirement plan, the first taxable year for which 
     the individual made a designated plus contribution to such 
     previously established account.
       ``(C) Distributions of excess deferrals and earnings.--The 
     term `qualified distribution' shall not include any 
     distribution of any excess deferral under section 402(g)(2) 
     and any income on the excess deferral.
       ``(3) Aggregation rules.--Section 72 shall be applied 
     separately with respect to distributions and payments from a 
     designated plus account and other distributions and payments 
     from the plan.
       ``(e) Other Definitions.--For purposes of this section--
       ``(1) Applicable retirement plan.--The term `applicable 
     retirement plan' means--
       ``(A) an employees' trust described in section 401(a) which 
     is exempt from tax under section 501(a), and
       ``(B) a plan under which amounts are contributed by an 
     individual's employer for an annuity contract described in 
     section 403(b).
       ``(2) Elective deferral.--The term `elective deferral' 
     means any elective deferral described in subparagraph (A) or 
     (C) of section 402(g)(3).''.
       (b) Excess Deferrals.--Section 402(g) (relating to 
     limitation on exclusion for elective deferrals) is amended--
       (1) by adding at the end of paragraph (1) the following new 
     sentence: ``The preceding sentence shall not apply to so much 
     of such excess as does not exceed the designated plus 
     contributions of the individual for the taxable year.'', and
       (2) by inserting ``(or would be included but for the last 
     sentence thereof)'' after ``paragraph (1)'' in paragraph 
     (2)(A).
       (c) Rollovers.--Subparagraph (B) of section 402(c)(8) is 
     amended by adding at the end the following:
     ``If any portion of an eligible rollover distribution is 
     attributable to payments or distributions from a designated 
     plus account (as defined in section 402A), an eligible 
     retirement plan with respect to such portion shall include 
     only another designated plus account and a Roth IRA.''.
       (d) Reporting Requirements.--
       (1) W-2 information.--Section 6051(a)(8) is amended by 
     inserting ``, including the amount of designated plus 
     contributions (as defined in section 402A)'' before the comma 
     at the end.
       (2) Information.--Section 6047 is amended by redesignating 
     subsection (f ) as subsection (g) and by inserting after 
     subsection (e) the following new subsection:
       ``(f ) Designated Plus Contributions.--The Secretary shall 
     require the plan administrator of each applicable retirement 
     plan (as defined in section 402A) to make such returns and 
     reports regarding designated plus contributions (as so 
     defined) to the Secretary, participants and beneficiaries of 
     the plan, and such other persons as the Secretary may 
     prescribe.''.
       (e) Conforming Amendments.--
       (1) Section 408A(e) is amended by adding after the first 
     sentence the following new sentence: ``Such term includes a 
     rollover contribution described in section 402A(c)(3)(A).''.
       (2) The table of sections for subpart A of part I of 
     subchapter D of chapter 1 is amended by inserting after the 
     item relating to section 402 the following new item:

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

     SEC. 309. REDUCED PBGC PREMIUM FOR NEW PLANS OF SMALL 
                   EMPLOYERS.

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

     SEC. 310. REDUCTION OF ADDITIONAL PBGC PREMIUM FOR NEW AND 
                   SMALL PLANS.

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

     For purposes of this clause, a defined benefit plan (as 
     defined in section 3(35)) maintained by a contributing 
     sponsor shall be treated as a new defined benefit plan for 
     its first 5 plan years if, during the 36-month period ending 
     on the date of the adoption of the plan, the sponsor and each 
     member of any controlled group including the sponsor (or any 
     predecessor of either) did not establish or maintain a plan 
     to which this title applies with respect to which benefits 
     were accrued for substantially the same employees as are in 
     the new plan.''.
       (b) Small Plans.--Paragraph (3) of section 4006(a) of the 
     Employee Retirement Income Security Act of 1974 (29 U.S.C. 
     1306(a)) is amended--
       (1) by striking ``The'' in subparagraph (E)(i) and 
     inserting ``Except as provided in subparagraph (G), the'', 
     and
       (2) by inserting after subparagraph (F) the following new 
     subparagraph:
       ``(G)(i) In the case of an employer who has 25 or fewer 
     employees on the first day of the plan year, the additional 
     premium determined under subparagraph (E) for each 
     participant shall not exceed $5 multiplied by the number of 
     participants in the plan as of the close of the preceding 
     plan year.
       ``(ii) For purposes of clause (i), whether an employer has 
     25 or fewer employees on the first day of the plan year is 
     determined taking into consideration all of the employees of 
     all members of the contributing sponsor's controlled group. 
     In the case of a plan maintained by two or more contributing 
     sponsors, the employees of all contributing sponsors and 
     their controlled groups shall be aggregated for purposes of 
     determining whether 25-or-fewer-employees limitation has been 
     satisfied.''.
       (c) Effective Dates.--
       (1) Subsection (a).--The amendments made by subsection (a) 
     shall apply to plans established after December 31, 2000.
       (2) Subsection (b).--The amendments made by subsection (b) 
     shall apply to plan years beginning after December 31, 2000.

[[Page 2538]]



                Subtitle B--Enhancing Fairness for Women

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

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

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

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

    ``For taxable years                                  The applicable
    beginning in:                                        percentage is:
      2001..................................................10 percent 
      2002..................................................20 percent 
      2003..................................................30 percent 
      2004..................................................40 percent 
      2005 and thereafter...................................50 percent.

       ``(3) Treatment of contributions.--In the case of any 
     contribution to a plan under paragraph (1)--
       ``(A) such contribution shall not, with respect to the year 
     in which the contribution is made--
       ``(i) be subject to any otherwise applicable limitation 
     contained in section 402(g), 402(h), 403(b), 404(a), 404(h), 
     408, 415, or 457, or
       ``(ii) be taken into account in applying such limitations 
     to other contributions or benefits under such plan or any 
     other such plan, and
       ``(B) such plan shall not be treated as failing to meet the 
     requirements of section 401(a)(4), 401(a)(26), 401(k)(3), 
     401(k)(11), 401(k)(12), 401(m), 403(b)(12), 408(k), 408(p), 
     408B, 410(b), or 416 by reason of the making of (or the right 
     to make) such contribution.
       ``(4) Eligible participant.--For purposes of this 
     subsection, the term `eligible participant' means, with 
     respect to any plan year, a participant in a plan--
       ``(A) who has attained the age of 50 before the close of 
     the plan year, and
       ``(B) with respect to whom no other elective deferrals may 
     (without regard to this subsection) be made to the plan for 
     the plan year by reason of the application of any limitation 
     or other restriction described in paragraph (3) or contained 
     in the terms of the plan.
       ``(5) Other definitions and rules.--For purposes of this 
     subsection--
       ``(A) Applicable dollar amount.--The term `applicable 
     dollar amount' means, with respect to any year, the amount in 
     effect under section 402(g)(1)(B), 408(p)(2)(E)(i), or 
     457(e)(15)(A), whichever is applicable to an applicable 
     employer plan, for such year.
       ``(B) Applicable employer plan.--The term `applicable 
     employer plan' means--
       ``(i) an employees' trust described in section 401(a) which 
     is exempt from tax under section 501(a),
       ``(ii) a plan under which amounts are contributed by an 
     individual's employer for an annuity contract described in 
     section 403(b),
       ``(iii) an eligible deferred compensation plan under 
     section 457 of an eligible employer as defined in section 
     457(e)(1)(A), and
       ``(iv) an arrangement meeting the requirements of section 
     408 (k) or (p).
       ``(C) Elective deferral.--The term `elective deferral' has 
     the meaning given such term by subsection (u)(2)(C).
       ``(D) Exception for section 457 plans.--This subsection 
     shall not apply to an applicable employer plan described in 
     subparagraph (B)(iii) for any year to which section 457(b)(3) 
     applies.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to contributions in taxable years beginning after 
     December 31, 2000.

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

       (a) Equitable Treatment.--
       (1) In general.--Subparagraph (B) of section 415(c)(1) 
     (relating to limitation for defined contribution plans) is 
     amended by striking ``25 percent'' and inserting ``100 
     percent''.
       (2) Application to section 403(b).--Section 403(b) is 
     amended--
       (A) by striking ``the exclusion allowance for such taxable 
     year'' in paragraph (1) and inserting ``the applicable limit 
     under section 415'',
       (B) by striking paragraph (2), and
       (C) by inserting ``or any amount received by a former 
     employee after the 5th taxable year following the taxable 
     year in which such employee was terminated'' before the 
     period at the end of the second sentence of paragraph (3).
       (3) Conforming amendments.--
       (A) Subsection (f ) of section 72 is amended by striking 
     ``section 403(b)(2)(D)(iii))'' and inserting ``section 
     403(b)(2)(D)(iii), as in effect before the enactment of the 
     Wage and Employment Growth Act of 1999)''.
       (B) Section 404(a)(10)(B) is amended by striking ``, the 
     exclusion allowance under section 403(b)(2),''.
       (C) Section 415(a)(2) is amended by striking ``, and the 
     amount of the contribution for such portion shall reduce the 
     exclusion allowance as provided in section 403(b)(2)''.
       (D) Section 415(c)(3) is amended by adding at the end the 
     following new subparagraph:
       ``(E) Annuity contracts.--In the case of an annuity 
     contract described in section 403(b), the term `participant's 
     compensation' means the participant's includible compensation 
     determined under section 403(b)(3).''.
       (E) Section 415(c) is amended by striking paragraph (4).
       (F) Section 415(c)(7) is amended to read as follows:
       ``(7) Certain contributions by church plans not treated as 
     exceeding limit.--
       ``(A) In general.--Notwithstanding any other provision of 
     this subsection, at the election of a participant who is an 
     employee of a church or a convention or association of 
     churches, including an organization described in section 
     414(e)(3)(B)(ii), contributions and other additions for an 
     annuity contract or retirement income account described in 
     section 403(b) with respect to such participant, when 
     expressed as an annual addition to such participant's 
     account, shall be treated as not exceeding the limitation of 
     paragraph (1) if such annual addition is not in excess of 
     $10,000.
       ``(B) $40,000 aggregate limitation.--The total amount of 
     additions with respect to any participant which may be taken 
     into account for purposes of this subparagraph for all years 
     may not exceed $40,000.
       ``(C) Annual addition.--For purposes of this paragraph, the 
     term `annual addition' has the meaning given such term by 
     paragraph (2).''.
       (G) Subparagraph (B) of section 402(g)(7) (as redesignated 
     by section 211) is amended by inserting before the period at 
     the end the following: ``(as in effect before the enactment 
     of the Wage and Employment Growth Act of 1999)''.
       (3) Effective date.--The amendments made by this subsection 
     shall apply to years beginning after December 31, 2000.
       (b) Special Rules for Sections 403(b) and 408.--
       (1) In general.--Subsection (k) of section 415 is amended 
     by adding at the end the following new paragraph:
       ``(4) Special rules for sections 403(b) and 408.--For 
     purposes of this section, any annuity contract described in 
     section 403(b) for the benefit of a participant shall be 
     treated as a defined contribution plan maintained by each 
     employer with respect to which the participant has the 
     control required under subsection (b) or (c) of section 414 
     (as modified by subsection (h)). For purposes of this 
     section, any contribution by an employer to a simplified 
     employee pension plan for an individual for a taxable year 
     shall be treated as an employer contribution to a defined 
     contribution plan for such individual for such year.''.
       (2) Effective date.--
       (A) In general.--The amendment made by paragraph (1) shall 
     apply to limitation years beginning after December 31, 1999.
       (B) Exclusion allowance.--Effective for limitation years 
     beginning in 2000, in the case of any annuity contract 
     described in section 403(b) of the Internal Revenue Code of 
     1986, the amount of the contribution disqualified by reason 
     of section 415(g) of such Code shall reduce the exclusion 
     allowance as provided in section 403(b)(2) of such Code.
       (3) Modification of 403(b) exclusion allowance to conform 
     to 415 modification.--The Secretary of the Treasury shall 
     modify the regulations regarding the exclusion allowance 
     under section 403(b)(2) of the Internal Revenue Code of 1986 
     to render void the requirement that contributions to a 
     defined benefit pension plan be treated as previously 
     excluded amounts for purposes of the exclusion allowance. For 
     taxable years beginning after December 31, 1999, such 
     regulations shall be applied as if such requirement were 
     void.
       (c) Deferred Compensation Plans of State and Local 
     Governments and Tax-Exempt Organizations.--
       (1) In general.--Subparagraph (B) of section 457(b)(2) 
     (relating to salary limitation on eligible deferred 
     compensation plans) is amended by striking ``33\1/3\ 
     percent'' and inserting ``100 percent''.
       (2) Effective date.--The amendment made by this subsection 
     shall apply to years beginning after December 31, 2000.

     SEC. 323. FASTER VESTING OF CERTAIN EMPLOYER MATCHING 
                   CONTRIBUTIONS.

       (a) Amendments to 1986 Code.--Section 411(a) (relating to 
     minimum vesting standards) is amended--
       (1) in paragraph (2), by striking ``A plan'' and inserting 
     ``Except as provided in paragraph (12), a plan'', and

[[Page 2539]]

       (2) by adding at the end the following:
       ``(12) Faster vesting for matching contributions.--In the 
     case of matching contributions (as defined in section 
     401(m)(4)(A)), paragraph (2) shall be applied--
       ``(A) by substituting `3 years' for `5 years' in 
     subparagraph (A), and
       ``(B) by substituting the following table for the table 
     contained in subparagraph (B):

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

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

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

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

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

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

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

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

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

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

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

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

     SEC. 324. SIMPLIFY AND UPDATE THE MINIMUM DISTRIBUTION RULES.

       (a) Simplification and Finalization of Minimum Distribution 
     Requirements.--
       (1) In general.--The Secretary of the Treasury shall--
       (A) simplify and finalize the regulations relating to 
     minimum distribution requirements under sections 401(a)(9), 
     408(a)(6) and (b)(3), 403(b)(10), and 457(d)(2) of the 
     Internal Revenue Code of 1986, and
       (B) modify such regulations to--
       (i) reflect current life expectancy, and
       (ii) revise the required distribution methods so that, 
     under reasonable assumptions, the amount of the required 
     minimum distribution does not decrease over a participant's 
     life expectancy.
       (2) Fresh start.--Notwithstanding subparagraph (D) of 
     section 401(a)(9) of such Code, during the first year that 
     regulations are in effect under this subsection, required 
     distributions for future years may be redetermined to reflect 
     changes under such regulations. Such redetermination shall 
     include the opportunity to choose a new designated 
     beneficiary and to elect a new method of calculating life 
     expectancy.
       (3) Effective date for regulations.--Regulations referred 
     to in paragraph (1) shall be effective for years beginning 
     after December 31, 2000, and shall apply in such years 
     without regard to whether an individual had previously begun 
     receiving minimum distributions.
       (b) Repeal of Rule Where Distributions Had Begun Before 
     Death Occurs.--
       (1) In general.--Subparagraph (B) of section 401(a)(9) is 
     amended by striking clause (i) and redesignating clauses 
     (ii), (iii), and (iv) as clauses (i), (ii), and (iii), 
     respectively.
       (2) Conforming changes.--
       (A) Clause (i) of section 401(a)(9)(B) (as so redesignated) 
     is amended--
       (i) by striking ``for other cases'' in the heading, and
       (ii) by striking ``the distribution of the employee's 
     interest has begun in accordance with subparagraph (A)(ii)'' 
     and inserting ``his entire interest has been distributed to 
     him,''.
       (B) Clause (ii) of section 401(a)(9)(B) (as so 
     redesignated) is amended by striking ``clause (ii)'' and 
     inserting ``clause (i)''.
       (C) Clause (iii) of section 401(a)(9)(B) (as so 
     redesignated) is amended--
       (i) by striking ``clause (iii)(I)'' and inserting ``clause 
     (ii)(I)'',
       (ii) by striking ``clause (iii)(III)'' in subclause (I) and 
     inserting ``clause (ii)(III)'',
       (iii) by striking ``the date on which the employee would 
     have attained the age 70\1/2\,'' in subclause (I) and 
     inserting ``April 1 of the calendar year following the 
     calendar year in which the spouse attains 70\1/2\,'', and
       (iv) by striking ``the distributions to such spouse 
     begin,'' in subclause (II) and inserting ``his entire 
     interest has been distributed to him,''.
       (3) Effective date.--The amendments made by this subsection 
     shall apply to years beginning after December 31, 2000.
       (c) Reduction in Excise Tax.--
       (1) In general.--Subsection (a) of section 4974 is amended 
     by striking ``50 percent'' and inserting ``10 percent''.
       (2) Effective date.--The amendment made by this subsection 
     shall apply to years beginning after December 31, 2000.

     SEC. 325. CLARIFICATION OF TAX TREATMENT OF DIVISION OF 
                   SECTION 457 PLAN BENEFITS UPON DIVORCE.

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

     SEC. 326. MODIFICATION OF SAFE HARBOR RELIEF FOR HARDSHIP 
                   WITHDRAWALS FROM CASH OR DEFERRED ARRANGEMENTS.

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

          Subtitle C--Increasing Portability for Participants

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

       (a) Rollovers From and to Section 457 Plans.--
       (1) Rollovers from section 457 plans.--
       (A) In general.--Section 457(e) (relating to other 
     definitions and special rules) is amended by adding at the 
     end the following:
       ``(16) Rollover amounts.--
       ``(A) General rule.--In the case of an eligible deferred 
     compensation plan established and maintained by an employer 
     described in subsection (e)(1)(A), if--
       ``(i) any portion of the balance to the credit of an 
     employee in such plan is paid to such employee in an eligible 
     rollover distribution (within the meaning of section 
     402(c)(4) without regard to subparagraph (C) thereof),
       ``(ii) the employee transfers any portion of the property 
     such employee receives in such distribution to an eligible 
     retirement plan described in section 402(c)(8)(B), and
       ``(iii) in the case of a distribution of property other 
     than money, the amount so transferred consists of the 
     property distributed,

     then such distribution (to the extent so transferred) shall 
     not be includible in gross income for the taxable year in 
     which paid.
       ``(B) Certain rules made applicable.--The rules of 
     paragraphs (2) through (7) (other than paragraph (4)(C)) and 
     (9) of section 402(c) and section 402(f ) shall apply for 
     purposes of subparagraph (A).
       ``(C) Reporting.--Rollovers under this paragraph shall be 
     reported to the Secretary in the same manner as rollovers 
     from qualified retirement plans (as defined in section 
     4974(c)).''.
       (B) Deferral limit determined without regard to rollover 
     amounts.--Section 457(b)(2) (defining eligible deferred 
     compensation plan) is amended by inserting ``(other than 
     rollover amounts)'' after ``taxable year''.
       (C) Direct rollover.--Paragraph (1) of section 457(d) is 
     amended by striking ``and'' at the end of subparagraph (A), 
     by striking the period at the end of subparagraph (B) and 
     inserting ``, and'', and by inserting after subparagraph (B) 
     the following:

[[Page 2540]]

       ``(C) in the case of a plan maintained by an employer 
     described in subsection (e)(1)(A), the plan meets 
     requirements similar to the requirements of section 
     401(a)(31).

     Any amount transferred in a direct trustee-to-trustee 
     transfer in accordance with section 401(a)(31) shall not be 
     includible in gross income for the taxable year of 
     transfer.''.
       (D) Withholding.--
       (i) Paragraph (12) of section 3401(a) is amended by adding 
     at the end the following:
       ``(E) under or to an eligible deferred compensation plan 
     which, at the time of such payment, is a plan described in 
     section 457(b) maintained by an employer described in section 
     457(e)(1)(A); or''.
       (ii) Paragraph (3) of section 3405(c) is amended to read as 
     follows:
       ``(3) Eligible rollover distribution.--For purposes of this 
     subsection, the term `eligible rollover distribution' has the 
     meaning given such term by section 402(f )(2)(A).''.
       (iii) Liability for withholding.--Subparagraph (B) of 
     section 3405(d)(2) is amended by striking ``or'' at the end 
     of clause (ii), by striking the period at the end of clause 
     (iii) and inserting ``, or'', and by adding at the end the 
     following:
       ``(iv) section 457(b).''.
       (2) Rollovers to section 457 plans.--
       (A) In general.--Section 402(c)(8)(B) (defining eligible 
     retirement plan) is amended by striking ``and'' at the end of 
     clause (iii), by striking the period at the end of clause 
     (iv) and inserting ``, and'', and by inserting after clause 
     (iv) the following new clause:
       ``(v) an eligible deferred compensation plan described in 
     section 457(b) of an employer described in section 
     457(e)(1)(A).''.
       (B) Separate accounting.--Section 402(c) is amended by 
     adding at the end the following new paragraph:
       ``(11) Separate accounting.--Unless a plan described in 
     clause (v) of paragraph (8)(B) agrees to separately account 
     for amounts rolled into such plan from eligible retirement 
     plans not described in such clause, the plan described in 
     such clause may not accept transfers or rollovers from such 
     retirement plans.''.
       (C) 10 percent additional tax.--Subsection (t) of section 
     72 (relating to 10-percent additional tax on early 
     distributions from qualified retirement plans) is amended by 
     adding at the end the following new paragraph:
       ``(9) Special rule for rollovers to section 457 plans.--For 
     purposes of this subsection, a distribution from an eligible 
     deferred compensation plan (as defined in section 457(b)) of 
     an employer described in section 457(e)(1)(A) shall be 
     treated as a distribution from a qualified retirement plan 
     described in 4974(c)(1) to the extent that such distribution 
     is attributable to an amount transferred to an eligible 
     deferred compensation plan from a qualified retirement plan 
     (as defined in section 4974(c)).''.
       (b) Allowance of Rollovers From and to 403 (b) Plans.--
       (1) Rollovers from section 403 (b) plans.--Section 
     403(b)(8)(A)(ii) (relating to rollover amounts) is amended by 
     striking ``such distribution'' and all that follows and 
     inserting ``such distribution to an eligible retirement plan 
     described in section 402(c)(8)(B), and''.
       (2) Rollovers to section 403 (b) plans.--Section 
     402(c)(8)(B) (defining eligible retirement plan), as amended 
     by subsection (a), is amended by striking ``and'' at the end 
     of clause (iv), by striking the period at the end of clause 
     (v) and inserting ``, and'', and by inserting after clause 
     (v) the following new clause:
       ``(vi) an annuity contract described in section 403(b).''.
       (c) Expanded Explanation to Recipients of Rollover 
     Distributions.--Paragraph (1) of section 402(f ) (relating to 
     written explanation to recipients of distributions eligible 
     for rollover treatment) is amended by striking ``and'' at the 
     end of subparagraph (C), by striking the period at the end of 
     subparagraph (D) and inserting ``, and'', and by adding at 
     the end the following new subparagraph:
       ``(E) of the provisions under which distributions from the 
     eligible retirement plan receiving the distribution may be 
     subject to restrictions and tax consequences which are 
     different from those applicable to distributions from the 
     plan making such distribution.''.
       (d) Spousal Rollovers.--Section 402(c)(9) (relating to 
     rollover where spouse receives distribution after death of 
     employee) is amended by striking ``; except that'' and all 
     that follows up to the end period.
       (e) Conforming Amendments.--
       (1) Section 72(o)(4) is amended by striking ``and 
     408(d)(3)'' and inserting ``403(b)(8), 408(d)(3), and 
     457(e)(16)''.
       (2) Section 219(d)(2) is amended by striking ``or 
     408(d)(3)'' and inserting ``408(d)(3), or 457(e)(16)''.
       (3) Section 401(a)(31)(B) is amended by striking ``and 
     403(a)(4)'' and inserting ``, 403(a)(4), 403(b)(8), and 
     457(e)(16)''.
       (4) Subparagraph (A) of section 402(f )(2) is amended by 
     striking ``or paragraph (4) of section 403(a)'' and inserting 
     ``, paragraph (4) of section 403(a), subparagraph (A) of 
     section 403(b)(8), or subparagraph (A) of section 
     457(e)(16)''.
       (5) Paragraph (1) of section 402(f ) is amended by striking 
     ``from an eligible retirement plan''.
       (6) Subparagraphs (A) and (B) of section 402(f )(1) are 
     amended by striking ``another eligible retirement plan'' and 
     inserting ``an eligible retirement plan''.
       (7) Subparagraph (B) of section 403(b)(8) is amended to 
     read as follows:
       ``(B) Certain rules made applicable.--The rules of 
     paragraphs (2) through (7) and (9) of section 402(c) and 
     section 402(f ) shall apply for purposes of subparagraph (A), 
     except that section 402(f ) shall be applied to the payor in 
     lieu of the plan administrator.''.
       (8) Section 408(a)(1) is amended by striking ``or 
     403(b)(8)'' and inserting ``, 403(b)(8), or 457(e)(16)''.
       (9) Subparagraphs (A) and (B) of section 415(b)(2) are each 
     amended by striking ``and 408(d)(3)'' and inserting 
     ``403(b)(8), 408(d)(3), and 457(e)(16)''.
       (10) Section 415(c)(2) is amended by striking ``and 
     408(d)(3)'' and inserting ``408(d)(3), and 457(e)(16)''.
       (11) Section 4973(b)(1)(A) is amended by striking ``or 
     408(d)(3)'' and inserting ``408(d)(3), or 457(e)(16)''.
       (f ) Effective Date; Special Rule.--
       (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

[[Page 2541]]

     the portion of such distribution which is not so includible, 
     or
       ``(ii) is an eligible retirement plan described in clause 
     (i) or (ii) of section 402(c)(8)(B).''.
       (c) Rules for Applying Section 72 to IRAs.--Paragraph (3) 
     of section 408(d) (relating to special rules for applying 
     section 72) is amended by inserting at the end the following:
       ``(H) Application of section 72.--
       ``(i) In general.--If--

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

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

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

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

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

       (a) Exempt Trusts.--Paragraph (3) of section 402(c) 
     (relating to transfer must be made within 60 days of receipt) 
     is amended to read as follows:
       ``(3) Transfer must be made within 60 days of receipt.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     paragraph (1) shall not apply to any transfer of a 
     distribution made after the 60th day following the day on 
     which the distributee received the property distributed.
       ``(B) Hardship exception.--The Secretary may waive the 60-
     day requirement under subparagraph (A) where the failure to 
     waive such requirement would be against equity or good 
     conscience, including casualty, disaster, or other events 
     beyond the reasonable control of the individual subject to 
     such requirement.''.
       (b) IRAs.--Paragraph (3) of section 408(d) (relating to 
     rollover contributions), as amended by section 229, is 
     amended by adding after subparagraph (H) the following new 
     subparagraph:
       ``(I) Waiver of 60-day requirement.--The Secretary may 
     waive the 60-day requirement under subparagraphs (A) and (D) 
     where the failure to waive such requirement would be against 
     equity or good conscience, including casualty, disaster, or 
     other events beyond the reasonable control of the individual 
     subject to such requirement.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to distributions after December 31, 2000.

     SEC. 335. TREATMENT OF FORMS OF DISTRIBUTION.

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

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

       ``(V) if the transferor plan provides for an annuity as the 
     normal form of distribution under the plan in accordance with 
     section 417, the transfer is made with the consent of the 
     participant's spouse (if any), and such consent meets 
     requirements similar to the requirements imposed by section 
     417(a)(2), and
       ``(VI) the transferee plan allows the participant or 
     beneficiary described in clause (iii) to receive any 
     distribution to which the participant or beneficiary is 
     entitled under the transferee plan in the form of a single 
     sum distribution.

       ``(ii) Clause (i) shall apply to plan mergers and other 
     transactions having the effect of a direct transfer, 
     including consolidations of benefits attributable to 
     different employers within a multiple employer plan.
       ``(E) Elimination of form of distribution.--Except to the 
     extent provided in regulations, a defined contribution plan 
     shall not be treated as failing to meet the requirements of 
     this section merely because of the elimination of a form of 
     distribution previously available thereunder. This 
     subparagraph shall not apply to the elimination of a form of 
     distribution with respect to any participant unless--
       ``(i) a single sum payment is available to such participant 
     at the same time or times as the form of distribution being 
     eliminated, and
       ``(ii) such single sum payment is based on the same or 
     greater portion of the participant's account as the form of 
     distribution being eliminated.''.
       (2) Amendment to erisa.--Section 204(g) of the Employee 
     Retirement Income Security Act of 1974 (29 U.S.C. 1054(g)) is 
     amended by adding at the end the following:
       ``(4)(A) A defined contribution plan (in this subparagraph 
     referred to as the `transferee plan') shall not be treated as 
     failing to meet the requirements of this subsection merely 
     because the transferee plan does not provide some or all of 
     the forms of distribution previously available under another 
     defined contribution plan (in this subparagraph referred to 
     as the `transferor plan') to the extent that--
       ``(i) the forms of distribution previously available under 
     the transferor plan applied to the account of a participant 
     or beneficiary under the transferor plan that was transferred 
     from the transferor plan to the transferee plan pursuant to a 
     direct transfer rather than pursuant to a distribution from 
     the transferor plan;
       ``(ii) the terms of both the transferor plan and the 
     transferee plan authorize the transfer described in clause 
     (i);
       ``(iii) the transfer described in clause (i) was made 
     pursuant to a voluntary election by the participant or 
     beneficiary whose account was transferred to the transferee 
     plan;
       ``(iv) the election described in clause (iii) was made 
     after the participant or beneficiary received a notice 
     describing the consequences of making the election;
       ``(v) if the transferor plan provides for an annuity as the 
     normal form of distribution under the plan in accordance with 
     section 205, the transfer is made with the consent of the 
     participant's spouse (if any), and such consent meets 
     requirements similar to the requirements imposed by section 
     205(c)(2); and
       ``(vi) the transferee plan allows the participant or 
     beneficiary described in clause (iii) to receive any 
     distribution to which the participant or beneficiary is 
     entitled under the transferee plan in the form of a single 
     sum distribution.
       ``(B) Subparagraph (A) shall apply to plan mergers and 
     other transactions having the effect of a direct transfer, 
     including consolidations of benefits attributable to 
     different employers within a multiple employer plan.
       ``(5) Elimination of form of distribution.--Except to the 
     extent provided in regulations, a defined contribution plan 
     shall not be treated as failing to meet the requirements of 
     this section merely because of the elimination of a form of 
     distribution previously available thereunder. This paragraph 
     shall not apply to the elimination of a form of distribution 
     with respect to any participant unless--
       ``(A) a single sum payment is available to such participant 
     at the same time or times as the form of distribution being 
     eliminated; and
       ``(B) such single sum payment is based on the same or 
     greater portion of the participant's account as the form of 
     distribution being eliminated.''.
       (3) Effective date.--The amendments made by this subsection 
     shall apply to years beginning after December 31, 2000.
       (b) Regulations.--
       (1) Amendment to internal revenue code of 1986.--The last 
     sentence of paragraph (6)(B) of section 411(d) (relating to 
     accrued benefit not to be decreased by amendment) is amended 
     to read as follows: ``The Secretary shall by regulations 
     provide that this subparagraph shall not apply to any plan 
     amendment that does not adversely affect the rights of 
     participants in a material manner.''.
       (2) Amendment to erisa.--The last sentence of section 
     204(g)(2) of the Employee Retirement Income Security Act of 
     1974 (29 U.S.C. 1054(g)(2)) is amended to read as follows: 
     ``The Secretary of the Treasury shall by regulations provide 
     that this paragraph shall not apply to any plan amendment 
     that does not adversely affect the rights of participants in 
     a material manner.''.
       (3) Secretary directed.--Not later than December 31, 2001, 
     the Secretary of the Treasury is directed to issue final 
     regulations under section 411(d)(6) of the Internal Revenue 
     Code of 1986 and section 204(g) of the

[[Page 2542]]

     Employee Retirement Income Security Act of 1974, including 
     the regulations required by the amendments made by this 
     subsection. Such regulations shall apply to plan years 
     beginning after December 31, 2001, or such earlier date as is 
     specified by the Secretary of the Treasury.

     SEC. 336. RATIONALIZATION OF RESTRICTIONS ON DISTRIBUTIONS.

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

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

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

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

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

     SEC. 338. EMPLOYERS MAY DISREGARD ROLLOVERS FOR PURPOSES OF 
                   CASH-OUT AMOUNTS.

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

     SEC. 339. MINIMUM DISTRIBUTION AND INCLUSION REQUIREMENTS FOR 
                   SECTION 457 PLANS.

       (a) Minimum Distribution Requirements.--Paragraph (2) of 
     section 457(d) (relating to distribution requirements) is 
     amended to read as follows:
       ``(2) Minimum distribution requirements.--A plan meets the 
     minimum distribution requirements of this paragraph if such 
     plan meets the requirements of section 401(a)(9).''.
       (b) Inclusion in Gross Income.--
       (1) Year of inclusion.--Subsection (a) of section 457 
     (relating to year of inclusion in gross income) is amended to 
     read as follows:
       ``(a) Year of Inclusion in Gross Income.--
       ``(1) In general.--Any amount of compensation deferred 
     under an eligible deferred compensation plan, and any income 
     attributable to the amounts so deferred, shall be includible 
     in gross income only for the taxable year in which such 
     compensation or other income--
       ``(A) is paid to the participant or other beneficiary, in 
     the case of a plan of an eligible employer described in 
     subsection (e)(1)(A), and
       ``(B) is paid or otherwise made available to the 
     participant or other beneficiary, in the case of a plan of an 
     eligible employer described in subsection (e)(1)(B).
       ``(2) Special rule for rollover amounts.--To the extent 
     provided in section 72(t)(9), section 72(t) shall apply to 
     any amount includible in gross income under this 
     subsection.''.
       (2) Conforming amendments.--
       (A) So much of paragraph (9) of section 457(e) as precedes 
     subparagraph (A) is amended to read as follows:
       ``(9) Benefits of tax exempt organization plans not treated 
     as made available by reason of certain elections, etc.--In 
     the case of an eligible deferred compensation plan of an 
     employer described in subsection (e)(1)(B)--''.
       (B) Section 457(d) is amended by adding at the end the 
     following new paragraph:
       ``(3) Special rule for government plan.--An eligible 
     deferred compensation plan of an employer described in 
     subsection (e)(1)(A) shall not be treated as failing to meet 
     the requirements of this subsection solely by reason of 
     making a distribution described in subsection (e)(9)(A).''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to distributions after December 31, 2000.

       Subtitle D--Strengthening Pension Security and Enforcement

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

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

    ``In the case of any plan                            The applicable
      the beginning in--                                percentage is--
      2001.........................................................160 
      2002.........................................................165 
      2003......................................................170.''.

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

    ``In the case of any plan                            The applicable
      year beginning in--                               percentage is--
      2001.........................................................160 
      2002.........................................................165 
      2003......................................................170.''.

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

     SEC. 342. MAXIMUM CONTRIBUTION DEDUCTION RULES MODIFIED AND 
                   APPLIED TO ALL DEFINED BENEFIT PLANS.

       (a) In General.--Subparagraph (D) of section 404(a)(1) 
     (relating to special rule in case of certain plans) is 
     amended to read as follows:
       ``(D) Special rule in case of certain plans.--

[[Page 2543]]

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

     For purposes of this paragraph, the deductible limits under 
     section 404(a)(7) shall first be applied to amounts 
     contributed to a defined benefit plan and then to amounts 
     described in subparagraph (B).''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to plan years beginning after December 31, 2000.

     SEC. 343. MISSING PARTICIPANTS.

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

     SEC. 344. PERIODIC PENSION BENEFITS STATEMENTS.

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

     SEC. 345. CIVIL PENALTIES FOR BREACH OF FIDUCIARY 
                   RESPONSIBILITY.

       (a) Imposition and Amount of Penalty Made Discretionary.--
     Section 502(l)(1) of the Employee Retirement Income Security 
     Act of 1974 (29 U.S.C. 1132(l)(1)) is amended--
       (1) by striking ``shall'' and inserting ``may'', and
       (2) by striking ``equal to'' and inserting ``not greater 
     than''.
       (b) Applicable Recovery Amount.--Section 502(l)(2) of such 
     Act (29 U.S.C. 1132(l)(2)) is amended to read as follows:
       ``(2) For purposes of paragraph (1), the term `applicable 
     recovery amount' means any amount which is recovered from any 
     fiduciary or other person (or from any other person on behalf 
     of any such fiduciary or other person) with respect to a 
     breach or violation described in paragraph (1) on or after 
     the 30th day following receipt by such fiduciary or other 
     person of written notice from the Secretary of the violation, 
     whether paid voluntarily or by order of a court in a judicial 
     proceeding instituted by the Secretary under subsection 
     (a)(2) or (a)(5). The Secretary may, in the Secretary's sole 
     discretion, extend the 30-day period described in the 
     preceding sentence.''.
       (c) Other Rules.--Section 502(l) of the Employee Retirement 
     Income Security Act of 1974 (29 U.S.C. 1132(l)) is amended by 
     adding at the end the following:
       ``(5) A person shall be jointly and severally liable for 
     the penalty described in paragraph (1) to the same extent 
     that such person is jointly and severally liable for the 
     applicable recovery amount on which the penalty is based.
       ``(6) No penalty shall be assessed under this subsection 
     unless the person against whom the penalty is assessed is 
     given notice and opportunity for a hearing with respect to 
     the violation and applicable recovery amount.''.
       (d) Effective Dates.--

[[Page 2544]]

       (1) In general.--The amendments made by this section shall 
     apply to any breach of fiduciary responsibility or other 
     violation of part 4 of subtitle B of title I of the Employee 
     Retirement Income Security Act of 1974 occurring on or after 
     the date of enactment of this Act.
       (2) Transition rule.--In applying the amendment made by 
     subsection (b) (relating to applicable recovery amount), a 
     breach or other violation occurring before the date of 
     enactment of this Act which continues after the 180th day 
     after such date (and which may have been discontinued at any 
     time during its existence) shall be treated as having 
     occurred after such date of enactment.

     SEC. 346. EXCISE TAX RELIEF FOR SOUND PENSION FUNDING.

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

     SEC. 347. EXCISE TAX ON FAILURE TO PROVIDE NOTICE BY DEFINED 
                   BENEFIT PLANS SIGNIFICANTLY REDUCING FUTURE 
                   BENEFIT ACCRUALS.

       (a) Amendment to 1986 Code.--Chapter 43 (relating to 
     qualified pension, etc., plans) is amended by adding at the 
     end the following new section:

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

       ``(a) Imposition of Tax.--There is hereby imposed a tax on 
     the failure of any applicable pension plan to meet the 
     requirements of subsection (e) with respect to any applicable 
     individual.
       ``(b) Amount of Tax.--
       ``(1) In general.--The amount of the tax imposed by 
     subsection (a) on any failure with respect to any applicable 
     individual shall be $100 for each day in the noncompliance 
     period with respect to such failure.
       ``(2) Noncompliance period.--For purposes of this section, 
     the term `noncompliance period' means, with respect to any 
     failure, the period beginning on the date the failure first 
     occurs and ending on the date the failure is corrected.
       ``(c) Limitations on Amount of Tax.--
       ``(1) Overall limitation for unintentional failures.--In 
     the case of failures that are due to reasonable cause and not 
     to willful neglect, the tax imposed by subsection (a) for 
     failures during the taxable year of the employer (or, in the 
     case of a multiemployer plan, the taxable year of the trust 
     forming part of the plan) shall not exceed $500,000. For 
     purposes of the preceding sentence, all multiemployer plans 
     of which the same trust forms a part shall be treated as one 
     plan. For purposes of this paragraph, if not all persons who 
     are treated as a single employer for purposes of this section 
     have the same taxable year, the taxable years taken into 
     account shall be determined under principles similar to the 
     principles of section 1561.
       ``(2) Waiver by secretary.--In the case of a failure which 
     is due to reasonable cause and not to willful neglect, the 
     Secretary may waive part or all of the tax imposed by 
     subsection (a) to the extent that the payment of such tax 
     would be excessive relative to the failure involved.
       ``(d) Liability for Tax.--The following shall be liable for 
     the tax imposed by subsection (a):
       ``(1) In the case of a plan other than a multiemployer 
     plan, the employer.
       ``(2) In the case of a multiemployer plan, the plan.
       ``(e) Notice Requirements for Plans Significantly Reducing 
     Benefit Accruals.--
       ``(1) In general.--If an applicable pension plan is amended 
     to provide for a significant reduction in the rate of future 
     benefit accrual, the plan administrator shall provide written 
     notice to each applicable individual (and to each employee 
     organization representing applicable individuals).
       ``(2) Notice.--The notice required by paragraph (1) shall 
     be written in a manner calculated to be understood by the 
     average plan participant and shall provide sufficient 
     information (as determined in accordance with regulations 
     prescribed by the Secretary) to allow applicable individuals 
     to understand the effect of the plan amendment.
       ``(3) Timing of notice.--Except as provided in regulations, 
     the notice required by paragraph (1) shall be provided within 
     a reasonable time before the effective date of the plan 
     amendment.
       ``(4) Designees.--Any notice under paragraph (1) may be 
     provided to a person designated, in writing, by the person to 
     which it would otherwise be provided.
       ``(5) Notice before adoption of amendment.--A plan shall 
     not be treated as failing to meet the requirements of 
     paragraph (1) merely because notice is provided before the 
     adoption of the plan amendment if no material modification of 
     the amendment occurs before the amendment is adopted.
       ``(f ) Applicable Individual; Applicable Pension Plan.--For 
     purposes of this section--
       ``(1) Applicable individual.--The term `applicable 
     individual' means, with respect to any plan amendment--
       ``(A) any participant in the plan, and
       ``(B) any beneficiary who is an alternate payee (within the 
     meaning of section 414(p)(8)) under an applicable qualified 
     domestic relations order (within the meaning of section 
     414(p)(1)(A)),

     who may reasonably be expected to be affected by such plan 
     amendment.
       ``(2) Applicable pension plan.--The term `applicable 
     pension plan' means--
       ``(A) any defined benefit plan, or
       ``(B) an individual account plan which is subject to the 
     funding standards of section 412,

     which had 100 or more participants who had accrued a benefit, 
     or with respect to whom contributions were made, under the 
     plan (whether or not vested) as of the last day of the plan 
     year preceding the plan year in which the plan amendment 
     becomes effective. Such term shall not include a governmental 
     plan (within the meaning of section 414(d)) or a church plan 
     (within the meaning of section 414(e)) with respect to which 
     the election provided by section 410(d) has not been made.''.
       (b) Amendment to ERISA.--Section 204(h) of the Employee 
     Retirement Income Security Act of 1974 (29 U.S.C. 1054(h)) is 
     amended by adding at the end the following new paragraph:
       ``(3)(A) A plan to which paragraph (1) applies shall not be 
     treated as meeting the requirements of such paragraph unless, 
     in addition to any notice required to be provided to an 
     individual or organization under such paragraph, the plan 
     administrator provides the notice described in subparagraph 
     (B).
       ``(B) The notice required by subparagraph (A) shall be 
     written in a manner calculated to be understood by the 
     average plan participant and shall provide sufficient 
     information (as determined in accordance with regulations 
     prescribed by the Secretary of the Treasury) to allow 
     individuals to understand the effect of the plan amendment.
       ``(C) Except as provided in regulations prescribed by the 
     Secretary of the Treasury, the notice required by 
     subparagraph (A) shall be provided within a reasonable time 
     before the effective date of the plan amendment.
       ``(D) A plan shall not be treated as failing to meet the 
     requirements of subparagraph (A) merely because notice is 
     provided before the adoption of the plan amendment if no 
     material modification of the amendment occurs before the 
     amendment is adopted.''.
       (c) Clerical Amendment.--The table of sections for chapter 
     43 is amended by adding at the end the following new item:

 ``Sec. 4980F. Failure of applicable plans reducing benefit accruals to 
              satisfy notice requirements.''.

       (d) Effective Dates.--
       (1) In general.--The amendments made by this section shall 
     apply to plan amendments taking effect on or after the date 
     of the enactment of this Act.
       (2) Transition.--Until such time as the Secretary of the 
     Treasury issues regulations under sections 4980F(e)(2) and 
     (3) of the Internal Revenue Code of 1986 and section 
     204(h)(3) of the Employee Retirement Income Security Act of 
     1974 (as added by the amendments made by this section), a 
     plan shall be treated as meeting the requirements of such 
     sections if it makes a good faith effort to comply with such 
     requirements.
       (3) Special rule.--The period for providing any notice 
     required by the amendments made by this section shall not end 
     before the date which is 3 months after the date of the 
     enactment of this Act.

     SEC. 348. PROTECTION OF INVESTMENT OF EMPLOYEE CONTRIBUTIONS 
                   TO 401(K) PLANS.

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

[[Page 2545]]



     SEC. 349. TREATMENT OF MULTIEMPLOYER PLANS UNDER SECTION 415.

       (a) Compensation Limit.--Paragraph (11) of section 415(b) 
     (relating to limitation for defined benefit plans) is amended 
     to read as follows:
       ``(11) Special limitation rule for governmental and 
     multiemployer plans.--In the case of a governmental plan (as 
     defined in section 414(d)) or a multiemployer plan (as 
     defined in section 414(f )), subparagraph (B) of paragraph 
     (1) shall not apply.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to years beginning after December 31, 2000.

     SEC. 350. TECHNICAL CORRECTIONS TO SAVER ACT.

       Section 517 of the Employee Retirement Income Security Act 
     of 1974 (29 U.S.C. 1147) is amended--
       (1) in subsection (a), by striking ``2001 and 2005 on or 
     after September 1 of each year involved'' and inserting 
     ``2001, 2005, and 2009 in the month of September of each year 
     involved'';
       (2) in subsection (b), by adding at the end the following 
     new sentence: ``To effectuate the purposes of this paragraph, 
     the Secretary may enter into a cooperative agreement, 
     pursuant to the Federal Grant and Cooperative Agreement Act 
     of 1977 (31 U.S.C. 6301 et seq.), with the American Savings 
     Education Council.'';
       (3) in subsection (e)(2)--
       (A) by striking subparagraph (D) and inserting the 
     following:
       ``(D) the Chairman and Ranking Member of the Subcommittee 
     on Labor, Health and Human Services, and Education of the 
     Committee on Appropriations of the House of Representatives 
     and the Chairman and Ranking Member of the Subcommittee on 
     Labor, Health and Human Services, and Education of the 
     Committee on Appropriations of the Senate;'';
       (B) by redesignating subparagraph (G) as subparagraph (J); 
     and
       (C) by inserting after subparagraph (F) the following new 
     subparagraphs:
       ``(G) the Chairman and Ranking Member of the Committee on 
     Finance of the Senate;
       ``(H) the Chairman and Ranking Member of the Committee on 
     Ways and Means of the House of Representatives;
       ``(I) the Chairman and Ranking Member of the Subcommittee 
     on Employer-Employee Relations of the Committee on Education 
     and the Workforce of the House of Representatives; and'';
       (4) in subsection (e)(3)(A)--
       (A) by striking ``There shall be no more than 200 
     additional participants.'' and inserting ``The participants 
     in the National Summit shall also include additional 
     participants appointed under this subparagraph.'';
       (B) by striking ``one-half shall be appointed by the 
     President,'' in clause (i) and inserting ``not more than 100 
     participants shall be appointed under this clause by the 
     President,'', and by striking ``and'' at the end of clause 
     (i);
       (C) by striking ``one-half shall be appointed by the 
     elected leaders of Congress'' in clause (ii) and inserting 
     ``not more than 100 participants shall be appointed under 
     this clause by the elected leaders of Congress'', and by 
     striking the period at the end of clause (ii) and inserting 
     ``; and''; and
       (D) by adding at the end the following new clause:
       ``(iii) The President, in consultation with the elected 
     leaders of Congress referred to in subsection (a), may 
     appoint under this clause additional participants to the 
     National Summit. The number of such additional participants 
     appointed under this clause may not exceed the lesser of 3 
     percent of the total number of all additional participants 
     appointed under this paragraph, or 10. Such additional 
     participants shall be appointed from persons nominated by the 
     organization referred to in subsection (b)(2) which is made 
     up of private sector businesses and associations partnered 
     with Government entities to promote long term financial 
     security in retirement through savings and with which the 
     Secretary is required thereunder to consult and cooperate and 
     shall not be Federal, State, or local government 
     employees.'';
       (5) in subsection (e)(3)(B), by striking ``January 31, 
     1998'' in subparagraph (B) and inserting ``May 1, 2001, May 
     1, 2005, and May 1, 2009, for each of the subsequent summits, 
     respectively'';
       (6) in subsection (f)(1)(C), by inserting ``, no later than 
     90 days prior to the date of the commencement of the National 
     Summit,'' after ``comment'' in paragraph (1)(C);
       (7) in subsection (g), by inserting ``, in consultation 
     with the congressional leaders specified in subsection 
     (e)(2),'' after ``report'';
       (8) in subsection (i)--
       (A) by striking ``beginning on or after October 1, 1997'' 
     in paragraph (1) and inserting ``2001, 2005, and 2009''; and
       (B) by adding at the end the following new paragraph:
       ``(3) Reception and representation authority.--The 
     Secretary is hereby granted reception and representation 
     authority limited specifically to the events at the National 
     Summit. The Secretary shall use any private contributions 
     received in connection with the National Summit prior to 
     using funds appropriated for purposes of the National Summit 
     pursuant to this paragraph.''; and
       (9) in subsection (k)--
       (A) by striking ``shall enter into a contract on a sole-
     source basis'' and inserting ``may enter into a contract on a 
     sole-source basis''; and
       (B) by striking ``fiscal year 1998'' and inserting ``fiscal 
     years 2001, 2005, and 2009''.

     SEC. 351. MODEL SPOUSAL CONSENT LANGUAGE AND QUALIFIED 
                   DOMESTIC RELATIONS ORDER.

       (a) Model Spousal Consent Language.--Section 205(c) of the 
     Employee Retirement Income Security Act of 1974 (29 U.S.C. 
     1055(c)) is amended by adding at the end the following new 
     paragraph:
       ``(9) Not later than January 1, 2001, the Secretary of 
     Labor shall develop model language for the spousal consent 
     required under paragraph (2) which--
       ``(A) is written in a manner calculated to be understood by 
     the average person, and
       ``(B) discloses in plain terms whether--
       ``(i) the waiver is irrevocable, and
       ``(ii) the waiver may be revoked by a qualified domestic 
     relations order.''.
       (b) Model Qualified Domestic Relations Order.--Section 
     206(d)(3) of such Act (29 U.S.C. 1056(d)(3)) is amended by 
     adding at the end the following new subparagraph:
       ``(O) Not later than January 1, 2001, the Secretary shall 
     develop language for a qualified domestic relations order 
     which meets--
       ``(i) the requirements of subparagraph (B)(i), and
       ``(ii) the requirements of this Act related to the need to 
     consider the treatment of any lump sum payment, qualified 
     joint and survivor annuity, or qualified preretirement 
     survivor annuity.''.
       (c) Publicity.--The Secretary of Labor shall include 
     publicity for the model language required by the amendments 
     made by this section in the pension outreach efforts 
     undertaken by each Secretary.

     SEC. 352. ELIMINATION OF ERISA DOUBLE JEOPARDY.

       (a) Elimination of Second Lawsuits by the Secretary.--
     Section 502(h) of the Employee Retirement Income Security Act 
     of 1974 (29 U.S.C. 1132(h)) is amended--
       (1) by inserting ``(1)'' after ``(h)'', and
       (2) by adding at the end the following:
       ``(2) In any case in which--
       ``(A) a complaint in an action brought against a person 
     under subsection (a)(2) is served in accordance with 
     paragraph (1), and
       ``(B) the action is maintained as a class action or 
     derivative action under the Federal Rules of Civil Procedure,
       ``(C) the action is resolved by a court-approved settlement 
     agreement,
       ``(D) the complaint is served upon the Secretary at least 
     90 days prior to final court approval of the settlement 
     agreement, and
       ``(E) the Secretary receives a fully executed copy of the 
     settlement agreement within the time established by the court 
     for notifying the plan's participants of the proposed 
     compromise pursuant to Rule 23 or 23.1 of the Federal Rules 
     of Civil Procedure,

     the Secretary shall be barred from litigating any claim 
     against such person under subsection (a)(2) that was, or 
     could have been, brought in that action with respect to the 
     same plan. Notwithstanding this paragraph, the Secretary 
     shall not be barred from litigating any claim against such 
     person under subsection (a)(2) if the Secretary filed a 
     complaint under subsection (a)(2) prior to the final court 
     approval of the settlement agreement.''.
       (b) Effective Date.--The amendments made by this section 
     are effective with respect to all actions or claims commenced 
     by the Secretary that are pending on or after the date of the 
     enactment of this Act.

                Subtitle E--Reducing Regulatory Burdens

     SEC. 361. MODIFICATION OF TIMING OF PLAN VALUATIONS.

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

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

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

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

       ``(iii) Adjustments.--Information under clause (i) shall, 
     in accordance with regulations, be actuarially adjusted to 
     reflect significant differences in participants.

[[Page 2546]]

       ``(iv) Election.--An election under this subparagraph, once 
     made, shall be irrevocable without the consent of the 
     Secretary.''.
       (b) Amendments to ERISA.--Paragraph (9) of section 302(c) 
     of the Employee Retirement Income Security Act of 1974 (29 
     U.S.C. 1053(c)) is amended--
       (1) by inserting ``(A)'' after ``(9)'', and
       (2) by adding at the end the following:
       ``(B)(i) Except as provided in clause (ii), if, for any 
     plan year--
       ``(I) an election is in effect under this subparagraph with 
     respect to a plan, and
       ``(II) the assets of the plan are not less than 125 percent 
     of the plan's current liability (as defined in paragraph 
     (7)(B)), determined as of the valuation date for the 
     preceding plan year,

     then this section shall be applied using the information 
     available as of such valuation date.
       ``(ii)(I) Clause (i) shall not apply for more than 2 
     consecutive plan years and valuation shall be under 
     subparagraph (A) with respect to any plan year to which 
     clause (i) does not apply by reason of this subclause.
       ``(II) Clause (i) shall not apply to the extent that more 
     frequent valuations are required under the regulations under 
     subparagraph (A).
       ``(iii) Information under clause (i) shall, in accordance 
     with regulations, be actuarially adjusted to reflect 
     significant differences in participants.
       ``(iv) An election under this subparagraph, once made, 
     shall be irrevocable without the consent of the Secretary of 
     the Treasury.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to plan years beginning after December 31, 2000.

     SEC. 362. ESOP DIVIDENDS MAY BE REINVESTED WITHOUT LOSS OF 
                   DIVIDEND DEDUCTION.

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

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

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

     SEC. 363. REPEAL OF TRANSITION RULE RELATING TO CERTAIN 
                   HIGHLY COMPENSATED EMPLOYEES.

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

     SEC. 364. EMPLOYEES OF TAX-EXEMPT ENTITIES.

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

     SEC. 365. CLARIFICATION OF TREATMENT OF EMPLOYER-PROVIDED 
                   RETIREMENT ADVICE.

       (a) In General.--Subsection (a) of section 132 (relating to 
     exclusion from gross income) is amended by striking ``or'' at 
     the end of paragraph (5), by striking the period at the end 
     of paragraph (6) and inserting ``, or'', and by adding at the 
     end the following new paragraph:
       ``(7) qualified retirement planning services.''.
       (b) Qualified Retirement Planning Services Defined.--
     Section 132 is amended by redesignating subsection (m) as 
     subsection (n) and by inserting after subsection (l) the 
     following:
       ``(m) Qualified Retirement Planning Services.--
       ``(1) In general.--For purposes of this section, the term 
     `qualified retirement planning services' means any retirement 
     planning service provided to an employee and his spouse by an 
     employer maintaining a qualified employer plan.
       ``(2) Nondiscrimination rule.--Subsection (a)(7) shall 
     apply in the case of highly compensated employees only if 
     such services are available on substantially the same terms 
     to each member of the group of employees normally provided 
     education and information regarding the employer's qualified 
     employer plan.
       ``(3) Qualified employer plan.--For purposes of this 
     subsection, the term `qualified employer plan' means a plan, 
     contract, pension, or account described in section 
     219(g)(5).''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to years beginning after December 31, 2000.

     SEC. 366. REPORTING SIMPLIFICATION.

       (a) Simplified Annual Filing Requirement for Owners and 
     Their Spouses.--
       (1) In general.--The Secretary of the Treasury shall modify 
     the requirements for filing annual returns with respect to 
     one-participant retirement plans to ensure that such plans 
     with assets of $250,000 or less as of the close of the plan 
     year need not file a return for that year.
       (2) One-participant retirement plan defined.--For purposes 
     of this subsection, the term ``one-participant retirement 
     plan'' means a retirement plan that--
       (A) on the first day of the plan year--
       (i) covered only the employer (and the employer's spouse) 
     and the employer owned the entire business (whether or not 
     incorporated), or
       (ii) covered only one or more partners (and their spouses) 
     in a business partnership (including partners in an S or C 
     corporation),
       (B) meets the minimum coverage requirements of section 
     410(b) of the Internal Revenue Code of 1986 without being 
     combined with any other plan of the business that covers the 
     employees of the business,
       (C) does not provide benefits to anyone except the employer 
     (and the employer's spouse) or the partners (and their 
     spouses),
       (D) does not cover a business that is a member of an 
     affiliated service group, a controlled group of corporations, 
     or a group of businesses under common control, and
       (E) does not cover a business that leases employees.
       (3) Other definitions.--Terms used in paragraph (2) which 
     are also used in section 414 of the Internal Revenue Code of 
     1986 shall have the respective meanings given such terms by 
     such section.
       (b) Simplified Annual Filing Requirement for Plans With 
     Fewer Than 25 Employees.--In the case of a retirement plan 
     which covers less than 25 employees on the first day of the 
     plan year and meets the requirements described in 
     subparagraphs (B), (D), and (E) of subsection (a)(2), the 
     Secretary of the Treasury shall provide for the filing of a 
     simplified annual return that is substantially similar to the 
     annual return required to be filed by a one-participant 
     retirement plan.
       (c) Effective Date.--The provisions of this section shall 
     take effect on January 1, 2001.

     SEC. 367. IMPROVEMENT OF EMPLOYEE PLANS COMPLIANCE RESOLUTION 
                   SYSTEM.

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

     SEC. 368. SUBSTANTIAL OWNER BENEFITS IN TERMINATED PLANS.

       (a) Modification of Phase-In of Guarantee.--Section 
     4022(b)(5) of the Employee Retirement Income Security Act of 
     1974 (29 U.S.C. 1322(b)(5)) is amended to read as follows:
       ``(5)(A) For purposes of this paragraph, the term `majority 
     owner' means an individual who, at any time during the 60-
     month period ending on the date the determination is being 
     made--
       ``(i) owns the entire interest in an unincorporated trade 
     or business,
       ``(ii) in the case of a partnership, is a partner who owns, 
     directly or indirectly, 50 percent or more of either the 
     capital interest or the profits interest in such partnership, 
     or
       ``(iii) in the case of a corporation, owns, directly or 
     indirectly, 50 percent or more in value of either the voting 
     stock of that corporation or all the stock of that 
     corporation.

     For purposes of clause (iii), the constructive ownership 
     rules of section 1563(e) of the Internal Revenue Code of 1986 
     shall apply (determined without regard to section 
     1563(e)(3)(C)).
       ``(B) In the case of a participant who is a majority owner, 
     the amount of benefits guaranteed under this section shall 
     equal the product of--
       ``(i) a fraction (not to exceed 1) the numerator of which 
     is the number of years from the later of the effective date 
     or the adoption date of the plan to the termination date, and 
     the denominator of which is 10, and

[[Page 2547]]

       ``(ii) the amount of benefits that would be guaranteed 
     under this section if the participant were not a majority 
     owner.''.
       (b) Modification of Allocation of Assets.--
       (1) Section 4044(a)(4)(B) of the Employee Retirement Income 
     Security Act of 1974 (29 U.S.C. 1344(a)(4)(B)) is amended by 
     striking ``section 4022(b)(5)'' and inserting ``section 
     4022(b)(5)(B)''.
       (2) Section 4044(b) of such Act (29 U.S.C. 1344(b)) is 
     amended--
       (A) by striking ``(5)'' in paragraph (2) and inserting 
     ``(4), (5),'', and
       (B) by redesignating paragraphs (3) through (6) as 
     paragraphs (4) through (7), respectively, and by inserting 
     after paragraph (2) the following:
       ``(3) If assets available for allocation under paragraph 
     (4) of subsection (a) are insufficient to satisfy in full the 
     benefits of all individuals who are described in that 
     paragraph, the assets shall be allocated first to benefits 
     described in subparagraph (A) of that paragraph. Any 
     remaining assets shall then be allocated to benefits 
     described in subparagraph (B) of that paragraph. If assets 
     allocated to such subparagraph (B) are insufficient to 
     satisfy in full the benefits described in that subparagraph, 
     the assets shall be allocated pro rata among individuals on 
     the basis of the present value (as of the termination date) 
     of their respective benefits described in that 
     subparagraph.''.
       (c) Conforming Amendments.--
       (1) Section 4021 of the Employee Retirement Income Security 
     Act of 1974 (29 U.S.C. 1321) is amended--
       (A) in subsection (b)(9), by striking ``as defined in 
     section 4022(b)(6)'', and
       (B) by adding at the end the following:
       ``(d) For purposes of subsection (b)(9), the term 
     `substantial owner' means an individual who, at any time 
     during the 60-month period ending on the date the 
     determination is being made--
       ``(1) owns the entire interest in an unincorporated trade 
     or business,
       ``(2) in the case of a partnership, is a partner who owns, 
     directly or indirectly, more than 10 percent of either the 
     capital interest or the profits interest in such partnership, 
     or
       ``(3) in the case of a corporation, owns, directly or 
     indirectly, more than 10 percent in value of either the 
     voting stock of that corporation or all the stock of that 
     corporation.

     For purposes of paragraph (3), the constructive ownership 
     rules of section 1563(e) of the Internal Revenue Code of 1986 
     shall apply (determined without regard to section 
     1563(e)(3)(C)).''.
       (2) Section 4043(c)(7) of such Act (29 U.S.C. 1343(c)(7)) 
     is amended by striking ``section 4022(b)(6)'' and inserting 
     ``section 4021(d)''.
       (d) Effective Dates.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendments made by this section shall apply to plan 
     terminations--
       (A) under section 4041(c) of the Employee Retirement Income 
     Security Act of 1974 (29 U.S.C. 1341(c)) with respect to 
     which notices of intent to terminate are provided under 
     section 4041(a)(2) of such Act (29 U.S.C. 1341(a)(2)) after 
     December 31, 2000, and
       (B) under section 4042 of such Act (29 U.S.C. 1342) with 
     respect to which proceedings are instituted by the 
     corporation after such date.
       (2) Conforming amendments.--The amendments made by 
     subsection (c) shall take effect on the date of the enactment 
     of this Act.

     SEC. 369. MODIFICATION OF EXCLUSION FOR EMPLOYER PROVIDED 
                   TRANSIT PASSES.

       (a) In General.--Section 132(f )(3) (relating to cash 
     reimbursements) is amended by striking the last sentence.
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     1999.

     SEC. 370. REPEAL OF THE MULTIPLE USE TEST.

       (a) In General.--Paragraph (9) of section 401(m) is amended 
     to read as follows:
       ``(9) Regulations.--The Secretary shall prescribe such 
     regulations as may be necessary to carry out the purposes of 
     this subsection and subsection (k), including regulations 
     permitting appropriate aggregation of plans and 
     contributions.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to years beginning after December 31, 2000.

     SEC. 371. FLEXIBILITY IN NONDISCRIMINATION, COVERAGE, AND 
                   LINE OF BUSINESS RULES.

       (a) Nondiscrimination.--
       (1) In general.--The Secretary of the Treasury shall, by 
     regulation, provide that a plan shall be deemed to satisfy 
     the requirements of section 401(a)(4) of the Internal Revenue 
     Code of 1986 if such plan satisfies the facts and 
     circumstances test under section 401(a)(4) of such Code, as 
     in effect before January 1, 1994, but only if--
       (A) the plan satisfies conditions prescribed by the 
     Secretary to appropriately limit the availability of such 
     test, and
       (B) the plan is submitted to the Secretary for a 
     determination of whether it satisfies such test.

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

     Clause (ii) shall apply only to the extent provided by the 
     Secretary.''.
       (2) Effective dates.--
       (A) In general.--The amendment made by paragraph (1) shall 
     apply to years beginning after December 31, 2000.
       (B) Conditions of availability.--Any condition of 
     availability prescribed by the Secretary under regulations 
     prescribed by the Secretary under section 410(b)(1)(D) of the 
     Internal Revenue Code of 1986 shall not apply before the 
     first year beginning not less than 120 days after the date on 
     which such condition is prescribed.
       (c) Line of Business Rules.--The Secretary of the Treasury 
     shall, on or before December 31, 2000, modify the existing 
     regulations issued under section 414(r) of the Internal 
     Revenue Code of 1986 in order to expand (to the extent that 
     the Secretary determines appropriate) the ability of a 
     pension plan to demonstrate compliance with the line of 
     business requirements based upon the facts and circumstances 
     surrounding the design and operation of the plan, even though 
     the plan is unable to satisfy the mechanical tests currently 
     used to determine compliance.

     SEC. 372. EXTENSION TO INTERNATIONAL ORGANIZATIONS OF 
                   MORATORIUM ON APPLICATION OF CERTAIN 
                   NONDISCRIMINATION RULES APPLICABLE TO STATE AND 
                   LOCAL PLANS.

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

     SEC. 373. NOTICE AND CONSENT PERIOD REGARDING DISTRIBUTIONS.

       (a) Expansion of Period.--
       (1) In general.--Subparagraph (A) of section 205(c)(7) of 
     the Employee Retirement Income Security Act of 1974 (29 
     U.S.C. 1055) is amended by striking ``90-day'' and inserting 
     ``180-day''.
       (2) Modification of regulations.--The Secretary of the 
     Treasury shall modify the regulations of such Secretary under 
     part 2 of subtitle B of title I of the Employee Retirement 
     Income Security Act of 1974 to the extent that they relate to 
     sections 203(e) and 205 of such Act to substitute ``180 
     days'' for ``90 days'' each place it appears.
       (3) Effective date.--The amendments made by paragraph (1) 
     and the modifications required by paragraph (2) shall apply 
     to years beginning after December 31, 2000.
       (b) Consent Regulation Inapplicable to Certain 
     Distributions.--
       (1) In general.--The Secretary of the Treasury shall modify 
     the regulations under section 205 of the Employee Retirement 
     Income Security Act of 1974 to provide that the description 
     of a participant's right, if any, to defer receipt of a 
     distribution shall also describe the consequences of failing 
     to defer such receipt.
       (2) Effective date.--The modifications required by 
     paragraph (1) shall apply to years beginning after December 
     31, 2000.

     SEC. 374. ANNUAL REPORT DISSEMINATION.

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

     SEC. 375. EXCESS BENEFIT PLANS.

       (a) In General.--Section 3(36) of the Employee Retirement 
     Income Security Act of

[[Page 2548]]

     1974 (29 U.S.C. 1002(36)) is amended to read as follows:
       ``(36) The term `excess benefit plan' means a plan, without 
     regard to whether such plan is funded, maintained by an 
     employer solely for the purpose of providing benefits to 
     employees in excess of any limitation imposed by section 
     401(a)(17) or 415 of the Internal Revenue Code of 1986 or any 
     other limitation on contributions or benefits in such Code on 
     plans to which any of such sections apply. To the extent that 
     a separable part of a plan (as determined by the Secretary of 
     Labor) maintained by an employer is maintained for such 
     purpose, that part shall be treated as a separate plan which 
     is an excess benefit plan.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to years beginning after December 31, 1999.

     SEC. 376. BENEFIT SUSPENSION NOTICE.

       (a) Modification of Regulation.--The Secretary of Labor 
     shall modify the regulation under section 203(a)(3)(B) of the 
     Employee Retirement Income Security Act of 1974 (29 U.S.C. 
     1053(a)(3)(B)) to provide that, except in the case of 
     employment, subsequent to the commencement of payment of 
     benefits, with a former employer, the notification required 
     by such regulation--
       (1) may be included in the summary plan description for the 
     plan furnished in accordance with section 104(b) of such Act 
     (29 U.S.C. 1024(b)), rather than in a separate notice, and
       (2) need not include a copy of the relevant plan 
     provisions.
       (c) Effective Date.--The modification made under this 
     section shall apply to plan years beginning after December 
     31, 1999.

     SEC. 377. CLARIFICATION OF CHURCH WELFARE PLAN STATUS UNDER 
                   STATE INSURANCE LAW.

       For purposes of determining the status under State 
     insurance law of a church plan (as defined in section 414(e) 
     of the Internal Revenue Code and section 3(33) of the 
     Employee Retirement Income Security Act that is a welfare 
     plan (as defined in section 3(1)), such church plan (and any 
     trust under such plan) shall be deemed a single-employer plan 
     that--
       (1) reimburses costs from general church assets;
       (2) purchases insurance coverage with general church 
     assets; or
       (3) both.

     For purposes of this paragraph, the term ``reimbursing costs 
     from general church assets'' means engaging in a practice 
     that does not have the effect of transferring or spreading 
     risk. The scope of this paragraph is limited to determining 
     the status of a church welfare plan under State insurance 
     law, and does not otherwise recharacterized the status, or 
     modify or affect the rights, of any plan participant, 
     including those who make plan contributions.

                      Subtitle F--Plan Amendments

     SEC. 381. PROVISIONS RELATING TO PLAN AMENDMENTS.

       (a) In General.--If this section applies to any plan or 
     contract amendment--
       (1) such plan or contract shall be treated as being 
     operated in accordance with the terms of the plan during the 
     period described in subsection (b)(2)(A), and
       (2) such plan shall not fail to meet the requirements of 
     section 411(d)(6) of the Internal Revenue Code of 1986 by 
     reason of such amendment.
       (b) Amendments to Which Section Applies.--
       (1) In general.--This section shall apply to any amendment 
     to any plan or annuity contract which is made--
       (A) pursuant to any amendment made by this title, or 
     pursuant to any regulation issued under this title, and
       (B) on or before the last day of the first plan year 
     beginning on or after January 1, 2003.

     In the case of a government plan (as defined in section 
     414(d) of the Internal Revenue Code of 1986), this paragraph 
     shall be applied by substituting ``2005'' for ``2003''.
       (2) Conditions.--This section shall not apply to any 
     amendment unless--
       (A) during the period--
       (i) beginning on the date the legislative or regulatory 
     amendment described in paragraph (1)(A) takes effect (or in 
     the case of a plan or contract amendment not required by such 
     legislative or regulatory amendment, the effective date 
     specified by the plan), and
       (ii) ending on the date described in paragraph (1)(B) (or, 
     if earlier, the date the plan or contract amendment is 
     adopted),

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

  TITLE IV--EXTENSION OF WORK OPPORTUNITY CREDIT AND WELFARE-TO-WORK 
                                 CREDIT

     SEC. 401. WORK OPPORTUNITY CREDIT AND WELFARE-TO-WORK CREDIT.

       (a) Temporary Extension.--Sections 51(c)(4)(B) and 51A(f ) 
     (relating to termination) are each amended by striking ``June 
     30, 1999'' and inserting ``December 31, 2001''.
       (b) Clarification of First Year of Employment.--Paragraph 
     (2) of section 51(i) is amended by striking ``during which he 
     was not a member of a targeted group''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to individuals who begin work for the employer 
     after June 30, 1999.

                       TITLE V--ESTATE TAX RELIEF

          Subtitle A--Reductions of Estate and Gift Tax Rates

     SEC. 501. REDUCTIONS OF ESTATE AND GIFT TAX RATES.

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

$1,025,800, plus 50% of the excess over $2,500,000.''..................

       (2) Phase-in of reduced rate.--Subsection (c) of section 
     2001 is amended by adding at the end the following new 
     paragraph:
       ``(3) Phase-in of reduced rate.--In the case of decedents 
     dying, and gifts made, during 2001, the last item in the 
     table contained in paragraph (1) shall be applied by 
     substituting `53%' for `50%'.''.
       (b) Repeal of Phaseout of Graduated Rates.--Subsection (c) 
     of section 2001 is amended by striking paragraph (2) and 
     redesignating paragraph (3), as added by subsection (a), as 
     paragraph (2).
       (c) Additional Reductions of Rates of Tax.--Subsection (c) 
     of section 2001, as so amended, is amended by adding at the 
     end the following new paragraph:
       ``(3) Phasedown of tax.--In the case of estates of 
     decedents dying, and gifts made, during any calendar year 
     after 2002--
       ``(A) In general.--Except as provided in subparagraph (C), 
     the tentative tax under this subsection shall be determined 
     by using a table prescribed by the Secretary (in lieu of 
     using the table contained in paragraph (1)) which is the same 
     as such table; except that--
       ``(i) each of the rates of tax shall be reduced by the 
     number of percentage points determined under subparagraph 
     (B), and
       ``(ii) the amounts setting forth the tax shall be adjusted 
     to the extent necessary to reflect the adjustments under 
     clause (i).
       ``(B) Percentage points of reduction.--

                                                        The number of  
    ``For calendar year:                          percentage points is:
      2003.........................................................1.0 
      2004 and thereafter..........................................2.0.

       ``(C) Coordination with credit for state death taxes.--
     Rules similar to the rules of subparagraph (A) shall apply to 
     the table contained in section 2011(b) except that the 
     Secretary shall prescribe percentage point reductions which 
     maintain the proportionate relationship (as in effect before 
     any reduction under this paragraph) between the credit under 
     section 2011 and the tax rates under subsection (c).''.
       (d) Effective Dates.--
       (1) Subsections (a) and (b).--The amendments made by 
     subsections (a) and (b) shall apply to estates of decedents 
     dying, and gifts made, after December 31, 2000.
       (2) Subsection (c).--The amendment made by subsection (c) 
     shall apply to estates of decedents dying, and gifts made, 
     after December 31, 2002.

   Subtitle B--Unified Credit Replaced With Unified Exemption Amount

     SEC. 511. UNIFIED CREDIT AGAINST ESTATE AND GIFT TAXES 
                   REPLACED WITH UNIFIED EXEMPTION AMOUNT.

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

     ``SEC. 2052. EXEMPTION.

       ``(a) In general.--For purposes of the tax imposed by 
     section 2001, the value of the taxable estate shall be 
     determined by deducting from the value of the gross estate an 
     amount equal to the excess (if any) of--
       ``(1) the exemption amount for the calendar year in which 
     the decedent died, over
       ``(2) the sum of--
       ``(A) the aggregate amount allowed as an exemption under 
     section 2521 with respect to gifts made by the decedent after 
     December 31, 2000, and
       ``(B) the aggregate amount of gifts made by the decedent 
     for which credit was allowed by section 2505 (as in effect on 
     the day before the date of the enactment of the Wage and 
     Employment Growth Act of 1999).

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

``In the case of                                          The exemption
  calendar year:                                             amount is:
  2001........................................................$675,000 
  2002 and 2003...............................................$700,000 
  2004........................................................$850,000 
  2005........................................................$950,000 
  2006 or thereafter.....................................$1,000,000.''.

       (2) Gift tax.--Subchapter C of chapter 12 (relating to 
     deductions) is amended by inserting before section 2522 the 
     following new section:

     ``SEC. 2521. EXEMPTION.

       ``In computing taxable gifts for any calendar year, there 
     shall be allowed as a deduction in the case of a citizen or 
     resident of the

[[Page 2549]]

     United States an amount equal to the excess of--
       ``(1) the exemption amount determined under section 2052 
     for such calendar year, over
       ``(2) the sum of--
       ``(A) the aggregate amount allowed as an exemption under 
     this section for all preceding calendar years after 2000, and
       ``(B) the aggregate amount of gifts for which credit was 
     allowed by section 2505 (as in effect on the day before the 
     date of the enactment of the Wage and Employment Growth Act 
     of 1999).''.
       (b) Repeal of Unified Credits.--
       (1) Section 2010 (relating to unified credit against estate 
     tax) is hereby repealed.
       (2) Section 2505 (relating to unified credit against gift 
     tax) is hereby repealed.
       (c) Conforming Amendments.--
       (1) Subparagraph (B) of section 2001(b)(1) is amended by 
     inserting before the comma ``reduced by the amount described 
     in section 2052(a)(2)(B)''.
       (2)(A) Subsection (b) of section 2011 is amended--
       (i) by striking ``adjusted'' in the table, and
       (ii) by striking the last sentence.
       (B) Subsection (f ) of section 2011 is amended by striking 
     ``, reduced by the amount of the unified credit provided by 
     section 2010''.
       (3) Subsection (a) of section 2012 is amended by striking 
     ``and the unified credit provided by section 2010''.
       (4)(A) Subsection (b) of section 2013 is amended by 
     inserting before the period at the end of the first sentence 
     ``and increased by the exemption allowed under section 2052 
     or 2106(a)(4) (or the corresponding provisions of prior law) 
     in determining the taxable estate of the transferor for 
     purposes of the estate tax''.
       (B) Subparagraph (A) of section 2013(c)(1) is amended by 
     striking ``2010,''.
       (5) Paragraph (2) of section 2014(b) is amended by striking 
     ``2010,''.
       (6) Clause (ii) of section 2056A(b)(12)(C) is amended to 
     read as follows:
       ``(ii) to treat any reduction in the tax imposed by 
     paragraph (1)(A) by reason of the credit allowable under 
     section 2010 (as in effect on the day before the date of the 
     enactment of the Wage and Employment Growth Act of 1999) or 
     the exemption allowable under section 2052 with respect to 
     the decedent as a credit under section 2505 (as so in effect) 
     or exemption under section 2521 (as the case may be) 
     allowable to such surviving spouse for purposes of 
     determining the amount of the exemption allowable under 
     section 2521 with respect to taxable gifts made by the 
     surviving spouse during the year in which the spouse becomes 
     a citizen or any subsequent year,''.
       (7) Paragraph (3) of section 2057(a) is amended to read as 
     follows:
       ``(3) Coordination with exemption amount.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     if this section applies to an estate, the exemption amount 
     under section 2052 shall be $625,000.
       ``(B) Increase in exemption amount if deduction is less 
     than $675,000.--If the deduction allowed by this section is 
     less than $675,000, the amount of the exemption amount under 
     section 2052 shall be increased (but not above the amount 
     which would apply to the estate without regard to this 
     section) by the excess of $675,000 over the amount of the 
     deduction allowed.''.
       (8)(A) Subparagraph (B) of section 2101(b)(1) is amended by 
     inserting before the comma ``reduced by the aggregate amount 
     of gifts for which credit was allowed by section 2505 (as in 
     effect on the day before the date of the enactment of the 
     Wage and Employment Growth Act of 1999)''
       (B) Subsection (b) of section 2101 is amended by striking 
     the last sentence.
       (9) Section 2102 is amended by striking subsection (c).
       (10) Subsection (a) of section 2106 is amended by adding at 
     the end the following new paragraph:
       ``(4) Exemption.--
       ``(A) In general.--An exemption of $60,000.
       ``(B) Residents of possessions of the united states.--In 
     the case of a decedent who is considered to be a nonresident 
     not a citizen of the United States under section 2209, the 
     exemption under this paragraph shall be the greater of--
       ``(i) $60,000, or
       ``(ii) that proportion of $175,000 which the value of that 
     part of the decedent's gross estate which at the time of his 
     death is situated in the United States bears to the value of 
     his entire gross estate wherever situated.
       ``(C) Special rules.--
       ``(i) Coordination with treaties.--To the extent required 
     under any treaty obligation of the United States, the 
     exemption allowed under this paragraph shall be equal to the 
     amount which bears the same ratio to the exemption amount 
     under section 2052 (for the calendar year in which the 
     decedent died) as the value of the part of the decedent's 
     gross estate which at the time of his death is situated in 
     the United States bears to the value of his entire gross 
     estate wherever situated. For purposes of the preceding 
     sentence, property shall not be treated as situated in the 
     United States if such property is exempt from the tax imposed 
     by this subchapter under any treaty obligation of the United 
     States.
       ``(ii) Coordination with gift tax exemption and unified 
     credit.--If an exemption has been allowed under section 2521 
     (or a credit has been allowed under section 2505 as in effect 
     on the day before the date of the enactment of the Wage and 
     Employment Growth Act of 1999) with respect to any gift made 
     by the decedent, each dollar amount contained in subparagraph 
     (A) or (B) or the exemption amount applicable under clause 
     (i) of this subparagraph (whichever applies) shall be reduced 
     by the exemption so allowed under 2521 (or, in the case of 
     such a credit, by the amount of the gift for which the credit 
     was so allowed).''.
       (11)(A) Subsection (a) of section 2107 is amended by adding 
     at the end the following new paragraph:
       ``(3) Limitation on exemption amount.--Subparagraphs (B) 
     and (C) of section 2106(a)(4) shall not apply in applying 
     section 2106 for purposes of this section.''.
       (B) Subsection (c) of section 2107 is amended--
       (i) by striking paragraph (1) and by redesignating 
     paragraphs (2) and (3) as paragraphs (1) and (2), 
     respectively, and
       (ii) by striking the second sentence of paragraph (2) (as 
     so redesignated).
       (12) Section 2206 is amended by striking ``the taxable 
     estate'' in the first sentence and inserting ``the sum of the 
     taxable estate and the amount of the exemption allowed under 
     section 2052 or 2106(a)(4) in computing the taxable estate''.
       (13) Section 2207 is amended by striking ``the taxable 
     estate'' in the first sentence and inserting ``the sum of the 
     taxable estate and the amount of the exemption allowed under 
     section 2052 or 2106(a)(4) in computing the taxable estate''.
       (14) Subparagraph (B) of section 2207B(a)(1) is amended to 
     read as follows:
       ``(B) the sum of the taxable estate and the amount of the 
     exemption allowed under section 2052 or 2106(a)(4) in 
     computing the taxable estate.''.
       (15) Subsection (a) of section 2503 is amended by striking 
     ``section 2522'' and inserting ``section 2521''.
       (16) Paragraph (1) of section 6018(a) is amended by 
     striking ``the applicable exclusion amount in effect under 
     section 2010(c)'' and inserting ``the exemption amount under 
     section 2052''.
       (17) Subparagraph (A) of section 6601( j)(2) is amended to 
     read as follows:
       ``(A) the amount of the tax which would be imposed by 
     chapter 11 on an amount of taxable estate equal to 
     $1,000,000, or''.
       (18) The table of sections for part II of subchapter A of 
     chapter 11 is amended by striking the item relating to 
     section 2010.
       (19) The table of sections for part IV of subchapter A of 
     chapter 11 is amended by inserting after the item relating to 
     section 2051 the following new item:

``Sec. 2052. Exemption.''.

       (20) The table of sections for subchapter A of chapter 12 
     is amended by striking the item relating to section 2505.
       (21) The table of sections for subchapter C of chapter 12 
     is amended by inserting before the item relating to section 
     2522 the following new item:

``Sec. 2521. Exemption.''.

       (d) Effective Date.--The amendments made by this section--
       (1) insofar as they relate to the tax imposed by chapter 11 
     of the Internal Revenue Code of 1986, shall apply to estates 
     of decedents dying after December 31, 2000, and
       (2) insofar as they relate to the tax imposed by chapter 12 
     of such Code, shall apply to gifts made after December 31, 
     2000.

     Subtitle C--Modifications of Generation-skipping Transfer Tax

     SEC. 521. DEEMED ALLOCATION OF GST EXEMPTION TO LIFETIME 
                   TRANSFERS TO TRUSTS; RETROACTIVE ALLOCATIONS.

       (a) In General.--Section 2632 (relating to special rules 
     for allocation of GST exemption) is amended by redesignating 
     subsection (c) as subsection (e) and by inserting after 
     subsection (b) the following new subsections:
       ``(c) Deemed Allocation to Certain Lifetime Transfers to 
     GST Trusts.--
       ``(1) In general.--If any individual makes an indirect skip 
     during such individual's lifetime, any unused portion of such 
     individual's GST exemption shall be allocated to the property 
     transferred to the extent necessary to make the inclusion 
     ratio for such property zero. If the amount of the indirect 
     skip exceeds such unused portion, the entire unused portion 
     shall be allocated to the property transferred.
       ``(2) Unused portion.--For purposes of paragraph (1), the 
     unused portion of an individual's GST exemption is that 
     portion of such exemption which has not previously been--
       ``(A) allocated by such individual,
       ``(B) treated as allocated under subsection (b) with 
     respect to a direct skip occurring during or before the 
     calendar year in which the indirect skip is made, or
       ``(C) treated as allocated under paragraph (1) with respect 
     to a prior indirect skip.
       ``(3) Definitions.--
       ``(A) Indirect skip.--For purposes of this subsection, the 
     term `indirect skip' means

[[Page 2550]]

     any transfer of property (other than a direct skip) subject 
     to the tax imposed by chapter 12 made to a GST trust.
       ``(B) GST trust.--The term `GST trust' means a trust that 
     could have a generation-skipping transfer with respect to the 
     transferor unless--
       ``(i) the trust instrument provides that more than 25 
     percent of the trust corpus must be distributed to or may be 
     withdrawn by 1 or more individuals who are non-skip persons--

       ``(I) before the date that the individual attains age 46,
       ``(II) on or before one or more dates specified in the 
     trust instrument that will occur before the date that such 
     individual attains age 46, or
       ``(III) upon the occurrence of an event that, in accordance 
     with regulations prescribed by the Secretary, may reasonably 
     be expected to occur before the date that such individual 
     attains age 46;

       ``(ii) the trust instrument provides that more than 25 
     percent of the trust corpus must be distributed to or may be 
     withdrawn by one or more individuals who are non-skip persons 
     and who are living on the date of death of another person 
     identified in the instrument (by name or by class) who is 
     more than 10 years older than such individuals;
       ``(iii) the trust instrument provides that, if one or more 
     individuals who are non-skip persons die on or before a date 
     or event described in clause (i) or (ii), more than 25 
     percent of the trust corpus either must be distributed to the 
     estate or estates of one or more of such individuals or is 
     subject to a general power of appointment exercisable by one 
     or more of such individuals;
       ``(iv) the trust is a trust any portion of which would be 
     included in the gross estate of a non-skip person (other than 
     the transferor) if such person died immediately after the 
     transfer;
       ``(v) the trust is a charitable lead annuity trust (within 
     the meaning of section 2642(e)(3)(A)) or a charitable 
     remainder annuity trust or a charitable remainder unitrust 
     (within the meaning of section 664(d)); or
       ``(vi) the trust is a trust with respect to which a 
     deduction was allowed under section 2522 for the amount of an 
     interest in the form of the right to receive annual payments 
     of a fixed percentage of the net fair market value of the 
     trust property (determined yearly) and which is required to 
     pay principal to a non-skip person if such person is alive 
     when the yearly payments for which the deduction was allowed 
     terminate.

     For purposes of this subparagraph, the value of transferred 
     property shall not be considered to be includible in the 
     gross estate of a non-skip person or subject to a right of 
     withdrawal by reason of such person holding a right to 
     withdraw so much of such property as does not exceed the 
     amount referred to in section 2503(b) with respect to any 
     transferor, and it shall be assumed that powers of 
     appointment held by non-skip persons will not be exercised.
       ``(4) Automatic allocations to certain gst trusts.--For 
     purposes of this subsection, an indirect skip to which 
     section 2642(f ) applies shall be deemed to have been made 
     only at the close of the estate tax inclusion period. The 
     fair market value of such transfer shall be the fair market 
     value of the trust property at the close of the estate tax 
     inclusion period.
       ``(5) Applicability and effect.--
       ``(A) In general.--An individual--
       ``(i) may elect to have this subsection not apply to--

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

       ``(ii) may elect to treat any trust as a GST trust for 
     purposes of this subsection with respect to any or all 
     transfers made by such individual to such trust.
       ``(B) Elections.--
       ``(i) Elections with respect to indirect skips.--An 
     election under subparagraph (A)(i)(I) shall be deemed to be 
     timely if filed on a timely filed gift tax return for the 
     calendar year in which the transfer was made or deemed to 
     have been made pursuant to paragraph (4) or on such later 
     date or dates as may be prescribed by the Secretary.
       ``(ii) Other elections.--An election under clause (i)(II) 
     or (ii) of subparagraph (A) may be made on a timely filed 
     gift tax return for the calendar year for which the election 
     is to become effective.
       ``(d) Retroactive Allocations.--
       ``(1) In general.--If--
       ``(A) a non-skip person has an interest or a future 
     interest in a trust to which any transfer has been made,
       ``(B) such person--
       ``(i) is a lineal descendant of a grandparent of the 
     transferor or of a grandparent of the transferor's spouse or 
     former spouse, and
       ``(ii) is assigned to a generation below the generation 
     assignment of the transferor, and
       ``(C) such person predeceases the transferor,

     then the transferor may make an allocation of any of such 
     transferor's unused GST exemption to any previous transfer or 
     transfers to the trust on a chronological basis.
       ``(2) Special rules.--If the allocation under paragraph (1) 
     by the transferor is made on a gift tax return filed on or 
     before the date prescribed by section 6075(b) for gifts made 
     within the calendar year within which the non-skip person's 
     death occurred--
       ``(A) the value of such transfer or transfers for purposes 
     of section 2642(a) shall be determined as if such allocation 
     had been made on a timely filed gift tax return for each 
     calendar year within which each transfer was made,
       ``(B) such allocation shall be effective immediately before 
     such death, and
       ``(C) the amount of the transferor's unused GST exemption 
     available to be allocated shall be determined immediately 
     before such death.
       ``(3) Future interest.--For purposes of this subsection, a 
     person has a future interest in a trust if the trust may 
     permit income or corpus to be paid to such person on a date 
     or dates in the future.''.
       (b) Conforming Amendment.--Paragraph (2) of section 2632(b) 
     is amended by striking ``with respect to a direct skip'' and 
     inserting ``or subsection (c)(1)''.
       (c) Effective Dates.--
       (1) Deemed allocation.--Section 2632(c) of the Internal 
     Revenue Code of 1986 (as added by subsection (a)), and the 
     amendment made by subsection (b), shall apply to transfers 
     subject to chapter 11 or 12 made after December 31, 1999, and 
     to estate tax inclusion periods ending after December 31, 
     1999.
       (2) Retroactive allocations.--Section 2632(d) of the 
     Internal Revenue Code of 1986 (as added by subsection (a)) 
     shall apply to deaths of non-skip persons occurring after the 
     date of the enactment of this Act.

     SEC. 522. SEVERING OF TRUSTS.

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

       ``(I) the single trust was divided on a fractional basis, 
     and

       ``(II) the terms of the new trusts, in the aggregate, 
     provide for the same succession of interests of beneficiaries 
     as are provided in the original trust.

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

     SEC. 523. MODIFICATION OF CERTAIN VALUATION RULES.

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

[[Page 2551]]

     met, the value of such property shall be determined as of the 
     time of the distribution concerned.''.
       (c) Effective Date.--The amendments made by this section 
     shall take effect as if included in the amendments made by 
     section 1431 of the Tax Reform Act of 1986.

     SEC. 524. RELIEF PROVISIONS.

       (a) In General.--Section 2642 is amended by adding at the 
     end the following new subsection:
       ``(g) Relief Provisions.--
       ``(1) Relief for late elections.--
       ``(A) In general.--The Secretary shall by regulation 
     prescribe such circumstances and procedures under which 
     extensions of time will be granted to make--
       ``(i) an allocation of GST exemption described in paragraph 
     (1) or (2) of subsection (b), and
       ``(ii) an election under subsection (b)(3) or (c)(5) of 
     section 2632.

     Such regulations shall include procedures for requesting 
     comparable relief with respect to transfers made before the 
     date of the enactment of this paragraph.
       ``(B) Basis for determinations.--In determining whether to 
     grant relief under this paragraph, the Secretary shall take 
     into account all relevant circumstances, including evidence 
     of intent contained in the trust instrument or instrument of 
     transfer and such other factors as the Secretary deems 
     relevant. For purposes of determining whether to grant relief 
     under this paragraph, the time for making the allocation (or 
     election) shall be treated as if not expressly prescribed by 
     statute.
       ``(2) Substantial compliance.--An allocation of GST 
     exemption under section 2632 that demonstrates an intent to 
     have the lowest possible inclusion ratio with respect to a 
     transfer or a trust shall be deemed to be an allocation of so 
     much of the transferor's unused GST exemption as produces the 
     lowest possible inclusion ratio. In determining whether there 
     has been substantial compliance, all relevant circumstances 
     shall be taken into account, including evidence of intent 
     contained in the trust instrument or instrument of transfer 
     and such other factors as the Secretary deems relevant.''.
       (b) Effective Dates.--
       (1) Relief for late elections.--Section 2642(g)(1) of the 
     Internal Revenue Code of 1986 (as added by subsection (a)) 
     shall apply to requests pending on, or filed after, the date 
     of the enactment of this Act.
       (2) Substantial compliance.--Section 2642(g)(2) of such 
     Code (as so added) shall take effect on the date of the 
     enactment of this Act and shall apply to allocations made 
     prior to such date for purposes of determining the tax 
     consequences of generation-skipping transfers with respect to 
     which the period of time for filing claims for refund has not 
     expired. No implication is intended with respect to the 
     availability of relief for late elections or the application 
     of a rule of substantial compliance prior to the enactment of 
     this amendment.

                   Subtitle D--Conservation Easements

     SEC. 531. EXPANSION OF ESTATE TAX RULE FOR CONSERVATION 
                   EASEMENTS.

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

     TITLE VI--TAX RELIEF FOR DISTRESSED COMMUNITIES AND INDUSTRIES

           Subtitle A--American Community Renewal Act of 1999

     SEC. 601. SHORT TITLE.

       This subtitle may be cited as the ``American Community 
     Renewal Act of 1999''.

     SEC. 602. DESIGNATION OF AND TAX INCENTIVES FOR RENEWAL 
                   COMMUNITIES.

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

                  ``Subchapter X--Renewal Communities

``Part   I. Designation.
``Part  II. Renewal community capital gain; renewal community business.
``Part  III. Family development accounts.
``Part   IV. Additional incentives.

                         ``PART I--DESIGNATION

``Sec. 1400E. Designation of renewal communities.

     ``SEC. 1400E. DESIGNATION OF RENEWAL COMMUNITIES.

       ``(a) Designation.--
       ``(1) Definitions.--For purposes of this title, the term 
     `renewal community' means any area--
       ``(A) which is nominated by one or more local governments 
     and the State or States in which it is located for 
     designation as a renewal community (hereinafter in this 
     section referred to as a `nominated area'); and
       ``(B) which the Secretary of Housing and Urban Development 
     designates as a renewal community, after consultation with--
       ``(i) the Secretaries of Agriculture, Commerce, Labor, and 
     the Treasury; the Director of the Office of Management and 
     Budget; and the Administrator of the Small Business 
     Administration; and
       ``(ii) in the case of an area on an Indian reservation, the 
     Secretary of the Interior.
       ``(2) Number of designations.--
       ``(A) In general.--The Secretary of Housing and Urban 
     Development may designate not more than 15 nominated areas as 
     renewal communities of which--
       ``(i) only 5 may be designated during the first 12 months 
     of the period referred to in paragraph (4)(B),
       ``(ii) an additional 5 may be designated during the second 
     12 months of such period, and
       ``(iii) the remaining 5 may be designated during the last 
     12 months of such period.
       ``(B) Minimum designation in rural areas.--Of the areas 
     designated under paragraph (1), at least 3 must be areas--
       ``(i) which are within a local government jurisdiction or 
     jurisdictions with a population of less than 50,000,
       ``(ii) which are outside of a metropolitan statistical area 
     (within the meaning of section 143(k)(2)(B)), or
       ``(iii) which are determined by the Secretary of Housing 
     and Urban Development, after consultation with the Secretary 
     of Commerce, to be rural areas.
       ``(3) Areas designated based on degree of poverty, etc.--
       ``(A) In general.--Except as otherwise provided in this 
     section, the nominated areas designated as renewal 
     communities under this subsection shall be those nominated 
     areas with the highest average ranking with respect to the 
     criteria described in subparagraphs (B), (C), and (D) of 
     subsection (c)(3). For purposes of the preceding sentence, an 
     area shall be ranked within each such criterion on the basis 
     of the amount by which the area exceeds such criterion, with 
     the area which exceeds such criterion by the greatest amount 
     given the highest ranking.
       ``(B) Exception where inadequate course of action, etc.--An 
     area shall not be designated under subparagraph (A) if the 
     Secretary of Housing and Urban Development determines that 
     the course of action described in subsection (d)(2) with 
     respect to such area is inadequate.
       ``(C) Priority for empowerment zones and enterprise 
     communities with respect to first half of designations.--With 
     respect to the first 10 designations made under this 
     section--
       ``(i) all shall be chosen from nominated areas which are 
     empowerment zones or enterprise communities (and are 
     otherwise eligible for designation under this section); and
       ``(ii) two shall be areas described in paragraph (2)(B).
       ``(4) Limitation on designations.--
       ``(A) Publication of regulations.--The Secretary of Housing 
     and Urban Development shall prescribe by regulation no later 
     than 4 months after the date of the enactment of this 
     section, after consultation with the officials described in 
     paragraph (1)(B)--
       ``(i) the procedures for nominating an area under paragraph 
     (1)(A);
       ``(ii) the parameters relating to the size and population 
     characteristics of a renewal community; and
       ``(iii) the manner in which nominated areas will be 
     evaluated based on the criteria specified in subsection (d).
       ``(B) Time limitations.--The Secretary of Housing and Urban 
     Development may designate nominated areas as renewal 
     communities only during the 36-month period beginning on the 
     first day of the first month following the month in which the 
     regulations described in subparagraph (A) are prescribed.
       ``(C) Procedural rules.--The Secretary of Housing and Urban 
     Development shall not make any designation of a nominated 
     area as a renewal community under paragraph (2) unless--
       ``(i) the local governments and the States in which the 
     nominated area is located have the authority--

       ``(I) to nominate such area for designation as a renewal 
     community;
       ``(II) to make the State and local commitments described in 
     subsection (d); and
       ``(III) to provide assurances satisfactory to the Secretary 
     of Housing and Urban Development that such commitments will 
     be fulfilled,

       ``(ii) a nomination regarding such area is submitted in 
     such a manner and in such form, and contains such 
     information, as the Secretary of Housing and Urban 
     Development shall by regulation prescribe; and
       ``(iii) the Secretary of Housing and Urban Development 
     determines that any information furnished is reasonably 
     accurate.
       ``(5) Nomination process for indian reservations.--For 
     purposes of this subchapter, in the case of a nominated area 
     on an Indian reservation, the reservation governing body (as 
     determined by the Secretary of the Interior) shall be treated 
     as being both the State

[[Page 2552]]

     and local governments with respect to such area.
       ``(b) Period for Which Designation Is in Effect.--
       ``(1) In general.--Any designation of an area as a renewal 
     community shall remain in effect during the period beginning 
     on the date of the designation and ending on the earliest 
     of--
       ``(A) December 31, 2007,
       ``(B) the termination date designated by the State and 
     local governments in their nomination, or
       ``(C) the date the Secretary of Housing and Urban 
     Development revokes such designation.
       ``(2) Revocation of designation.--The Secretary of Housing 
     and Urban Development may revoke the designation under this 
     section of an area if such Secretary determines that the 
     local government or the State in which the area is located--
       ``(A) has modified the boundaries of the area, or
       ``(B) is not complying substantially with, or fails to make 
     progress in achieving, the State or local commitments, 
     respectively, described in subsection (d).
       ``(c) Area and Eligibility Requirements.--
       ``(1) In general.--The Secretary of Housing and Urban 
     Development may designate a nominated area as a renewal 
     community under subsection (a) only if the area meets the 
     requirements of paragraphs (2) and (3) of this subsection.
       ``(2) Area requirements.--A nominated area meets the 
     requirements of this paragraph if--
       ``(A) the area is within the jurisdiction of one or more 
     local governments;
       ``(B) the boundary of the area is continuous; and
       ``(C) the area--
       ``(i) has a population, of at least--

       ``(I) 4,000 if any portion of such area (other than a rural 
     area described in subsection (a)(2)(B)(i)) is located within 
     a metropolitan statistical area (within the meaning of 
     section 143(k)(2)(B)) which has a population of 50,000 or 
     greater; or
       ``(II) 1,000 in any other case; or

       ``(ii) is entirely within an Indian reservation (as 
     determined by the Secretary of the Interior).
       ``(3) Eligibility requirements.--A nominated area meets the 
     requirements of this paragraph if the State and the local 
     governments in which it is located certify (and the Secretary 
     of Housing and Urban Development, after such review of 
     supporting data as he deems appropriate, accepts such 
     certification) that--
       ``(A) the area is one of pervasive poverty, unemployment, 
     and general distress;
       ``(B) the unemployment rate in the area, as determined by 
     the most recent available data, was at least 1\1/2\ times the 
     national unemployment rate for the period to which such data 
     relate;
       ``(C) the poverty rate for each population census tract 
     within the nominated area is at least 20 percent; and
       ``(D) in the case of an urban area, at least 70 percent of 
     the households living in the area have incomes below 80 
     percent of the median income of households within the 
     jurisdiction of the local government (determined in the same 
     manner as under section 119(b)(2) of the Housing and 
     Community Development Act of 1974).
       ``(4) Consideration of high incidence of crime.--The 
     Secretary of Housing and Urban Development shall take into 
     account, in selecting nominated areas for designation as 
     renewal communities under this section, the extent to which 
     such areas have a high incidence of crime.
       ``(5) Consideration of communities identified in gao 
     study.--The Secretary of Housing and Urban Development shall 
     take into account, in selecting nominated areas for 
     designation as renewal communities under this section, if the 
     area has census tracts identified in the May 12, 1998, report 
     of the Government Accounting Office regarding the 
     identification of economically distressed areas.
       ``(d) Required State and Local Commitments.--
       ``(1) In general.--The Secretary of Housing and Urban 
     Development may designate any nominated area as a renewal 
     community under subsection (a) only if--
       ``(A) the local government and the State in which the area 
     is located agree in writing that, during any period during 
     which the area is a renewal community, such governments will 
     follow a specified course of action which meets the 
     requirements of paragraph (2) and is designed to reduce the 
     various burdens borne by employers or employees in such area; 
     and
       ``(B) the economic growth promotion requirements of 
     paragraph (3) are met.
       ``(2) Course of action.--
       ``(A) In general.--A course of action meets the 
     requirements of this paragraph if such course of action is a 
     written document, signed by a State (or local government) and 
     neighborhood organizations, which evidences a partnership 
     between such State or government and community-based 
     organizations and which commits each signatory to specific 
     and measurable goals, actions, and timetables. Such course of 
     action shall include at least five of the following:
       ``(i) A reduction of tax rates or fees applying within the 
     renewal community.
       ``(ii) An increase in the level of efficiency of local 
     services within the renewal community.
       ``(iii) Crime reduction strategies, such as crime 
     prevention (including the provision of such services by 
     nongovernmental entities).
       ``(iv) Actions to reduce, remove, simplify, or streamline 
     governmental requirements applying within the renewal 
     community.
       ``(v) Involvement in the program by private entities, 
     organizations, neighborhood organizations, and community 
     groups, particularly those in the renewal community, 
     including a commitment from such private entities to provide 
     jobs and job training for, and technical, financial, or other 
     assistance to, employers, employees, and residents from the 
     renewal community.
       ``(vi) State or local income tax benefits for fees paid for 
     services performed by a nongovernmental entity which were 
     formerly performed by a governmental entity.
       ``(vii) The gift (or sale at below fair market value) of 
     surplus real property (such as land, homes, and commercial or 
     industrial structures) in the renewal community to 
     neighborhood organizations, community development 
     corporations, or private companies.
       ``(B) Recognition of past efforts.--For purposes of this 
     section, in evaluating the course of action agreed to by any 
     State or local government, the Secretary of Housing and Urban 
     Development shall take into account the past efforts of such 
     State or local government in reducing the various burdens 
     borne by employers and employees in the area involved.
       ``(3) Economic growth promotion requirements.--The economic 
     growth promotion requirements of this paragraph are met with 
     respect to a nominated area if the local government and the 
     State in which such area is located certify in writing that 
     such government and State, respectively, have repealed or 
     otherwise will not enforce within the area, if such area is 
     designated as a renewal community--
       ``(A) licensing requirements for occupations that do not 
     ordinarily require a professional degree;
       ``(B) zoning restrictions on home-based businesses which do 
     not create a public nuisance;
       ``(C) permit requirements for street vendors who do not 
     create a public nuisance;
       ``(D) zoning or other restrictions that impede the 
     formation of schools or child care centers; and
       ``(E) franchises or other restrictions on competition for 
     businesses providing public services, including but not 
     limited to taxicabs, jitneys, cable television, or trash 
     hauling,
     except to the extent that such regulation of businesses and 
     occupations is necessary for and well-tailored to the 
     protection of health and safety.
       ``(e) Coordination With Treatment of Empowerment Zones and 
     Enterprise Communities.--For purposes of this title, if there 
     are in effect with respect to the same area both--
       ``(1) a designation as a renewal community; and
       ``(2) a designation as an empowerment zone or enterprise 
     community,

     both of such designations shall be given full effect with 
     respect to such area.
       ``(f ) Definitions and Special Rules.--For purposes of this 
     subchapter--
       ``(1) Governments.--If more than one government seeks to 
     nominate an area as a renewal community, any reference to, or 
     requirement of, this section shall apply to all such 
     governments.
       ``(2) State.--The term `State' includes Puerto Rico, the 
     Virgin Islands of the United States, Guam, American Samoa, 
     the Northern Mariana Islands, and any other possession of the 
     United States.
       ``(3) Local government.--The term `local government' 
     means--
       ``(A) any county, city, town, township, parish, village, or 
     other general purpose political subdivision of a State;
       ``(B) any combination of political subdivisions described 
     in subparagraph (A) recognized by the Secretary of Housing 
     and Urban Development; and
       ``(C) the District of Columbia.
       ``(4) Application of rules relating to census tracts and 
     census data.--The rules of sections 1392(b)(4) and 1393(a)(9) 
     shall apply.

 ``PART II--RENEWAL COMMUNITY CAPITAL GAIN; RENEWAL COMMUNITY BUSINESS

``Sec. 1400F. Renewal community capital gain.
``Sec. 1400G. Renewal community business defined.

     ``SEC. 1400F. RENEWAL COMMUNITY CAPITAL GAIN.

       ``(a) General Rule.--Gross income does not include any 
     qualified capital gain recognized on the sale or exchange of 
     a qualified community asset held for more than 5 years.
       ``(b) Qualified Community Asset.--For purposes of this 
     section--
       ``(1) In general.--The term `qualified community asset' 
     means--
       ``(A) any qualified community stock;

[[Page 2553]]

       ``(B) any qualified community partnership interest; and
       ``(C) any qualified community business property.
       ``(2) Qualified community stock.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     the term `qualified community stock' means any stock in a 
     domestic corporation if--
       ``(i) such stock is acquired by the taxpayer after December 
     31, 2000, and before January 1, 2008, at its original issue 
     (directly or through an underwriter) from the corporation 
     solely in exchange for cash;
       ``(ii) as of the time such stock was issued, such 
     corporation was a renewal community business (or, in the case 
     of a new corporation, such corporation was being organized 
     for purposes of being a renewal community business); and
       ``(iii) during substantially all of the taxpayer's holding 
     period for such stock, such corporation qualified as a 
     renewal community business.
       ``(B) Redemptions.--A rule similar to the rule of section 
     1202(c)(3) shall apply for purposes of this paragraph.
       ``(3) Qualified community partnership interest.--The term 
     `qualified community partnership interest' means any capital 
     or profits interest in a domestic partnership if--
       ``(A) such interest is acquired by the taxpayer after 
     December 31, 2000, and before January 1, 2008;
       ``(B) as of the time such interest was acquired, such 
     partnership was a renewal community business (or, in the case 
     of a new partnership, such partnership was being organized 
     for purposes of being a renewal community business); and
       ``(C) during substantially all of the taxpayer's holding 
     period for such interest, such partnership qualified as a 
     renewal community business.

     A rule similar to the rule of paragraph (2)(B) shall apply 
     for purposes of this paragraph.
       ``(4) Qualified community business property.--
       ``(A) In general.--The term `qualified community business 
     property' means tangible property if--
       ``(i) such property was acquired by the taxpayer by 
     purchase (as defined in section 179(d)(2)) after December 31, 
     2000, and before January 1, 2008;
       ``(ii) the original use of such property in the renewal 
     community commences with the taxpayer; and
       ``(iii) during substantially all of the taxpayer's holding 
     period for such property, substantially all of the use of 
     such property was in a renewal community business of the 
     taxpayer.
       ``(B) Special rule for substantial improvements.--The 
     requirements of clauses (i) and (ii) of subparagraph (A) 
     shall be treated as satisfied with respect to--
       ``(i) property which is substantially improved (within the 
     meaning of section 1400B(b)(4)(B)(ii)) by the taxpayer before 
     January 1, 2008; and
       ``(ii) any land on which such property is located.
       ``(c) Certain Rules To Apply.--Rules similar to the rules 
     of paragraphs (5), (6), and (7) of subsection (b), and 
     subsections (e), (f ), and (g), of section 1400B shall apply 
     for purposes of this section.

     ``SEC. 1400G. RENEWAL COMMUNITY BUSINESS DEFINED.

       ``For purposes of this part, the term `renewal community 
     business' means any entity or proprietorship which would be a 
     qualified business entity or qualified proprietorship under 
     section 1397B if--
       ``(1) references to renewal communities were substituted 
     for references to empowerment zones in such section; and
       ``(2) `80 percent' were substituted for `50 percent' in 
     subsections (b)(2) and (c)(1) of such section.

                ``PART III--FAMILY DEVELOPMENT ACCOUNTS

``Sec. 1400H. Family development accounts for renewal community EITC 
              recipients.
``Sec. 1400I. Designation of earned income tax credit payments for 
              deposit to family development account.

     ``SEC. 1400H. FAMILY DEVELOPMENT ACCOUNTS FOR RENEWAL 
                   COMMUNITY EITC RECIPIENTS.

       ``(a) Allowance of Deduction.--
       ``(1) In general.--There shall be allowed as a deduction--
       ``(A) in the case of a qualified individual, the amount 
     paid in cash for the taxable year by such individual to any 
     family development account for such individual's benefit; and
       ``(B) in the case of any person other than a qualified 
     individual, the amount paid in cash for the taxable year by 
     such person to any family development account for the benefit 
     of a qualified individual but only if the amount so paid is 
     designated for purposes of this section by such individual.
       ``(2) Limitation.--
       ``(A) In general.--The amount allowable as a deduction to 
     any individual for any taxable year by reason of paragraph 
     (1)(A) shall not exceed the lesser of--
       ``(i) $2,000, or
       ``(ii) an amount equal to the compensation includible in 
     the individual's gross income for such taxable year.
       ``(B) Persons donating to family development accounts of 
     others.--The amount which may be designated under paragraph 
     (1)(B) by any qualified individual for any taxable year of 
     such individual shall not exceed $1,000.
       ``(3) Special rules for certain married individuals.--Rules 
     similar to rules of section 219(c) shall apply to the 
     limitation in paragraph (2)(A).
       ``(4) Coordination with iras.--No deduction shall be 
     allowed under this section for any taxable year to any person 
     by reason of a payment to an account for the benefit of a 
     qualified individual if any amount is paid for such taxable 
     year into an individual retirement account (including a Roth 
     IRA) for the benefit of such individual.
       ``(5) Rollovers.--No deduction shall be allowed under this 
     section with respect to any rollover contribution.
       ``(b) Tax Treatment of Distributions.--
       ``(1) Inclusion of amounts in gross income.--Except as 
     otherwise provided in this subsection, any amount paid or 
     distributed out of a family development account shall be 
     included in gross income by the payee or distributee, as the 
     case may be.
       ``(2) Exclusion of qualified family development 
     distributions.--Paragraph (1) shall not apply to any 
     qualified family development distribution.
       ``(c) Qualified Family Development Distribution.--For 
     purposes of this section--
       ``(1) In general.--The term `qualified family development 
     distribution' means any amount paid or distributed out of a 
     family development account which would otherwise be 
     includible in gross income, to the extent that such payment 
     or distribution is used exclusively to pay qualified family 
     development expenses for the holder of the account or the 
     spouse or dependent (as defined in section 152) of such 
     holder.
       ``(2) Qualified family development expenses.--The term 
     `qualified family development expenses' means any of the 
     following:
       ``(A) Qualified higher education expenses.
       ``(B) Qualified first-time homebuyer costs.
       ``(C) Qualified business capitalization costs.
       ``(D) Qualified medical expenses.
       ``(E) Qualified rollovers.
       ``(3) Qualified higher education expenses.--
       ``(A) In general.--The term `qualified higher education 
     expenses' has the meaning given such term by section 
     72(t)(7), determined by treating postsecondary vocational 
     educational schools as eligible educational institutions.
       ``(B) Postsecondary vocational education school.--The term 
     `postsecondary vocational educational school' means an area 
     vocational education school (as defined in subparagraph (C) 
     or (D) of section 521(4) of the Carl D. Perkins Vocational 
     and Applied Technology Education Act (20 U.S.C. 2471(4))) 
     which is in any State (as defined in section 521(33) of such 
     Act), as such sections are in effect on the date of the 
     enactment of this section.
       ``(C) Coordination with other benefits.--The amount of 
     qualified higher education expenses for any taxable year 
     shall be reduced as provided in section 25A(g)(2).
       ``(4) Qualified first-time homebuyer costs.--The term 
     `qualified first-time homebuyer costs' means qualified 
     acquisition costs (as defined in section 72(t)(8) without 
     regard to subparagraph (B) thereof) with respect to a 
     principal residence (within the meaning of section 121) for a 
     qualified first-time homebuyer (as defined in section 
     72(t)(8)).
       ``(5) Qualified business capitalization costs.--
       ``(A) In general.--The term `qualified business 
     capitalization costs' means qualified expenditures for the 
     capitalization of a qualified business pursuant to a 
     qualified plan.
       ``(B) Qualified expenditures.--The term `qualified 
     expenditures' means expenditures included in a qualified 
     plan, including capital, plant, equipment, working capital, 
     and inventory expenses.
       ``(C) Qualified business.--The term `qualified business' 
     means any trade or business other than any trade or 
     business--
       ``(i) which consists of the operation of any facility 
     described in section 144(c)(6)(B), or
       ``(ii) which contravenes any law.
       ``(D) Qualified plan.--The term `qualified plan' means a 
     business plan which meets such requirements as the Secretary 
     may specify.
       ``(6) Qualified medical expenses.--The term `qualified 
     medical expenses' means any amount paid during the taxable 
     year, not compensated for by insurance or otherwise, for 
     medical care (as defined in section 213(d)) of the taxpayer, 
     his spouse, or his dependent (as defined in section 152).
       ``(7) Qualified rollovers.--The term `qualified rollover' 
     means any amount paid from a family development account of a 
     taxpayer into another such account established for the 
     benefit of--
       ``(A) such taxpayer, or
       ``(B) any qualified individual who is--
       ``(i) the spouse of such taxpayer, or
       ``(ii) any dependent (as defined in section 152) of the 
     taxpayer.


[[Page 2554]]


     Rules similar to the rules of section 408(d)(3) shall apply 
     for purposes of this paragraph.
       ``(d) Tax Treatment of Accounts.--
       ``(1) In general.--Any family development account is exempt 
     from taxation under this subtitle unless such account has 
     ceased to be a family development account by reason of 
     paragraph (2). Notwithstanding the preceding sentence, any 
     such account is subject to the taxes imposed by section 511 
     (relating to imposition of tax on unrelated business income 
     of charitable, etc., organizations). Notwithstanding any 
     other provision of this title (including chapters 11 and 12), 
     the basis of any person in such an account is zero.
       ``(2) Loss of exemption in case of prohibited 
     transactions.--For purposes of this section, rules similar to 
     the rules of section 408(e) shall apply.
       ``(3) Other rules to apply.--Rules similar to the rules of 
     paragraphs (4), (5), and (6) of section 408(d) shall apply 
     for purposes of this section.
       ``(e) Family Development Account.--For purposes of this 
     title, the term `family development account' means a trust 
     created or organized in the United States for the exclusive 
     benefit of a qualified individual or his beneficiaries, but 
     only if the written governing instrument creating the trust 
     meets the following requirements:
       ``(1) Except in the case of a qualified rollover (as 
     defined in subsection (c)(7))--
       ``(A) no contribution will be accepted unless it is in 
     cash; and
       ``(B) contributions will not be accepted for the taxable 
     year in excess of $3,000.
       ``(2) The requirements of paragraphs (2) through (6) of 
     section 408(a) are met.
       ``(f ) Qualified Individual.--For purposes of this section, 
     the term `qualified individual' means, for any taxable year, 
     an individual--
       ``(1) who is a bona fide resident of a renewal community 
     throughout the taxable year; and
       ``(2) to whom a credit was allowed under section 32 for the 
     preceding taxable year.
       ``(g) Other Definitions and Special Rules.--
       ``(1) Compensation.--The term `compensation' has the 
     meaning given such term by section 219(f )(1).
       ``(2) Married individuals.--The maximum deduction under 
     subsection (a) shall be computed separately for each 
     individual, and this section shall be applied without regard 
     to any community property laws.
       ``(3) Time when contributions deemed made.--For purposes of 
     this section, a taxpayer shall be deemed to have made a 
     contribution to a family development account on the last day 
     of the preceding taxable year if the contribution is made on 
     account of such taxable year and is made not later than the 
     time prescribed by law for filing the return for such taxable 
     year (not including extensions thereof).
       ``(4) Employer payments; custodial accounts.--Rules similar 
     to the rules of sections 219(f )(5) and 408(h) shall apply 
     for purposes of this section.
       ``(5) Reports.--The trustee of a family development account 
     shall make such reports regarding such account to the 
     Secretary and to the individual for whom the account is 
     maintained with respect to contributions (and the years to 
     which they relate), distributions, and such other matters as 
     the Secretary may require under regulations. The reports 
     required by this paragraph--
       ``(A) shall be filed at such time and in such manner as the 
     Secretary prescribes in such regulations; and
       ``(B) shall be furnished to individuals--
       ``(i) not later than January 31 of the calendar year 
     following the calendar year to which such reports relate; and
       ``(ii) in such manner as the Secretary prescribes in such 
     regulations.
       ``(6) Investment in collectibles treated as 
     distributions.--Rules similar to the rules of section 408(m) 
     shall apply for purposes of this section.
       ``(h) Penalty for Distributions Not Used for Qualified 
     Family Development Expenses.--
       ``(1) In general.--If any amount is distributed from a 
     family development account and is not used exclusively to pay 
     qualified family development expenses for the holder of the 
     account or the spouse or dependent (as defined in section 
     152) of such holder, the tax imposed by this chapter for the 
     taxable year of such distribution shall be increased by 10 
     percent of the portion of such amount which is includible in 
     gross income.
       ``(2) Exception for certain distributions.--Paragraph (1) 
     shall not apply to distributions which are--
       ``(A) made on or after the date on which the account holder 
     attains age 59\1/2\,
       ``(B) made to a beneficiary (or the estate of the account 
     holder) on or after the death of the account holder, or
       ``(C) attributable to the account holder's being disabled 
     within the meaning of section 72(m)(7).
       ``(i) Application of Section.--This section shall apply to 
     amounts paid to a family development account for any taxable 
     year beginning after December 31, 2000, and before January 1, 
     2008.

     ``SEC. 1400I. DESIGNATION OF EARNED INCOME TAX CREDIT 
                   PAYMENTS FOR DEPOSIT TO FAMILY DEVELOPMENT 
                   ACCOUNT.

       ``(a) In General.--With respect to the return of any 
     qualified individual (as defined in section 1400H(f )) for 
     the taxable year of the tax imposed by this chapter, such 
     individual may designate that a specified portion (not less 
     than $1) of any overpayment of tax for such taxable year 
     which is attributable to the earned income tax credit shall 
     be deposited by the Secretary into a family development 
     account of such individual. The Secretary shall so deposit 
     such portion designated under this subsection.
       ``(b) Manner and Time of Designation.--A designation under 
     subsection (a) may be made with respect to any taxable year--
       ``(1) at the time of filing the return of the tax imposed 
     by this chapter for such taxable year, or
       ``(2) at any other time (after the time of filing the 
     return of the tax imposed by this chapter for such taxable 
     year) specified in regulations prescribed by the Secretary.

     Such designation shall be made in such manner as the 
     Secretary prescribes by regulations.
       ``(c) Portion Attributable to Earned Income Tax Credit.--
     For purposes of subsection (a), an overpayment for any 
     taxable year shall be treated as attributable to the earned 
     income tax credit to the extent that such overpayment does 
     not exceed the credit allowed to the taxpayer under section 
     32 for such taxable year.
       ``(d) Overpayments Treated as Refunded.--For purposes of 
     this title, any portion of an overpayment of tax designated 
     under subsection (a) shall be treated as being refunded to 
     the taxpayer as of the last date prescribed for filing the 
     return of tax imposed by this chapter (determined without 
     regard to extensions) or, if later, the date the return is 
     filed.
       ``(e) Termination.--This section shall not apply to any 
     taxable year beginning after December 31, 2007.

                    ``PART IV--ADDITIONAL INCENTIVES

``Sec. 1400K. Commercial revitalization deduction.
``Sec. 1400L. Increase in expensing under section 179.

     ``SEC. 1400K. COMMERCIAL REVITALIZATION DEDUCTION.

       ``(a) General Rule.--At the election of the taxpayer, 
     either--
       ``(1) one-half of any qualified revitalization expenditures 
     chargeable to capital account with respect to any qualified 
     revitalization building shall be allowable as a deduction for 
     the taxable year in which the building is placed in service, 
     or
       ``(2) a deduction for all such expenditures shall be 
     allowable ratably over the 120-month period beginning with 
     the month in which the building is placed in service.

     The deduction provided by this section with respect to such 
     expenditure shall be in lieu of any depreciation deduction 
     otherwise allowable on account of such expenditure.
       ``(b) Qualified Revitalization Buildings and 
     Expenditures.--For purposes of this section--
       ``(1) Qualified revitalization building.--The term 
     `qualified revitalization building' means any building (and 
     its structural components) if--
       ``(A) such building is located in a renewal community and 
     is placed in service after December 31, 2000;
       ``(B) a commercial revitalization deduction amount is 
     allocated to the building under subsection (d); and
       ``(C) depreciation (or amortization in lieu of 
     depreciation) is allowable with respect to the building 
     (without regard to this section).
       ``(2) Qualified revitalization expenditure.--
       ``(A) In general.--The term `qualified revitalization 
     expenditure' means any amount properly chargeable to capital 
     account--
       ``(i) for property for which depreciation is allowable 
     under section 168 (without regard to this section) and which 
     is--

       ``(I) nonresidential real property; or
       ``(II) an addition or improvement to property described in 
     subclause (I);

       ``(ii) in connection with the construction of any qualified 
     revitalization building which was not previously placed in 
     service or in connection with the substantial rehabilitation 
     (within the meaning of section 47(c)(1)(C)) of a building 
     which was placed in service before the beginning of such 
     rehabilitation; and
       ``(iii) for land (including land which is functionally 
     related to such property and subordinate thereto).
       ``(B) Dollar limitation.--The aggregate amount which may be 
     treated as qualified revitalization expenditures with respect 
     to any qualified revitalization building for any taxable year 
     shall not exceed the excess of--
       ``(i) $10,000,000, reduced by
       ``(ii) any such expenditures with respect to the building 
     taken into account by the taxpayer or any predecessor in 
     determining the amount of the deduction under this section 
     for all preceding taxable years.
       ``(C) Certain expenditures not included.--The term 
     `qualified revitalization expenditure' does not include--
       ``(i) Acquisition costs.--The costs of acquiring any 
     building or interest therein and any land in connection with 
     such building to the extent that such costs exceed 30 percent 
     of the qualified revitalization expenditures determined 
     without regard to this clause.

[[Page 2555]]

       ``(ii) Credits.--Any expenditure which the taxpayer may 
     take into account in computing any credit allowable under 
     this title unless the taxpayer elects to take the expenditure 
     into account only for purposes of this section.
       ``(c) When Expenditures Taken Into Account.--Qualified 
     revitalization expenditures with respect to any qualified 
     revitalization building shall be taken into account for the 
     taxable year in which the qualified revitalization building 
     is placed in service. For purposes of the preceding sentence, 
     a substantial rehabilitation of a building shall be treated 
     as a separate building.
       ``(d) Limitation on Aggregate Deductions Allowable With 
     Respect to Buildings Located in a State.--
       ``(1) In general.--The amount of the deduction determined 
     under this section for any taxable year with respect to any 
     building shall not exceed the commercial revitalization 
     deduction amount (in the case of an amount determined under 
     subsection (a)(2), the present value of such amount as 
     determined under the rules of section 42(b)(2)(C) by 
     substituting `100 percent' for `72 percent' in clause (ii) 
     thereof) allocated to such building under this subsection by 
     the commercial revitalization agency. Such allocation shall 
     be made at the same time and in the same manner as under 
     paragraphs (1) and (7) of section 42(h).
       ``(2) Commercial revitalization deduction amount for 
     agencies.--
       ``(A) In general.--The aggregate commercial revitalization 
     deduction amount which a commercial revitalization agency may 
     allocate for any calendar year is the amount of the State 
     commercial revitalization deduction ceiling determined under 
     this paragraph for such calendar year for such agency.
       ``(B) State commercial revitalization deduction ceiling.--
     The State commercial revitalization deduction ceiling 
     applicable to any State--
       ``(i) for each calendar year after 2000 and before 2008 is 
     $6,000,000 for each renewal community in the State; and
       ``(ii) zero for each calendar year thereafter.
       ``(C) Commercial revitalization agency.--For purposes of 
     this section, the term `commercial revitalization agency' 
     means any agency authorized by a State to carry out this 
     section.
       ``(e) Responsibilities of Commercial Revitalization 
     Agencies.--
       ``(1) Plans for allocation.--Notwithstanding any other 
     provision of this section, the commercial revitalization 
     deduction amount with respect to any building shall be zero 
     unless--
       ``(A) such amount was allocated pursuant to a qualified 
     allocation plan of the commercial revitalization agency which 
     is approved (in accordance with rules similar to the rules of 
     section 147(f )(2) (other than subparagraph (B)(ii) thereof)) 
     by the governmental unit of which such agency is a part; and
       ``(B) such agency notifies the chief executive officer (or 
     its equivalent) of the local jurisdiction within which the 
     building is located of such allocation and provides such 
     individual a reasonable opportunity to comment on the 
     allocation.
       ``(2) Qualified allocation plan.--For purposes of this 
     subsection, the term `qualified allocation plan' means any 
     plan--
       ``(A) which sets forth selection criteria to be used to 
     determine priorities of the commercial revitalization agency 
     which are appropriate to local conditions;
       ``(B) which considers--
       ``(i) the degree to which a project contributes to the 
     implementation of a strategic plan that is devised for a 
     renewal community through a citizen participation process;
       ``(ii) the amount of any increase in permanent, full-time 
     employment by reason of any project; and
       ``(iii) the active involvement of residents and nonprofit 
     groups within the renewal community; and
       ``(C) which provides a procedure that the agency (or its 
     agent) will follow in monitoring compliance with this 
     section.
       ``(f ) Regulations.--For purposes of this section, the 
     Secretary shall, by regulations, provide for the application 
     of rules similar to the rules of section 49 and subsections 
     (a) and (b) of section 50.
       ``(g) Termination.--This section shall not apply to any 
     building placed in service after December 31, 2007.

     ``SEC. 1400L. INCREASE IN EXPENSING UNDER SECTION 179.

       ``(a) General Rule.--In the case of a renewal community 
     business (as defined in section 1400G), for purposes of 
     section 179--
       ``(1) the limitation under section 179(b)(1) shall be 
     increased by the lesser of--
       ``(A) $35,000; or
       ``(B) the cost of section 179 property which is qualified 
     renewal property placed in service during the taxable year; 
     and
       ``(2) the amount taken into account under section 179(b)(2) 
     with respect to any section 179 property which is qualified 
     renewal property shall be 50 percent of the cost thereof.
       ``(b) Recapture.--Rules similar to the rules under section 
     179(d)(10) shall apply with respect to any qualified renewal 
     property which ceases to be used in a renewal community by a 
     renewal community business.
       ``(c) Qualified Renewal Property.--For purposes of this 
     section--
       ``(1) In general.--The term `qualified renewal property' 
     means any property to which section 168 applies (or would 
     apply but for section 179) if--
       ``(A) such property was acquired by the taxpayer by 
     purchase (as defined in section 179(d)(2)) after December 31, 
     2000, and before January 1, 2008; and
       ``(B) such property would be qualified zone property (as 
     defined in section 1397C) if references to renewal 
     communities were substituted for references to empowerment 
     zones in section 1397C.
       ``(2) Certain rules to apply.--The rules of subsections 
     (a)(2) and (b) of section 1397C shall apply for purposes of 
     this section.''.

     SEC. 603. EXTENSION OF EXPENSING OF ENVIRONMENTAL REMEDIATION 
                   COSTS TO RENEWAL COMMUNITIES.

       (a) Extension.--Paragraph (2) of section 198(c) (defining 
     targeted area) is amended by redesignating subparagraph (C) 
     as subparagraph (D) and by inserting after subparagraph (B) 
     the following new subparagraph:
       ``(C) Renewal communities included.--Except as provided in 
     subparagraph (B), such term shall include a renewal community 
     (as defined in section 1400E) with respect to expenditures 
     paid or incurred after December 31, 2000.''.
       (b) Extension of Termination Date for Renewal 
     Communities.--Subsection (h) of section 198 is amended by 
     inserting before the period ``(December 31, 2007, in the case 
     of a renewal community, as defined in section 1400E).''.

     SEC. 604. EXTENSION OF WORK OPPORTUNITY TAX CREDIT FOR 
                   RENEWAL COMMUNITIES.

       (a) Extension.--Subsection (c) of section 51 (relating to 
     termination) is amended by adding at the end the following 
     new paragraph:
       ``(5) Extension of credit for renewal communities.--
       ``(A) In general.--In the case of an individual who begins 
     work for the employer after the date contained in paragraph 
     (4)(B), for purposes of section 38--
       ``(i) in lieu of applying subsection (a), the amount of the 
     work opportunity credit determined under this section for the 
     taxable year shall be equal to--

       ``(I) 15 percent of the qualified first-year wages for such 
     year; and
       ``(II) 30 percent of the qualified second-year wages for 
     such year;

       ``(ii) subsection (b)(3) shall be applied by substituting 
     `$10,000' for `$6,000';
       ``(iii) paragraph (4)(B) shall be applied by substituting 
     for the date contained therein the last day for which the 
     designation under section 1400E of the renewal community 
     referred to in subparagraph (B)(i) is in effect; and
       ``(iv) rules similar to the rules of section 51A(b)(5)(C) 
     shall apply.
       ``(B) Qualified first- and second-year wages.--For purposes 
     of subparagraph (A)--
       ``(i) In general.--The term `qualified wages' means, with 
     respect to each 1-year period referred to in clause (ii) or 
     (iii), as the case may be, the wages paid or incurred by the 
     employer during the taxable year to any individual but only 
     if--

       ``(I) the employer is engaged in a trade or business in a 
     renewal community throughout such 1-year period;
       ``(II) the principal place of abode of such individual is 
     in such renewal community throughout such 1-year period; and
       ``(III) substantially all of the services which such 
     individual performs for the employer during such 1-year 
     period are performed in such renewal community.

       ``(ii) Qualified first-year wages.--The term `qualified 
     first-year wages' means, with respect to any individual, 
     qualified wages attributable to service rendered during the 
     1-year period beginning with the day the individual begins 
     work for the employer.
       ``(iii) Qualified second-year wages.--The term `qualified 
     second-year wages' means, with respect to any individual, 
     qualified wages attributable to service rendered during the 
     1-year period beginning on the day after the last day of the 
     1-year period with respect to such individual determined 
     under clause (ii).''.
       (b) Congruent Treatment of Renewal Communities and 
     Enterprise Zones for Purposes of Youth Residence 
     Requirements.--
       (1) High-risk youth.--Subparagraphs (A)(ii) and (B) of 
     section 51(d)(5) are each amended by striking ``empowerment 
     zone or enterprise community'' and inserting ``empowerment 
     zone, enterprise community, or renewal community''.
       (2) Qualified summer youth employee.--Clause (iv) of 
     section 51(d)(7)(A) is amended by striking ``empowerment zone 
     or enterprise community'' and inserting ``empowerment zone, 
     enterprise community, or renewal community''.
       (3) Headings.--Paragraphs (5)(B) and (7)(C) of section 
     51(d) are each amended by inserting ``or community'' in the 
     heading after ``zone''.
       (4) Effective date.--The amendments made by this subsection 
     shall apply to individuals who begin work for the employer 
     after December 31, 2000.

     SEC. 605. CONFORMING AND CLERICAL AMENDMENTS.

       (a) Deduction for Contributions to Family Development 
     Accounts Allowable Whether or Not Taxpayer Itemizes.--
     Subsection (a) of section 62 (relating to adjusted

[[Page 2556]]

     gross income defined) is amended by inserting after paragraph 
     (19) the following new paragraph:
       ``(20) Family development accounts.--The deduction allowed 
     by section 1400H(a)(1).''.
       (b) Tax on Excess Contributions.--
       (1) Tax imposed.--Subsection (a) of section 4973 is amended 
     by striking ``or'' at the end of paragraph (3), adding ``or'' 
     at the end of paragraph (4), and inserting after paragraph 
     (4) the following new paragraph:
       ``(5) a family development account (within the meaning of 
     section 1400H(e)),''.
       (2) Excess contributions.--Section 4973 is amended by 
     adding at the end the following new subsection:
       ``(g) Family Development Accounts.--For purposes of this 
     section, in the case of family development accounts, the term 
     `excess contributions' means the sum of--
       ``(1) the excess (if any) of--
       ``(A) the amount contributed for the taxable year to the 
     accounts (other than a qualified rollover, as defined in 
     section 1400H(c)(7)), over
       ``(B) the amount allowable as a deduction under section 
     1400H for such contributions; and
       ``(2) the amount determined under this subsection for the 
     preceding taxable year reduced by the sum of--
       ``(A) the distributions out of the accounts for the taxable 
     year which were included in the gross income of the payee 
     under section 1400H(b)(1);
       ``(B) the distributions out of the accounts for the taxable 
     year to which rules similar to the rules of section 408(d)(5) 
     apply by reason of section 1400H(d)(3); and
       ``(C) the excess (if any) of the maximum amount allowable 
     as a deduction under section 1400H for the taxable year over 
     the amount contributed to the account for the taxable year.

     For purposes of this subsection, any contribution which is 
     distributed from the family development account in a 
     distribution to which rules similar to the rules of section 
     408(d)(4) apply by reason of section 1400H(d)(3) shall be 
     treated as an amount not contributed.''.
       (c) Tax on Prohibited Transactions.--Section 4975 is 
     amended--
       (1) by adding at the end of subsection (c) the following 
     new paragraph:
       ``(6) Special rule for family development accounts.--An 
     individual for whose benefit a family development account is 
     established and any contributor to such account shall be 
     exempt from the tax imposed by this section with respect to 
     any transaction concerning such account (which would 
     otherwise be taxable under this section) if, with respect to 
     such transaction, the account ceases to be a family 
     development account by reason of the application of section 
     1400H(d)(2) to such account.''; and
       (2) in subsection (e)(1), by striking ``or'' at the end of 
     subparagraph (E), by redesignating subparagraph (F) as 
     subparagraph (G), and by inserting after subparagraph (E) the 
     following new subparagraph:
       ``(F) a family development account described in section 
     1400H(e), or''.
       (d) Information Relating to Certain Trusts and Annuity 
     Plans.--Subsection (c) of section 6047 is amended--
       (1) by inserting ``or section 1400H'' after ``section 
     219''; and
       (2) by inserting ``, of any family development account 
     described in section 1400H(e),'', after ``section 408(a)''.
       (e) Inspection of Applications for Tax Exemption.--Clause 
     (i) of section 6104(a)(1)(B) is amended by inserting ``a 
     family development account described in section 1400H(e),'' 
     after ``section 408(a),''.
       (f ) Failure To Provide Reports on Family Development 
     Accounts.--Paragraph (2) of section 6693(a) is amended by 
     striking ``and'' at the end of subparagraph (C), by striking 
     the period and inserting 
     ``, and'' at the end of subparagraph (D), and by adding at 
     the end the following new subparagraph:
       ``(E) section 1400H(g)(6) (relating to family development 
     accounts).''.
       (g) Conforming Amendments Regarding Commercial 
     Revitalization Deduction.--
       (1) Section 172 is amended by redesignating subsection ( j) 
     as subsection (k) and by inserting after subsection (i) the 
     following new subsection:
       ``( j) No Carryback of Section 1400k Deduction Before Date 
     of the Enactment.--No portion of the net operating loss for 
     any taxable year which is attributable to any commercial 
     revitalization deduction determined under section 1400K may 
     be carried back to a taxable year ending before the date of 
     the enactment of section 1400K.''.
       (2) Subparagraph (B) of section 48(a)(2) is amended by 
     inserting ``or commercial revitalization'' after 
     ``rehabilitation'' each place it appears in the text and 
     heading.
       (3) Subparagraph (C) of section 469(i)(3) is amended--
       (A) by inserting ``or section 1400K'' after ``section 42''; 
     and
       (B) by inserting ``and commercial revitalization 
     deduction'' after ``credit'' in the heading.
       (h) Clerical Amendments.--The table of subchapters for 
     chapter 1 is amended by adding at the end the following new 
     item:

``Subchapter X. Renewal Communities.''.

                     Subtitle B--Timber Incentives

     SEC. 611. TEMPORARY SUSPENSION OF MAXIMUM AMOUNT OF 
                   AMORTIZABLE REFORESTATION EXPENDITURES.

       (a) Increase in Dollar Limitation.--Paragraph (1) of 
     section 194(b) (relating to amortization of reforestation 
     expenditures) is amended by striking ``$10,000 ($5,000'' and 
     inserting ``$25,000 ($12,500''.
       (b) Temporary Suspension of Increased Dollar Limitation.--
     Subsection (b) of section 194(b) (relating to amortization of 
     reforestation expenditures) is amended by adding at the end 
     the following new paragraph:
       ``(5) Suspension of dollar limitation.--Paragraph (1) shall 
     not apply to taxable years beginning after December 31, 1999, 
     and before January 1, 2004.
       (c) Conforming Amendment.--Paragraph (1) of section 48(b) 
     is amended by striking ``section 194(b)(1)'' and inserting 
     ``section 194(b)(1) and without regard to section 
     194(b)(5)''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2000.

                   TITLE VII--REAL ESTATE PROVISIONS

         Subtitle A--Improvements in Low-Income Housing Credit

     SEC. 701. MODIFICATION OF STATE CEILING ON LOW-INCOME HOUSING 
                   CREDIT.

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

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

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

    ``For calendar                                       The applicable
      year:                                                  amount is:
      2000......................................................$1.35  
      2001.....................................................  1.45  
      2002.....................................................  1.55  
      2003.....................................................  1.65  
      2004 and thereafter.................................  1.75.''.   

       (c) Adjustment of State Ceiling for Increases in Cost-of-
     Living.--Paragraph (3) of section 42(h) (relating to housing 
     credit dollar amount for agencies), as amended by subsection 
     (c), is amended by adding at the end the following new 
     subparagraph:
       ``(I) Cost-of-living adjustment.--
       ``(i) In general.--In the case of a calendar year after 
     2004, the $2,000,000 in subparagraph (C) and the $1.75 amount 
     in subparagraph (H) shall each be increased by an amount 
     equal to--

       ``(I) such dollar amount, multiplied by
       ``(II) the cost-of-living adjustment determined under 
     section 1(f )(3) for such calendar year by substituting 
     `calendar year 2003' for `calendar year 1992' in subparagraph 
     (B) thereof.

       ``(ii) Rounding.--

       ``(I) In the case of the amount in subparagraph (C), any 
     increase under clause (i) which is not a multiple of $5,000 
     shall be rounded to the next lowest multiple of $5,000.
       ``(II) In the case of the amount in subparagraph (H), any 
     increase under clause (i) which is not a multiple of 5 cents 
     shall be rounded to the next lowest multiple of 5 cents.''.

       (d) Conforming Amendments.--
       (1) Section 42(h)(3)(C), as amended by subsection (a), is 
     amended--
       (A) by striking ``clause (ii)'' in the matter following 
     clause (iv) and inserting ``clause (i)'', and
       (B) by striking ``clauses (i)'' in the matter following 
     clause (iv) and inserting ``clauses (ii)''.
       (2) Section 42(h)(3)(D)(ii) is amended--
       (A) by striking ``subparagraph (C)(ii)'' and inserting 
     ``subparagraph (C)(i)'', and
       (B) by striking ``clauses (i)'' in subclause (II) and 
     inserting ``clauses (ii)''.
       (e) Effective Date.--The amendments made by this section 
     shall apply to calendar years after 2000.

     SEC. 702. MODIFICATION OF CRITERIA FOR ALLOCATING HOUSING 
                   CREDITS AMONG PROJECTS.

       (a) Selection Criteria.--Subparagraph (C) of section 
     42(m)(1) (relating to certain selection criteria must be 
     used) is amended--
       (1) by inserting ``, including whether the project includes 
     the use of existing housing as part of a community 
     revitalization plan'' before the comma at the end of clause 
     (iii), and
       (2) by striking clauses (v), (vi), and (vii) and inserting 
     the following new clauses:
       ``(v) tenant populations with special housing needs,
       ``(vi) public housing waiting lists,
       ``(vii) tenant populations of individuals with children, 
     and
       ``(viii) projects intended for eventual tenant 
     ownership.''.
       (b) Preference for Community Revitalization Projects 
     Located in Qualified Census Tracts.--Clause (ii) of section

[[Page 2557]]

     42(m)(1)(B) is amended by striking ``and'' at the end of 
     subclause (I), by adding ``and'' at the end of subclause 
     (II), and by inserting after subclause (II) the following new 
     subclause:

       ``(III) projects which are located in qualified census 
     tracts (as defined in subsection (d)(5)(C)) and the 
     development of which contributes to a concerted community 
     revitalization plan,''.

     SEC. 703. ADDITIONAL RESPONSIBILITIES OF HOUSING CREDIT 
                   AGENCIES.

       (a) Market Study; Public Disclosure of Rationale for Not 
     Following Credit Allocation Priorities.--Subparagraph (A) of 
     section 42(m)(1) (relating to responsibilities of housing 
     credit agencies) is amended by striking ``and'' at the end of 
     clause (i), by striking the period at the end of clause (ii) 
     and inserting a comma, and by adding at the end the following 
     new clauses:
       ``(iii) a comprehensive market study of the housing needs 
     of low-income individuals in the area to be served by the 
     project is conducted before the credit allocation is made and 
     at the developer's expense by a disinterested party who is 
     approved by such agency, and
       ``(iv) a written explanation is available to the general 
     public for any allocation of a housing credit dollar amount 
     which is not made in accordance with established priorities 
     and selection criteria of the housing credit agency.''.
       (b) Site Visits.--Clause (iii) of section 42(m)(1)(B) 
     (relating to qualified allocation plan) is amended by 
     inserting before the period ``and in monitoring for 
     noncompliance with habitability standards through regular 
     site visits''.

     SEC. 704. MODIFICATIONS TO RULES RELATING TO BASIS OF 
                   BUILDING WHICH IS ELIGIBLE FOR CREDIT.

       (a) Adjusted Basis To Include Portion of Certain Buildings 
     Used by Low-Income Individuals Who Are Not Tenants and by 
     Project Employees.--Paragraph (4) of section 42(d) (relating 
     to special rules relating to determination of adjusted basis) 
     is amended--
       (1) by striking ``subparagraph (B)'' in subparagraph (A) 
     and inserting ``subparagraphs (B) and (C)'',
       (2) by redesignating subparagraph (C) as subparagraph (D), 
     and
       (3) by inserting after subparagraph (B) the following new 
     subparagraph:
       ``(C) Inclusion of basis of property used to provide 
     services for certain nontenants.--
       ``(i) In general.--The adjusted basis of any building 
     located in a qualified census tract (as defined in paragraph 
     (5)(C)) shall be determined by taking into account the 
     adjusted basis of property (of a character subject to the 
     allowance for depreciation and not otherwise taken into 
     account) used throughout the taxable year in providing any 
     community service facility.
       ``(ii) Limitation.--The increase in the adjusted basis of 
     any building which is taken into account by reason of clause 
     (i) shall not exceed 10 percent of the eligible basis of the 
     qualified low-income housing project of which it is a part. 
     For purposes of the preceding sentence, all community service 
     facilities which are part of the same qualified low-income 
     housing project shall be treated as one facility.
       ``(iii) Community service facility.--For purposes of this 
     subparagraph, the term `community service facility' means any 
     facility designed to serve primarily individuals whose income 
     is 60 percent or less of area median income (within the 
     meaning of subsection (g)(1)(B)).''.
       (b) Certain Native American Housing Assistance Disregarded 
     in Determining Whether Building Is Federally Subsidized for 
     Purposes of the Low-Income Housing Credit.--Subparagraph (E) 
     of section 42(i)(2) (relating to determination of whether 
     building is federally subsidized) is amended--
       (1) in clause (i), by inserting ``or the Native American 
     Housing Assistance and Self-Determination Act of 1996 (25 
     U.S.C. 4101 et seq.) (as in effect on October 1, 1997)'' 
     after ``this subparagraph)'', and
       (2) in the subparagraph heading, by inserting ``or native 
     american housing assistance'' after ``home assistance''.

     SEC. 705. OTHER MODIFICATIONS.

       (a) Allocation of Credit Limit to Certain Buildings.--
       (1) The first sentence of section 42(h)(1)(E)(ii) is 
     amended by striking ``(as of'' the first place it appears and 
     inserting ``(as of the later of the date which is 6 months 
     after the date that the allocation was made or''.
       (2) The last sentence of section 42(h)(3)(C) is amended by 
     striking ``project which'' and inserting ``project which 
     fails to meet the 10 percent test under paragraph (1)(E)(ii) 
     on a date after the close of the calendar year in which the 
     allocation was made or which''.
       (b) Determination of Whether Buildings Are Located in High 
     Cost Areas.--The first sentence of section 42(d)(5)(C)(ii)(I) 
     is amended--
       (1) by inserting ``either'' before ``in which 50 percent'', 
     and
       (2) by inserting before the period ``or which has a poverty 
     rate of at least 25 percent''.

     SEC. 706. CARRYFORWARD RULES.

       (a) In General.--Clause (ii) of section 42(h)(3)(D) 
     (relating to unused housing credit carryovers allocated among 
     certain States) is amended by striking ``the excess'' and all 
     that follows and inserting ``the excess (if any) of--

       ``(I) the unused State housing credit ceiling for the year 
     preceding such year, over
       ``(II) the aggregate housing credit dollar amount allocated 
     for such year.''.

       (b) Conforming Amendment.--The second sentence of section 
     42(h)(3)(C) (relating to State housing credit ceiling) is 
     amended by striking ``clauses (i) and (iii)'' and inserting 
     ``clauses (i) through (iv)''.

     SEC. 707. EFFECTIVE DATE.

       Except as otherwise provided in this subtitle, the 
     amendments made by this subtitle shall apply to--
       (1) housing credit dollar amounts allocated after December 
     31, 1999, and
       (2) buildings placed in service after such date to the 
     extent paragraph (1) of section 42(h) of the Internal Revenue 
     Code of 1986 does not apply to any building by reason of 
     paragraph (4) thereof, but only with respect to bonds issued 
     after such date.

    Subtitle B--Provisions Relating to Real Estate Investment Trusts

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

     SEC. 711. MODIFICATIONS TO ASSET DIVERSIFICATION TEST.

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

     SEC. 712. TREATMENT OF INCOME AND SERVICES PROVIDED BY 
                   TAXABLE REIT SUBSIDIARIES.

       (a) Income From Taxable REIT Subsidiaries Not Treated as 
     Impermissible Tenant Service Income.--Clause (i) of section 
     856(d)(7)(C) (relating to exceptions to impermissible tenant 
     service income) is amended by inserting ``or through a 
     taxable REIT subsidiary of such trust'' after ``income''.
       (b) Certain Income From Taxable REIT Subsidiaries Not 
     Excluded From Rents From Real Property.--
       (1) In general.--Subsection (d) of section 856 (relating to 
     rents from real property defined) is amended by adding at the 
     end the following new paragraphs:
       ``(8) Special rule for taxable reit subsidiaries.--For 
     purposes of this subsection, amounts paid to a real estate 
     investment trust by a taxable REIT subsidiary of such trust 
     shall not be excluded from rents from real property by reason 
     of paragraph (2)(B) if the requirements of either of the 
     following subparagraphs are met:
       ``(A) Limited rental exception.--The requirements of this 
     subparagraph are met with respect to any property if at least 
     90 percent of the leased space of the property is rented to 
     persons other than taxable REIT subsidiaries of such trust 
     and other than persons described in section 856(d)(2)(B). The 
     preceding sentence shall apply only to the extent that the 
     amounts paid to the trust as rents from real property (as 
     defined in paragraph (1) without regard to paragraph (2)(B)) 
     from such property are substantially comparable to such rents 
     made by the other tenants of the trust's property for 
     comparable space.
       ``(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

[[Page 2558]]

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

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

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

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

       ``(D) Qualified lodging facility.--For purposes of this 
     paragraph--
       ``(i) In general.--The term `qualified lodging facility' 
     means any lodging facility unless wagering activities are 
     conducted at or in connection with such facility by any 
     person who is engaged in the business of accepting wagers and 
     who is legally authorized to engage in such business at or in 
     connection with such facility.
       ``(ii) Lodging facility.--The term `lodging facility' means 
     a hotel, motel, or other establishment more than one-half of 
     the dwelling units in which are used on a transient basis.
       ``(iii) Customary amenities and facilities.--The term 
     `lodging facility' includes customary amenities and 
     facilities operated as part of, or associated with, the 
     lodging facility so long as such amenities and facilities are 
     customary for other properties of a comparable size and class 
     owned by other owners unrelated to such real estate 
     investment trust.
       ``(E) Operate includes manage.--References in this 
     paragraph to operating a property shall be treated as 
     including a reference to managing the property.
       ``(F) Related person.--Persons shall be treated as related 
     to each other if such persons are treated as a single 
     employer under subsection (a) or (b) of section 52.''.
       (2) Conforming amendment.--Subparagraph (B) of section 
     856(d)(2) is amended by inserting ``except as provided in 
     paragraph (8),'' after ``(B)''.
       (3) Determining rents from real property.--
       (A)(i) Paragraph (1) of section 856(d) is amended by 
     striking ``adjusted bases'' each place it occurs and 
     inserting ``fair market values''.
       (ii) The amendment made by this subparagraph shall apply to 
     taxable years beginning after December 31, 2000.
       (B)(i) Clause (i) of section 856(d)(2)(B) is amended by 
     striking ``number'' and inserting ``value''.
       (ii) The amendment made by this subparagraph shall apply to 
     amounts received or accrued in taxable years beginning after 
     December 31, 2000, except for amounts paid pursuant to leases 
     in effect on July 12, 1999, or pursuant to a binding contract 
     in effect on such date and at all times thereafter.

     SEC. 713. TAXABLE REIT SUBSIDIARY.

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

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

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

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

     SEC. 714. LIMITATION ON EARNINGS STRIPPING.

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

     SEC. 715. 100 PERCENT TAX ON IMPROPERLY ALLOCATED AMOUNTS.

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

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

       ``(v) Exception for certain separately charged services.--
     Clause (i) shall not

[[Page 2559]]

     apply to any service rendered by a taxable REIT subsidiary of 
     a real estate investment trust to a tenant of such trust if--

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

       ``(vi) Exception for certain services based on subsidiary's 
     income from the services.--Clause (i) shall not apply to any 
     service rendered by a taxable REIT subsidiary of a real 
     estate investment trust to a tenant of such trust if the 
     gross income of such subsidiary from such service is not less 
     than 150 percent of such subsidiary's direct cost in 
     furnishing or rendering the service.
       ``(vii) Exceptions granted by secretary.--The Secretary may 
     waive the tax otherwise imposed by subparagraph (A) if the 
     trust establishes to the satisfaction of the Secretary that 
     rents charged to tenants were established on an arms' length 
     basis even though a taxable REIT subsidiary of the trust 
     provided services to such tenants.
       ``(C) Redetermined deductions.--The term `redetermined 
     deductions' means deductions (other than redetermined rents) 
     of a taxable REIT subsidiary of a real estate investment 
     trust if the amount of such deductions would (but for 
     subparagraph (E)) be decreased on distribution, 
     apportionment, or allocation under section 482 to clearly 
     reflect income as between such subsidiary and such trust.
       ``(D) Excess interest.--The term `excess interest' means 
     any deductions for interest payments by a taxable REIT 
     subsidiary of a real estate investment trust to such trust to 
     the extent that the interest payments are in excess of a rate 
     that is commercially reasonable.
       ``(E) Coordination with section 482.--The imposition of tax 
     under subparagraph (A) shall be in lieu of any distribution, 
     apportionment, or allocation under section 482.
       ``(F) Regulatory authority.--The Secretary shall prescribe 
     such regulations as may be necessary or appropriate to carry 
     out the purposes of this paragraph. Until the Secretary 
     prescribes such regulations, real estate investment trusts 
     and their taxable REIT subsidiaries may base their 
     allocations on any reasonable method.''.
       (b) Amount Subject to Tax Not Required To Be Distributed.--
     Subparagraph (E) of section 857(b)(2) (relating to real 
     estate investment trust taxable income) is amended by 
     striking ``paragraph (5)'' and inserting ``paragraphs (5) and 
     (7)''.

     SEC. 716. EFFECTIVE DATE.

       (a) In General.--The amendments made by this part shall 
     apply to taxable years beginning after December 31, 2000.
       (b) Transitional Rules Related to Section 711.--
       (1) Existing arrangements.--
       (A) In general.--Except as otherwise provided in this 
     paragraph, the amendment made by section 711 shall not apply 
     to a real estate investment trust with respect to--
       (i) securities of a corporation held directly or indirectly 
     by such trust on July 12, 1999,
       (ii) securities of a corporation held by an entity on July 
     12, 1999, if such trust acquires control of such entity 
     pursuant to a written binding contract in effect on such date 
     and at all times thereafter before such acquisition,
       (iii) securities received by such trust (or a successor) in 
     exchange for, or with respect to, securities described in 
     clause (i) or (ii) in a transaction in which gain or loss is 
     not recognized, and
       (iv) securities acquired directly or indirectly by such 
     trust as part of a reorganization (as defined in section 
     368(a)(1) of the Internal Revenue Code of 1986) with respect 
     to such trust if such securities are described in clause (i), 
     (ii), or (iii) with respect to any other real estate 
     investment trust.
       (B) New trade or business or substantial new assets.--
     Subparagraph (A) shall cease to apply to securities of a 
     corporation as of the first day after July 12, 1999, on which 
     such corporation engages in a substantial new line of 
     business, or acquires any substantial asset, other than--
       (i) pursuant to a binding contract in effect on such date 
     and at all times thereafter before the acquisition of such 
     asset,
       (ii) in a transaction in which gain or loss is not 
     recognized by reason of section 1031 or 1033 of the Internal 
     Revenue Code of 1986, or
       (iii) in a reorganization (as so defined) with another 
     corporation the securities of which are described in 
     paragraph (1)(A) of this subsection.
       (C) Limitation on transition rules.--Subparagraph (A) shall 
     cease to apply to securities of a corporation held, acquired, 
     or received, directly or indirectly, by a real estate 
     investment trust as of the first day after July 12, 1999, on 
     which such trust acquires any additional securities of such 
     corporation other than--
       (i) pursuant to a binding contract in effect on July 12, 
     1999, and at all times thereafter, or
       (ii) in a reorganization (as so defined) with another 
     corporation the securities of which are described in 
     paragraph (1)(A) of this subsection.
       (2) Tax-free conversion.--If--
       (A) at the time of an election for a corporation to become 
     a taxable REIT subsidiary, the amendment made by section 1021 
     does not apply to such corporation by reason of paragraph 
     (1), and
       (B) such election first takes effect before January 1, 
     2004,

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

                       PART II--HEALTH CARE REITS

     SEC. 721. HEALTH CARE REITS.

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

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

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

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

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

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

      PART III--CONFORMITY WITH REGULATED INVESTMENT COMPANY RULES

     SEC. 731. CONFORMITY WITH REGULATED INVESTMENT COMPANY RULES.

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

[[Page 2560]]



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

     SEC. 741. CLARIFICATION OF EXCEPTION FOR INDEPENDENT 
                   OPERATORS.

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

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

           PART V--MODIFICATION OF EARNINGS AND PROFITS RULES

     SEC. 751. MODIFICATION OF EARNINGS AND PROFITS RULES.

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

              Subtitle C--Private Activity Bond Volume Cap

     SEC. 761. ACCELERATION OF PHASE-IN OF INCREASE IN VOLUME CAP 
                   ON PRIVATE ACTIVITY BONDS.

       (a) In General.--The table contained in section 146(d)(2) 
     (relating to per capita limit; aggregate limit) is amended to 
     read as follows:

 
       ``Calendar Year           Per Capita Limit      Aggregate Limit
------------------------------------------------------------------------
  2000.......................         $55.00             165,000,000
  2001.......................          60.00             180,000,000
  2002.......................          65.00             195,000,000
  2003.......................          70.00             210,000,000
  2004 and thereafter........          75.00           225,000,000.''.

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

 Subtitle D--Exclusion from gross income for certain forgiven mortgage 
                              obligations

     SEC. 771. EXCLUSION FROM GROSS INCOME FOR CERTAIN FORGIVEN 
                   MORTGAGE OBLIGATIONS.

       (a) In General.--Paragraph (1) of section 108(a) of the 
     Internal Revenue Code of 1986 (relating to exclusion from 
     gross income) is amended by striking ``or'' at the end of 
     both subparagraphs (A) and (C), by striking the period at the 
     end of subparagraph (D) and inserting ``, or'', and by 
     inserting after subparagraph (D) the following new 
     subparagraph:
       ``(E) in the case of an individual, the indebtedness 
     discharged is qualified residential indebtedness.''.
       (b) Qualified Residential Indebtedness Shortfall.--Section 
     108 of such Code (relating to discharge of indebtedness) is 
     amended by adding at the end the following new subsection:
       ``(h) Qualified Residential Indebtedness.--
       ``(1) Limitations.--The amount excluded under subparagraph 
     (E) of subsection (a)(1) with respect to any qualified 
     residential indebtedness shall not exceed the excess (if any) 
     of--
       ``(A) the outstanding principal amount of such indebtedness 
     (immediately before the discharge), over
       ``(B) the sum of--
       ``(i) the amount realized from the sale of the real 
     property securing such indebtedness reduced by the cost of 
     such sale, and
       ``(ii) the outstanding principal amount of any other 
     indebtedness secured by such property.
       ``(2) Qualified residential indebtedness.--
       ``(A) In general.--The term `qualified residential 
     indebtedness' means indebtedness which--
       ``(i) was incurred or assumed by the taxpayer in connection 
     with real property used as a residence and is secured by such 
     real property,
       ``(ii) is incurred or assumed to acquire, construct, 
     reconstruct, or substantially improve such real property, and
       ``(iii) with respect to which such taxpayer makes an 
     election to have this paragraph apply.
       ``(B) Refinanced indebtedness.--Such term shall include 
     indebtedness resulting from the refinancing of indebtedness 
     under subparagraph (A)(ii), but only to the extent the 
     refinanced indebtedness does not exceed the amount of the 
     indebtedness being refinanced.
       ``(C) Exceptions.--Such term shall not include qualified 
     farm indebtedness or qualified real property business 
     indebtedness.''.
       (c) Conforming Amendments.--
       (1) Paragraph (2) of section 108(a) of such Code is 
     amended--
       (A) in subparagraph (A) by striking ``and (D)'' and 
     inserting ``(D), and (E)'', and
       (B) by amending subparagraph (B) to read as follows:
       ``(B) Insolvency exclusion takes precedence over qualified 
     farm exclusion; qualified real property business exclusion; 
     and qualified residential shortfall exclusion.--Subparagraphs 
     (C), (D), and (E) of paragraph (1) shall not apply to a 
     discharge to the extent the taxpayer is insolvent.''.
       (2) Paragraph (1) of section 108(b) of such Code is amended 
     by striking ``or (C)'' and inserting ``(C), or (E)''.
       (3) Subsection (c) of section 121 of such Code is amended 
     by adding at the end the following new paragraph:
       ``(4) Special rule relating to discharge of indebtedness.--
     The amount of gain which (but for this paragraph) would be 
     excluded from gross income under subsection (a) with respect 
     to a principal residence shall be reduced by the amount 
     excluded from gross income under section 108(a)(1)(E) with 
     respect to such residence.''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to discharges after the date of the enactment of 
     this Act.

                  TITLE VIII--MISCELLANEOUS PROVISIONS

     SEC. 801. CREDIT FOR MODIFICATIONS TO INTER-CITY BUSES 
                   REQUIRED UNDER THE AMERICANS WITH DISABILITIES 
                   ACT OF 1990.

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

     SEC. 802. CERTAIN EDUCATIONAL BENEFITS PROVIDED BY AN 
                   EMPLOYER TO CHILDREN OF EMPLOYEES EXCLUDABLE 
                   FROM GROSS INCOME AS A SCHOLARSHIP.

       (a) In General.--Section 117 (relating to qualified 
     scholarships) is amended by adding at the end the following 
     new subsection:

[[Page 2561]]

       ``(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 151(c)(3)) of an employee of such 
     employer,
       ``(B) such amount is provided pursuant to a plan which 
     meets the nondiscrimination requirements of subsection 
     (d)(3), and
       ``(C) amounts provided under such plan are in addition to 
     any other compensation payable to employees and such plan 
     does not provide employees with a choice between such amounts 
     and any other benefit.

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

     SEC. 803. TAX INCENTIVES FOR QUALIFIED UNITED STATES 
                   INDEPENDENT FILM AND TELEVISION PRODUCTION.

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

     ``SEC. 35. UNITED STATES INDEPENDENT FILM AND TELEVISION 
                   PRODUCTION WAGE CREDIT.

       ``(a) Amount of Credit.--There shall be allowed as a credit 
     against the tax imposed by this subtitle for the taxable year 
     an amount equal to 20 percent of the qualified wages paid or 
     incurred during the calendar year which ends with or within 
     the taxable year.
       ``(b) Only First $20,000 of Wages per Year Taken Into 
     Account.--With respect to each qualified United States 
     independent film and television production, the amount of 
     qualified wages paid or incurred to each qualified United 
     States independent film and television production employee 
     which may be taken into account for a calendar year shall not 
     exceed $20,000.
       ``(c) Qualified Wages.--For purposes of this section--
       ``(1) In general.--The term `qualified wages' means any 
     wages paid or incurred by an employer for services performed 
     by an employee while such employee is a qualified United 
     States independent film and television production employee.
       ``(2) Qualified united states independent film and 
     television production employee.--
       ``(A) In general.--The term `qualified United States 
     independent film and television production employee' means, 
     with respect to any period, any employee of an employer if 
     substantially all of the services performed during such 
     period by such employee for such employer are performed in an 
     activity related to any qualified United States independent 
     film and television production in a trade or business of the 
     employer.
       ``(B) Certain individuals not eligible.--Such term shall 
     not include--
       ``(i) any individual described in subparagraph (A), (B), or 
     (C) of section 51(i)(1), and
       ``(ii) any 5-percent owner (as defined in section 
     416(i)(1)(B).
       ``(3) Coordination with other wage credits.--No credit 
     shall be allowed under any other provision of this chapter 
     for wages paid to any employee during any calendar year if 
     the employer is allowed a credit under this section for any 
     of such wages.
       ``(4) Wages.--The term `wages' has the same meaning as when 
     used in section 51.
       ``(d) Qualified United States Independent Film and 
     Television Production.--For purposes of this section--
       ``(1) In general.--The term `qualified United States 
     independent film and television production' means any 
     production of any motion picture (whether released 
     theatrically or directly to video cassette or any other 
     format), a mini series, or a pilot production for a dramatic 
     series if--
       ``(A) the production is produced in whole or in substantial 
     part within the United States (determined on the basis of 
     proportion of the qualified United States independent film 
     and television production employees with respect to such 
     production to total employee performing services related to 
     such production),
       ``(B) the production is created primarily for use as public 
     entertainment or for educational purposes, and
       ``(C) the total production cost of the production is less 
     than $10,000,000.
       ``(2) Public entertainment.--The term `public 
     entertainment' includes a motion picture film, video tape, or 
     television program intended for initial broadcast via the 
     public broadcast spectrum or delivered via cable 
     distribution, or productions that are submitted to a national 
     organization that rates films for violent or adult content. 
     Such term does not include any film or tape the market for 
     which is primarily topical, is otherwise essentially 
     transitory in nature, or is produced for private 
     noncommercial use.
       ``(3) Total production cost.--The term `total production 
     cost' includes costs incurred in the delivery of the final 
     master copy but does not include development, acquisition, 
     and marketing costs of the qualified United States 
     independent film and television production.
       ``(e) Controlled Groups.--For purposes of this section--
       ``(1) all employers treated as a single employer under 
     subsection (a) or (b) of section 52 shall be treated as a 
     single employer for purposes of this subpart, and
       ``(2) the credit (if any) determined under this section 
     with respect to each such employer shall be its proportionate 
     share of the wages giving rise to such credit.
       ``(f) Certain Other Rules Made Applicable.--Rules similar 
     to the rules of section 51(k) and subsections (c) and (d) of 
     section 52 shall apply for purposes of this section.''.
       (b) Denial of Double Benefit.--Subsection (a) of section 
     280C is amended by inserting ``35,'' before ``45A(a),''.
       (c) Conforming Amendments.--
       (1) Paragraph (2) of section 1324(b) of title 31, United 
     States Code, is amended by inserting before the period ``, or 
     from section 35 of such Code''.
       (2) The table of sections for subpart C of part IV of 
     subchapter A of chapter 1 is amended by striking the last 
     item and inserting the following new items:

``Sec. 35. United States independent film and television production 
              wage credit.
``Sec. 36. Overpayments of tax.''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to wages paid or incurred after the date of the 
     enactment of this Act in taxable years ending after such 
     date.

  The SPEAKER pro tempore. The amendment consisting of the text of H.R. 
3832 is adopted.
  The text of H.R. 3081, as amended by inserting the text of H.R. 3832, 
is as follows:

                               H.R. 3832

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

     SECTION 1. SHORT TITLE; REFERENCES; TABLE OF CONTENTS.

       (a) Short Title.--This Act may be cited as the ``Small 
     Business Tax Fairness Act of 2000''.
       (b) Amendment of 1986 Code.--Except as otherwise expressly 
     provided, whenever in this Act an amendment or repeal is 
     expressed in terms of an amendment to, or repeal of, a 
     section or other provision, the reference shall be considered 
     to be made to a section or other provision of the Internal 
     Revenue Code of 1986.
       (c) Table of Contents.--

Sec. 1. Short title; references; table of contents.

                   TITLE I--SMALL BUSINESS PROVISIONS

Sec. 101. Deduction for 100 percent of health insurance costs of self-
              employed individuals.
Sec. 102. Increase in expense treatment for small businesses.
Sec. 103. Increased deduction for meal expenses.
Sec. 104. Increased deductibility of business meal expenses for 
              individuals subject to Federal limitations on hours of 
              service.
Sec. 105. Income averaging for farmers and fishermen not to increase 
              alternative minimum tax liability.
Sec. 106. Repeal of occupational taxes relating to distilled spirits, 
              wine, and beer.
Sec. 107. Repeal of modification of installment method.

                      TITLE II--PENSION PROVISIONS

                     Subtitle A--Expanding Coverage

Sec. 201. Increase in benefit and contribution limits.
Sec. 202. Plan loans for subchapter S owners, partners, and sole 
              proprietors.

[[Page 2562]]

Sec. 203. Modification of top-heavy rules.
Sec. 204. Elective deferrals not taken into account for purposes of 
              deduction limits.
Sec. 205. Repeal of coordination requirements for deferred compensation 
              plans of State and local governments and tax-exempt 
              organizations.
Sec. 206. Elimination of user fee for requests to IRS regarding pension 
              plans.
Sec. 207. Deduction limits.
Sec. 208. Option to treat elective deferrals as after-tax 
              contributions.

                Subtitle B--Enhancing Fairness for Women

Sec. 221. Catchup contributions for individuals age 50 or over.
Sec. 222. Equitable treatment for contributions of employees to defined 
              contribution plans.
Sec. 223. Faster vesting of certain employer matching contributions.
Sec. 224. Simplify and update the minimum distribution rules.
Sec. 225. Clarification of tax treatment of division of section 457 
              plan benefits upon divorce.
Sec. 226. Modification of safe harbor relief for hardship withdrawals 
              from cash or deferred arrangements.

          Subtitle C--Increasing Portability for Participants

Sec. 231. Rollovers allowed among various types of plans.
Sec. 232. Rollovers of IRAs into workplace retirement plans.
Sec. 233. Rollovers of after-tax contributions.
Sec. 234. Hardship exception to 60-day rule.
Sec. 235. Treatment of forms of distribution.
Sec. 236. Rationalization of restrictions on distributions.
Sec. 237. Purchase of service credit in governmental defined benefit 
              plans.
Sec. 238. Employers may disregard rollovers for purposes of cash-out 
              amounts.
Sec. 239. Minimum distribution and inclusion requirements for section 
              457 plans.

       Subtitle D--Strengthening Pension Security and Enforcement

Sec. 241. Repeal of 150 percent of current liability funding limit.
Sec. 242. Maximum contribution deduction rules modified and applied to 
              all defined benefit plans.
Sec. 243. Excise tax relief for sound pension funding.
Sec. 244. Excise tax on failure to provide notice by defined benefit 
              plans significantly reducing future benefit accruals.
Sec. 245. Treatment of multiemployer plans under section 415.

                Subtitle E--Reducing Regulatory Burdens

Sec. 261. Modification of timing of plan valuations.
Sec. 262. ESOP dividends may be reinvested without loss of dividend 
              deduction.
Sec. 263. Repeal of transition rule relating to certain highly 
              compensated employees.
Sec. 264. Employees of tax-exempt entities.
Sec. 265. Clarification of treatment of employer-provided retirement 
              advice.
Sec. 266. Reporting simplification.
Sec. 267. Improvement of employee plans compliance resolution system.
Sec. 268. Modification of exclusion for employer provided transit 
              passes.
Sec. 269. Repeal of the multiple use test.
Sec. 270. Flexibility in nondiscrimination, coverage, and line of 
              business rules.
Sec. 271. Extension to international organizations of moratorium on 
              application of certain nondiscrimination rules applicable 
              to State and local plans.
Sec. 272. Notice and consent period regarding distributions.

                      Subtitle F--Plan Amendments

Sec. 281. Provisions relating to plan amendments.

                      TITLE III--ESTATE TAX RELIEF

          Subtitle A--Reductions of Estate and Gift Tax Rates

Sec. 301. Reductions of estate and gift tax rates.
Sec. 302. Sense of the Congress concerning repeal of the death tax.

   Subtitle B--Unified Credit Replaced With Unified Exemption Amount

Sec. 311. Unified credit against estate and gift taxes replaced with 
              unified exemption amount.

     Subtitle C--Modifications of Generation-Skipping Transfer Tax

Sec. 321. Deemed allocation of GST exemption to lifetime transfers to 
              trusts; retroactive allocations.
Sec. 322. Severing of trusts.
Sec. 323. Modification of certain valuation rules.
Sec. 324. Relief provisions.

                   Subtitle D--Conservation Easements

Sec. 331. Expansion of estate tax rule for conservation easements.

     TITLE IV--TAX RELIEF FOR DISTRESSED COMMUNITIES AND INDUSTRIES

           Subtitle A--American Community Renewal Act of 2000

Sec. 401. Short title.
Sec. 402. Designation of and tax incentives for renewal communities.
Sec. 403. Extension of expensing of environmental remediation costs to 
              renewal communities.
Sec. 404. Extension of work opportunity tax credit for renewal 
              communities.
Sec. 405. Conforming and clerical amendments.

                     Subtitle B--Timber Incentives

Sec. 411. Temporary suspension of maximum amount of amortizable 
              reforestation expenditures.

                    TITLE V--REAL ESTATE PROVISIONS

         Subtitle A--Improvements in Low-Income Housing Credit

Sec. 501. Modification of State ceiling on low-income housing credit.
Sec. 502. Modification of criteria for allocating housing credits among 
              projects.
Sec. 503. Additional responsibilities of housing credit agencies.
Sec. 504. Modifications to rules relating to basis of building which is 
              eligible for credit.
Sec. 505. Other modifications.
Sec. 506. Carryforward rules.
Sec. 507. Effective date.

              Subtitle B--Private Activity Bond Volume Cap

Sec. 511. Acceleration of phase-in of increase in volume cap on private 
              activity bonds.

 Subtitle C--Exclusion From Gross Income for Certain Forgiven Mortgage 
                              Obligations

Sec. 512. Exclusion from gross income for certain forgiven mortgage 
              obligations.

                   TITLE I--SMALL BUSINESS PROVISIONS

     SEC. 101. DEDUCTION FOR 100 PERCENT OF HEALTH INSURANCE COSTS 
                   OF SELF-EMPLOYED INDIVIDUALS.

       (a) In General.--Paragraph (1) of section 162(l) is amended 
     to read as follows:
       ``(1) Allowance of deduction.--In the case of an individual 
     who is an employee within the meaning of section 401(c)(1), 
     there shall be allowed as a deduction under this section an 
     amount equal to 100 percent of the amount paid during the 
     taxable year for insurance which constitutes medical care for 
     the taxpayer and the taxpayer's spouse and dependents.''.
       (b) Clarification of Limitations on Other Coverage.--The 
     first sentence of section 162(l)(2)(B) is amended to read as 
     follows: ``Paragraph (1) shall not apply to any taxpayer for 
     any calendar month for which the taxpayer participates in any 
     subsidized health plan maintained by any employer (other than 
     an employer described in section 401(c)(4)) of the taxpayer 
     or the spouse of the taxpayer.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2000.

     SEC. 102. INCREASE IN EXPENSE TREATMENT FOR SMALL BUSINESSES.

       (a) In General.--Paragraph (1) of section 179(b) (relating 
     to dollar limitation) is amended to read as follows:
       ``(1) Dollar limitation.--The aggregate cost which may be 
     taken into account under subsection (a) for any taxable year 
     shall not exceed $30,000.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     2000.

     SEC. 103. INCREASED DEDUCTION FOR MEAL EXPENSES.

       (a) In General.--Paragraph (1) of section 274(n) (relating 
     to only 50 percent of meal and entertainment expenses allowed 
     as deduction) is amended by striking ``50 percent'' in the 
     text and inserting ``the allowable percentage''.
       (b) Allowable Percentages.--Subsection (n) of section 274 
     is amended by redesignating paragraphs (2) and (3) as 
     paragraphs (3) and (4), respectively, and by inserting after 
     paragraph (1) the following new paragraph:
       ``(2) Allowable percentage.--For purposes of paragraph (1), 
     the allowable percentage is--
       ``(A) in the case of amounts for items described in 
     paragraph (1)(B), 50 percent, and
       ``(B) in the case of expenses for food or beverages, 60 
     percent (55 percent for taxable years beginning during 
     2001).''
       (c) Conforming Amendment.--The heading for subsection (n) 
     of section 274 is amended by striking ``50 Percent'' and 
     inserting ``Limited Percentages''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2000.

     SEC. 104. INCREASED DEDUCTIBILITY OF BUSINESS MEAL EXPENSES 
                   FOR INDIVIDUALS SUBJECT TO FEDERAL LIMITATIONS 
                   ON HOURS OF SERVICE.

       (a) In General.--Paragraph (4) of section 274(n) (relating 
     to limited percentages of meal and entertainment expenses 
     allowed as deduction), as redesignated by section 103, is 
     amended to read as follows:
       ``(4) Special rule for individuals subject to federal hours 
     of service.--In the case

[[Page 2563]]

     of any expenses for food or beverages consumed while away 
     from home (within the meaning of section 162(a)(2)) by an 
     individual during, or incident to, the period of duty subject 
     to the hours of service limitations of the Department of 
     Transportation, paragraph (2)(B) shall be applied by 
     substituting `80 percent' for the percentage otherwise 
     applicable under paragraph (2)(B).''
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to taxable years beginning after December 31, 
     2000.

     SEC. 105. INCOME AVERAGING FOR FARMERS AND FISHERMEN NOT TO 
                   INCREASE ALTERNATIVE MINIMUM TAX LIABILITY.

       (a) In General.--Section 55(c) (defining regular tax) is 
     amended by redesignating paragraph (2) as paragraph (3) and 
     by inserting after paragraph (1) the following:
       ``(2) Coordination with income averaging for farmers and 
     fishermen.--Solely for purposes of this section, section 1301 
     (relating to averaging of farm and fishing income) shall not 
     apply in computing the regular tax.''.
       (b) Allowing Income Averaging for Fishermen.--
       (1) In general.--Section 1301(a) is amended by striking 
     ``farming business'' and inserting ``farming business or 
     fishing business,''.
       (2) Definition of elected farm income.--
       (A) In general.--Clause (i) of section 1301(b)(1)(A) is 
     amended by inserting ``or fishing business'' before the 
     semicolon.
       (B) Conforming amendment.--Subparagraph (B) of section 
     1301(b)(1) is amended by inserting ``or fishing business'' 
     after ``farming business'' both places it occurs.
       (3) Definition of fishing business.--Section 1301(b) is 
     amended by adding at the end the following new paragraph:
       ``(4) Fishing business.--The term `fishing business' means 
     the conduct of commercial fishing as defined in section 3 of 
     the Magnuson-Stevens Fishery Conservation and Management Act 
     (16 U.S.C. 1802).''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2000.

     SEC. 106. REPEAL OF OCCUPATIONAL TAXES RELATING TO DISTILLED 
                   SPIRITS, WINE, AND BEER.

       (a) Repeal of Occupational Taxes.--
       (1) In general.--The following provisions of part II of 
     subchapter A of chapter 51 of the Internal Revenue Code of 
     1986 (relating to occupational taxes) are hereby repealed:
       (A) Subpart A (relating to proprietors of distilled spirits 
     plants, bonded wine cellars, etc.).
       (B) Subpart B (relating to brewer).
       (C) Subpart D (relating to wholesale dealers) (other than 
     sections 5114 and 5116).
       (D) Subpart E (relating to retail dealers) (other than 
     section 5124).
       (E) Subpart G (relating to general provisions) (other than 
     sections 5142, 5143, 5145, and 5146).
       (2) Nonbeverage domestic drawback.--Section 5131 is amended 
     by striking ``, on payment of a special tax per annum,''.
       (3) Industrial use of distilled spirits.--Section 5276 is 
     hereby repealed.
       (b) Conforming Amendments.--
       (1)(A) The heading for part II of subchapter A of chapter 
     51 and the table of subparts for such part are amended to 
     read as follows:

                  ``PART II--MISCELLANEOUS PROVISIONS

``Subpart A. Manufacturers of stills.
``Subpart B. Nonbeverage domestic drawback claimants.
``Subpart C. Recordkeeping by dealers.
``Subpart D. Other provisions.''
       (B) The table of parts for such subchapter A is amended by 
     striking the item relating to part II and inserting the 
     following new item:

``Part II. Miscellaneous provisions.''
       (2) Subpart C of part II of such subchapter (relating to 
     manufacturers of stills) is redesignated as subpart A.
       (3)(A) Subpart F of such part II (relating to nonbeverage 
     domestic drawback claimants) is redesignated as subpart B and 
     sections 5131 through 5134 are redesignated as sections 5111 
     through 5114, respectively.
       (B) The table of sections for such subpart B, as so 
     redesignated, is amended--
       (i) by redesignating the items relating to sections 5131 
     through 5134 as relating to sections 5111 through 5114, 
     respectively, and
       (ii) by striking ``and rate of tax'' in the item relating 
     to section 5111, as so redesignated.
       (C) Section 5111, as redesignated by subparagraph (A), is 
     amended--
       (i) by striking ``and rate of tax'' in the section heading,
       (ii) by striking ``(a) Eligibility for Drawback.--'', and
       (iii) by striking subsection (b).
       (4) Part II of subchapter A of chapter 51 is amended by 
     adding after subpart B, as redesignated by paragraph (3), the 
     following new subpart:

                 ``Subpart C--Recordkeeping by Dealers

``Sec. 5121. Recordkeeping by wholesale dealers.
``Sec. 5122. Recordkeeping by retail dealers.
``Sec. 5123. Preservation and inspection of records, and entry of 
              premises for inspection.''
       (5)(A) Section 5114 (relating to records) is moved to 
     subpart C of such part II and inserted after the table of 
     sections for such subpart.
       (B) Section 5114 is amended--
       (i) by striking the section heading and inserting the 
     following new heading:

     ``SEC. 5121. RECORDKEEPING BY WHOLESALE DEALERS.'',

     and
       (ii) by redesignating subsection (c) as subsection (d) and 
     by inserting after subsection (b) the following new 
     subsection:
       ``(c) Wholesale Dealers.--For purposes of this part--
       ``(1) Wholesale dealer in liquors.--The term `wholesale 
     dealer in liquors' means any dealer (other than a wholesale 
     dealer in beer) who sells, or offers for sale, distilled 
     spirits, wines, or beer, to another dealer.
       ``(2) Wholesale dealer in beer.--The term `wholesale dealer 
     in beer' means any dealer who sells, or offers for sale, 
     beer, but not distilled spirits or wines, to another dealer.
       ``(3) Dealer.--The term `dealer' means any person who 
     sells, or offers for sale, any distilled spirits, wines, or 
     beer.
       ``(4) Presumption in case of sale of 20 wine gallons or 
     more.--The sale, or offer for sale, of distilled spirits, 
     wines, or beer, in quantities of 20 wine gallons or more to 
     the same person at the same time, shall be presumptive 
     evidence that the person making such sale, or offer for sale, 
     is engaged in or carrying on the business of a wholesale 
     dealer in liquors or a wholesale dealer in beer, as the case 
     may be. Such presumption may be overcome by evidence 
     satisfactorily showing that such sale, or offer for sale, was 
     made to a person other than a dealer.''
       (C) Paragraph (3) of section 5121(d), as so redesignated, 
     is amended by striking ``section 5146'' and inserting 
     ``section 5123''.
       (6)(A) Section 5124 (relating to records) is moved to 
     subpart C of part II of subchapter A of chapter 51 and 
     inserted after section 5121.
       (B) Section 5124 is amended--
       (i) by striking the section heading and inserting the 
     following new heading:

     ``SEC. 5122. RECORDKEEPING BY RETAIL DEALERS.'',

       (ii) by striking ``section 5146'' in subsection (c) and 
     inserting ``section 5123'', and
       (iii) by redesignating subsection (c) as subsection (d) and 
     inserting after subsection (b) the following new subsection:
       ``(c) Retail Dealers.--For purposes of this section--
       ``(1) Retail dealer in liquors.--The term `retail dealer in 
     liquors' means any dealer (other than a retail dealer in 
     beer) who sells, or offers for sale, distilled spirits, 
     wines, or beer, to any person other than a dealer.
       ``(2) Retail dealer in beer.--The term `retail dealer in 
     beer' means any dealer who sells, or offers for sale, beer, 
     but not distilled spirits or wines, to any person other than 
     a dealer.
       ``(3) Dealer.--The term `dealer' has the meaning given such 
     term by section 5121(c)(3).''
       (7) Section 5146 is moved to subpart C of part II of 
     subchapter A of chapter 51, inserted after section 5122, and 
     redesignated as section 5123.
       (8) Part II of subchapter A of chapter 51 is amended by 
     inserting after subpart C the following new subpart:

                     ``Subpart D. Other Provisions

``Sec. 5131. Packaging distilled spirits for industrial uses.
``Sec. 5132. Prohibited purchases by dealers.''
       (9) Section 5116 is moved to subpart D of part II of 
     subchapter A of chapter 51, inserted after the table of 
     sections, redesignated as section 5131, and amended by 
     inserting ``(as defined in section 5121(c))'' after 
     ``dealer'' in subsection (a).
       (10) Subpart D of part II of subchapter A of chapter 51 is 
     amended by adding at the end thereof the following new 
     section:

     ``SEC. 5132. PROHIBITED PURCHASES BY DEALERS.

       ``(a) In General.--Except as provided in regulations 
     prescribed by the Secretary, it shall be unlawful for a 
     dealer to purchase distilled spirits from any person other 
     than a wholesale dealer in liquors who is required to keep 
     the records prescribed by section 5121.
       ``(b) Penalty and Forfeiture.--
  ``For penalty and forfeiture provisions applicable to violations of 
subsection (a), see sections 5687 and 7302.''
       (11) Subsection (b) of section 5002 is amended--
       (A) by striking ``section 5112(a)'' and inserting ``section 
     5121(c)(3)'',
       (B) by striking ``section 5112'' and inserting ``section 
     5121(c)'',
       (C) by striking ``section 5122'' and inserting ``section 
     5122(c)''.
       (12) Subparagraph (A) of section 5010(c)(2) is amended by 
     striking ``section 5134'' and inserting ``section 5114''.
       (13) Subsection (d) of section 5052 is amended to read as 
     follows:
       ``(d) Brewer.--For purposes of this chapter, the term 
     `brewer' means any person who brews beer or produces beer for 
     sale. Such term shall not include any person who produces 
     only beer exempt from tax under section 5053(e).''
       (14) The text of section 5182 is amended to read as 
     follows:

[[Page 2564]]

  ``For provisions requiring recordkeeping by wholesale liquor dealers, 
see section 5112, and by retail liquor dealers, see section 5122.''
       (15) Subsection (b) of section 5402 is amended by striking 
     ``section 5092'' and inserting ``section 5052(d)''.
       (16) Section 5671 is amended by striking ``or 5091''.
       (17)(A) Part V of subchapter J of chapter 51 is hereby 
     repealed.
       (B) The table of parts for such subchapter J is amended by 
     striking the item relating to part V.
       (18)(A) Sections 5142, 5143, and 5145 are moved to 
     subchapter D of chapter 52, inserted after section 5731, 
     redesignated as sections 5732, 5733, and 5734, respectively, 
     and amended--
       (i) by striking ``this part'' each place it appears and 
     inserting ``this subchapter'', and
       (ii) by striking ``this subpart'' in section 5732(c)(2) (as 
     so redesignated) and inserting ``this subchapter''.
       (B) Section 5732, as redesignated by subparagraph (A), is 
     amended by striking ``(except the tax imposed by section 
     5131)'' each place it appears.
       (C) Subsection (c) of section 5733, as redesignated by 
     subparagraph (A), is amended by striking paragraph (2) and by 
     redesignating paragraph (3) as paragraph (2).
       (D) The table of sections for subchapter D of chapter 52 is 
     amended by adding at the end thereof the following:

``Sec. 5732. Payment of tax.
``Sec. 5733. Provisions relating to liability for occupational taxes.
``Sec. 5734. Application of State laws.''
       (E) Section 5731 is amended by striking subsection (c) and 
     by redesignating subsection (d) as subsection (c).
       (19) Subsection (c) of section 6071 is amended by striking 
     ``section 5142'' and inserting ``section 5732''.
       (20) Paragraph (1) of section 7652(g) is amended--
       (A) by striking ``subpart F'' and inserting ``subpart B'', 
     and
       (B) by striking ``section 5131(a)'' and inserting ``section 
     5111(a)''.
       (21) The table of sections for subchapter D of chapter 51 
     is amended by striking the item relating to section 5276.
       (c) Effective Date.--The amendments made by this section 
     shall take effect on July 1, 2001, but shall not apply to 
     taxes imposed for periods before such date.

     SEC. 107. REPEAL OF MODIFICATION OF INSTALLMENT METHOD.

       (a) In General.--Subsection (a) of section 536 of the 
     Ticket to Work and Work Incentives Improvement Act of 1999 
     (relating to modification of installment method and repeal of 
     installment method for accrual method taxpayers) is repealed 
     effective with respect to sales and other dispositions 
     occurring on or after the date of the enactment of such Act.
       (b) Applicability.--The Internal Revenue Code of 1986 shall 
     be applied and administered as if that subsection (and the 
     amendments made by that subsection) had not been enacted.

                      TITLE II--PENSION PROVISIONS

                     Subtitle A--Expanding Coverage

     SEC. 201. INCREASE IN BENEFIT AND CONTRIBUTION LIMITS.

       (a) Defined Benefit Plans.--
       (1) Dollar limit.--
       (A) Subparagraph (A) of section 415(b)(1) (relating to 
     limitation for defined benefit plans) is amended by striking 
     ``$90,000'' and inserting ``$160,000''.
       (B) Subparagraphs (C) and (D) of section 415(b)(2) are each 
     amended by striking ``$90,000'' each place it appears in the 
     headings and the text and inserting ``$160,000''.
       (C) Paragraph (7) of section 415(b) (relating to benefits 
     under certain collectively bargained plans) is amended by 
     striking ``the greater of $68,212 or one-half the amount 
     otherwise applicable for such year under paragraph (1)(A) for 
     `$90,000' '' and inserting ``one-half the amount otherwise 
     applicable for such year under paragraph (1)(A) for 
     `$160,000' ''.
       (2) Limit reduced when benefit begins before age 62.--
     Subparagraph (C) of section 415(b)(2) is amended by striking 
     ``the social security retirement age'' each place it appears 
     in the heading and text and inserting ``age 62''.
       (3) Limit increased when benefit begins after age 65.--
     Subparagraph (D) of section 415(b)(2) is amended by striking 
     ``the social security retirement age'' each place it appears 
     in the heading and text and inserting ``age 65''.
       (4) Cost-of-living adjustments.--Subsection (d) of section 
     415 (related to cost-of-living adjustments) is amended--
       (A) by striking ``$90,000'' in paragraph (1)(A) and 
     inserting ``$160,000'', and
       (B) in paragraph (3)(A)--
       (i) by striking ``$90,000'' in the heading and inserting 
     ``$160,000'', and
       (ii) by striking ``October 1, 1986'' and inserting ``July 
     1, 2000''.
       (5) Conforming amendment.--Section 415(b)(2) is amended by 
     striking subparagraph (F).
       (b) Defined Contribution Plans.--
       (1) Dollar limit.--Subparagraph (A) of section 415(c)(1) 
     (relating to limitation for defined contribution plans) is 
     amended by striking ``$30,000'' and inserting ``$40,000''.
       (2) Cost-of-living adjustments.--Subsection (d) of section 
     415 (related to cost-of-living adjustments) is amended--
       (A) by striking ``$30,000'' in paragraph (1)(C) and 
     inserting ``$40,000'', and
       (B) in paragraph (3)(D)--
       (i) by striking ``$30,000'' in the heading and inserting 
     ``$40,000'', and
       (ii) by striking ``October 1, 1993'' and inserting ``July 
     1, 2000''.
       (c) Qualified Trusts.--
       (1) Compensation limit.--Sections 401(a)(17), 404(l), 
     408(k), and 505(b)(7) are each amended by striking 
     ``$150,000'' each place it appears and inserting 
     ``$200,000''.
       (2) Base period and rounding of cost-of-living 
     adjustment.--Subparagraph (B) of section 401(a)(17) is 
     amended--
       (A) by striking ``October 1, 1993'' and inserting ``July 1, 
     2000'', and
       (B) by striking ``$10,000'' both places it appears and 
     inserting ``$5,000''.
       (d) Elective Deferrals.--
       (1) In general.--Paragraph (1) of section 402(g) (relating 
     to limitation on exclusion for elective deferrals) is amended 
     to read as follows:
       ``(1) In general.--
       ``(A) Limitation.--Notwithstanding subsections (e)(3) and 
     (h)(1)(B), the elective deferrals of any individual for any 
     taxable year shall be included in such individual's gross 
     income to the extent the amount of such deferrals for the 
     taxable year exceeds the applicable dollar amount.
       ``(B) Applicable dollar amount.--For purposes of 
     subparagraph (A), the applicable dollar amount shall be the 
     amount determined in accordance with the following table:

    ``For taxable years                                  The applicable
      beginning in                                       dollar amount:
      calendar year:
      2001.....................................................$11,000 
      2002.....................................................$12,000 
      2003.....................................................$13,000 
      2004 or thereafter....................................$14,000.''.

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

    ``For taxable years                                  The applicable
      beginning in                                       dollar amount:
      calendar year:
      2001.....................................................$11,000 
      2002.....................................................$12,000 
      2003.....................................................$13,000 
      2004 or thereafter.......................................$14,000.

       ``(B) Cost-of-living adjustments.--In the case of taxable 
     years beginning after December 31, 2004, the Secretary shall 
     adjust the $14,000 amount specified in the table in 
     subparagraph (A) at the same time and in the same manner as 
     under section 415(d), except that the base period shall be 
     the calendar quarter beginning July 1, 2003, and any increase 
     under this paragraph which is not a multiple of $500 shall be 
     rounded to the next lowest multiple of $500.''.
       (f ) Simple Retirement Accounts.--
       (1) Limitation.--Clause (ii) of section 408(p)(2)(A) 
     (relating to general rule for qualified salary reduction 
     arrangement) is amended by striking ``$6,000'' and inserting 
     ``the applicable dollar amount''.
       (2) Applicable dollar amount.--Subparagraph (E) of 
     408(p)(2) is amended to read as follows:
       ``(E) Applicable dollar amount; cost-of-living 
     adjustment.--

[[Page 2565]]

       ``(i) In general.--For purposes of subparagraph (A)(ii), 
     the applicable dollar amount shall be the amount determined 
     in accordance with the following table:

    ``For taxable years                                  The applicable
      beginning in                                       dollar amount:
      calendar year:
          2001..................................................$7,000 
          2002..................................................$8,000 
          2003..................................................$9,000 
          2004 or thereafter...................................$10,000.

       ``(ii) Cost-of-living adjustment.--In the case of a year 
     beginning after December 31, 2004, the Secretary shall adjust 
     the $10,000 amount under clause (i) at the same time and in 
     the same manner as under section 415(d), except that the base 
     period taken into account shall be the calendar quarter 
     beginning July 1, 2003, and any increase under this 
     subparagraph which is not a multiple of $500 shall be rounded 
     to the next lower multiple of $500.''.
       (3) Conforming amendments.--
       (A) Clause (I) of section 401(k)(11)(B)(i) is amended by 
     striking ``$6,000'' and inserting ``the amount in effect 
     under section 408(p)(2)(A)(ii)''.
       (B) Section 401(k)(11) is amended by striking subparagraph 
     (E).
       (g) Rounding Rule Relating to Defined Benefit Plans and 
     Defined Contribution Plans.--Paragraph (4) of section 415(d) 
     is amended to read as follows:
       ``(4) Rounding.--
       ``(A) $160,000 amount.--Any increase under subparagraph (A) 
     of paragraph (1) which is not a multiple of $5,000 shall be 
     rounded to the next lowest multiple of $5,000.
       ``(B) $40,000 amount.--Any increase under subparagraph (C) 
     of paragraph (1) which is not a multiple of $1,000 shall be 
     rounded to the next lowest multiple of $1,000.''.
       (h) Effective Date.--The amendments made by this section 
     shall apply to years beginning after December 31, 2000.

     SEC. 202. PLAN LOANS FOR SUBCHAPTER S OWNERS, PARTNERS, AND 
                   SOLE PROPRIETORS.

       (a) Amendment to 1986 Code.--Subparagraph (B) of section 
     4975(f )(6) (relating to exemptions not to apply to certain 
     transactions) is amended by adding at the end the following 
     new clause:
       ``(iii) Loan exception.--For purposes of subparagraph 
     (A)(i), the term `owner-employee' shall only include a person 
     described in subclause (II) or (III) of clause (i).''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to loans made after December 31, 2000.

     SEC. 203. MODIFICATION OF TOP-HEAVY RULES.

       (a) Simplification of Definition of Key Employee.--
       (1) In general.--Section 416(i)(1)(A) (defining key 
     employee) is amended--
       (A) by striking ``or any of the 4 preceding plan years'' in 
     the matter preceding clause (i),
       (B) by striking clause (i) and inserting the following:
       ``(i) an officer of the employer having an annual 
     compensation greater than $150,000,'',
       (C) by striking clause (ii) and redesignating clauses (iii) 
     and (iv) as clauses (ii) and (iii), respectively, and
       (D) by striking the second sentence in the matter following 
     clause (iii), as redesignated by subparagraph (C).
       (2) Conforming amendment.--Section 416(i)(1)(B)(iii) is 
     amended by striking ``and subparagraph (A)(ii)''.
       (b) Matching Contributions Taken Into Account for Minimum 
     Contribution Requirements.--Section 416(c)(2)(A) (relating to 
     defined contribution plans) is amended by adding at the end 
     the following: ``Employer matching contributions (as defined 
     in section 401(m)(4)(A)) shall be taken into account for 
     purposes of this subparagraph.''.
       (c) Distributions During Last Year Before Determination 
     Date Taken Into Account.--
       (1) In general.--Paragraph (3) of section 416(g) is amended 
     to read as follows:
       ``(3) Distributions during last year before determination 
     date taken into account.--
       ``(A) In general.--For purposes of determining--
       ``(i) the present value of the cumulative accrued benefit 
     for any employee, or
       ``(ii) the amount of the account of any employee,
     such present value or amount shall be increased by the 
     aggregate distributions made with respect to such employee 
     under the plan during the 1-year period ending on the 
     determination date. The preceding sentence shall also apply 
     to distributions under a terminated plan which if it had not 
     been terminated would have been required to be included in an 
     aggregation group.
       ``(B) 5-year period in case of in-service distribution.--In 
     the case of any distribution made for a reason other than 
     separation from service, death, or disability, subparagraph 
     (A) shall be applied by substituting `5-year period' for `1-
     year period'.''.
       (2) Benefits not taken into account.--Subparagraph (E) of 
     section 416(g)(4) is amended--
       (A) by striking ``last 5 years'' in the heading and 
     inserting ``last year before determination date'', and
       (B) by striking ``5-year period'' and inserting ``1-year 
     period''.
       (d) Definition of Top-Heavy Plans.--Paragraph (4) of 
     section 416(g) (relating to other special rules for top-heavy 
     plans) is amended by adding at the end the following new 
     subparagraph:
       ``(H) Cash or deferred arrangements using alternative 
     methods of meeting nondiscrimination requirements.--The term 
     `top-heavy plan' shall not include a plan which consists 
     solely of--
       ``(i) a cash or deferred arrangement which meets the 
     requirements of section 401(k)(12), and
       ``(ii) matching contributions with respect to which the 
     requirements of section 401(m)(11) are met.
     If, but for this subparagraph, a plan would be treated as a 
     top-heavy plan because it is a member of an aggregation group 
     which is a top-heavy group, contributions under the plan may 
     be taken into account in determining whether any other plan 
     in the group meets the requirements of subsection (c)(2).''.
       (e) Frozen Plan Exempt From Minimum Benefit Requirement.--
     Subparagraph (C) of section 416(c)(1) (relating to defined 
     benefit plans) is amended--
       (A) by striking ``clause (ii)'' in clause (i) and inserting 
     ``clause (ii) or (iii)'', and
       (B) by adding at the end the following:
       ``(iii) Exception for frozen plan.--For purposes of 
     determining an employee's years of service with the employer, 
     any service with the employer shall be disregarded to the 
     extent that such service occurs during a plan year when the 
     plan benefits (within the meaning of section 410(b)) no 
     employee or former employee.''.
       (f ) Elimination of Family Attribution.--Section 
     416(i)(1)(B) (defining 5-percent owner) is amended by adding 
     at the end the following new clause:
       ``(iv) Family attribution disregarded.--Solely for purposes 
     of applying this paragraph (and not for purposes of any 
     provision of this title which incorporates by reference the 
     definition of a key employee or 5-percent owner under this 
     paragraph), section 318 shall be applied without regard to 
     subsection (a)(1) thereof in determining whether any person 
     is a 5-percent owner.''.
       (g) Effective Date.--The amendments made by this section 
     shall apply to years beginning after December 31, 2000.

     SEC. 204. ELECTIVE DEFERRALS NOT TAKEN INTO ACCOUNT FOR 
                   PURPOSES OF DEDUCTION LIMITS.

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

     SEC. 205. REPEAL OF COORDINATION REQUIREMENTS FOR DEFERRED 
                   COMPENSATION PLANS OF STATE AND LOCAL 
                   GOVERNMENTS AND TAX-EXEMPT ORGANIZATIONS.

       (a) In General.--Subsection (c) of section 457 (relating to 
     deferred compensation plans of State and local governments 
     and tax-exempt organizations), as amended by section 211, is 
     amended to read as follows:
       ``(c) Limitation.--The maximum amount of the compensation 
     of any one individual which may be deferred under subsection 
     (a) during any taxable year shall not exceed the amount in 
     effect under subsection (b)(2)(A) (as modified by any 
     adjustment provided under subsection (b)(3)).''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to years beginning after December 31, 2000.

     SEC. 206. ELIMINATION OF USER FEE FOR REQUESTS TO IRS 
                   REGARDING PENSION PLANS.

       (a) Elimination of Certain User Fees.--The Secretary of the 
     Treasury or the Secretary's delegate shall not require 
     payment of user fees under the program established under 
     section 7527 of the Internal Revenue Code of 1986 for 
     requests to the Internal Revenue Service for determination 
     letters with respect to the qualified status of a pension 
     benefit plan maintained solely by one or more eligible 
     employers or any trust which is part of the plan. The 
     preceding sentence shall not apply to any request--
       (1) made after the 5th plan year the pension benefit plan 
     is in existence, or
       (2) made by the sponsor of any prototype or similar plan 
     which the sponsor intends to market to participating 
     employers.
       (b) Pension Benefit Plan.--For purposes of this section, 
     the term ``pension benefit plan'' means a pension, profit-
     sharing, stock bonus, annuity, or employee stock ownership 
     plan.
       (c) Eligible Employer.--For purposes of this section, the 
     term ``eligible employer'' has the same meaning given such 
     term in section 408(p)(2)(C)(i)(I) of the Internal Revenue 
     Code of 1986. The determination of whether an employer is an 
     eligible employer under this section shall be made as of the

[[Page 2566]]

     date of the request described in subsection (a).
       (d) Effective Date.--The provisions of this section shall 
     apply with respect to requests made after December 31, 2000.

     SEC. 207. DEDUCTION LIMITS.

       (a) In General.--Section 404(a) (relating to general rule) 
     is amended by adding at the end the following:
       ``(12) Definition of compensation.--For purposes of 
     paragraphs (3), (7), (8), and (9), the term `compensation' 
     shall include amounts treated as participant's compensation 
     under subparagraph (C) or (D) of section 415(c)(3).''.
       (b) Conforming Amendment.--Subparagraph (B) of section 
     404(a)(3) is amended by striking the last sentence thereof.
       (c) Effective Date.--The amendments made by this section 
     shall apply to years beginning after December 31, 2000.

     SEC. 208. OPTION TO TREAT ELECTIVE DEFERRALS AS AFTER-TAX 
                   CONTRIBUTIONS.

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

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

       ``(a) General Rule.--If an applicable retirement plan 
     includes a qualified plus contribution program--
       ``(1) any designated plus contribution made by an employee 
     pursuant to the program shall be treated as an elective 
     deferral for purposes of this chapter, except that such 
     contribution shall not be excludable from gross income, and
       ``(2) such plan (and any arrangement which is part of such 
     plan) shall not be treated as failing to meet any requirement 
     of this chapter solely by reason of including such program.
       ``(b) Qualified Plus Contribution Program.--For purposes of 
     this section--
       ``(1) In general.--The term `qualified plus contribution 
     program' means a program under which an employee may elect to 
     make designated plus contributions in lieu of all or a 
     portion of elective deferrals the employee is otherwise 
     eligible to make under the applicable retirement plan.
       ``(2) Separate accounting required.--A program shall not be 
     treated as a qualified plus contribution program unless the 
     applicable retirement plan--
       ``(A) establishes separate accounts (`designated plus 
     accounts') for the designated plus contributions of each 
     employee and any earnings properly allocable to the 
     contributions, and
       ``(B) maintains separate recordkeeping with respect to each 
     account.
       ``(c) Definitions and Rules Relating to Designated Plus 
     Contributions.--For purposes of this section--
       ``(1) Designated plus contribution.--The term `designated 
     plus contribution' means any elective deferral which--
       ``(A) is excludable from gross income of an employee 
     without regard to this section, and
       ``(B) the employee designates (at such time and in such 
     manner as the Secretary may prescribe) as not being so 
     excludable.
       ``(2) Designation limits.--The amount of elective deferrals 
     which an employee may designate under paragraph (1) shall not 
     exceed the excess (if any) of--
       ``(A) the maximum amount of elective deferrals excludable 
     from gross income of the employee for the taxable year 
     (without regard to this section), over
       ``(B) the aggregate amount of elective deferrals of the 
     employee for the taxable year which the employee does not 
     designate under paragraph (1).
       ``(3) Rollover contributions.--
       ``(A) In general.--A rollover contribution of any payment 
     or distribution from a designated plus account which is 
     otherwise allowable under this chapter may be made only if 
     the contribution is to--
       ``(i) another designated plus account of the individual 
     from whose account the payment or distribution was made, or
       ``(ii) a Roth IRA of such individual.
       ``(B) Coordination with limit.--Any rollover contribution 
     to a designated plus account under subparagraph (A) shall not 
     be taken into account for purposes of paragraph (1).
       ``(d) Distribution Rules.--For purposes of this title--
       ``(1) Exclusion.--Any qualified distribution from a 
     designated plus account shall not be includible in gross 
     income.
       ``(2) Qualified distribution.--For purposes of this 
     subsection--
       ``(A) In general.--The term `qualified distribution' has 
     the meaning given such term by section 408A(d)(2)(A) (without 
     regard to clause (iv) thereof).
       ``(B) Distributions within nonexclusion period.--A payment 
     or distribution from a designated plus account shall not be 
     treated as a qualified distribution if such payment or 
     distribution is made within the 5-taxable-year period 
     beginning with the earlier of--
       ``(i) the first taxable year for which the individual made 
     a designated plus contribution to any designated plus account 
     established for such individual under the same applicable 
     retirement plan, or
       ``(ii) if a rollover contribution was made to such 
     designated plus account from a designated plus account 
     previously established for such individual under another 
     applicable retirement plan, the first taxable year for which 
     the individual made a designated plus contribution to such 
     previously established account.
       ``(C) Distributions of excess deferrals and earnings.--The 
     term `qualified distribution' shall not include any 
     distribution of any excess deferral under section 402(g)(2) 
     and any income on the excess deferral.
       ``(3) Aggregation rules.--Section 72 shall be applied 
     separately with respect to distributions and payments from a 
     designated plus account and other distributions and payments 
     from the plan.
       ``(e) Other Definitions.--For purposes of this section--
       ``(1) Applicable retirement plan.--The term `applicable 
     retirement plan' means--
       ``(A) an employees' trust described in section 401(a) which 
     is exempt from tax under section 501(a), and
       ``(B) a plan under which amounts are contributed by an 
     individual's employer for an annuity contract described in 
     section 403(b).
       ``(2) Elective deferral.--The term `elective deferral' 
     means any elective deferral described in subparagraph (A) or 
     (C) of section 402(g)(3).''.
       (b) Excess Deferrals.--Section 402(g) (relating to 
     limitation on exclusion for elective deferrals) is amended--
       (1) by adding at the end of paragraph (1) the following new 
     sentence: ``The preceding sentence shall not apply to so much 
     of such excess as does not exceed the designated plus 
     contributions of the individual for the taxable year.'', and
       (2) by inserting ``(or would be included but for the last 
     sentence thereof)'' after ``paragraph (1)'' in paragraph 
     (2)(A).
       (c) Rollovers.--Subparagraph (B) of section 402(c)(8) is 
     amended by adding at the end the following:

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

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

                Subtitle B--Enhancing Fairness for Women

     SEC. 221. CATCHUP CONTRIBUTIONS FOR INDIVIDUALS AGE 50 OR 
                   OVER.

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

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

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

``For taxable years beginning in:         The applicable percentage is:
  2001...............................................................10
  2002...............................................................20

[[Page 2567]]

  2003...............................................................30
  2004 and thereafter................................................40

       ``(3) Treatment of contributions.--In the case of any 
     contribution to a plan under paragraph (1)--
       ``(A) such contribution shall not, with respect to the year 
     in which the contribution is made--
       ``(i) be subject to any otherwise applicable limitation 
     contained in section 402(g), 402(h), 403(b), 404(a), 404(h), 
     408, 415, or 457, or
       ``(ii) be taken into account in applying such limitations 
     to other contributions or benefits under such plan or any 
     other such plan, and
       ``(B) such plan shall not be treated as failing to meet the 
     requirements of section 401(a)(4), 401(a)(26), 401(k)(3), 
     401(k)(11), 401(k)(12), 401(m), 403(b)(12), 408(k), 408(p), 
     408B, 410(b), or 416 by reason of the making of (or the right 
     to make) such contribution.
       ``(4) Eligible participant.--For purposes of this 
     subsection, the term `eligible participant' means, with 
     respect to any plan year, a participant in a plan--
       ``(A) who has attained the age of 50 before the close of 
     the plan year, and
       ``(B) with respect to whom no other elective deferrals may 
     (without regard to this subsection) be made to the plan for 
     the plan year by reason of the application of any limitation 
     or other restriction described in paragraph (3) or contained 
     in the terms of the plan.
       ``(5) Other definitions and rules.--For purposes of this 
     subsection--
       ``(A) Applicable dollar amount.--The term `applicable 
     dollar amount' means, with respect to any year, the amount in 
     effect under section 402(g)(1)(B), 408(p)(2)(E)(i), or 
     457(e)(15)(A), whichever is applicable to an applicable 
     employer plan, for such year.
       ``(B) Applicable employer plan.--The term `applicable 
     employer plan' means--
       ``(i) an employees' trust described in section 401(a) which 
     is exempt from tax under section 501(a),
       ``(ii) a plan under which amounts are contributed by an 
     individual's employer for an annuity contract described in 
     section 403(b),
       ``(iii) an eligible deferred compensation plan under 
     section 457 of an eligible employer as defined in section 
     457(e)(1)(A), and
       ``(iv) an arrangement meeting the requirements of section 
     408 (k) or (p).
       ``(C) Elective deferral.--The term `elective deferral' has 
     the meaning given such term by subsection (u)(2)(C).
       ``(D) Exception for section 457 plans.--This subsection 
     shall not apply to an applicable employer plan described in 
     subparagraph (B)(iii) for any year to which section 457(b)(3) 
     applies.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to contributions in taxable years beginning after 
     December 31, 2000.

     SEC. 222. EQUITABLE TREATMENT FOR CONTRIBUTIONS OF EMPLOYEES 
                   TO DEFINED CONTRIBUTION PLANS.

       (a) Equitable Treatment.--
       (1) In general.--Subparagraph (B) of section 415(c)(1) 
     (relating to limitation for defined contribution plans) is 
     amended by striking ``25 percent'' and inserting ``100 
     percent''.
       (2) Application to section 403(b).--Section 403(b) is 
     amended--
       (A) by striking ``the exclusion allowance for such taxable 
     year'' in paragraph (1) and inserting ``the applicable limit 
     under section 415'',
       (B) by striking paragraph (2), and
       (C) by inserting ``or any amount received by a former 
     employee after the 5th taxable year following the taxable 
     year in which such employee was terminated'' before the 
     period at the end of the second sentence of paragraph (3).
       (3) Conforming amendments.--
       (A) Subsection (f ) of section 72 is amended by striking 
     ``section 403(b)(2)(D)(iii))'' and inserting ``section 
     403(b)(2)(D)(iii), as in effect before the enactment of the 
     Small Business Tax Fairness Act of 2000)''.
       (B) Section 404(a)(10)(B) is amended by striking ``, the 
     exclusion allowance under section 403(b)(2),''.
       (C) Section 415(a)(2) is amended by striking ``, and the 
     amount of the contribution for such portion shall reduce the 
     exclusion allowance as provided in section 403(b)(2)''.
       (D) Section 415(c)(3) is amended by adding at the end the 
     following new subparagraph:
       ``(E) Annuity contracts.--In the case of an annuity 
     contract described in section 403(b), the term `participant's 
     compensation' means the participant's includible compensation 
     determined under section 403(b)(3).''.
       (E) Section 415(c) is amended by striking paragraph (4).
       (F) Section 415(c)(7) is amended to read as follows:
       ``(7) Certain contributions by church plans not treated as 
     exceeding limit.--
       ``(A) In general.--Notwithstanding any other provision of 
     this subsection, at the election of a participant who is an 
     employee of a church or a convention or association of 
     churches, including an organization described in section 
     414(e)(3)(B)(ii), contributions and other additions for an 
     annuity contract or retirement income account described in 
     section 403(b) with respect to such participant, when 
     expressed as an annual addition to such participant's 
     account, shall be treated as not exceeding the limitation of 
     paragraph (1) if such annual addition is not in excess of 
     $10,000.
       ``(B) $40,000 aggregate limitation.--The total amount of 
     additions with respect to any participant which may be taken 
     into account for purposes of this subparagraph for all years 
     may not exceed $40,000.
       ``(C) Annual addition.--For purposes of this paragraph, the 
     term `annual addition' has the meaning given such term by 
     paragraph (2).''.
       (G) Subparagraph (B) of section 402(g)(7) (as redesignated 
     by section 211) is amended by inserting before the period at 
     the end the following: ``(as in effect before the enactment 
     of the Small Business Tax Fairness Act of 2000)''.
       (3) Effective date.--The amendments made by this subsection 
     shall apply to years beginning after December 31, 2000.
       (b) Special Rules for Sections 403(b) and 408.--
       (1) In general.--Subsection (k) of section 415 is amended 
     by adding at the end the following new paragraph:
       ``(4) Special rules for sections 403(b) and 408.--For 
     purposes of this section, any annuity contract described in 
     section 403(b) for the benefit of a participant shall be 
     treated as a defined contribution plan maintained by each 
     employer with respect to which the participant has the 
     control required under subsection (b) or (c) of section 414 
     (as modified by subsection (h)). For purposes of this 
     section, any contribution by an employer to a simplified 
     employee pension plan for an individual for a taxable year 
     shall be treated as an employer contribution to a defined 
     contribution plan for such individual for such year.''.
       (2) Effective date.--
       (A) In general.--The amendment made by paragraph (1) shall 
     apply to limitation years beginning after December 31, 1999.
       (B) Exclusion allowance.--Effective for limitation years 
     beginning in 2000, in the case of any annuity contract 
     described in section 403(b) of the Internal Revenue Code of 
     1986, the amount of the contribution disqualified by reason 
     of section 415(g) of such Code shall reduce the exclusion 
     allowance as provided in section 403(b)(2) of such Code.
       (3) Modification of 403(b) exclusion allowance to conform 
     to 415 modification.--The Secretary of the Treasury shall 
     modify the regulations regarding the exclusion allowance 
     under section 403(b)(2) of the Internal Revenue Code of 1986 
     to render void the requirement that contributions to a 
     defined benefit pension plan be treated as previously 
     excluded amounts for purposes of the exclusion allowance. For 
     taxable years beginning after December 31, 1999, such 
     regulations shall be applied as if such requirement were 
     void.
       (c) Deferred Compensation Plans of State and Local 
     Governments and Tax-Exempt Organizations.--
       (1) In general.--Subparagraph (B) of section 457(b)(2) 
     (relating to salary limitation on eligible deferred 
     compensation plans) is amended by striking ``33\1/3\ 
     percent'' and inserting ``100 percent''.
       (2) Effective date.--The amendment made by this subsection 
     shall apply to years beginning after December 31, 2000.

     SEC. 223. FASTER VESTING OF CERTAIN EMPLOYER MATCHING 
                   CONTRIBUTIONS.

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

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

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

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

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

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

       (b) Effective Dates.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendments made by this section shall apply to contributions 
     for plan years beginning after December 31, 2000.
       (2) Collective bargaining agreements.--In the case of a 
     plan maintained pursuant to one or more collective bargaining 
     agreements between employee representatives and one or more 
     employers ratified by the date of the enactment of this Act, 
     the amendments made by this section shall not apply to 
     contributions on behalf of employees covered by any such 
     agreement for plan years beginning before the earlier of--
       (A) the later of--
       (i) the date on which the last of such collective 
     bargaining agreements terminates (determined without regard 
     to any extension thereof on or after such date of the 
     enactment), or

[[Page 2568]]

       (ii) January 1, 2001, or
       (B) January 1, 2005.
       (3) Service required.--With respect to any plan, the 
     amendments made by this section shall not apply to any 
     employee before the date that such employee has 1 hour of 
     service under such plan in any plan year to which the 
     amendments made by this section apply.

     SEC. 224. SIMPLIFY AND UPDATE THE MINIMUM DISTRIBUTION RULES.

       (a) Simplification and Finalization of Minimum Distribution 
     Requirements.--
       (1) In general.--The Secretary of the Treasury shall--
       (A) simplify and finalize the regulations relating to 
     minimum distribution requirements under sections 401(a)(9), 
     408(a)(6) and (b)(3), 403(b)(10), and 457(d)(2) of the 
     Internal Revenue Code of 1986, and
       (B) modify such regulations to--
       (i) reflect current life expectancy, and
       (ii) revise the required distribution methods so that, 
     under reasonable assumptions, the amount of the required 
     minimum distribution does not decrease over a participant's 
     life expectancy.
       (2) Fresh start.--Notwithstanding subparagraph (D) of 
     section 401(a)(9) of such Code, during the first year that 
     regulations are in effect under this subsection, required 
     distributions for future years may be redetermined to reflect 
     changes under such regulations. Such redetermination shall 
     include the opportunity to choose a new designated 
     beneficiary and to elect a new method of calculating life 
     expectancy.
       (3) Effective date for regulations.--Regulations referred 
     to in paragraph (1) shall be effective for years beginning 
     after December 31, 2000, and shall apply in such years 
     without regard to whether an individual had previously begun 
     receiving minimum distributions.
       (b) Repeal of Rule Where Distributions Had Begun Before 
     Death Occurs.--
       (1) In general.--Subparagraph (B) of section 401(a)(9) is 
     amended by striking clause (i) and redesignating clauses 
     (ii), (iii), and (iv) as clauses (i), (ii), and (iii), 
     respectively.
       (2) Conforming changes.--
       (A) Clause (i) of section 401(a)(9)(B) (as so redesignated) 
     is amended--
       (i) by striking ``for other cases'' in the heading, and
       (ii) by striking ``the distribution of the employee's 
     interest has begun in accordance with subparagraph (A)(ii)'' 
     and inserting ``his entire interest has been distributed to 
     him,''.
       (B) Clause (ii) of section 401(a)(9)(B) (as so 
     redesignated) is amended by striking ``clause (ii)'' and 
     inserting ``clause (i)''.
       (C) Clause (iii) of section 401(a)(9)(B) (as so 
     redesignated) is amended--
       (i) by striking ``clause (iii)(I)'' and inserting ``clause 
     (ii)(I)'',
       (ii) by striking ``clause (iii)(III)'' in subclause (I) and 
     inserting ``clause (ii)(III)'',
       (iii) by striking ``the date on which the employee would 
     have attained the age 70\1/2\,'' in subclause (I) and 
     inserting ``April 1 of the calendar year following the 
     calendar year in which the spouse attains 70\1/2\,'', and
       (iv) by striking ``the distributions to such spouse 
     begin,'' in subclause (II) and inserting ``his entire 
     interest has been distributed to him,''.
       (3) Effective date.--The amendments made by this subsection 
     shall apply to years beginning after December 31, 2000.
       (c) Reduction in Excise Tax.--
       (1) In general.--Subsection (a) of section 4974 is amended 
     by striking ``50 percent'' and inserting ``10 percent''.
       (2) Effective date.--The amendment made by this subsection 
     shall apply to years beginning after December 31, 2000.

     SEC. 225. CLARIFICATION OF TAX TREATMENT OF DIVISION OF 
                   SECTION 457 PLAN BENEFITS UPON DIVORCE.

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

     SEC. 226. MODIFICATION OF SAFE HARBOR RELIEF FOR HARDSHIP 
                   WITHDRAWALS FROM CASH OR DEFERRED ARRANGEMENTS.

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

          Subtitle C--Increasing Portability for Participants

     SEC. 231. ROLLOVERS ALLOWED AMONG VARIOUS TYPES OF PLANS.

       (a) Rollovers From and to Section 457 Plans.--
       (1) Rollovers from section 457 plans.--
       (A) In general.--Section 457(e) (relating to other 
     definitions and special rules) is amended by adding at the 
     end the following:
       ``(16) Rollover amounts.--
       ``(A) General rule.--In the case of an eligible deferred 
     compensation plan established and maintained by an employer 
     described in subsection (e)(1)(A), if--
       ``(i) any portion of the balance to the credit of an 
     employee in such plan is paid to such employee in an eligible 
     rollover distribution (within the meaning of section 
     402(c)(4) without regard to subparagraph (C) thereof),
       ``(ii) the employee transfers any portion of the property 
     such employee receives in such distribution to an eligible 
     retirement plan described in section 402(c)(8)(B), and
       ``(iii) in the case of a distribution of property other 
     than money, the amount so transferred consists of the 
     property distributed,

     then such distribution (to the extent so transferred) shall 
     not be includible in gross income for the taxable year in 
     which paid.
       ``(B) Certain rules made applicable.--The rules of 
     paragraphs (2) through (7) (other than paragraph (4)(C)) and 
     (9) of section 402(c) and section 402(f ) shall apply for 
     purposes of subparagraph (A).
       ``(C) Reporting.--Rollovers under this paragraph shall be 
     reported to the Secretary in the same manner as rollovers 
     from qualified retirement plans (as defined in section 
     4974(c)).''.
       (B) Deferral limit determined without regard to rollover 
     amounts.--Section 457(b)(2) (defining eligible deferred 
     compensation plan) is amended by inserting ``(other than 
     rollover amounts)'' after ``taxable year''.
       (C) Direct rollover.--Paragraph (1) of section 457(d) is 
     amended by striking ``and'' at the end of subparagraph (A), 
     by striking the period at the end of subparagraph (B) and 
     inserting ``, and'', and by inserting after subparagraph (B) 
     the following:
       ``(C) in the case of a plan maintained by an employer 
     described in subsection (e)(1)(A), the plan meets 
     requirements similar to the requirements of section 
     401(a)(31).

     Any amount transferred in a direct trustee-to-trustee 
     transfer in accordance with section 401(a)(31) shall not be 
     includible in gross income for the taxable year of 
     transfer.''.
       (D) Withholding.--
       (i) Paragraph (12) of section 3401(a) is amended by adding 
     at the end the following:
       ``(E) under or to an eligible deferred compensation plan 
     which, at the time of such payment, is a plan described in 
     section 457(b) maintained by an employer described in section 
     457(e)(1)(A); or''.
       (ii) Paragraph (3) of section 3405(c) is amended to read as 
     follows:
       ``(3) Eligible rollover distribution.--For purposes of this 
     subsection, the term `eligible rollover distribution' has the 
     meaning given such term by section 402(f )(2)(A).''.
       (iii) Liability for withholding.--Subparagraph (B) of 
     section 3405(d)(2) is amended by striking ``or'' at the end 
     of clause (ii), by striking the period at the end of clause 
     (iii) and inserting ``, or'', and by adding at the end the 
     following:
       ``(iv) section 457(b).''.
       (2) Rollovers to section 457 plans.--
       (A) In general.--Section 402(c)(8)(B) (defining eligible 
     retirement plan) is amended by striking ``and'' at the end of 
     clause (iii), by striking the period at the end of clause 
     (iv) and inserting ``, and'', and by inserting after clause 
     (iv) the following new clause:
       ``(v) an eligible deferred compensation plan described in 
     section 457(b) of an employer described in section 
     457(e)(1)(A).''.
       (B) Separate accounting.--Section 402(c) is amended by 
     adding at the end the following new paragraph:
       ``(11) Separate accounting.--Unless a plan described in 
     clause (v) of paragraph (8)(B) agrees to separately account 
     for amounts rolled into such plan from eligible retirement 
     plans not described in such clause, the plan described in 
     such clause may not accept transfers or rollovers from such 
     retirement plans.''.
       (C) 10 percent additional tax.--Subsection (t) of section 
     72 (relating to 10-percent additional tax on early 
     distributions from qualified retirement plans) is amended by 
     adding at the end the following new paragraph:

[[Page 2569]]

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

     SEC. 232. ROLLOVERS OF IRAS INTO WORKPLACE RETIREMENT PLANS.

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

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

     SEC. 233. ROLLOVERS OF AFTER-TAX CONTRIBUTIONS.

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

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

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

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

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

     SEC. 234. HARDSHIP EXCEPTION TO 60-DAY RULE.

       (a) Exempt Trusts.--Paragraph (3) of section 402(c) 
     (relating to transfer must be made within 60 days of receipt) 
     is amended to read as follows:
       ``(3) Transfer must be made within 60 days of receipt.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     paragraph (1) shall not apply to any transfer of a 
     distribution made after the 60th day following the day on 
     which the distributee received the property distributed.
       ``(B) Hardship exception.--The Secretary may waive the 60-
     day requirement under

[[Page 2570]]

     subparagraph (A) where the failure to waive such requirement 
     would be against equity or good conscience, including 
     casualty, disaster, or other events beyond the reasonable 
     control of the individual subject to such requirement.''.
       (b) IRAs.--Paragraph (3) of section 408(d) (relating to 
     rollover contributions), as amended by section 233, is 
     amended by adding after subparagraph (H) the following new 
     subparagraph:
       ``(I) Waiver of 60-day requirement.--The Secretary may 
     waive the 60-day requirement under subparagraphs (A) and (D) 
     where the failure to waive such requirement would be against 
     equity or good conscience, including casualty, disaster, or 
     other events beyond the reasonable control of the individual 
     subject to such requirement.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to distributions after December 31, 2000.

     SEC. 235. TREATMENT OF FORMS OF DISTRIBUTION.

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

       ``(I) the forms of distribution previously available under 
     the transferor plan applied to the account of a participant 
     or beneficiary under the transferor plan that was transferred 
     from the transferor plan to the transferee plan pursuant to a 
     direct transfer rather than pursuant to a distribution from 
     the transferor plan,
       ``(II) the terms of both the transferor plan and the 
     transferee plan authorize the transfer described in subclause 
     (I),
       ``(III) the transfer described in subclause (I) was made 
     pursuant to a voluntary election by the participant or 
     beneficiary whose account was transferred to the transferee 
     plan,
       ``(IV) the election described in subclause (III) was made 
     after the participant or beneficiary received a notice 
     describing the consequences of making the election,
       ``(V) if the transferor plan provides for an annuity as the 
     normal form of distribution under the plan in accordance with 
     section 417, the transfer is made with the consent of the 
     participant's spouse (if any), and such consent meets 
     requirements similar to the requirements imposed by section 
     417(a)(2), and
       ``(VI) the transferee plan allows the participant or 
     beneficiary described in clause (iii) to receive any 
     distribution to which the participant or beneficiary is 
     entitled under the transferee plan in the form of a single 
     sum distribution.

       ``(ii) Clause (i) shall apply to plan mergers and other 
     transactions having the effect of a direct transfer, 
     including consolidations of benefits attributable to 
     different employers within a multiple employer plan.
       ``(E) Elimination of form of distribution.--Except to the 
     extent provided in regulations, a defined contribution plan 
     shall not be treated as failing to meet the requirements of 
     this section merely because of the elimination of a form of 
     distribution previously available thereunder. This 
     subparagraph shall not apply to the elimination of a form of 
     distribution with respect to any participant unless--
       ``(i) a single sum payment is available to such participant 
     at the same time or times as the form of distribution being 
     eliminated, and
       ``(ii) such single sum payment is based on the same or 
     greater portion of the participant's account as the form of 
     distribution being eliminated.''.
       (2) Effective date.--The amendment made by this subsection 
     shall apply to years beginning after December 31, 2000.
       (b) Regulations.--
       (1) Amendment to internal revenue code of 1986.--The last 
     sentence of paragraph (6)(B) of section 411(d) (relating to 
     accrued benefit not to be decreased by amendment) is amended 
     to read as follows: ``The Secretary shall by regulations 
     provide that this subparagraph shall not apply to any plan 
     amendment that does not adversely affect the rights of 
     participants in a material manner.''.
       (2) Secretary directed.--Not later than December 31, 2001, 
     the Secretary of the Treasury is directed to issue final 
     regulations under section 411(d)(6) of the Internal Revenue 
     Code of 1986, including the regulations required by the 
     amendments made by this subsection. Such regulations shall 
     apply to plan years beginning after December 31, 2001, or 
     such earlier date as is specified by the Secretary of the 
     Treasury.

     SEC. 236. RATIONALIZATION OF RESTRICTIONS ON DISTRIBUTIONS.

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

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

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

     SEC. 237. PURCHASE OF SERVICE CREDIT IN GOVERNMENTAL DEFINED 
                   BENEFIT PLANS.

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

     SEC. 238. EMPLOYERS MAY DISREGARD ROLLOVERS FOR PURPOSES OF 
                   CASH-OUT AMOUNTS.

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

     SEC. 239. MINIMUM DISTRIBUTION AND INCLUSION REQUIREMENTS FOR 
                   SECTION 457 PLANS.

       (a) Minimum Distribution Requirements.--Paragraph (2) of 
     section 457(d) (relating to distribution requirements) is 
     amended to read as follows:
       ``(2) Minimum distribution requirements.--A plan meets the 
     minimum distribution requirements of this paragraph if such 
     plan meets the requirements of section 401(a)(9).''.
       (b) Inclusion in Gross Income.--

[[Page 2571]]

       (1) Year of inclusion.--Subsection (a) of section 457 
     (relating to year of inclusion in gross income) is amended to 
     read as follows:
       ``(a) Year of Inclusion in Gross Income.--
       ``(1) In general.--Any amount of compensation deferred 
     under an eligible deferred compensation plan, and any income 
     attributable to the amounts so deferred, shall be includible 
     in gross income only for the taxable year in which such 
     compensation or other income--
       ``(A) is paid to the participant or other beneficiary, in 
     the case of a plan of an eligible employer described in 
     subsection (e)(1)(A), and
       ``(B) is paid or otherwise made available to the 
     participant or other beneficiary, in the case of a plan of an 
     eligible employer described in subsection (e)(1)(B).
       ``(2) Special rule for rollover amounts.--To the extent 
     provided in section 72(t)(9), section 72(t) shall apply to 
     any amount includible in gross income under this 
     subsection.''.
       (2) Conforming amendments.--
       (A) So much of paragraph (9) of section 457(e) as precedes 
     subparagraph (A) is amended to read as follows:
       ``(9) Benefits of tax exempt organization plans not treated 
     as made available by reason of certain elections, etc.--In 
     the case of an eligible deferred compensation plan of an 
     employer described in subsection (e)(1)(B)--''.
       (B) Section 457(d) is amended by adding at the end the 
     following new paragraph:
       ``(3) Special rule for government plan.--An eligible 
     deferred compensation plan of an employer described in 
     subsection (e)(1)(A) shall not be treated as failing to meet 
     the requirements of this subsection solely by reason of 
     making a distribution described in subsection (e)(9)(A).''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to distributions after December 31, 2000.

       Subtitle D--Strengthening Pension Security and Enforcement

     SEC. 241. REPEAL OF 150 PERCENT OF CURRENT LIABILITY FUNDING 
                   LIMIT.

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

``In the case of any plan year beginning The applicable percentage is--
    2001............................................................160
    2002............................................................165
    2003........................................................170.''.

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

     SEC. 242. MAXIMUM CONTRIBUTION DEDUCTION RULES MODIFIED AND 
                   APPLIED TO ALL DEFINED BENEFIT PLANS.

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

     For purposes of this paragraph, the deductible limits under 
     section 404(a)(7) shall first be applied to amounts 
     contributed to a defined benefit plan and then to amounts 
     described in subparagraph (B).''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to plan years beginning after December 31, 2000.

     SEC. 243. EXCISE TAX RELIEF FOR SOUND PENSION FUNDING.

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

     SEC. 244. EXCISE TAX ON FAILURE TO PROVIDE NOTICE BY DEFINED 
                   BENEFIT PLANS SIGNIFICANTLY REDUCING FUTURE 
                   BENEFIT ACCRUALS.

       (a) Amendment to 1986 Code.--Chapter 43 (relating to 
     qualified pension, etc., plans) is amended by adding at the 
     end the following new section:

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

       ``(a) Imposition of Tax.--There is hereby imposed a tax on 
     the failure of any applicable pension plan to meet the 
     requirements of subsection (e) with respect to any applicable 
     individual.
       ``(b) Amount of Tax.--
       ``(1) In general.--The amount of the tax imposed by 
     subsection (a) on any failure with respect to any applicable 
     individual shall be $100 for each day in the noncompliance 
     period with respect to such failure.
       ``(2) Noncompliance period.--For purposes of this section, 
     the term `noncompliance period' means, with respect to any 
     failure, the period beginning on the date the failure first 
     occurs and ending on the date the failure is corrected.
       ``(c) Limitations on Amount of Tax.--
       ``(1) Overall limitation for unintentional failures.--In 
     the case of failures that are due to reasonable cause and not 
     to willful neglect, the tax imposed by subsection (a) for 
     failures during the taxable year of the employer (or, in the 
     case of a multiemployer plan, the taxable year of the trust 
     forming part of the plan) shall not exceed $500,000. For 
     purposes of the preceding sentence, all multiemployer plans 
     of which the same trust forms a part shall be treated as one 
     plan. For purposes of this paragraph, if not all persons who 
     are treated as a single employer for purposes of this section 
     have the same taxable year, the taxable years taken into 
     account shall be determined under principles similar to the 
     principles of section 1561.
       ``(2) Waiver by secretary.--In the case of a failure which 
     is due to reasonable cause and not to willful neglect, the 
     Secretary may waive part or all of the tax imposed by 
     subsection (a) to the extent that the payment of such tax 
     would be excessive relative to the failure involved.
       ``(d) Liability for Tax.--The following shall be liable for 
     the tax imposed by subsection (a):
       ``(1) In the case of a plan other than a multiemployer 
     plan, the employer.
       ``(2) In the case of a multiemployer plan, the plan.
       ``(e) Notice Requirements for Plans Significantly Reducing 
     Benefit Accruals.--
       ``(1) In general.--If an applicable pension plan is amended 
     to provide for a significant reduction in the rate of future 
     benefit accrual, the plan administrator shall provide written 
     notice to each applicable individual (and to each employee 
     organization representing applicable individuals).
       ``(2) Notice.--The notice required by paragraph (1) shall 
     be written in a manner calculated to be understood by the 
     average plan participant and shall provide sufficient 
     information (as determined in accordance with regulations 
     prescribed by the Secretary) to allow applicable individuals 
     to understand the effect of the plan amendment.

[[Page 2572]]

       ``(3) Timing of notice.--Except as provided in regulations, 
     the notice required by paragraph (1) shall be provided within 
     a reasonable time before the effective date of the plan 
     amendment.
       ``(4) Designees.--Any notice under paragraph (1) may be 
     provided to a person designated, in writing, by the person to 
     which it would otherwise be provided.
       ``(5) Notice before adoption of amendment.--A plan shall 
     not be treated as failing to meet the requirements of 
     paragraph (1) merely because notice is provided before the 
     adoption of the plan amendment if no material modification of 
     the amendment occurs before the amendment is adopted.
       ``(f ) Applicable Individual; Applicable Pension Plan.--For 
     purposes of this section--
       ``(1) Applicable individual.--The term `applicable 
     individual' means, with respect to any plan amendment--
       ``(A) any participant in the plan, and
       ``(B) any beneficiary who is an alternate payee (within the 
     meaning of section 414(p)(8)) under an applicable qualified 
     domestic relations order (within the meaning of section 
     414(p)(1)(A)),

     who may reasonably be expected to be affected by such plan 
     amendment.
       ``(2) Applicable pension plan.--The term `applicable 
     pension plan' means--
       ``(A) any defined benefit plan, or
       ``(B) an individual account plan which is subject to the 
     funding standards of section 412,

     which had 100 or more participants who had accrued a benefit, 
     or with respect to whom contributions were made, under the 
     plan (whether or not vested) as of the last day of the plan 
     year preceding the plan year in which the plan amendment 
     becomes effective. Such term shall not include a governmental 
     plan (within the meaning of section 414(d)) or a church plan 
     (within the meaning of section 414(e)) with respect to which 
     the election provided by section 410(d) has not been made.''.
       (b) Clerical Amendment.--The table of sections for chapter 
     43 is amended by adding at the end the following new item:

 ``Sec. 4980F. Failure of applicable plans reducing benefit accruals to 
              satisfy notice requirements.''.

       (c) Effective Dates.--
       (1) In general.--The amendments made by this section shall 
     apply to plan amendments taking effect on or after the date 
     of the enactment of this Act.
       (2) Transition.--Until such time as the Secretary of the 
     Treasury issues regulations under sections 4980F(e)(2) and 
     (3) of the Internal Revenue Code of 1986 (as added by the 
     amendments made by this section), a plan shall be treated as 
     meeting the requirements of such sections if it makes a good 
     faith effort to comply with such requirements.
       (3) Special rule.--The period for providing any notice 
     required by the amendments made by this section shall not end 
     before the date which is 3 months after the date of the 
     enactment of this Act.

     SEC. 245. TREATMENT OF MULTIEMPLOYER PLANS UNDER SECTION 415.

       (a) Compensation Limit.--Paragraph (11) of section 415(b) 
     (relating to limitation for defined benefit plans) is amended 
     to read as follows:
       ``(11) Special limitation rule for governmental and 
     multiemployer plans.--In the case of a governmental plan (as 
     defined in section 414(d)) or a multiemployer plan (as 
     defined in section 414(f )), subparagraph (B) of paragraph 
     (1) shall not apply.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to years beginning after December 31, 2000.

                Subtitle E--Reducing Regulatory Burdens

     SEC. 261. MODIFICATION OF TIMING OF PLAN VALUATIONS.

       (a) Amendments to 1986 Code.--Section 412(c)(9) (relating 
     to annual valuation) is amended--
       (1) by striking ``For purposes'' and inserting the 
     following:
       ``(A) In general.--For purposes'', and
       (2) by adding at the end the following:
       ``(B) Election to use prior year valuation.--
       ``(i) In general.--Except as provided in clause (ii), if, 
     for any plan year--

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

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

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

       ``(iii) Adjustments.--Information under clause (i) shall, 
     in accordance with regulations, be actuarially adjusted to 
     reflect significant differences in participants.
       ``(iv) Election.--An election under this subparagraph, once 
     made, shall be irrevocable without the consent of the 
     Secretary.''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to plan years beginning after December 31, 2000.

     SEC. 262. ESOP DIVIDENDS MAY BE REINVESTED WITHOUT LOSS OF 
                   DIVIDEND DEDUCTION.

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

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

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

     SEC. 263. REPEAL OF TRANSITION RULE RELATING TO CERTAIN 
                   HIGHLY COMPENSATED EMPLOYEES.

       (a) In General.--Paragraph (4) of section 1114(c) of the 
     Tax Reform Act of 1986 is hereby repealed.
       (b) Effective Date.--The repeal made by subsection (a) 
     shall apply to plan years beginning after December 31, 2000.

     SEC. 264. EMPLOYEES OF TAX-EXEMPT ENTITIES.

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

     SEC. 265. CLARIFICATION OF TREATMENT OF EMPLOYER-PROVIDED 
                   RETIREMENT ADVICE.

       (a) In General.--Subsection (a) of section 132 (relating to 
     exclusion from gross income) is amended by striking ``or'' at 
     the end of paragraph (5), by striking the period at the end 
     of paragraph (6) and inserting ``, or'', and by adding at the 
     end the following new paragraph:
       ``(7) qualified retirement planning services.''.
       (b) Qualified Retirement Planning Services Defined.--
     Section 132 is amended by redesignating subsection (m) as 
     subsection (n) and by inserting after subsection (l) the 
     following:
       ``(m) Qualified Retirement Planning Services.--
       ``(1) In general.--For purposes of this section, the term 
     `qualified retirement planning services' means any retirement 
     planning service provided to an employee and his spouse by an 
     employer maintaining a qualified employer plan.
       ``(2) Nondiscrimination rule.--Subsection (a)(7) shall 
     apply in the case of highly compensated employees only if 
     such services are available on substantially the same terms 
     to each member of the group of employees normally provided 
     education and information regarding the employer's qualified 
     employer plan.
       ``(3) Qualified employer plan.--For purposes of this 
     subsection, the term `qualified employer plan' means a plan, 
     contract, pension, or account described in section 
     219(g)(5).''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to years beginning after December 31, 2000.

     SEC. 266. REPORTING SIMPLIFICATION.

       (a) Simplified Annual Filing Requirement for Owners and 
     Their Spouses.--
       (1) In general.--The Secretary of the Treasury shall modify 
     the requirements for filing annual returns with respect to 
     one-participant retirement plans to ensure that such plans 
     with assets of $250,000 or less as of the close of the plan 
     year need not file a return for that year.
       (2) One-participant retirement plan defined.--For purposes 
     of this subsection, the term ``one-participant retirement 
     plan'' means a retirement plan that--
       (A) on the first day of the plan year--
       (i) covered only the employer (and the employer's spouse) 
     and the employer owned the entire business (whether or not 
     incorporated), or
       (ii) covered only one or more partners (and their spouses) 
     in a business partnership (including partners in an S or C 
     corporation),
       (B) meets the minimum coverage requirements of section 
     410(b) of the Internal Revenue Code of 1986 without being 
     combined

[[Page 2573]]

     with any other plan of the business that covers the employees 
     of the business,
       (C) does not provide benefits to anyone except the employer 
     (and the employer's spouse) or the partners (and their 
     spouses),
       (D) does not cover a business that is a member of an 
     affiliated service group, a controlled group of corporations, 
     or a group of businesses under common control, and
       (E) does not cover a business that leases employees.
       (3) Other definitions.--Terms used in paragraph (2) which 
     are also used in section 414 of the Internal Revenue Code of 
     1986 shall have the respective meanings given such terms by 
     such section.
       (b) Simplified Annual Filing Requirement for Plans With 
     Fewer Than 25 Employees.--In the case of a retirement plan 
     which covers less than 25 employees on the first day of the 
     plan year and meets the requirements described in 
     subparagraphs (B), (D), and (E) of subsection (a)(2), the 
     Secretary of the Treasury shall provide for the filing of a 
     simplified annual return that is substantially similar to the 
     annual return required to be filed by a one-participant 
     retirement plan.
       (c) Effective Date.--The provisions of this section shall 
     take effect on January 1, 2001.

     SEC. 267. IMPROVEMENT OF EMPLOYEE PLANS COMPLIANCE RESOLUTION 
                   SYSTEM.

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

     SEC. 268. MODIFICATION OF EXCLUSION FOR EMPLOYER PROVIDED 
                   TRANSIT PASSES.

       (a) In General.--Section 132(f )(3) (relating to cash 
     reimbursements) is amended by striking the last sentence.
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     2000.

     SEC. 269. REPEAL OF THE MULTIPLE USE TEST.

       (a) In General.--Paragraph (9) of section 401(m) is amended 
     to read as follows:
       ``(9) Regulations.--The Secretary shall prescribe such 
     regulations as may be necessary to carry out the purposes of 
     this subsection and subsection (k), including regulations 
     permitting appropriate aggregation of plans and 
     contributions.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to years beginning after December 31, 2000.

     SEC. 270. FLEXIBILITY IN NONDISCRIMINATION, COVERAGE, AND 
                   LINE OF BUSINESS RULES.

       (a) Nondiscrimination.--
       (1) In general.--The Secretary of the Treasury shall, by 
     regulation, provide that a plan shall be deemed to satisfy 
     the requirements of section 401(a)(4) of the Internal Revenue 
     Code of 1986 if such plan satisfies the facts and 
     circumstances test under section 401(a)(4) of such Code, as 
     in effect before January 1, 1994, but only if--
       (A) the plan satisfies conditions prescribed by the 
     Secretary to appropriately limit the availability of such 
     test, and
       (B) the plan is submitted to the Secretary for a 
     determination of whether it satisfies such test.

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

     Clause (ii) shall apply only to the extent provided by the 
     Secretary.''.
       (2) Effective dates.--
       (A) In general.--The amendment made by paragraph (1) shall 
     apply to years beginning after December 31, 2000.
       (B) Conditions of availability.--Any condition of 
     availability prescribed by the Secretary under regulations 
     prescribed by the Secretary under section 410(b)(1)(D) of the 
     Internal Revenue Code of 1986 shall not apply before the 
     first year beginning not less than 120 days after the date on 
     which such condition is prescribed.
       (c) Line of Business Rules.--The Secretary of the Treasury 
     shall, on or before December 31, 2000, modify the existing 
     regulations issued under section 414(r) of the Internal 
     Revenue Code of 1986 in order to expand (to the extent that 
     the Secretary determines appropriate) the ability of a 
     pension plan to demonstrate compliance with the line of 
     business requirements based upon the facts and circumstances 
     surrounding the design and operation of the plan, even though 
     the plan is unable to satisfy the mechanical tests currently 
     used to determine compliance.

     SEC. 271. EXTENSION TO INTERNATIONAL ORGANIZATIONS OF 
                   MORATORIUM ON APPLICATION OF CERTAIN 
                   NONDISCRIMINATION RULES APPLICABLE TO STATE AND 
                   LOCAL PLANS.

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

     SEC. 272. NOTICE AND CONSENT PERIOD REGARDING DISTRIBUTIONS.

       (a) Expansion of Period.--
       (1) Amendment to 1986 code.--Subparagraph (A) of section 
     417(a)(6) is amended by striking ``90-day'' and inserting 
     ``180-day''.
       (2) Modification of regulations.--The Secretary of the 
     Treasury shall modify the regulations under sections 402(f), 
     411(a)(11), and 417 of the Internal Revenue Code of 1986 to 
     substitute ``180 days'' for ``90 days'' each place it appears 
     in Treasury Regulations sections 1.402(f)-1, 1.411(a)-11(c), 
     and 1.417(e)-1(b).
       (3) Effective date.--The amendment made by paragraph (1) 
     and the modifications required by paragraph (2) shall apply 
     to years beginning after December 31, 2000.
       (b) Consent Regulation Inapplicable to Certain 
     Distributions.--
       (1) In general.--The Secretary of the Treasury shall modify 
     the regulations under section 411(a)(11) of the Internal 
     Revenue Code of 1986 to provide that the description of a 
     participant's right, if any, to defer receipt of a 
     distribution shall also describe the consequences of failing 
     to defer such receipt.
       (2) Effective date.--The modifications required by 
     paragraph (1) shall apply to years beginning after December 
     31, 2000.

                      Subtitle F--Plan Amendments

     SEC. 281. PROVISIONS RELATING TO PLAN AMENDMENTS.

       (a) In General.--If this section applies to any plan or 
     contract amendment--
       (1) such plan or contract shall be treated as being 
     operated in accordance with the terms of the plan during the 
     period described in subsection (b)(2)(A), and
       (2) such plan shall not fail to meet the requirements of 
     section 411(d)(6) of the Internal Revenue Code of 1986 by 
     reason of such amendment.
       (b) Amendments to Which Section Applies.--
       (1) In general.--This section shall apply to any amendment 
     to any plan or annuity contract which is made--
       (A) pursuant to any amendment made by this title, or 
     pursuant to any regulation issued under this title, and
       (B) on or before the last day of the first plan year 
     beginning on or after January 1, 2003.

     In the case of a governmental plan (as defined in section 
     414(d) of the Internal Revenue Code of 1986), this paragraph 
     shall be applied by substituting ``2005'' for ``2003''.
       (2) Conditions.--This section shall not apply to any 
     amendment unless--
       (A) during the period--
       (i) beginning on the date the legislative or regulatory 
     amendment described in paragraph (1)(A) takes effect (or in 
     the case of a plan or contract amendment not required by such 
     legislative or regulatory amendment, the effective date 
     specified by the plan), and
       (ii) ending on the date described in paragraph (1)(B) (or, 
     if earlier, the date the plan or contract amendment is 
     adopted),

     the plan or contract is operated as if such plan or contract 
     amendment were in effect, and

[[Page 2574]]

       (B) such plan or contract amendment applies retroactively 
     for such period.

                      TITLE III--ESTATE TAX RELIEF

          Subtitle A--Reductions of Estate and Gift Tax Rates

     SEC. 301. REDUCTIONS OF ESTATE AND GIFT TAX RATES.

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

$1,025,800, plus 50% of the excess over $2,500,000.''..................

       (2) Phase-in of reduced rate.--Subsection (c) of section 
     2001 is amended by adding at the end the following new 
     paragraph:
       ``(3) Phase-in of reduced rate.--In the case of decedents 
     dying, and gifts made, during 2001, the last item in the 
     table contained in paragraph (1) shall be applied by 
     substituting `53%' for `50%'.''.
       (b) Repeal of Phaseout of Graduated Rates.--Subsection (c) 
     of section 2001 is amended by striking paragraph (2) and 
     redesignating paragraph (3), as added by subsection (a), as 
     paragraph (2).
       (c) Additional Reductions of Rates of Tax.--Subsection (c) 
     of section 2001, as so amended, is amended by adding at the 
     end the following new paragraph:
       ``(3) Phasedown of tax.--In the case of estates of 
     decedents dying, and gifts made, during any calendar year 
     after 2002--
       ``(A) In general.--Except as provided in subparagraph (C), 
     the tentative tax under this subsection shall be determined 
     by using a table prescribed by the Secretary (in lieu of 
     using the table contained in paragraph (1)) which is the same 
     as such table; except that--
       ``(i) each of the rates of tax shall be reduced by the 
     number of percentage points determined under subparagraph 
     (B), and
       ``(ii) the amounts setting forth the tax shall be adjusted 
     to the extent necessary to reflect the adjustments under 
     clause (i).
       ``(B) Percentage points of reduction.--

                                                        The number of  
    ``For calendar year:                          percentage points is:
      2003.........................................................1.0 
      2004.........................................................2.0.

       ``(C) Table for years after 2004.--The table applicable 
     under this subsection to estates of decedents dying, and 
     gifts made, during calendar year 2004 shall apply to estates 
     of decedents dying, and gifts made, after calendar year 2004.
       ``(D) Coordination with credit for state death taxes.--
     Rules similar to the rules of subparagraph (A) shall apply to 
     the table contained in section 2011(b) except that the 
     Secretary shall prescribe percentage point reductions which 
     maintain the proportionate relationship (as in effect before 
     any reduction under this paragraph) between the credit under 
     section 2011 and the tax rates under subsection (c).''.
       (d) Effective Dates.--
       (1) Subsections (a) and (b).--The amendments made by 
     subsections (a) and (b) shall apply to estates of decedents 
     dying, and gifts made, after December 31, 2000.
       (2) Subsection (c).--The amendment made by subsection (c) 
     shall apply to estates of decedents dying, and gifts made, 
     after December 31, 2002.

     SEC. 302. SENSE OF THE CONGRESS CONCERNING REPEAL OF THE 
                   DEATH TAX.

       (a) Findings.--Congress finds the following:
       (1) The death tax stifles economic growth by taking 
     productive resources out of the private sector, thereby 
     causing unemployment and inhibiting job creation.
       (2) The death tax penalizes hard work and entrepreneurial 
     activity by causing the demise of small, family-owned 
     businesses when an owner dies.
       (3) The death tax rates in the United States are the second 
     highest among all industrialized nations.
       (4) The death tax prevents minorities from gaining an 
     economic foothold in the economy since it limits the inter-
     generational transfer of wealth, which is critical to 
     establishing a legacy and power base for minorities in our 
     society.
       (5) The death tax presents serious challenges for farmers 
     whose value is in their land, not liquid assets, and who must 
     sell land to pay the tax, thereby jeopardizing the future 
     existence of the already-struggling family farm.
       (6) The death tax contributes to the development of rural 
     areas by causing farms and ranches to be sold and subdivided.
       (7) Previous attempts by Congress to create death tax 
     exemptions have been ineffective due to an inability to 
     legislatively duplicate the complex family relationships that 
     exist in our society.
       (8) Increasing entrepreneurship and investment in 
     retirement will bring a whole new class of people under the 
     death tax.
       (b) Sense of Congress.--It is the sense of Congress that 
     the death tax relief in this Act is considered a first step 
     in our effort to ultimately repeal this onerous tax.

   Subtitle B--Unified Credit Replaced With Unified Exemption Amount

     SEC. 311. UNIFIED CREDIT AGAINST ESTATE AND GIFT TAXES 
                   REPLACED WITH UNIFIED EXEMPTION AMOUNT.

       (a) In General.--
       (1) Estate tax.--Subsection (b) of section 2001 (relating 
     to computation of tax) is amended to read as follows:
       ``(b) Computation of Tax.--
       ``(1) In general.--The tax imposed by this section shall be 
     the amount equal to the excess (if any) of--
       ``(A) the tentative tax determined under paragraph (2), 
     over
       ``(B) the aggregate amount of tax which would have been 
     payable under chapter 12 with respect to gifts made by the 
     decedent after December 31, 1976, if the provisions of 
     subsection (c) (as in effect at the decedent's death) had 
     been applicable at the time of such gifts.
       ``(2) Tentative tax.--For purposes of paragraph (1), the 
     tentative tax determined under this paragraph is a tax 
     computed under subsection (c) on the excess of--
       ``(A) the sum of--
       ``(i) the amount of the taxable estate, and
       ``(ii) the amount of the adjusted taxable gifts, over
       ``(B) the exemption amount for the calendar year in which 
     the decedent died.
       ``(3) Exemption amount.--For purposes of paragraph (2), the 
     term `exemption amount' means the amount determined in 
     accordance with the following table:

``In the case of                                          The exemption
  calendar year:                                             amount is:
  2001........................................................$675,000 
  2002 and 2003...............................................$700,000 
  2004........................................................$850,000 
  2005........................................................$950,000 
  2006 or thereafter........................................$1,000,000.
       ``(4) Adjusted taxable gifts.--For purposes of paragraph 
     (2), the term `adjusted taxable gifts' means the total amount 
     of the taxable gifts (within the meaning of section 2503) 
     made by the decedent after December 31, 1976, other than 
     gifts which are includible in the gross estate of the 
     decedent.''
       (2) Gift tax.--Subsection (a) of section 2502 (relating to 
     computation of tax) is amended to read as follows:
       ``(a) Computation of Tax.--
       ``(1) In general.--The tax imposed by section 2501 for each 
     calendar year shall be the amount equal to the excess (if 
     any) of--
       ``(A) the tentative tax determined under paragraph (2), 
     over
       ``(B) the tax paid under this section for all prior 
     calendar periods.
       ``(2) Tentative tax.--For purposes of paragraph (1), the 
     tentative tax determined under this paragraph for a calendar 
     year is a tax computed under section 2001(c) on the excess 
     of--
       ``(A) the aggregate sum of the taxable gifts for such 
     calendar year and for each of the preceding calendar periods, 
     over
       ``(B) the exemption amount under section 2001(b)(3) for 
     such calendar year.''
       (b) Repeal of Unified Credits.--
       (1) Section 2010 (relating to unified credit against estate 
     tax) is hereby repealed.
       (2) Section 2505 (relating to unified credit against gift 
     tax) is hereby repealed.
       (c) Conforming Amendments.--
       (1)(A) Subsection (b) of section 2011 is amended--
       (i) by striking ``adjusted'' in the table, and
       (ii) by striking the last sentence.
       (B) Subsection (f ) of section 2011 is amended by striking 
     ``, reduced by the amount of the unified credit provided by 
     section 2010''.
       (2) Subsection (a) of section 2012 is amended by striking 
     ``and the unified credit provided by section 2010''.
       (3) Subparagraph (A) of section 2013(c)(1) is amended by 
     striking ``2010,''.
       (4) Paragraph (2) of section 2014(b) is amended by striking 
     ``2010,''.
       (5) Clause (ii) of section 2056A(b)(12)(C) is amended to 
     read as follows:
       ``(ii) to treat any reduction in the tax imposed by 
     paragraph (1)(A) by reason of the credit allowable under 
     section 2010 (as in effect on the day before the date of the 
     enactment of the Small Business Tax Fairness Act of 2000) or 
     the exemption amount allowable under section 2001(b) with 
     respect to the decedent as a credit under section 2505 (as so 
     in effect) or exemption under section 2521 (as the case may 
     be) allowable to such surviving spouse for purposes of 
     determining the amount of the exemption allowable under 
     section 2521 with respect to taxable gifts made by the 
     surviving spouse during the year in which the spouse becomes 
     a citizen or any subsequent year,''.
       (6) Subsection (a) of section 2057 is amended by striking 
     paragraphs (2) and (3) and inserting the following new 
     paragraph:
       ``(2) Maximum deduction.--The deduction allowed by this 
     section shall not exceed the excess of $1,300,000 over the 
     exemption amount (as defined in section 2001(b)(3)).''
       (7)(A) Subsection (b) of section 2101 is amended amended to 
     read as follows:
       ``(b) Computation of Tax.--
       ``(1) In general.--The tax imposed by this section shall be 
     the amount equal to the excess (if any) of--
       ``(A) the tentative tax determined under paragraph (2), 
     over
       ``(B) a tentative tax computed under section 2001(c) on the 
     amount of the adjusted taxable gifts.
       ``(2) Tentative tax.--For purposes of paragraph (1), the 
     tentative tax determined under this paragraph is a tax 
     computed under section 2001(c) on the excess of--

[[Page 2575]]

       ``(A) the sum of--
       ``(i) the amount of the taxable estate, and
       ``(ii) the amount of the adjusted taxable gifts, over
       ``(B) the exemption amount for the calendar year in which 
     the decedent died.
       ``(3) Exemption amount.--
       ``(A) In general.--The term `exemption amount' means 
     $60,000.
       ``(B) Residents of possessions of the united states.--In 
     the case of a decedent who is considered to be a nonresident 
     not a citizen of the United States under section 2209, the 
     exemption amount under this paragraph shall be the greater 
     of--
       ``(i) $60,000, or
       ``(ii) that proportion of $175,000 which the value of that 
     part of the decedent's gross estate which at the time of his 
     death is situated in the United States bears to the value of 
     his entire gross estate wherever situated.
       ``(C) Special rules.--
       ``(i) Coordination with treaties.--To the extent required 
     under any treaty obligation of the United States, the 
     exemption amount allowed under this paragraph shall be equal 
     to the amount which bears the same ratio to the exemption 
     amount under section 2001(b)(3) (for the calendar year in 
     which the decedent died) as the value of the part of the 
     decedent's gross estate which at the time of his death is 
     situated in the United States bears to the value of his 
     entire gross estate wherever situated. For purposes of the 
     preceding sentence, property shall not be treated as situated 
     in the United States if such property is exempt from the tax 
     imposed by this subchapter under any treaty obligation of the 
     United States.
       ``(ii) Coordination with gift tax exemption and unified 
     credit.--If an exemption has been allowed under section 2521 
     (or a credit has been allowed under section 2505 as in effect 
     on the day before the date of the enactment of the Small 
     Business Tax Fairness Act of 2000) with respect to any gift 
     made by the decedent, each dollar amount contained in 
     subparagraph (A) or (B) or the exemption amount applicable 
     under clause (i) of this subparagraph (whichever applies) 
     shall be reduced by the exemption so allowed under 2521 (or, 
     in the case of such a credit, by the amount of the gift for 
     which the credit was so allowed).''.
       (8) Section 2102 is amended by striking subsection (c).
       (9)(A) Subsection (a) of section 2107 is amended by adding 
     at the end the following new paragraph:
       ``(3) Limitation on exemption amount.--Subparagraphs (B) 
     and (C) of section 2101(b)(3) shall not apply in applying 
     section 2101 for purposes of this section.''.
       (B) Subsection (c) of section 2107 is amended--
       (i) by striking paragraph (1) and by redesignating 
     paragraphs (2) and (3) as paragraphs (1) and (2), 
     respectively, and
       (ii) by striking the second sentence of paragraph (2) (as 
     so redesignated).
       (10) Paragraph (1) of section 6018(a) is amended by 
     striking ``the applicable exclusion amount in effect under 
     section 2010(c)'' and inserting ``the exemption amount under 
     section 2001(b)(3)''.
       (11) Subparagraph (A) of section 6601( j)(2) is amended to 
     read as follows:
       ``(A) the amount of the tentative tax which would be 
     determined under the rate schedule set forth in section 
     2001(c) if the amount with respect to which such tentative 
     tax is to be computed were $1,000,000, or''.
       (12) The table of sections for part II of subchapter A of 
     chapter 11 is amended by striking the item relating to 
     section 2010.
       (20) The table of sections for subchapter A of chapter 12 
     is amended by striking the item relating to section 2505.
       (13) The table of sections for subchapter C of chapter 12 
     is amended by inserting before the item relating to section 
     2522 the following new item:

``Sec. 2521. Exemption.''.
       (d) Effective Date.--The amendments made by this section--
       (1) insofar as they relate to the tax imposed by chapter 11 
     of the Internal Revenue Code of 1986, shall apply to estates 
     of decedents dying after December 31, 2000, and
       (2) insofar as they relate to the tax imposed by chapter 12 
     of such Code, shall apply to gifts made after December 31, 
     2000.

     Subtitle C--Modifications of Generation-skipping Transfer Tax

     SEC. 321. DEEMED ALLOCATION OF GST EXEMPTION TO LIFETIME 
                   TRANSFERS TO TRUSTS; RETROACTIVE ALLOCATIONS.

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

       ``(I) before the date that the individual attains age 46,
       ``(II) on or before one or more dates specified in the 
     trust instrument that will occur before the date that such 
     individual attains age 46, or
       ``(III) upon the occurrence of an event that, in accordance 
     with regulations prescribed by the Secretary, may reasonably 
     be expected to occur before the date that such individual 
     attains age 46;

       ``(ii) the trust instrument provides that more than 25 
     percent of the trust corpus must be distributed to or may be 
     withdrawn by one or more individuals who are non-skip persons 
     and who are living on the date of death of another person 
     identified in the instrument (by name or by class) who is 
     more than 10 years older than such individuals;
       ``(iii) the trust instrument provides that, if one or more 
     individuals who are non-skip persons die on or before a date 
     or event described in clause (i) or (ii), more than 25 
     percent of the trust corpus either must be distributed to the 
     estate or estates of one or more of such individuals or is 
     subject to a general power of appointment exercisable by one 
     or more of such individuals;
       ``(iv) the trust is a trust any portion of which would be 
     included in the gross estate of a non-skip person (other than 
     the transferor) if such person died immediately after the 
     transfer;
       ``(v) the trust is a charitable lead annuity trust (within 
     the meaning of section 2642(e)(3)(A)) or a charitable 
     remainder annuity trust or a charitable remainder unitrust 
     (within the meaning of section 664(d)); or
       ``(vi) the trust is a trust with respect to which a 
     deduction was allowed under section 2522 for the amount of an 
     interest in the form of the right to receive annual payments 
     of a fixed percentage of the net fair market value of the 
     trust property (determined yearly) and which is required to 
     pay principal to a non-skip person if such person is alive 
     when the yearly payments for which the deduction was allowed 
     terminate.

     For purposes of this subparagraph, the value of transferred 
     property shall not be considered to be includible in the 
     gross estate of a non-skip person or subject to a right of 
     withdrawal by reason of such person holding a right to 
     withdraw so much of such property as does not exceed the 
     amount referred to in section 2503(b) with respect to any 
     transferor, and it shall be assumed that powers of 
     appointment held by non-skip persons will not be exercised.
       ``(4) Automatic allocations to certain gst trusts.--For 
     purposes of this subsection, an indirect skip to which 
     section 2642(f ) applies shall be deemed to have been made 
     only at the close of the estate tax inclusion period. The 
     fair market value of such transfer shall be the fair market 
     value of the trust property at the close of the estate tax 
     inclusion period.
       ``(5) Applicability and effect.--
       ``(A) In general.--An individual--
       ``(i) may elect to have this subsection not apply to--

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

       ``(ii) may elect to treat any trust as a GST trust for 
     purposes of this subsection with respect to any or all 
     transfers made by such individual to such trust.
       ``(B) Elections.--
       ``(i) Elections with respect to indirect skips.--An 
     election under subparagraph (A)(i)(I) shall be deemed to be 
     timely if filed on a timely filed gift tax return for the 
     calendar year in which the transfer was made or deemed to 
     have been made pursuant to paragraph (4) or on such later 
     date or dates as may be prescribed by the Secretary.
       ``(ii) Other elections.--An election under clause (i)(II) 
     or (ii) of subparagraph (A) may be made on a timely filed 
     gift tax return for the calendar year for which the election 
     is to become effective.
       ``(d) Retroactive Allocations.--
       ``(1) In general.--If--
       ``(A) a non-skip person has an interest or a future 
     interest in a trust to which any transfer has been made,
       ``(B) such person--

[[Page 2576]]

       ``(i) is a lineal descendant of a grandparent of the 
     transferor or of a grandparent of the transferor's spouse or 
     former spouse, and
       ``(ii) is assigned to a generation below the generation 
     assignment of the transferor, and
       ``(C) such person predeceases the transferor,

     then the transferor may make an allocation of any of such 
     transferor's unused GST exemption to any previous transfer or 
     transfers to the trust on a chronological basis.
       ``(2) Special rules.--If the allocation under paragraph (1) 
     by the transferor is made on a gift tax return filed on or 
     before the date prescribed by section 6075(b) for gifts made 
     within the calendar year within which the non-skip person's 
     death occurred--
       ``(A) the value of such transfer or transfers for purposes 
     of section 2642(a) shall be determined as if such allocation 
     had been made on a timely filed gift tax return for each 
     calendar year within which each transfer was made,
       ``(B) such allocation shall be effective immediately before 
     such death, and
       ``(C) the amount of the transferor's unused GST exemption 
     available to be allocated shall be determined immediately 
     before such death.
       ``(3) Future interest.--For purposes of this subsection, a 
     person has a future interest in a trust if the trust may 
     permit income or corpus to be paid to such person on a date 
     or dates in the future.''.
       (b) Conforming Amendment.--Paragraph (2) of section 2632(b) 
     is amended by striking ``with respect to a direct skip'' and 
     inserting ``or subsection (c)(1)''.
       (c) Effective Dates.--
       (1) Deemed allocation.--Section 2632(c) of the Internal 
     Revenue Code of 1986 (as added by subsection (a)), and the 
     amendment made by subsection (b), shall apply to transfers 
     subject to chapter 11 or 12 made after December 31, 1999, and 
     to estate tax inclusion periods ending after December 31, 
     1999.
       (2) Retroactive allocations.--Section 2632(d) of the 
     Internal Revenue Code of 1986 (as added by subsection (a)) 
     shall apply to deaths of non-skip persons occurring after 
     December 31, 1999.

     SEC. 322. SEVERING OF TRUSTS.

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

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

       ``(ii) Trusts with inclusion ratio greater than zero.--If a 
     trust has an inclusion ratio of greater than zero and less 
     than 1, a severance is a qualified severance only if the 
     single trust is divided into two trusts, one of which 
     receives a fractional share of the total value of all trust 
     assets equal to the applicable fraction of the single trust 
     immediately before the severance. In such case, the trust 
     receiving such fractional share shall have an inclusion ratio 
     of zero and the other trust shall have an inclusion ratio of 
     1.
       ``(iii) Regulations.--The term `qualified severance' 
     includes any other severance permitted under regulations 
     prescribed by the Secretary.
       ``(C) Timing and manner of severances.--A severance 
     pursuant to this paragraph may be made at any time. The 
     Secretary shall prescribe by forms or regulations the manner 
     in which the qualified severance shall be reported to the 
     Secretary.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to severances after December 31, 1999.

     SEC. 323. MODIFICATION OF CERTAIN VALUATION RULES.

       (a) Gifts for Which Gift Tax Return Filed or Deemed 
     Allocation Made.--Paragraph (1) of section 2642(b) (relating 
     to valuation rules, etc.) is amended to read as follows:
       ``(1) Gifts for which gift tax return filed or deemed 
     allocation made.--If the allocation of the GST exemption to 
     any transfers of property is made on a gift tax return filed 
     on or before the date prescribed by section 6075(b) for such 
     transfer or is deemed to be made under section 2632 (b)(1) or 
     (c)(1)--
       ``(A) the value of such property for purposes of subsection 
     (a) shall be its value as finally determined for purposes of 
     chapter 12 (within the meaning of section 2001(f )(2)), or, 
     in the case of an allocation deemed to have been made at the 
     close of an estate tax inclusion period, its value at the 
     time of the close of the estate tax inclusion period, and
       ``(B) such allocation shall be effective on and after the 
     date of such transfer, or, in the case of an allocation 
     deemed to have been made at the close of an estate tax 
     inclusion period, on and after the close of such estate tax 
     inclusion period.''.
       (b) Transfers at Death.--Subparagraph (A) of section 
     2642(b)(2) is amended to read as follows:
       ``(A) Transfers at death.--If property is transferred as a 
     result of the death of the transferor, the value of such 
     property for purposes of subsection (a) shall be its value as 
     finally determined for purposes of chapter 11; except that, 
     if the requirements prescribed by the Secretary respecting 
     allocation of post-death changes in value are not met, the 
     value of such property shall be determined as of the time of 
     the distribution concerned.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to transfers subject to chapter 11 or 12 of the 
     Internal Revenue Code of 1986 made after December 31, 1999.

     SEC. 324. RELIEF PROVISIONS.

       (a) In General.--Section 2642 is amended by adding at the 
     end the following new subsection:
       ``(g) Relief Provisions.--
       ``(1) Relief for late elections.--
       ``(A) In general.--The Secretary shall by regulation 
     prescribe such circumstances and procedures under which 
     extensions of time will be granted to make--
       ``(i) an allocation of GST exemption described in paragraph 
     (1) or (2) of subsection (b), and
       ``(ii) an election under subsection (b)(3) or (c)(5) of 
     section 2632.

     Such regulations shall include procedures for requesting 
     comparable relief with respect to transfers made before the 
     date of the enactment of this paragraph.
       ``(B) Basis for determinations.--In determining whether to 
     grant relief under this paragraph, the Secretary shall take 
     into account all relevant circumstances, including evidence 
     of intent contained in the trust instrument or instrument of 
     transfer and such other factors as the Secretary deems 
     relevant. For purposes of determining whether to grant relief 
     under this paragraph, the time for making the allocation (or 
     election) shall be treated as if not expressly prescribed by 
     statute.
       ``(2) Substantial compliance.--An allocation of GST 
     exemption under section 2632 that demonstrates an intent to 
     have the lowest possible inclusion ratio with respect to a 
     transfer or a trust shall be deemed to be an allocation of so 
     much of the transferor's unused GST exemption as produces the 
     lowest possible inclusion ratio. In determining whether there 
     has been substantial compliance, all relevant circumstances 
     shall be taken into account, including evidence of intent 
     contained in the trust instrument or instrument of transfer 
     and such other factors as the Secretary deems relevant.''.
       (b) Effective Dates.--
       (1) Relief for late elections.--Section 2642(g)(1) of the 
     Internal Revenue Code of 1986 (as added by subsection (a)) 
     shall apply to requests pending on, or filed after, December 
     31, 1999.
       (2) Substantial compliance.--Section 2642(g)(2) of such 
     Code (as so added) shall take effect on the date of the 
     enactment of this Act and shall apply to transfers subject to 
     chapter 11 or 12 of the Internal Revenue Code of 1986 made 
     after December 31, 1999.

                   Subtitle D--Conservation Easements

     SEC. 331. EXPANSION OF ESTATE TAX RULE FOR CONSERVATION 
                   EASEMENTS.

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

     TITLE IV--TAX RELIEF FOR DISTRESSED COMMUNITIES AND INDUSTRIES

           Subtitle A--American Community Renewal Act of 2000

     SEC. 401. SHORT TITLE.

       This subtitle may be cited as the ``American Community 
     Renewal Act of 2000''.

     SEC. 402. DESIGNATION OF AND TAX INCENTIVES FOR RENEWAL 
                   COMMUNITIES.

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

                  ``Subchapter X--Renewal Communities

``Part   I. Designation.
``Part  II. Renewal community capital gain; renewal community business.
``Part  III. Family development accounts.
``Part   IV. Additional incentives.

[[Page 2577]]



                         ``PART I--DESIGNATION

``Sec. 1400E. Designation of renewal communities.

     ``SEC. 1400E. DESIGNATION OF RENEWAL COMMUNITIES.

       ``(a) Designation.--
       ``(1) Definitions.--For purposes of this title, the term 
     `renewal community' means any area--
       ``(A) which is nominated by one or more local governments 
     and the State or States in which it is located for 
     designation as a renewal community (hereinafter in this 
     section referred to as a `nominated area'); and
       ``(B) which the Secretary of Housing and Urban Development 
     designates as a renewal community, after consultation with--
       ``(i) the Secretaries of Agriculture, Commerce, Labor, and 
     the Treasury; the Director of the Office of Management and 
     Budget; and the Administrator of the Small Business 
     Administration; and
       ``(ii) in the case of an area on an Indian reservation, the 
     Secretary of the Interior.
       ``(2) Number of designations.--
       ``(A) In general.--The Secretary of Housing and Urban 
     Development may designate not more than 15 nominated areas as 
     renewal communities.
       ``(B) Minimum designation in rural areas.--Of the areas 
     designated under paragraph (1), at least 3 must be areas--
       ``(i) which are within a local government jurisdiction or 
     jurisdictions with a population of less than 50,000,
       ``(ii) which are outside of a metropolitan statistical area 
     (within the meaning of section 143(k)(2)(B)), or
       ``(iii) which are determined by the Secretary of Housing 
     and Urban Development, after consultation with the Secretary 
     of Commerce, to be rural areas.
       ``(3) Areas designated based on degree of poverty, etc.--
       ``(A) In general.--Except as otherwise provided in this 
     section, the nominated areas designated as renewal 
     communities under this subsection shall be those nominated 
     areas with the highest average ranking with respect to the 
     criteria described in subparagraphs (B), (C), and (D) of 
     subsection (c)(3). For purposes of the preceding sentence, an 
     area shall be ranked within each such criterion on the basis 
     of the amount by which the area exceeds such criterion, with 
     the area which exceeds such criterion by the greatest amount 
     given the highest ranking.
       ``(B) Exception where inadequate course of action, etc.--An 
     area shall not be designated under subparagraph (A) if the 
     Secretary of Housing and Urban Development determines that 
     the course of action described in subsection (d)(2) with 
     respect to such area is inadequate.
       ``(C) Priority for empowerment zones and enterprise 
     communities with respect to first 10 designations.--With 
     respect to the first 10 designations made under this 
     section--
       ``(i) all shall be chosen from nominated areas which are 
     empowerment zones or enterprise communities (and are 
     otherwise eligible for designation under this section); and
       ``(ii) two shall be areas described in paragraph (2)(B).
       ``(4) Limitation on designations.--
       ``(A) Publication of regulations.--The Secretary of Housing 
     and Urban Development shall prescribe by regulation no later 
     than 4 months after the date of the enactment of this 
     section, after consultation with the officials described in 
     paragraph (1)(B)--
       ``(i) the procedures for nominating an area under paragraph 
     (1)(A);
       ``(ii) the parameters relating to the size and population 
     characteristics of a renewal community; and
       ``(iii) the manner in which nominated areas will be 
     evaluated based on the criteria specified in subsection (d).
       ``(B) Time limitations.--The Secretary of Housing and Urban 
     Development may designate nominated areas as renewal 
     communities only during the 36-month period beginning on the 
     first day of the first month following the month in which the 
     regulations described in subparagraph (A) are prescribed.
       ``(C) Procedural rules.--The Secretary of Housing and Urban 
     Development shall not make any designation of a nominated 
     area as a renewal community under paragraph (2) unless--
       ``(i) the local governments and the States in which the 
     nominated area is located have the authority--

       ``(I) to nominate such area for designation as a renewal 
     community;
       ``(II) to make the State and local commitments described in 
     subsection (d); and
       ``(III) to provide assurances satisfactory to the Secretary 
     of Housing and Urban Development that such commitments will 
     be fulfilled,

       ``(ii) a nomination regarding such area is submitted in 
     such a manner and in such form, and contains such 
     information, as the Secretary of Housing and Urban 
     Development shall by regulation prescribe; and
       ``(iii) the Secretary of Housing and Urban Development 
     determines that any information furnished is reasonably 
     accurate.
       ``(5) Nomination process for indian reservations.--For 
     purposes of this subchapter, in the case of a nominated area 
     on an Indian reservation, the reservation governing body (as 
     determined by the Secretary of the Interior) shall be treated 
     as being both the State and local governments with respect to 
     such area.
       ``(b) Period for Which Designation Is in Effect.--
       ``(1) In general.--Any designation of an area as a renewal 
     community shall remain in effect during the period beginning 
     on the date of the designation and ending on the earliest 
     of--
       ``(A) December 31, 2007,
       ``(B) the termination date designated by the State and 
     local governments in their nomination, or
       ``(C) the date the Secretary of Housing and Urban 
     Development revokes such designation.
       ``(2) Revocation of designation.--The Secretary of Housing 
     and Urban Development may revoke the designation under this 
     section of an area if such Secretary determines that the 
     local government or the State in which the area is located--
       ``(A) has modified the boundaries of the area, or
       ``(B) is not complying substantially with, or fails to make 
     progress in achieving, the State or local commitments, 
     respectively, described in subsection (d).
       ``(c) Area and Eligibility Requirements.--
       ``(1) In general.--The Secretary of Housing and Urban 
     Development may designate a nominated area as a renewal 
     community under subsection (a) only if the area meets the 
     requirements of paragraphs (2) and (3) of this subsection.
       ``(2) Area requirements.--A nominated area meets the 
     requirements of this paragraph if--
       ``(A) the area is within the jurisdiction of one or more 
     local governments;
       ``(B) the boundary of the area is continuous; and
       ``(C) the area--
       ``(i) has a population, of at least--

       ``(I) 4,000 if any portion of such area (other than a rural 
     area described in subsection (a)(2)(B)(i)) is located within 
     a metropolitan statistical area (within the meaning of 
     section 143(k)(2)(B)) which has a population of 50,000 or 
     greater; or
       ``(II) 1,000 in any other case; or

       ``(ii) is entirely within an Indian reservation (as 
     determined by the Secretary of the Interior).
       ``(3) Eligibility requirements.--A nominated area meets the 
     requirements of this paragraph if the State and the local 
     governments in which it is located certify (and the Secretary 
     of Housing and Urban Development, after such review of 
     supporting data as he deems appropriate, accepts such 
     certification) that--
       ``(A) the area is one of pervasive poverty, unemployment, 
     and general distress;
       ``(B) the unemployment rate in the area, as determined by 
     the most recent available data, was at least 1\1/2\ times the 
     national unemployment rate for the period to which such data 
     relate;
       ``(C) the poverty rate for each population census tract 
     within the nominated area is at least 20 percent; and
       ``(D) in the case of an urban area, at least 70 percent of 
     the households living in the area have incomes below 80 
     percent of the median income of households within the 
     jurisdiction of the local government (determined in the same 
     manner as under section 119(b)(2) of the Housing and 
     Community Development Act of 1974).
       ``(4) Consideration of high incidence of crime.--The 
     Secretary of Housing and Urban Development shall take into 
     account, in selecting nominated areas for designation as 
     renewal communities under this section, the extent to which 
     such areas have a high incidence of crime.
       ``(5) Consideration of communities identified in gao 
     study.--The Secretary of Housing and Urban Development shall 
     take into account, in selecting nominated areas for 
     designation as renewal communities under this section, if the 
     area has census tracts identified in the May 12, 1998, report 
     of the Government Accounting Office regarding the 
     identification of economically distressed areas.
       ``(d) Required State and Local Commitments.--
       ``(1) In general.--The Secretary of Housing and Urban 
     Development may designate any nominated area as a renewal 
     community under subsection (a) only if--
       ``(A) the local government and the State in which the area 
     is located agree in writing that, during any period during 
     which the area is a renewal community, such governments will 
     follow a specified course of action which meets the 
     requirements of paragraph (2) and is designed to reduce the 
     various burdens borne by employers or employees in such area; 
     and
       ``(B) the economic growth promotion requirements of 
     paragraph (3) are met.
       ``(2) Course of action.--
       ``(A) In general.--A course of action meets the 
     requirements of this paragraph if such course of action is a 
     written document, signed by a State (or local government) and 
     neighborhood organizations, which evidences a partnership 
     between such State or government and community-based 
     organizations and which commits each signatory to specific 
     and measurable goals, actions, and

[[Page 2578]]

     timetables. Such course of action shall include at least five 
     of the following:
       ``(i) A reduction of tax rates or fees applying within the 
     renewal community.
       ``(ii) An increase in the level of efficiency of local 
     services within the renewal community.
       ``(iii) Crime reduction strategies, such as crime 
     prevention (including the provision of such services by 
     nongovernmental entities).
       ``(iv) Actions to reduce, remove, simplify, or streamline 
     governmental requirements applying within the renewal 
     community.
       ``(v) Involvement in the program by private entities, 
     organizations, neighborhood organizations, and community 
     groups, particularly those in the renewal community, 
     including a commitment from such private entities to provide 
     jobs and job training for, and technical, financial, or other 
     assistance to, employers, employees, and residents from the 
     renewal community.
       ``(vi) State or local income tax benefits for fees paid for 
     services performed by a nongovernmental entity which were 
     formerly performed by a governmental entity.
       ``(vii) The gift (or sale at below fair market value) of 
     surplus real property (such as land, homes, and commercial or 
     industrial structures) in the renewal community to 
     neighborhood organizations, community development 
     corporations, or private companies.
       ``(B) Recognition of past efforts.--For purposes of this 
     section, in evaluating the course of action agreed to by any 
     State or local government, the Secretary of Housing and Urban 
     Development shall take into account the past efforts of such 
     State or local government in reducing the various burdens 
     borne by employers and employees in the area involved.
       ``(3) Economic growth promotion requirements.--The economic 
     growth promotion requirements of this paragraph are met with 
     respect to a nominated area if the local government and the 
     State in which such area is located certify in writing that 
     such government and State, respectively, have repealed or 
     otherwise will not enforce within the area, if such area is 
     designated as a renewal community--
       ``(A) licensing requirements for occupations that do not 
     ordinarily require a professional degree;
       ``(B) zoning restrictions on home-based businesses which do 
     not create a public nuisance;
       ``(C) permit requirements for street vendors who do not 
     create a public nuisance;
       ``(D) zoning or other restrictions that impede the 
     formation of schools or child care centers; and
       ``(E) franchises or other restrictions on competition for 
     businesses providing public services, including but not 
     limited to taxicabs, jitneys, cable television, or trash 
     hauling,
     except to the extent that such regulation of businesses and 
     occupations is necessary for and well-tailored to the 
     protection of health and safety.
       ``(e) Coordination With Treatment of Empowerment Zones and 
     Enterprise Communities.--For purposes of this title, if there 
     are in effect with respect to the same area both--
       ``(1) a designation as a renewal community; and
       ``(2) a designation as an empowerment zone or enterprise 
     community,
     both of such designations shall be given full effect with 
     respect to such area.
       ``(f ) Definitions and Special Rules.--For purposes of this 
     subchapter--
       ``(1) Governments.--If more than one government seeks to 
     nominate an area as a renewal community, any reference to, or 
     requirement of, this section shall apply to all such 
     governments.
       ``(2) State.--The term `State' includes Puerto Rico, the 
     Virgin Islands of the United States, Guam, American Samoa, 
     the Northern Mariana Islands, and any other possession of the 
     United States.
       ``(3) Local government.--The term `local government' 
     means--
       ``(A) any county, city, town, township, parish, village, or 
     other general purpose political subdivision of a State;
       ``(B) any combination of political subdivisions described 
     in subparagraph (A) recognized by the Secretary of Housing 
     and Urban Development; and
       ``(C) the District of Columbia.
       ``(4) Application of rules relating to census tracts and 
     census data.--The rules of sections 1392(b)(4) and 1393(a)(9) 
     shall apply.

 ``PART II--RENEWAL COMMUNITY CAPITAL GAIN; RENEWAL COMMUNITY BUSINESS

``Sec. 1400F. Renewal community capital gain.
``Sec. 1400G. Renewal community business defined.

     ``SEC. 1400F. RENEWAL COMMUNITY CAPITAL GAIN.

       ``(a) General Rule.--Gross income does not include any 
     qualified capital gain recognized on the sale or exchange of 
     a qualified community asset held for more than 5 years.
       ``(b) Qualified Community Asset.--For purposes of this 
     section--
       ``(1) In general.--The term `qualified community asset' 
     means--
       ``(A) any qualified community stock;
       ``(B) any qualified community partnership interest; and
       ``(C) any qualified community business property.
       ``(2) Qualified community stock.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     the term `qualified community stock' means any stock in a 
     domestic corporation if--
       ``(i) such stock is acquired by the taxpayer after December 
     31, 2000, and before January 1, 2008, at its original issue 
     (directly or through an underwriter) from the corporation 
     solely in exchange for cash;
       ``(ii) as of the time such stock was issued, such 
     corporation was a renewal community business (or, in the case 
     of a new corporation, such corporation was being organized 
     for purposes of being a renewal community business); and
       ``(iii) during substantially all of the taxpayer's holding 
     period for such stock, such corporation qualified as a 
     renewal community business.
       ``(B) Redemptions.--A rule similar to the rule of section 
     1202(c)(3) shall apply for purposes of this paragraph.
       ``(3) Qualified community partnership interest.--The term 
     `qualified community partnership interest' means any capital 
     or profits interest in a domestic partnership if--
       ``(A) such interest is acquired by the taxpayer after 
     December 31, 2000, and before January 1, 2008;
       ``(B) as of the time such interest was acquired, such 
     partnership was a renewal community business (or, in the case 
     of a new partnership, such partnership was being organized 
     for purposes of being a renewal community business); and
       ``(C) during substantially all of the taxpayer's holding 
     period for such interest, such partnership qualified as a 
     renewal community business.
     A rule similar to the rule of paragraph (2)(B) shall apply 
     for purposes of this paragraph.
       ``(4) Qualified community business property.--
       ``(A) In general.--The term `qualified community business 
     property' means tangible property if--
       ``(i) such property was acquired by the taxpayer by 
     purchase (as defined in section 179(d)(2)) after December 31, 
     2000, and before January 1, 2008;
       ``(ii) the original use of such property in the renewal 
     community commences with the taxpayer; and
       ``(iii) during substantially all of the taxpayer's holding 
     period for such property, substantially all of the use of 
     such property was in a renewal community business of the 
     taxpayer.
       ``(B) Special rule for substantial improvements.--The 
     requirements of clauses (i) and (ii) of subparagraph (A) 
     shall be treated as satisfied with respect to--
       ``(i) property which is substantially improved (within the 
     meaning of section 1400B(b)(4)(B)(ii)) by the taxpayer before 
     January 1, 2008; and
       ``(ii) any land on which such property is located.
       ``(c) Certain Rules To Apply.--Rules similar to the rules 
     of paragraphs (5), (6), and (7) of subsection (b), and 
     subsections (e), (f ), and (g), of section 1400B shall apply 
     for purposes of this section.

     ``SEC. 1400G. RENEWAL COMMUNITY BUSINESS DEFINED.

       ``For purposes of this part, the term `renewal community 
     business' means any entity or proprietorship which would be a 
     qualified business entity or qualified proprietorship under 
     section 1397B if--
       ``(1) references to renewal communities were substituted 
     for references to empowerment zones in such section; and
       ``(2) `80 percent' were substituted for `50 percent' in 
     subsections (b)(2) and (c)(1) of such section.

                ``PART III--FAMILY DEVELOPMENT ACCOUNTS

``Sec. 1400H. Family development accounts for renewal community EITC 
              recipients.
``Sec. 1400I. Designation of earned income tax credit payments for 
              deposit to family development account.

     ``SEC. 1400H. FAMILY DEVELOPMENT ACCOUNTS FOR RENEWAL 
                   COMMUNITY EITC RECIPIENTS.

       ``(a) Allowance of Deduction.--
       ``(1) In general.--There shall be allowed as a deduction--
       ``(A) in the case of a qualified individual, the amount 
     paid in cash for the taxable year by such individual to any 
     family development account for such individual's benefit; and
       ``(B) in the case of any person other than a qualified 
     individual, the amount paid in cash for the taxable year by 
     such person to any family development account for the benefit 
     of a qualified individual but only if the amount so paid is 
     designated for purposes of this section by such individual.
       ``(2) Limitation.--
       ``(A) In general.--The amount allowable as a deduction to 
     any individual for any taxable year by reason of paragraph 
     (1)(A) shall not exceed the lesser of--
       ``(i) $2,000, or

[[Page 2579]]

       ``(ii) an amount equal to the compensation includible in 
     the individual's gross income for such taxable year.
       ``(B) Persons donating to family development accounts of 
     others.--The amount which may be designated under paragraph 
     (1)(B) by any qualified individual for any taxable year of 
     such individual shall not exceed $1,000.
       ``(3) Special rules for certain married individuals.--Rules 
     similar to rules of section 219(c) shall apply to the 
     limitation in paragraph (2)(A).
       ``(4) Coordination with iras.--No deduction shall be 
     allowed under this section for any taxable year to any person 
     by reason of a payment to an account for the benefit of a 
     qualified individual if any amount is paid for such taxable 
     year into an individual retirement account (including a Roth 
     IRA) for the benefit of such individual.
       ``(5) Rollovers.--No deduction shall be allowed under this 
     section with respect to any rollover contribution.
       ``(b) Tax Treatment of Distributions.--
       ``(1) Inclusion of amounts in gross income.--Except as 
     otherwise provided in this subsection, any amount paid or 
     distributed out of a family development account shall be 
     included in gross income by the payee or distributee, as the 
     case may be.
       ``(2) Exclusion of qualified family development 
     distributions.--Paragraph (1) shall not apply to any 
     qualified family development distribution.
       ``(c) Qualified Family Development Distribution.--For 
     purposes of this section--
       ``(1) In general.--The term `qualified family development 
     distribution' means any amount paid or distributed out of a 
     family development account which would otherwise be 
     includible in gross income, to the extent that such payment 
     or distribution is used exclusively to pay qualified family 
     development expenses for the holder of the account or the 
     spouse or dependent (as defined in section 152) of such 
     holder.
       ``(2) Qualified family development expenses.--The term 
     `qualified family development expenses' means any of the 
     following:
       ``(A) Qualified higher education expenses.
       ``(B) Qualified first-time homebuyer costs.
       ``(C) Qualified business capitalization costs.
       ``(D) Qualified medical expenses.
       ``(E) Qualified rollovers.
       ``(3) Qualified higher education expenses.--
       ``(A) In general.--The term `qualified higher education 
     expenses' has the meaning given such term by section 
     72(t)(7), determined by treating postsecondary vocational 
     educational schools as eligible educational institutions.
       ``(B) Postsecondary vocational education school.--The term 
     `postsecondary vocational educational school' means an area 
     vocational education school (as defined in subparagraph (C) 
     or (D) of section 521(4) of the Carl D. Perkins Vocational 
     and Applied Technology Education Act (20 U.S.C. 2471(4))) 
     which is in any State (as defined in section 521(33) of such 
     Act), as such sections are in effect on the date of the 
     enactment of this section.
       ``(C) Coordination with other benefits.--The amount of 
     qualified higher education expenses for any taxable year 
     shall be reduced as provided in section 25A(g)(2).
       ``(4) Qualified first-time homebuyer costs.--The term 
     `qualified first-time homebuyer costs' means qualified 
     acquisition costs (as defined in section 72(t)(8) without 
     regard to subparagraph (B) thereof) with respect to a 
     principal residence (within the meaning of section 121) for a 
     qualified first-time homebuyer (as defined in section 
     72(t)(8)).
       ``(5) Qualified business capitalization costs.--
       ``(A) In general.--The term `qualified business 
     capitalization costs' means qualified expenditures for the 
     capitalization of a qualified business pursuant to a 
     qualified plan.
       ``(B) Qualified expenditures.--The term `qualified 
     expenditures' means expenditures included in a qualified 
     plan, including capital, plant, equipment, working capital, 
     and inventory expenses.
       ``(C) Qualified business.--The term `qualified business' 
     means any trade or business other than any trade or 
     business--
       ``(i) which consists of the operation of any facility 
     described in section 144(c)(6)(B), or
       ``(ii) which contravenes any law.
       ``(D) Qualified plan.--The term `qualified plan' means a 
     business plan which meets such requirements as the Secretary 
     may specify.
       ``(6) Qualified medical expenses.--The term `qualified 
     medical expenses' means any amount paid during the taxable 
     year, not compensated for by insurance or otherwise, for 
     medical care (as defined in section 213(d)) of the taxpayer, 
     his spouse, or his dependent (as defined in section 152).
       ``(7) Qualified rollovers.--The term `qualified rollover' 
     means any amount paid from a family development account of a 
     taxpayer into another such account established for the 
     benefit of--
       ``(A) such taxpayer, or
       ``(B) any qualified individual who is--
       ``(i) the spouse of such taxpayer, or
       ``(ii) any dependent (as defined in section 152) of the 
     taxpayer.
     Rules similar to the rules of section 408(d)(3) shall apply 
     for purposes of this paragraph.
       ``(d) Tax Treatment of Accounts.--
       ``(1) In general.--Any family development account is exempt 
     from taxation under this subtitle unless such account has 
     ceased to be a family development account by reason of 
     paragraph (2). Notwithstanding the preceding sentence, any 
     such account is subject to the taxes imposed by section 511 
     (relating to imposition of tax on unrelated business income 
     of charitable, etc., organizations). Notwithstanding any 
     other provision of this title (including chapters 11 and 12), 
     the basis of any person in such an account is zero.
       ``(2) Loss of exemption in case of prohibited 
     transactions.--For purposes of this section, rules similar to 
     the rules of section 408(e) shall apply.
       ``(3) Other rules to apply.--Rules similar to the rules of 
     paragraphs (4), (5), and (6) of section 408(d) shall apply 
     for purposes of this section.
       ``(e) Family Development Account.--For purposes of this 
     title, the term `family development account' means a trust 
     created or organized in the United States for the exclusive 
     benefit of a qualified individual or his beneficiaries, but 
     only if the written governing instrument creating the trust 
     meets the following requirements:
       ``(1) Except in the case of a qualified rollover (as 
     defined in subsection (c)(7))--
       ``(A) no contribution will be accepted unless it is in 
     cash; and
       ``(B) contributions will not be accepted for the taxable 
     year in excess of $3,000.
       ``(2) The requirements of paragraphs (2) through (6) of 
     section 408(a) are met.
       ``(f ) Qualified Individual.--For purposes of this section, 
     the term `qualified individual' means, for any taxable year, 
     an individual--
       ``(1) who is a bona fide resident of a renewal community 
     throughout the taxable year; and
       ``(2) to whom a credit was allowed under section 32 for the 
     preceding taxable year.
       ``(g) Other Definitions and Special Rules.--
       ``(1) Compensation.--The term `compensation' has the 
     meaning given such term by section 219(f )(1).
       ``(2) Married individuals.--The maximum deduction under 
     subsection (a) shall be computed separately for each 
     individual, and this section shall be applied without regard 
     to any community property laws.
       ``(3) Time when contributions deemed made.--For purposes of 
     this section, a taxpayer shall be deemed to have made a 
     contribution to a family development account on the last day 
     of the preceding taxable year if the contribution is made on 
     account of such taxable year and is made not later than the 
     time prescribed by law for filing the return for such taxable 
     year (not including extensions thereof).
       ``(4) Employer payments; custodial accounts.--Rules similar 
     to the rules of sections 219(f )(5) and 408(h) shall apply 
     for purposes of this section.
       ``(5) Reports.--The trustee of a family development account 
     shall make such reports regarding such account to the 
     Secretary and to the individual for whom the account is 
     maintained with respect to contributions (and the years to 
     which they relate), distributions, and such other matters as 
     the Secretary may require under regulations. The reports 
     required by this paragraph--
       ``(A) shall be filed at such time and in such manner as the 
     Secretary prescribes in such regulations; and
       ``(B) shall be furnished to individuals--
       ``(i) not later than January 31 of the calendar year 
     following the calendar year to which such reports relate; and
       ``(ii) in such manner as the Secretary prescribes in such 
     regulations.
       ``(6) Investment in collectibles treated as 
     distributions.--Rules similar to the rules of section 408(m) 
     shall apply for purposes of this section.
       ``(h) Penalty for Distributions Not Used for Qualified 
     Family Development Expenses.--
       ``(1) In general.--If any amount is distributed from a 
     family development account and is not used exclusively to pay 
     qualified family development expenses for the holder of the 
     account or the spouse or dependent (as defined in section 
     152) of such holder, the tax imposed by this chapter for the 
     taxable year of such distribution shall be increased by 10 
     percent of the portion of such amount which is includible in 
     gross income.
       ``(2) Exception for certain distributions.--Paragraph (1) 
     shall not apply to distributions which are--
       ``(A) made on or after the date on which the account holder 
     attains age 59\1/2\,
       ``(B) made to a beneficiary (or the estate of the account 
     holder) on or after the death of the account holder, or
       ``(C) attributable to the account holder's being disabled 
     within the meaning of section 72(m)(7).
       ``(i) Application of Section.--This section shall apply to 
     amounts paid to a family development account for any taxable 
     year beginning after December 31, 2000, and before January 1, 
     2008.

[[Page 2580]]



     ``SEC. 1400I. DESIGNATION OF EARNED INCOME TAX CREDIT 
                   PAYMENTS FOR DEPOSIT TO FAMILY DEVELOPMENT 
                   ACCOUNT.

       ``(a) In General.--With respect to the return of any 
     qualified individual (as defined in section 1400H(f )) for 
     the taxable year of the tax imposed by this chapter, such 
     individual may designate that a specified portion (not less 
     than $1) of any overpayment of tax for such taxable year 
     which is attributable to the earned income tax credit shall 
     be deposited by the Secretary into a family development 
     account of such individual. The Secretary shall so deposit 
     such portion designated under this subsection.
       ``(b) Manner and Time of Designation.--A designation under 
     subsection (a) may be made with respect to any taxable year--
       ``(1) at the time of filing the return of the tax imposed 
     by this chapter for such taxable year, or
       ``(2) at any other time (after the time of filing the 
     return of the tax imposed by this chapter for such taxable 
     year) specified in regulations prescribed by the Secretary.
     Such designation shall be made in such manner as the 
     Secretary prescribes by regulations.
       ``(c) Portion Attributable to Earned Income Tax Credit.--
     For purposes of subsection (a), an overpayment for any 
     taxable year shall be treated as attributable to the earned 
     income tax credit to the extent that such overpayment does 
     not exceed the credit allowed to the taxpayer under section 
     32 for such taxable year.
       ``(d) Overpayments Treated as Refunded.--For purposes of 
     this title, any portion of an overpayment of tax designated 
     under subsection (a) shall be treated as being refunded to 
     the taxpayer as of the last date prescribed for filing the 
     return of tax imposed by this chapter (determined without 
     regard to extensions) or, if later, the date the return is 
     filed.
       ``(e) Termination.--This section shall not apply to any 
     taxable year beginning after December 31, 2007.

                    ``PART IV--ADDITIONAL INCENTIVES

``Sec. 1400K. Commercial revitalization deduction.
``Sec. 1400L. Increase in expensing under section 179.

     ``SEC. 1400K. COMMERCIAL REVITALIZATION DEDUCTION.

       ``(a) General Rule.--At the election of the taxpayer, 
     either--
       ``(1) one-half of any qualified revitalization expenditures 
     chargeable to capital account with respect to any qualified 
     revitalization building shall be allowable as a deduction for 
     the taxable year in which the building is placed in service, 
     or
       ``(2) a deduction for all such expenditures shall be 
     allowable ratably over the 120-month period beginning with 
     the month in which the building is placed in service.
     The deduction provided by this section with respect to such 
     expenditure shall be in lieu of any depreciation deduction 
     otherwise allowable on account of such expenditure.
       ``(b) Qualified Revitalization Buildings and 
     Expenditures.--For purposes of this section--
       ``(1) Qualified revitalization building.--The term 
     `qualified revitalization building' means any building (and 
     its structural components) if--
       ``(A) such building is located in a renewal community and 
     is placed in service after December 31, 2000;
       ``(B) a commercial revitalization deduction amount is 
     allocated to the building under subsection (d); and
       ``(C) depreciation (or amortization in lieu of 
     depreciation) is allowable with respect to the building 
     (without regard to this section).
       ``(2) Qualified revitalization expenditure.--
       ``(A) In general.--The term `qualified revitalization 
     expenditure' means any amount properly chargeable to capital 
     account--
       ``(i) for property for which depreciation is allowable 
     under section 168 (without regard to this section) and which 
     is--

       ``(I) nonresidential real property; or
       ``(II) an addition or improvement to property described in 
     subclause (I);

       ``(ii) in connection with the construction of any qualified 
     revitalization building which was not previously placed in 
     service or in connection with the substantial rehabilitation 
     (within the meaning of section 47(c)(1)(C)) of a building 
     which was placed in service before the beginning of such 
     rehabilitation; and
       ``(iii) for land (including land which is functionally 
     related to such property and subordinate thereto).
       ``(B) Dollar limitation.--The aggregate amount which may be 
     treated as qualified revitalization expenditures with respect 
     to any qualified revitalization building for any taxable year 
     shall not exceed the excess of--
       ``(i) $10,000,000, reduced by
       ``(ii) any such expenditures with respect to the building 
     taken into account by the taxpayer or any predecessor in 
     determining the amount of the deduction under this section 
     for all preceding taxable years.
       ``(C) Certain expenditures not included.--The term 
     `qualified revitalization expenditure' does not include--
       ``(i) Acquisition costs.--The costs of acquiring any 
     building or interest therein and any land in connection with 
     such building to the extent that such costs exceed 30 percent 
     of the qualified revitalization expenditures determined 
     without regard to this clause.
       ``(ii) Credits.--Any expenditure which the taxpayer may 
     take into account in computing any credit allowable under 
     this title unless the taxpayer elects to take the expenditure 
     into account only for purposes of this section.
       ``(c) When Expenditures Taken Into Account.--Qualified 
     revitalization expenditures with respect to any qualified 
     revitalization building shall be taken into account for the 
     taxable year in which the qualified revitalization building 
     is placed in service. For purposes of the preceding sentence, 
     a substantial rehabilitation of a building shall be treated 
     as a separate building.
       ``(d) Limitation on Aggregate Deductions Allowable With 
     Respect to Buildings Located in a State.--
       ``(1) In general.--The amount of the deduction determined 
     under this section for any taxable year with respect to any 
     building shall not exceed the commercial revitalization 
     deduction amount (in the case of an amount determined under 
     subsection (a)(2), the present value of such amount as 
     determined under the rules of section 42(b)(2)(C) by 
     substituting `100 percent' for `72 percent' in clause (ii) 
     thereof) allocated to such building under this subsection by 
     the commercial revitalization agency. Such allocation shall 
     be made at the same time and in the same manner as under 
     paragraphs (1) and (7) of section 42(h).
       ``(2) Commercial revitalization deduction amount for 
     agencies.--
       ``(A) In general.--The aggregate commercial revitalization 
     deduction amount which a commercial revitalization agency may 
     allocate for any calendar year is the amount of the State 
     commercial revitalization deduction ceiling determined under 
     this paragraph for such calendar year for such agency.
       ``(B) State commercial revitalization deduction ceiling.--
     The State commercial revitalization deduction ceiling 
     applicable to any State--
       ``(i) for each calendar year after 2000 and before 2008 is 
     $6,000,000 for each renewal community in the State; and
       ``(ii) zero for each calendar year thereafter.
       ``(C) Commercial revitalization agency.--For purposes of 
     this section, the term `commercial revitalization agency' 
     means any agency authorized by a State to carry out this 
     section.
       ``(e) Responsibilities of Commercial Revitalization 
     Agencies.--
       ``(1) Plans for allocation.--Notwithstanding any other 
     provision of this section, the commercial revitalization 
     deduction amount with respect to any building shall be zero 
     unless--
       ``(A) such amount was allocated pursuant to a qualified 
     allocation plan of the commercial revitalization agency which 
     is approved (in accordance with rules similar to the rules of 
     section 147(f )(2) (other than subparagraph (B)(ii) thereof)) 
     by the governmental unit of which such agency is a part; and
       ``(B) such agency notifies the chief executive officer (or 
     its equivalent) of the local jurisdiction within which the 
     building is located of such allocation and provides such 
     individual a reasonable opportunity to comment on the 
     allocation.
       ``(2) Qualified allocation plan.--For purposes of this 
     subsection, the term `qualified allocation plan' means any 
     plan--
       ``(A) which sets forth selection criteria to be used to 
     determine priorities of the commercial revitalization agency 
     which are appropriate to local conditions;
       ``(B) which considers--
       ``(i) the degree to which a project contributes to the 
     implementation of a strategic plan that is devised for a 
     renewal community through a citizen participation process;
       ``(ii) the amount of any increase in permanent, full-time 
     employment by reason of any project; and
       ``(iii) the active involvement of residents and nonprofit 
     groups within the renewal community; and
       ``(C) which provides a procedure that the agency (or its 
     agent) will follow in monitoring compliance with this 
     section.
       ``(f ) Regulations.--For purposes of this section, the 
     Secretary shall, by regulations, provide for the application 
     of rules similar to the rules of section 49 and subsections 
     (a) and (b) of section 50.
       ``(g) Termination.--This section shall not apply to any 
     building placed in service after December 31, 2007.

     ``SEC. 1400L. INCREASE IN EXPENSING UNDER SECTION 179.

       ``(a) General Rule.--In the case of a renewal community 
     business (as defined in section 1400G), for purposes of 
     section 179--
       ``(1) the limitation under section 179(b)(1) shall be 
     increased by the lesser of--
       ``(A) $35,000; or
       ``(B) the cost of section 179 property which is qualified 
     renewal property placed in service during the taxable year; 
     and
       ``(2) the amount taken into account under section 179(b)(2) 
     with respect to any section 179 property which is qualified 
     renewal property shall be 50 percent of the cost thereof.
       ``(b) Recapture.--Rules similar to the rules under section 
     179(d)(10) shall apply with respect to any qualified renewal 
     property which ceases to be used in a renewal community by a 
     renewal community business.

[[Page 2581]]

       ``(c) Qualified Renewal Property.--For purposes of this 
     section--
       ``(1) In general.--The term `qualified renewal property' 
     means any property to which section 168 applies (or would 
     apply but for section 179) if--
       ``(A) such property was acquired by the taxpayer by 
     purchase (as defined in section 179(d)(2)) after December 31, 
     2000, and before January 1, 2008; and
       ``(B) such property would be qualified zone property (as 
     defined in section 1397C) if references to renewal 
     communities were substituted for references to empowerment 
     zones in section 1397C.
       ``(2) Certain rules to apply.--The rules of subsections 
     (a)(2) and (b) of section 1397C shall apply for purposes of 
     this section.''.

     SEC. 403. EXTENSION OF EXPENSING OF ENVIRONMENTAL REMEDIATION 
                   COSTS TO RENEWAL COMMUNITIES.

       (a) Extension.--Paragraph (2) of section 198(c) (defining 
     targeted area) is amended by redesignating subparagraph (C) 
     as subparagraph (D) and by inserting after subparagraph (B) 
     the following new subparagraph:
       ``(C) Renewal communities included.--Except as provided in 
     subparagraph (B), such term shall include a renewal community 
     (as defined in section 1400E) with respect to expenditures 
     paid or incurred after December 31, 2000.''.
       (b) Extension of Termination Date for Renewal 
     Communities.--Subsection (h) of section 198 is amended by 
     inserting before the period ``(December 31, 2007, in the case 
     of a renewal community, as defined in section 1400E).''.

     SEC. 404. EXTENSION OF WORK OPPORTUNITY TAX CREDIT FOR 
                   RENEWAL COMMUNITIES.

       (a) Extension.--Subsection (c) of section 51 (relating to 
     termination) is amended by adding at the end the following 
     new paragraph:
       ``(5) Extension of credit for renewal communities.--
       ``(A) In general.--In the case of an individual who begins 
     work for the employer after the date contained in paragraph 
     (4)(B), for purposes of section 38--
       ``(i) in lieu of applying subsection (a), the amount of the 
     work opportunity credit determined under this section for the 
     taxable year shall be equal to--

       ``(I) 15 percent of the qualified first-year wages for such 
     year; and
       ``(II) 30 percent of the qualified second-year wages for 
     such year;

       ``(ii) subsection (b)(3) shall be applied by substituting 
     `$10,000' for `$6,000';
       ``(iii) paragraph (4)(B) shall be applied by substituting 
     for the date contained therein the last day for which the 
     designation under section 1400E of the renewal community 
     referred to in subparagraph (B)(i) is in effect; and
       ``(iv) rules similar to the rules of section 51A(b)(5)(C) 
     shall apply.
       ``(B) Qualified first- and second-year wages.--For purposes 
     of subparagraph (A)--
       ``(i) In general.--The term `qualified wages' means, with 
     respect to each 1-year period referred to in clause (ii) or 
     (iii), as the case may be, the wages paid or incurred by the 
     employer during the taxable year to any individual but only 
     if--

       ``(I) the employer is engaged in a trade or business in a 
     renewal community throughout such 1-year period;
       ``(II) the principal place of abode of such individual is 
     in such renewal community throughout such 1-year period; and
       ``(III) substantially all of the services which such 
     individual performs for the employer during such 1-year 
     period are performed in such renewal community.

       ``(ii) Qualified first-year wages.--The term `qualified 
     first-year wages' means, with respect to any individual, 
     qualified wages attributable to service rendered during the 
     1-year period beginning with the day the individual begins 
     work for the employer.
       ``(iii) Qualified second-year wages.--The term `qualified 
     second-year wages' means, with respect to any individual, 
     qualified wages attributable to service rendered during the 
     1-year period beginning on the day after the last day of the 
     1-year period with respect to such individual determined 
     under clause (ii).''.
       (b) Congruent Treatment of Renewal Communities and 
     Enterprise Zones for Purposes of Youth Residence 
     Requirements.--
       (1) High-risk youth.--Subparagraphs (A)(ii) and (B) of 
     section 51(d)(5) are each amended by striking ``empowerment 
     zone or enterprise community'' and inserting ``empowerment 
     zone, enterprise community, or renewal community''.
       (2) Qualified summer youth employee.--Clause (iv) of 
     section 51(d)(7)(A) is amended by striking ``empowerment zone 
     or enterprise community'' and inserting ``empowerment zone, 
     enterprise community, or renewal community''.
       (3) Headings.--Paragraphs (5)(B) and (7)(C) of section 
     51(d) are each amended by inserting ``or community'' in the 
     heading after ``zone''.
       (4) Effective date.--The amendments made by this subsection 
     shall apply to individuals who begin work for the employer 
     after December 31, 2000.

     SEC. 405. CONFORMING AND CLERICAL AMENDMENTS.

       (a) Deduction for Contributions to Family Development 
     Accounts Allowable Whether or Not Taxpayer Itemizes.--
     Subsection (a) of section 62 (relating to adjusted gross 
     income defined) is amended by inserting after paragraph (19) 
     the following new paragraph:
       ``(20) Family development accounts.--The deduction allowed 
     by section 1400H(a)(1).''.
       (b) Tax on Excess Contributions.--
       (1) Tax imposed.--Subsection (a) of section 4973 is amended 
     by striking ``or'' at the end of paragraph (3), adding ``or'' 
     at the end of paragraph (4), and inserting after paragraph 
     (4) the following new paragraph:
       ``(5) a family development account (within the meaning of 
     section 1400H(e)),''.
       (2) Excess contributions.--Section 4973 is amended by 
     adding at the end the following new subsection:
       ``(g) Family Development Accounts.--For purposes of this 
     section, in the case of family development accounts, the term 
     `excess contributions' means the sum of--
       ``(1) the excess (if any) of--
       ``(A) the amount contributed for the taxable year to the 
     accounts (other than a qualified rollover, as defined in 
     section 1400H(c)(7)), over
       ``(B) the amount allowable as a deduction under section 
     1400H for such contributions; and
       ``(2) the amount determined under this subsection for the 
     preceding taxable year reduced by the sum of--
       ``(A) the distributions out of the accounts for the taxable 
     year which were included in the gross income of the payee 
     under section 1400H(b)(1);
       ``(B) the distributions out of the accounts for the taxable 
     year to which rules similar to the rules of section 408(d)(5) 
     apply by reason of section 1400H(d)(3); and
       ``(C) the excess (if any) of the maximum amount allowable 
     as a deduction under section 1400H for the taxable year over 
     the amount contributed to the account for the taxable year.
     For purposes of this subsection, any contribution which is 
     distributed from the family development account in a 
     distribution to which rules similar to the rules of section 
     408(d)(4) apply by reason of section 1400H(d)(3) shall be 
     treated as an amount not contributed.''.
       (c) Tax on Prohibited Transactions.--Section 4975 is 
     amended--
       (1) by adding at the end of subsection (c) the following 
     new paragraph:
       ``(6) Special rule for family development accounts.--An 
     individual for whose benefit a family development account is 
     established and any contributor to such account shall be 
     exempt from the tax imposed by this section with respect to 
     any transaction concerning such account (which would 
     otherwise be taxable under this section) if, with respect to 
     such transaction, the account ceases to be a family 
     development account by reason of the application of section 
     1400H(d)(2) to such account.''; and
       (2) in subsection (e)(1), by striking ``or'' at the end of 
     subparagraph (E), by redesignating subparagraph (F) as 
     subparagraph (G), and by inserting after subparagraph (E) the 
     following new subparagraph:
       ``(F) a family development account described in section 
     1400H(e), or''.
       (d) Information Relating to Certain Trusts and Annuity 
     Plans.--Subsection (c) of section 6047 is amended--
       (1) by inserting ``or section 1400H'' after ``section 
     219''; and
       (2) by inserting ``, of any family development account 
     described in section 1400H(e),'', after ``section 408(a)''.
       (e) Inspection of Applications for Tax Exemption.--Clause 
     (i) of section 6104(a)(1)(B) is amended by inserting ``a 
     family development account described in section 1400H(e),'' 
     after ``section 408(a),''.
       (f ) Failure To Provide Reports on Family Development 
     Accounts.--Paragraph (2) of section 6693(a) is amended by 
     striking ``and'' at the end of subparagraph (C), by striking 
     the period and inserting ``, and'' at the end of subparagraph 
     (D), and by adding at the end the following new subparagraph:
       ``(E) section 1400H(g)(6) (relating to family development 
     accounts).''.
       (g) Conforming Amendments Regarding Commercial 
     Revitalization Deduction.--
       (1) Section 172 is amended by redesignating subsection ( j) 
     as subsection (k) and by inserting after subsection (i) the 
     following new subsection:
       ``( j) No carryback of section 1400k Deduction Before Date 
     of the Enactment.--No portion of the net operating loss for 
     any taxable year which is attributable to any commercial 
     revitalization deduction determined under section 1400K may 
     be carried back to a taxable year ending before the date of 
     the enactment of section 1400K.''.
       (2) Subparagraph (B) of section 48(a)(2) is amended by 
     inserting ``or commercial revitalization'' after 
     ``rehabilitation'' each place it appears in the text and 
     heading.
       (3) Subparagraph (C) of section 469(i)(3) is amended--
       (A) by inserting ``or section 1400K'' after ``section 42''; 
     and
       (B) by inserting ``and commercial revitalization 
     deduction'' after ``credit'' in the heading.
       (h) Clerical Amendments.--The table of subchapters for 
     chapter 1 is amended by adding at the end the following new 
     item:


[[Page 2582]]


``Subchapter X. Renewal Communities.''.

                     Subtitle B--Timber Incentives

     SEC. 411. TEMPORARY SUSPENSION OF MAXIMUM AMOUNT OF 
                   AMORTIZABLE REFORESTATION EXPENDITURES.

       (a) Increase in Dollar Limitation.--Paragraph (1) of 
     section 194(b) (relating to amortization of reforestation 
     expenditures) is amended by striking ``$10,000 ($5,000'' and 
     inserting ``$25,000 ($12,500''.
       (b) Temporary Suspension of Increased Dollar Limitation.--
     Subsection (b) of section 194(b) (relating to amortization of 
     reforestation expenditures) is amended by adding at the end 
     the following new paragraph:
       ``(5) Suspension of dollar limitation.--Paragraph (1) shall 
     not apply to taxable years beginning after December 31, 2000, 
     and before January 1, 2004.
       (c) Conforming Amendment.--Paragraph (1) of section 48(b) 
     is amended by striking ``section 194(b)(1)'' and inserting 
     ``section 194(b)(1) and without regard to section 
     194(b)(5)''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2000.

                    TITLE V--REAL ESTATE PROVISIONS

         Subtitle A--Improvements in Low-Income Housing Credit

     SEC. 501. MODIFICATION OF STATE CEILING ON LOW-INCOME HOUSING 
                   CREDIT.

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

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

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

The applicable amount is:
      2001......................................................$1.35  
      2002.....................................................  1.45  
      2003.....................................................  1.55  
      2004 and thereafter..................................  1.65.''.  

       (c) Adjustment of State Ceiling for Increases in Cost-of-
     Living.--Paragraph (3) of section 42(h) (relating to housing 
     credit dollar amount for agencies), as amended by subsection 
     (c), is amended by adding at the end the following new 
     subparagraph:
       ``(I) Cost-of-living adjustment.--
       ``(i) In general.--In the case of a calendar year after 
     2004, the $2,000,000 in subparagraph (C) and the $1.65 amount 
     in subparagraph (H) shall each be increased by an amount 
     equal to--

       ``(I) such dollar amount, multiplied by
       ``(II) the cost-of-living adjustment determined under 
     section 1(f )(3) for such calendar year by substituting 
     `calendar year 2003' for `calendar year 1992' in subparagraph 
     (B) thereof.

       ``(ii) Rounding.--

       ``(I) In the case of the amount in subparagraph (C), any 
     increase under clause (i) which is not a multiple of $5,000 
     shall be rounded to the next lowest multiple of $5,000.
       ``(II) In the case of the amount in subparagraph (H), any 
     increase under clause (i) which is not a multiple of 5 cents 
     shall be rounded to the next lowest multiple of 5 cents.''.

       (d) Conforming Amendments.--
       (1) Section 42(h)(3)(C), as amended by subsection (a), is 
     amended--
       (A) by striking ``clause (ii)'' in the matter following 
     clause (iv) and inserting ``clause (i)'', and
       (B) by striking ``clauses (i)'' in the matter following 
     clause (iv) and inserting ``clauses (ii)''.
       (2) Section 42(h)(3)(D)(ii) is amended--
       (A) by striking ``subparagraph (C)(ii)'' and inserting 
     ``subparagraph (C)(i)'', and
       (B) by striking ``clauses (i)'' in subclause (II) and 
     inserting ``clauses (ii)''.
       (e) Effective Date.--The amendments made by this section 
     shall apply to calendar years after 2000.

     SEC. 502. MODIFICATION OF CRITERIA FOR ALLOCATING HOUSING 
                   CREDITS AMONG PROJECTS.

       (a) Selection Criteria.--Subparagraph (C) of section 
     42(m)(1) (relating to certain selection criteria must be 
     used) is amended--
       (1) by inserting ``, including whether the project includes 
     the use of existing housing as part of a community 
     revitalization plan'' before the comma at the end of clause 
     (iii), and
       (2) by striking clauses (v), (vi), and (vii) and inserting 
     the following new clauses:
       ``(v) tenant populations with special housing needs,
       ``(vi) public housing waiting lists,
       ``(vii) tenant populations of individuals with children, 
     and
       ``(viii) projects intended for eventual tenant 
     ownership.''.
       (b) Preference for Community Revitalization Projects 
     Located in Qualified Census Tracts.--Clause (ii) of section 
     42(m)(1)(B) is amended by striking ``and'' at the end of 
     subclause (I), by adding ``and'' at the end of subclause 
     (II), and by inserting after subclause (II) the following new 
     subclause:

       ``(III) projects which are located in qualified census 
     tracts (as defined in subsection (d)(5)(C)) and the 
     development of which contributes to a concerted community 
     revitalization plan,''.

     SEC. 503. ADDITIONAL RESPONSIBILITIES OF HOUSING CREDIT 
                   AGENCIES.

       (a) Market Study; Public Disclosure of Rationale for Not 
     Following Credit Allocation Priorities.--Subparagraph (A) of 
     section 42(m)(1) (relating to responsibilities of housing 
     credit agencies) is amended by striking ``and'' at the end of 
     clause (i), by striking the period at the end of clause (ii) 
     and inserting a comma, and by adding at the end the following 
     new clauses:
       ``(iii) a comprehensive market study of the housing needs 
     of low-income individuals in the area to be served by the 
     project is conducted before the credit allocation is made and 
     at the developer's expense by a disinterested party who is 
     approved by such agency, and
       ``(iv) a written explanation is available to the general 
     public for any allocation of a housing credit dollar amount 
     which is not made in accordance with established priorities 
     and selection criteria of the housing credit agency.''.
       (b) Site Visits.--Clause (iii) of section 42(m)(1)(B) 
     (relating to qualified allocation plan) is amended by 
     inserting before the period ``and in monitoring for 
     noncompliance with habitability standards through regular 
     site visits''.

     SEC. 504. MODIFICATIONS TO RULES RELATING TO BASIS OF 
                   BUILDING WHICH IS ELIGIBLE FOR CREDIT.

       (a) Adjusted Basis To Include Portion of Certain Buildings 
     Used by Low-Income Individuals Who Are Not Tenants and by 
     Project Employees.--Paragraph (4) of section 42(d) (relating 
     to special rules relating to determination of adjusted basis) 
     is amended--
       (1) by striking ``subparagraph (B)'' in subparagraph (A) 
     and inserting ``subparagraphs (B) and (C)'',
       (2) by redesignating subparagraph (C) as subparagraph (D), 
     and
       (3) by inserting after subparagraph (B) the following new 
     subparagraph:
       ``(C) Inclusion of basis of property used to provide 
     services for certain nontenants.--
       ``(i) In general.--The adjusted basis of any building 
     located in a qualified census tract (as defined in paragraph 
     (5)(C)) shall be determined by taking into account the 
     adjusted basis of property (of a character subject to the 
     allowance for depreciation and not otherwise taken into 
     account) used throughout the taxable year in providing any 
     community service facility.
       ``(ii) Limitation.--The increase in the adjusted basis of 
     any building which is taken into account by reason of clause 
     (i) shall not exceed 10 percent of the eligible basis of the 
     qualified low-income housing project of which it is a part. 
     For purposes of the preceding sentence, all community service 
     facilities which are part of the same qualified low-income 
     housing project shall be treated as one facility.
       ``(iii) Community service facility.--For purposes of this 
     subparagraph, the term `community service facility' means any 
     facility designed to serve primarily individuals whose income 
     is 60 percent or less of area median income (within the 
     meaning of subsection (g)(1)(B)).''.
       (b) Certain Native American Housing Assistance Disregarded 
     in Determining Whether Building Is Federally Subsidized for 
     Purposes of the Low-Income Housing Credit.--Subparagraph (E) 
     of section 42(i)(2) (relating to determination of whether 
     building is federally subsidized) is amended--
       (1) in clause (i), by inserting ``or the Native American 
     Housing Assistance and Self-Determination Act of 1996 (25 
     U.S.C. 4101 et seq.) (as in effect on October 1, 1997)'' 
     after ``this subparagraph)'', and
       (2) in the subparagraph heading, by inserting ``or native 
     american housing assistance'' after ``home assistance''.

     SEC. 505. OTHER MODIFICATIONS.

       (a) Allocation of Credit Limit to Certain Buildings.--
       (1) The first sentence of section 42(h)(1)(E)(ii) is 
     amended by striking ``(as of'' the first place it appears and 
     inserting ``(as of the later of the date which is 6 months 
     after the date that the allocation was made or''.
       (2) The last sentence of section 42(h)(3)(C) is amended by 
     striking ``project which'' and inserting ``project which 
     fails to meet the 10 percent test under paragraph (1)(E)(ii) 
     on a date after the close of the calendar year in which the 
     allocation was made or which''.
       (b) Determination of Whether Buildings Are Located in High 
     Cost Areas.--The first sentence of section 42(d)(5)(C)(ii)(I) 
     is amended--
       (1) by inserting ``either'' before ``in which 50 percent'', 
     and
       (2) by inserting before the period ``or which has a poverty 
     rate of at least 25 percent''.

[[Page 2583]]



     SEC. 506. CARRYFORWARD RULES.

       (a) In General.--Clause (ii) of section 42(h)(3)(D) 
     (relating to unused housing credit carryovers allocated among 
     certain States) is amended by striking ``the excess'' and all 
     that follows and inserting ``the excess (if any) of--

       ``(I) the unused State housing credit ceiling for the year 
     preceding such year, over
       ``(II) the aggregate housing credit dollar amount allocated 
     for such year.''.

       (b) Conforming Amendment.--The second sentence of section 
     42(h)(3)(C) (relating to State housing credit ceiling) is 
     amended by striking ``clauses (i) and (iii)'' and inserting 
     ``clauses (i) through (iv)''.

     SEC. 507. EFFECTIVE DATE.

       Except as otherwise provided in this subtitle, the 
     amendments made by this subtitle shall apply to--
       (1) housing credit dollar amounts allocated after December 
     31, 2000, and
       (2) buildings placed in service after such date to the 
     extent paragraph (1) of section 42(h) of the Internal Revenue 
     Code of 1986 does not apply to any building by reason of 
     paragraph (4) thereof, but only with respect to bonds issued 
     after such date.

              Subtitle B--Private Activity Bond Volume Cap

     SEC. 511. ACCELERATION OF PHASE-IN OF INCREASE IN VOLUME CAP 
                   ON PRIVATE ACTIVITY BONDS.

       (a) In General.--The table contained in section 146(d)(2) 
     (relating to per capita limit; aggregate limit) is amended to 
     read as follows:
       

 
       ``Calendar Year           Per Capita Limit      Aggregate Limit
------------------------------------------------------------------------
  2001.......................         $55.00            $165,000,000
  2002.......................          60.00             180,000,000
  2003.......................          65.00             195,000,000
  2004, 2005, and 2006.......          70.00             210,000,000
  2007 and thereafter........          75.00           225,000,000.''.

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

 Subtitle C--Exclusion From Gross Income for Certain Forgiven Mortgage 
                              Obligations

     SEC. 512. EXCLUSION FROM GROSS INCOME FOR CERTAIN FORGIVEN 
                   MORTGAGE OBLIGATIONS.

       (a) In General.--Paragraph (1) of section 108(a) (relating 
     to exclusion from gross income) is amended by striking ``or'' 
     at the end of both subparagraphs (A) and (C), by striking the 
     period at the end of subparagraph (D) and inserting ``, or'', 
     and by inserting after subparagraph (D) the following new 
     subparagraph:
       ``(E) in the case of an individual, the indebtedness 
     discharged is qualified residential indebtedness.''.
       (b) Qualified Residential Indebtedness Shortfall.--Section 
     108 (relating to discharge of indebtedness) is amended by 
     adding at the end the following new subsection:
       ``(h) Qualified Residential Indebtedness.--
       ``(1) Limitations.--The amount excluded under subparagraph 
     (E) of subsection (a)(1) with respect to any qualified 
     residential indebtedness shall not exceed the excess (if any) 
     of--
       ``(A) the outstanding principal amount of such indebtedness 
     (immediately before the discharge), over
       ``(B) the sum of--
       ``(i) the amount realized from the sale of the real 
     property securing such indebtedness reduced by the cost of 
     such sale, and
       ``(ii) the outstanding principal amount of any other 
     indebtedness secured by such property.
       ``(2) Qualified residential indebtedness.--
       ``(A) In general.--The term `qualified residential 
     indebtedness' means indebtedness which--
       ``(i) was incurred or assumed by the taxpayer in connection 
     with real property used as the principal residence (within 
     the meaning of section 121) of the taxpayer and is secured by 
     such real property,
       ``(ii) is incurred or assumed to acquire, construct, 
     reconstruct, or substantially improve such real property, and
       ``(iii) with respect to which such taxpayer makes an 
     election to have this paragraph apply.
       ``(B) Refinanced indebtedness.--Such term shall include 
     indebtedness resulting from the refinancing of indebtedness 
     under subparagraph (A)(ii), but only to the extent the amount 
     of the indebtedness resulting from such refinancing does not 
     exceed the amount of the refinanced indebtedness.
       ``(C) Exceptions.--Such term shall not include qualified 
     farm indebtedness or qualified real property business 
     indebtedness.''.
       (c) Conforming Amendments.--
       (1) Paragraph (2) of section 108(a) is amended--
       (A) in subparagraph (A) by striking ``and (D)'' and 
     inserting ``(D), and (E)'', and
       (B) by amending subparagraph (B) to read as follows:
       ``(B) Insolvency exclusion takes precedence over qualified 
     farm exclusion; qualified real property business exclusion; 
     and qualified residential shortfall exclusion.--Subparagraphs 
     (C), (D), and (E) of paragraph (1) shall not apply to a 
     discharge to the extent the taxpayer is insolvent.''.
       (2) Paragraph (1) of section 108(b) is amended by striking 
     ``or (C)'' and inserting ``(C), or (E)''.
       (3) Subsection (c) of section 121 of such Code is amended 
     by adding at the end the following new paragraph:
       ``(4) Special rule relating to discharge of indebtedness.--
     The amount of gain which (but for this paragraph) would be 
     excluded from gross income under subsection (a) with respect 
     to a principal residence shall be reduced by the amount 
     excluded from gross income under section 108(a)(1)(E) with 
     respect to such residence.''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to discharges after December 31, 2000.

  The SPEAKER pro tempore. The gentleman from Texas (Mr. Archer) and 
the gentleman from New York (Mr. Rangel) each will control 1 hour.
  The Chair recognizes the gentleman from Texas (Mr. Archer).


                             General Leave

  Mr. ARCHER. Mr. Speaker, I ask unanimous consent that all Members may 
have 5 legislative days in which to revise and extend their remarks and 
include extraneous material on the bill, H.R. 3081.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from Texas?
  There was no objection.

                              {time}  1530

  Mr. ARCHER. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, today will be another day of accomplishment for the 
American people because today Congress will once again do the right 
thing and pass a plan to help make health care more affordable and 
accessible for hard-working, middle-income, self-employed Americans. We 
will also strengthen our pension system for millions of Americans and 
make it better for working women and people who switch jobs so often 
and in that way all Americans can be more secure in their retirement.
  Mr. Speaker, I am proud that Congress is here today once again 
pushing to remove the gruesome death tax penalty from the Tax Code and 
to send it one step closer to the grave. Clearly, the death tax is one 
of the most unfair taxes in the Tax Code today. It is terribly complex 
and, what is worse, at a time when the only economic cloud on our 
horizon is our negative private savings rate, the death tax is a dollar 
for dollar tax on the personal savings of Americans. That is wrong.
  Furthermore, it often prevents families from being able to see their 
small businesses go down to their heirs and forced to be sold in order 
to pay the tax. No one should have to visit the undertaker and the IRS 
on the same day.
  Today the House considers the Small Business Tax Fairness Act to help 
the diesel engine of our economy and the job creation factory of our 
country. That factory is America's small businesses. More than 6 out of 
every 10 American workers is employed by a small business. Small 
businesses have created two-thirds of the new jobs since 1970, and 
small businesses account for close to 40 percent of the GNP.
  American women are starting new businesses at twice the rate of men. 
This year, in fact, will be the first year in our entire history where 
women will own more than half of all businesses, about 8 million across 
the Nation. The Small Business Tax Fairness Act is aimed to help those 
hard-working, middle-income Americans, the shopkeeper in South 
Carolina, the restaurant owner in California, and the small family in 
Ohio. These Americans are not rich. The average small business owner 
makes about $40,000 a year, and the average restaurant owner makes 
about $50,000 a year; but as we have heard already this morning, and it 
is really a shame, Democrats who want to divide our country are making 
the same old class warfare arguments that do nothing to help unite us; 
do nothing to help recognize the ladder of upward mobility for all 
Americans and that no one stays fixed in where they are today.
  We should be expanding opportunity for all, not pitting one group of 
Americans against another. Is expanding the low-income housing tax 
credit a tax break for the rich? Is creating new renewal communities in 
America's most

[[Page 2584]]

poverty stricken communities a tax break for the rich? Is helping self-
employed Americans get health insurance at a tax break, is that helping 
the rich? Is strengthening our pension system a tax break for the rich?
  All these provisions are included in this bill, but Democrats still 
cannot stop the tax cut for the rich broken record. Why can Democrats 
not leave the divisive class warfare rhetoric back in the 20th century 
where it belongs?
  Once again, Democrats are fighting tax relief, any tax relief and all 
tax relief, whether it is for married couples or whether it is for 
small businesses.
  Mr. Speaker, today Congress is once again doing the right thing. It 
was right to balance the budget and to pay down the debt, and we did 
that. It was right to strengthen Medicare, and we did that. It was 
right to cut taxes for families, promote higher education, expand 
health care, and we have done that. It was right to fix the failed 
welfare system so Americans can discover the freedom of independence 
and personal responsibility. It was right to reform the IRS, and we did 
that. It was right to help our school children and help parents and 
teachers with education reform. It was right to stop the raid on the 
Social Security trust fund and protect every dime of Social Security 
from being spent on other programs, and we have done that.
  It is right to pass this plan today, a plan to help more Americans 
get health insurance, to give millions of Americans more retirement 
security, to help small businesses continue to create jobs and economic 
growth, and to put a nail in the coffin of one of the worst taxes in 
America today, the death tax.
  Mr. Speaker, I urge the passage of this bill, and I would like to 
submit for the Record the following correspondence between Chairman 
Goodling and myself:


                                  Committee on Ways and Means,

                                    Washington, DC, March 7, 2000.
     Hon. William F. Goodling,
     Chairman, Committee on Education and the Workforce, Rayburn 
         House Office Building, Washington, DC.
       Dear Chairman Goodling: I write to confirm our mutual 
     understanding with respect to further consideration of H.R. 
     3801, the ``Wage and Employment Growth Act.'' H.R. 3801 was 
     favorable reported by the Committee on Ways and Means on 
     November 11, 1999.
       In addition to the tax items considered by the Committee on 
     Ways and Means, H.R. 3081 contains a number of provisions 
     within the jurisdiction of the Education and Workforce 
     Committee. In addition to the amendments to the Fair Labor 
     Standards Act in Title I, the bill also contains provisions 
     in Title III relating to the Employee Retirement Income 
     Security Act (ERISA) and other pension related matters, which 
     were previously approved by your Committee and included in 
     the conference report for H.R. 2488, the ``Taxpayer Refund 
     and Relief Act.'' You may recall that, in order to expedite 
     consideration of H.R. 2488, you agreed to withhold the ERISA 
     related items when the bill was considered on the floor 
     pending subsequent action in conference.
       Similarly, in order to expedite consideration of H.R. 3081, 
     it is my understanding that you will agree to withhold 
     consideration on the floor of the ERISA and pension related 
     items within your Committee's jurisdiction at this time. This 
     is being done based on the understanding that I will support 
     efforts to include the agreed upon provisions in the final 
     conference report on H.R. 3081, and that I will not object to 
     a request for conferees with respect to matters within the 
     jurisdiction of your Committee when a House-Senate conference 
     is convened on this legislation.
       Finally, I will include in the Record a copy of our 
     exchange of letters on this matter during floor 
     consideration. Thank you for your assistance and cooperation 
     in this matter. With best personal regards,
           Sincerely,
                                                      Bill Archer,
     Chairman.
                                  ____

                                            Committee on Education


                                            and the Workforce,

                                    Washington, DC, March 7, 2000.
     Hon. Bill Archer,
     Chairman, Committee on Ways and Means, Longworth HOB, 
         Washington, DC.
       Dear Chairman Archer: Thank you for your letter and for 
     working with me regarding H.R. 3081, the Wage and Employment 
     Growth Act. As you have correctly noted H.R. 3081 contains a 
     number of provisions within the jurisdiction of the Committee 
     on Education and the Workforce. I understand that in order to 
     expedite consideration of the bill, all provisions within the 
     sole jurisdiction of the Committee on Education and the 
     Workforce will be deleted from the bill, including Title I, 
     Amendments to the Fair Labor Standards Act; Section 377, a 
     free standing provision dealing with the clarification of 
     church plans under state insurance law; and all pension 
     amendments to ERISA contained in Title III.
       I appreciate your support and efforts to include the above 
     referenced pension provisions in the final conference 
     agreement on H.R. 3081. I also appreciate your support in my 
     request to the Speaker for the appointment of conferees from 
     my Committee with respect to matters within the jurisdiction 
     of my Committee when a conference with the Senate is convened 
     on this legislation.
       Thank you for working with me to develop this legislation 
     and for agreeing to include this exchange of letters in the 
     Congressional Record during the House debate on H.R. 3081. I 
     look forward to working with you on these issues in the 
     future.
           Sincerely,
                                                    Bill Goodling,
                                                         Chairman.

  Mr. Speaker, I reserve the balance of my time.
  Mr. RANGEL. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, when we are talking about justice, equity, and fair 
play, it is not right to call this a class war. While it is true that 
in the Republican tax bill, which basically came out of the Committee 
on Rules, that there are some democratic principles that we can 
support, the truth of the matter is one does not have to be an 
accountant or H&R Block or a tax lawyer to see that the $120 billion 
tax cut is not for the small business person. So take a look at it. 
Clearly, it is targeted for the wealthiest Americans that we have.
  Now, it may not be bad to do that, but do not pile up on a bill that 
is just trying to give a dollar extra in terms of minimum wage. If 
these things want to be done, come out and let the Committee on Ways 
and Means have hearings, vote on it and bring it to the floor so that 
the floor can work its will.
  What my colleagues are basically doing today is to say how can we 
kill the minimum wage bill. Now, the gentleman from California (Mr. 
Dreier), the chairman of the Committee on Rules, he stood up in this 
well and he said he thought it was bad to superimpose congressional 
rule on employers, and I know a lot of my colleagues think that is 
true. So why not just take the minimum wage bill, leave the tax portion 
to the Committee on Ways and Means, and vote up or down on what is 
right on minimum wage. Or do it their way and say, hey, the President 
is inclined to support minimum wage; maybe politically we can vote for 
it and have the President to veto it.
  Now, how can one get the President to veto it? Load it up with 
provisions of the tax bill that passed last year because he would veto 
it.
  Now, it just seems to me that if my colleagues on the other side did 
not have the political courage to get a vote to override the 
President's veto, we should not do on legislation for minimum wage what 
the Committee on Ways and Means and what this House is not prepared to 
do with a straight shot.
  Everything that the people want is going to be taken, whether it is 
the Patients' Bill of Rights, affordable drugs, and it is going to be 
said that my colleagues on the other side are for these things and then 
add on to it substantial tax cuts that is not for the working people 
but for those who really have the highest earnings and deserve the 
benefits the least.
  If one takes a look at the alternative that we asked for, many of the 
things that are in their bill we have, but what we do is close the 
loopholes of Americans that after enjoying the benefits of the great 
prosperity that we have renounce their citizenship, renounce their 
country, renounce the American flag and flee off to foreign countries. 
For crying out loud, why would anyone be opposed to closing up that 
loophole? It is in our alternative.
  We then will target the tax money, not $122 billion but $36 billion, 
to the small farmers, the small businesspeople, and this is what they 
want and this is what the President is willing to sign.
  We have targeted relief for people that need and deserve it. So if 
what my colleagues on the other side are trying to say is that they are 
for an increase in the minimum wage but they want to

[[Page 2585]]

help the small businessman, how do they explain that three-fourths of 
the bill, in terms of tax cuts, is not going to the small businessman, 
not going to the small farmer? Is this their way to kill a bill by 
having the President to veto it and then wait until their whole 
legislative process collapses and then we negotiate with the President?
  We should not have to negotiate with any President. We should 
legislate, and we should also give the minority an opportunity to 
express its will.
  What does that mean? Why would the rule deny us an opportunity just 
for an alternative, just to give Republicans and Democrats an 
opportunity to say that we have a better way to do it?
  Well, we know one thing, that what is really trying to be done is to 
get that 800 pound billion dollar gorilla back up here to the tax floor 
in smaller pieces. It did not work last year. It was vetoed last year. 
An override for the veto last year was not run for, and an override 
this year is not being thought about to try for.
  There are things that we should be working together on: Fixing up 
Social Security, Medicare, Patients' Bill of Rights, affordable drugs, 
education; not to do it as Democrats, not to do it as Republicans but 
to do it as Americans and as Members of Congress and working with the 
President. One does not have to like the President to work with him, 
but they cannot do it alone and the only time we can accomplish 
something is by cooperation, as the chairman and I did when we brought 
to the floor removing the penalty for people who want to work after 65. 
That is what is called cooperation. That is how bills are not vetoed, 
and that is how we can work again.
  Mr. Speaker, I reserve the balance of my time.
  Mr. ARCHER. Mr. Speaker, I yield 2\1/2\ minutes to the gentleman from 
Illinois (Mr. Crane), the ranking Republican member of the Committee on 
Ways and Means.
  Mr. CRANE. Mr. Speaker, I thank the chairman, the gentleman from 
Texas (Mr. Archer), for yielding me this time.
  Mr. Speaker, we stand on this floor, representatives of a country 
that is basking in a time of great economic prosperity. The United 
States is at full employment and business is expanding with new jobs 
being created at a rate rarely experienced in anyone's lifetime. Today 
we have an opportunity to return money to Americans who work hard and, 
based on that work, pay too much in taxes.
  While I wish it could be more, it is time to give a little back. I am 
particularly pleased with the death tax relief provisions and delighted 
that we continue our efforts to eradicate it. Whether it is the family 
farm or a more traditional business, the death tax is an assault upon 
the moral values of every family in this country that has had the 
wherewithal to create a business from nothing, persevere through the 
bad times and hope to leave it to their children.
  Unfortunately, it is all too often that a family is forced to sell 
its business because the Federal Government has decreed that it is 
entitled to a disproportionate share of a family's business once the 
owner has died. In effect, Uncle Sam put a bounty on family-owned 
businesses. The old saying is that death and taxes are sure things, and 
years ago the Federal Government made certain that through the death 
tax the two are inextricably intertwined.
  This bill gives us an opportunity to loosen just a little the 
stranglehold the Tax Code has on these families and their livelihoods.
  I also want to convey my support for accelerating the 100 percent 
health insurance deduction for the self-employed. Being able to 
purchase health care insurance means that more children and men and 
women will have access to the best health care system in the world.
  I was pleased we were able to include a reinstatement of the 
installment method of accounting for accrual basis taxpayers, which has 
been so detrimental to hundreds of thousands of businesses across the 
country, many of them in my home State of Illinois.

                              {time}  1545

  Mr. Speaker, I will continue my fight to drastically reform our tax 
system and reduce the tax burden our American families struggle with 
every day.
  I urge my colleagues to vote in support of H.R. 3081, the Small 
Business Tax Fairness Act of 2000.
  Mr. RANGEL. Mr. Speaker, I yield 3 minutes to the gentleman from 
Michigan (Mr. Levin), a senior member of the Committee on Ways and 
Means.
  Mr. LEVIN. Mr. Speaker, there has been a lot of talk on the 
Republican side about the ``straight-talk express.'' This bill is the 
``double-talk express.''
  These are the facts: our Democratic bill does more, does more for 
small business than the Republican bill. The Republican bill does most 
for the very wealthy. As the gentleman from New York (Mr. Rangel) 
eloquently stated, about three-quarters of the tax relief in this bill 
goes to the upper 1 percent, and this is called a small business bill. 
This is called a minimum wage bill.
  Mr. Speaker, we are not fighting any tax relief; we are fighting for 
the right kind of tax relief. What the Republicans are doing here is 
using the minimum wage as a bargaining chip, and the very wealthy pick 
up most of the winnings.
  The class warfare here, if there is any, is against the working poor. 
A Member of Congress earns in one month what a low-income family 
working hard earns in about a year. I do not demean the work of those 
of us in Congress, and we should not demean the work of those who are 
in low-income categories.
  We passed a welfare reform bill here; and I voted for it, people 
moving from welfare to work. Tens of thousands of them who have moved 
from welfare to work under the present minimum wage cannot earn enough 
to get above the poverty line; cannot earn enough when they work hard 
40 hours a week to get above the poverty line. What my colleagues are 
trying to do is to nickel and dime this bill and tie it to a bill that 
is going to be vetoed. Why pass a bill through here that the President 
says he is going to veto? What is the sense of doing that? This is the 
same old same old Republican majority.
  Mr. Speaker, it is time to turn a new leaf in this House. The people 
who work hard for a living at a minimum wage deserve an increase. They 
are way behind in terms of real dollars where they were 15 years ago, 
even after the action of a couple of years ago. It is a disgrace to tie 
this bill to something else. Bring it up alone. Mr. Speaker, we know 
why they will not do it, because they know it will pass. Eventually, we 
are going to pass a bill here that addresses the needs of hard-working, 
low-income families, and not a bill that gives almost 75 percent to the 
most wealthy 1 percent in the United States of America.
  Mr. ARCHER. Mr. Speaker, I yield 3 minutes to the gentlewoman from 
the State of Washington (Ms. Dunn), a respected Member of the Committee 
on Ways and Means.
  Ms. DUNN. Mr. Speaker, I want to thank the gentleman from Texas (Mr. 
Archer) and all of the other people, Republicans and Democrats, who 
worked so hard and so fairly to put the provisions together that we 
will be voting on today. This bill provides essential relief that is a 
down payment toward the ultimate repeal of the devastating death tax.
  The freedom to attain prosperity and to accumulate wealth is uniquely 
American; and when unfettered, it is a wonderful thing to behold. Yet, 
the current tax treatment of a person's life savings is so onerous that 
children are often forced to turn over more than half of their 
inheritance to the Federal Government, in cash, within 9 months of the 
death of the parent. We all know stories about the basic unfairness of 
this tax. It is just as wrong as it is tragic, and it dishonors the 
hard work of those who have passed on.
  As a result, in the past, Congress has tried to provide targeted 
death tax relief to certain people. In 1997, a new death tax provision 
was enacted to provide additional relief to smaller family-held 
businesses and farms. Although it was a good idea at the time, this 
exemption has proven to be a

[[Page 2586]]

boondoggle for attorneys who are hired by families trying to navigate 
their way through the 14-point eligibility test.
  The Democrats now propose to increase this family-owned business 
exemption under the guise of relief. Well, it will not work. Many 
estate planners have told us that this exemption is so complex that 
fewer than 2 percent of businesses or farms even qualify. As much as we 
try, it is simply impossible to duplicate in law the complex family 
relationships that exist in the real world.
  Democrats will also argue today that this tax only hits a select few. 
This argument is misleading because it only focuses on a portion of the 
debate: who pays the tax. What they do not tell us is that the mere 
existence of the tax forces businesses to spend an average of $67,000 
per year in life insurance premiums and attorneys and accountant fees 
in order to prepare for the tax. The total cost of compliance in the 
private sector alone is about equal to the total dollars collected in 
this tax each year. In addition, their argument does not account for 
the number of businesses who sell before the owner dies in order to pay 
a lower capital gains tax.
  The Chicago-based Vanguard, one of America's last remaining black-
owned newspapers, was forced to sell last year because they could not 
pay the millions of dollars they owed in death tax. As a result, that 
community lost an important voice. This is typical of what happens when 
a family-owned enterprise cannot afford to pay the high after-death 
taxes.
  That is also why the Black Chamber of Commerce, the Hispanic Chamber 
of Commerce, and the National Indian Business Council all support the 
repeal of the death tax. They argue that it takes 2 or 3 generations to 
gain an economic foothold in the community. To them, the death tax is 
an enemy.
  Mr. Speaker, I urge every single one of my colleagues on the floor of 
this House to vote against the repeal of the unfair death tax that we 
can do away with in this bill.
  Mr. RANGEL. Mr. Speaker, I yield 2 minutes to the gentleman from 
Illinois (Mr. Phelps).
  Mr. PHELPS. Mr. Speaker, I rise in strong opposition today to the 
Republican tax cut package. I urge that all Members who support fair, 
affordable, small business tax relief to instead cosponsor the 
Democratic alternative which we should have been allowed to consider on 
the floor today.
  Yesterday I testified before the Committee on Rules in favor of a 
rule that made in order both the wage and tax provisions of the 
Democratic alternative. This alternative, originally sponsored by the 
gentleman from Michigan (Mr. Bonior), the gentleman from New York (Mr. 
Rangel), the gentleman from Texas (Mr. Sandlin), and myself included a 
two-step, one-dollar minimum wage increase and a $32 billion package of 
targeted small business tax relief. It had strong support in the House 
and across the country, and it merited an opportunity for debate in a 
clean up or down vote. Unfortunately, perhaps because they too were 
aware of our proposal's popularity, the committee recommended a closed 
rule on H.R. 3081.
  This should not be a partisan issue. This is an issue of fairness and 
fiscal responsibility of making it easier for working men and women to 
provide for their families and making it easier for employers to help 
them do so. Members on both sides of the aisle deserve the chance to 
vote on a package of sensible, targeted tax provisions that are fully 
paid for and that serve the specific purpose of helping to offset the 
burdens that result from an increased minimum wage.
  Instead, we have before us a sprawling, incredibly expensive tax cut 
bill which lavishes the vast majority of its benefits on the wealthiest 
one-third or 1 percent of taxpayers. In fact, the portion of the 
Republican bill which actually helps small businesses is less than the 
$32 billion provided by our substitute. Yet, the Republican bill 
carries a cost of $122 billion over 10 years. Unlike the Democratic 
package, which is fully offset, H.R. 3081 jeopardizes not only the 
future of Social Security and Medicare, but also our ability to give 
Americans the biggest tax break of all by paying down the national 
debt.
  At the conclusion of this debate, a motion to recommit will be 
offered that will contain the Democratic tax statistic. I urge support 
of the Democratic alternative.
  Mr. ARCHER. Mr. Speaker, I yield 2\1/2\ minutes to the gentleman from 
Florida (Mr. Foley), a respected member of the Committee on Ways and 
Means.
  Mr. FOLEY. Mr. Speaker, let me thank the chairman of the committee 
for the excellent bill that is on the floor today, and let me urge the 
members of the minority to use a little caution when characterizing 
these bills.
  First and foremost, I supported increasing minimum wage and will vote 
again that same way today. But let me also detail for my colleagues the 
fact that the process today in the bill we are debating are in fact 
sponsored largely by a number of prominent Democrats. Pension 
modernization that is coming within this bill is known as the Portman-
Cardin bill; distressed communities, which does not sound like 
something that is for the rich in Palm Beach, known as Watts-Talent-
Frost and 19 others. Low income housing, Johnson-Rangel, the ranking 
member of the committee, on a bill that I have sponsored with the 
gentleman from New Jersey (Mr. Andrews) for forgiving mortgage 
obligations, that is, forgiving debt for somebody who has gone 
bankrupt. We are trying to help those that need help rebuilding their 
lives.
  Why do we debate this bill if it is going to be vetoed by the 
President? I heard that question asked by my colleague. We have to do 
that until the President finally gets it right. We did that three times 
with welfare reform and finally, finally the President signed the bill. 
Lo and behold, every Member running for Congress for reelection, 
Democrat or Republican, gets up and says, we have reformed welfare. Now 
they take credit for it because it is a good bill.
  The other thing that bothers me in this process is many of the people 
that advocate putting another dollar burden on the average small 
business owner are those same people who have never actually worked 
outside this process in their life. They have not had a small business. 
I owned a restaurant. It was difficult to make ends meet, difficult to 
make payroll; and at times, I went without a paycheck because I had to 
pay my staff. Yes, I agree increasing the minimum wage will help, but I 
certainly do not find it a problem to at least assist the small 
businesses in making that increase in payroll costs softened at least 
by some important tax provisions.
  Now, we can sit here and wrangle all day about a bad bill, a good 
bill, this bill, that bill. I have heard many Members of Congress today 
say, help the small people out, and I agree. People at minimum wage are 
seeing increased fuel costs. I am not hearing much being done by the 
Energy Department or the White House, other than to say, my God, gas 
prices are up. I think we need some help for people that are, in fact, 
paying for gas at the pump. But one thing we can do certainly today is 
help provide some incentives for small business.
  Mr. Speaker, again, if people would look carefully at what is in this 
bill, they will not be taken in by the persuasive arguments of some on 
the other side that this is for the wealthy. That is an easy argument. 
They always come with that wealthy argument: it is for the rich; it is 
for the rich. Folks, look at the bill. Health insurance, pension 
modernization, distressed communities, low-income housing. These issues 
are not for the rich; these are for every American.
  Mr. RANGEL. Mr. Speaker, I yield 2 minutes to the gentleman from 
Texas (Mr. Doggett).
  Mr. DOGGETT. Mr. Speaker, Members may not recognize this fellow in 
the fedora standing in the shadows, but they ought to be aware of what 
he is doing. He is a caricature of America's leading tax shelter 
hustlers. This bill is his bill. By restricting amendments, by assuring 
that we cannot deal with the leading causes of injustice in our tax

[[Page 2587]]

system today, Republicans have protected the tax shelter hustlers.
  Only yesterday, the Secretary of the Treasury, Larry Summers, told 
the Senate Finance Committee that failure to address this issue of tax 
shelters ``in a meaningful way puts the fairness and efficacy of our 
tax system at risk.'' He has also said that the most serious compliance 
problem we have in the American tax system today is the failure to deal 
with tax shelter hustlers. This bill in particular, like the Committee 
on Ways and Means, in general does absolutely nothing to stop the tax 
shelter hustlers that are robbing the Treasury of upwards of $10 
billion a year.
  Only this week we learned that the tax shelter problem has gotten so 
serious that one insurance company after another is moving to Bermuda. 
It is so bad that even some of the insurance companies that remain in 
this country are saying, our competitors are gaining an unfair 
advantage through their tax shelters.

                              {time}  1600

  It is wrong, and that is why the substitute that the gentleman from 
New York (Mr. Rangel) has proposed incorporates a bill that I wrote 
concerning abusive tax shelters. It would do something about the most 
serious compliance problem with our tax system. The instant bill does 
absolutely nothing.
  There is another problem that the gentleman from New York (Mr. 
Rangel) addresses. As incredible as this tax shelter hustler problem 
is, there is even one greater problem. Some Americans have grown so 
prosperous that they can afford the arrogance of renouncing their 
citizenship and discovering one day that the Port Royal Golf Course in 
Bermuda is their hometown, that they have new citizenship. This 
expatriotism problem represents a multi-billion dollar scandal of 
people renouncing their citizenship for the sole purpose of dodging 
taxes.
  Once again, like the fellow in the fedora, those who have so little 
patriotism, those scoundrels, who would renounce their American 
citizenship to evade their taxes, they are fully protected in this 
bill. But they are fully dealt with in the substitute of the gentleman 
from New York (Mr. Rangel). Republicans are so fearful of dealing with 
these real tax problems in this country.
  And who do Members think picks up the tax tab for the hustler in the 
fedora and the scoundrel, who renounces his American citizenship? Small 
business and individual taxpayer because who else is left to pick up 
the tab? So by dodging these serious problems of tax dodging our 
Republican colleagues are actually imposing more burden on the small 
businesses of America.
  Mr. ARCHER. Mr. Speaker, I yield 2\1/2\ minutes to the respected 
gentlewoman from Connecticut (Mrs. Johnson), a member of the Committee 
on Ways and Means.
  Mrs. JOHNSON of Connecticut. Mr. Speaker, I rise in strong support of 
this legislation. Small business is the engine of our growing economy. 
It also creates more new jobs than all the big business put together. 
Yet, it finds it very difficult to pay higher wages for entry level 
jobs.
  Today, between the various bills that we will pass, we will increase 
the minimum wage, but we will also cut costs for our small businesses 
so they will have the revenues to pay the higher wage without laying 
people off.
  I am proud that the Republican approach very carefully and 
realistically focuses on job retention, as well as fair wages. I am 
also pleased that this bill has lots of things in it for working 
people, not just about wages, but in this bill we pass pension 
legislation that allows women over 50 to make catch-up contributions to 
pension plans. This means women who stay home and take care of their 
children, when they return to the work force, can make those catch-up 
contributions and retire with the level of security that, frankly, they 
need, and we in America need them to have.
  It is also true that this bill allows portability, makes it much 
easier to carry your pension from one job to another without fear of 
loss. It also allows faster vesting.
  This is terrific legislation for working people. It will enable small 
businesses to offer pension plans. It will give women a fair shake in 
the retirement security business. In addition, it will spread and 
encourage the building of affordable housing in our cities.
  If there is one crisis that is looming that we are not talking about, 
it is the need for low-wage earners to have decent places to live and 
rent in our cities. This bill addresses that issue, as well.
  It also cuts costs for small business in other ways, allowing them to 
expense the cost of equipment so they can hire more people and do 
better strengthening our economy and the fabric of our communities.
  This is broad-based tax reform for small business. It helps working 
people, not only through wages, when it is coupled with the following 
bill, but through housing, pension reform, health care deductibility 
for premiums.
  We need to think holistically about opportunity in America. That is 
what this tax bill does. Cutting taxes means we can save for our 
retirement. Cutting taxes strengthens our economy and helps our people.
  Mr. RANGEL. Mr. Speaker, I yield 3 minutes to the gentleman from 
Washington (Mr. McDermott).
  Mr. McDERMOTT. Mr. Speaker, Yogi Berra says, it is deja vu all over 
again, and here we are again. It is another month. We saw the February 
tax bill, and now we have the March tax bill. This one cuts $120 
billion out of the tax base with no budget, no concern for Medicare, no 
concern for social security. We are simply giving it away again.
  This one has an interesting twist to it, because it says, you small 
business guys, we are going to do something for you. We are going to 
raise the minimum wage for your workers, and that is going to be a cost 
to you. Now we have to give something to the small business people.
  But let me tell the Members, it is premised on the idea that small 
business people must be stupid, that they cannot read tax law, because 
this bill is not designed for small business people. Two-thirds of the 
$120 billion in tax breaks goes for the estate tax. That affects the 2 
percent richest people at the top of the society. That is why this 
graph is so illustrative. The Republican tax bill is all loaded on the 
end of the rich people.
  The gentleman from New York (Mr. Rangel) has put a bill forward that 
says, yes, we believe there ought to be some estate tax changes, but 
like this blue line, it ought to start way back with small people's 
estates and sort of be equal all the way. Not the Republicans, give it 
all to the rich. That is why we have a spike down here in accounts of 
$25 million and more. That is not for small business people.
  We talk about what we are going to do for pension changes. Eighty-
seven percent of the pension changes go to the 5 percent of the people 
at the top. It is, again, a bill skewed to the people at the top. That 
is in the face of not doing anything about Medicare, not doing anything 
about social security. Let us just shovel the money out the door.
  Now, between the February bill and this bill, we have served up to 
the American people the belief that they are going to get $375 billion 
in taxes, a reduction. Now wait for the April bill and the May bill and 
the June bill. They will be right back where they were last year with a 
tax cut of over $792 billion, which the President vetoed.
  If Members think that the President is not paying attention, and that 
if they send it to him one piece at a time he will not understand what 
they are doing, they are really kind of underestimating the intellect 
of the President. He can add. He can add the February bill to the March 
bill to the April bill to the May bill, and he is going to veto them 
all. This is a poison pill for a raise in the minimum wage. That is all 
it is designed to do.
  Mr. ARCHER. Mr. Speaker, I yield myself 30 seconds.
  Mr. Speaker, the gentleman has an interesting chart. The fascinating 
thing about it is, though, that the people that he claims will get the 
benefit

[[Page 2588]]

of the reduction in the death tax are dead. They do not get any 
benefit. They are gone. The real issue is, who are their heirs? How is 
it distributed?
  But they do not want to talk about that. That is the reason why there 
is no official distribution table on the death tax, because it is not 
going to benefit the people who have died, it is the people who lose 
their jobs and it is the people who have the distribution.
  Mr. Speaker, I yield 2 minutes to the gentleman from Louisiana (Mr. 
McCrery), a respected member of the Committee on Ways and Means.
  Mr. McCRERY. Mr. Speaker, I thank the gentleman for yielding time to 
me.
  Mr. Speaker, every time we bring a bill to the floor to cut taxes, 
the Democrats come up with the same old objection: ``Oh, it is a tax 
cut for the rich.'' The way they define rich, I just want all those 
folks out in America who are middle class to know that they are 
actually rich, because they are among those defined to be rich by the 
Democrats. So keep that in mind.
  Let me just enumerate a few provisions of this bill that are clearly 
not for the rich: a 100 percent health insurance deductibility for the 
self-employed. Those are not rich folks, those are folks that have 
started their own business and worked for years and years at those 
razor-thin margins to keep it going, and they do not get the same 
health care treatment as big corporations. This bill will do that.
  Community renewal, tax breaks to build the inner city and rural areas 
to try to provide jobs in those areas. That is not for the rich. A low-
income housing tax credit. We are going to increase the amount of money 
available for low-income housing in this country. That is not for the 
rich. There is pension reform, and 77 percent of people on pensions are 
middle class and lower-income workers, not rich.
  Finally, if we want to talk about the estate tax, yes, if we count 
all the assets and the income of the folks who are affected by the 
death tax, we could think they are rich. The fact is that a great many 
of those folks, like farmers, like small business owners, are asset 
rich and cash poor. When they die, for their small business or their 
farm to keep alive, to keep going, we had better have death tax relief, 
or those small farms and small businesses are going to go away because 
their heirs are cash poor. They cannot afford to pay the tax, so they 
have to sell the farm or sell the business in order to pay the tax. 
That is not right.
  This bill will get us just a little way down the road towards 
correcting the inequity in the Tax Code of America.
  Mr. RANGEL. Mr. Speaker, I yield 3 minutes to the gentleman from 
Tennessee (Mr. Tanner), a member of the committee.
  Mr. TANNER. Mr. Speaker, I thank the gentleman for yielding time to 
me. I want to thank the gentleman from New York (Mr. Rangel) for the 
opportunity to say a few words.
  Mr. Speaker, I am still, as a Blue Dog, mystified as to this 
procedure, this process. The majority party continues to bring bills to 
the floor when we do not have a budget. We owe $3.7 trillion in hard 
cash, and we are paying $240 billion year in interest alone. One-third 
of all of the individual and corporate taxes being collected on April 
15 go to pay nothing but interest. Yet, we bring these tax measures to 
the floor.
  If we pass this one, this body will have passed over $300 billion 
worth of tax cuts with no budget, not doing anything about the debt, 
nothing about social security, energy, nothing about Medicare, 
recruitment and retention in the military, readiness of the country. We 
need military modernization, we need a pay raise for the troops. The 
veterans, it will take $3 billion to help the veterans.
  We do not have time for that, but we do have time for $300 billion 
worth of tax cuts over the next 10 years on money that is not even 
here. This money is projected. They have to be living in a cave not to 
understand that oil prices are rising, if Members do not understand 
that. That puts tremendous inflationary pressure on the system. This 
projection of a huge surplus could go away just as easily as it came 
about with rising oil prices, rising interest rates. That surplus that 
all of these tax cuts come out of may never get here.
  Mr. Speaker, the other part I want to talk about is the estate tax. I 
do not like estate taxes. I am responsible for a bill to do away with 
them. But politics is the art of the possible. Here it is not, in this 
day, in this time, possible politically to do away with the estate tax.
  What did the gentleman from New York (Mr. Rangel) write? He wrote 
true estate tax relief for the small family farmer. Tim and Susan Lucky 
live in my district in Gibson County, Tennessee. They have a farm that 
is worth about $3 million. They do not have any money, but they have a 
farm worth about $3 million. Do Members know what they pay, under the 
bill of the gentleman from New York (Mr. Rangel) in estate taxes? 
Nothing. Do Members know what they pay under the Republican plan in 
estate taxes? It would be $336,000. Tell me who is interested in estate 
tax relief for the family farmer and the small businessman.
  This is a fact, under these bills that are mentioned. We did not get 
to offer the bill of the gentleman from New York (Mr. Rangel). Do 
Members know why? Because it will pass.
  So legislative malpractice in bringing tax bills to the floor without 
a budget is the same legislative malpractice in shutting out a bill 
like this.
  Mr. ARCHER. Mr. Speaker, I yield 2\1/2\ minutes to the gentleman from 
California (Mr. Herger), another respected member of the Committee on 
Ways and Means.
  Mr. HERGER. Mr. Speaker, small businesses are the backbone of our 
Nation's economy, creating jobs, economic growth, and innovation. The 
legislation before us today, the Small Business Tax Fairness Act, 
provides the tax reform necessary to ensure that small businesses will 
continue to prosper.
  For example, this legislation will help the self-employed afford 
health care by providing full deductibility of health insurance 
premiums. It will help small businesses acquire the tools they need to 
compete by increasing the amount small businesses can expense.
  This legislation also provides much needed assistance to families 
attempting to pass a business from one generation to the next by 
reducing the burdensome death tax.

                              {time}  1615

  Furthermore, this legislation will help Americans save for their 
retirement by modernizing pension laws.
  Mr. Speaker, I am especially pleased that the legislation before us 
today includes a provision I authored, which will restore peace of mind 
to small business owners by allowing small businesses to once again 
make use of installment sales. This provision will correct an urgent 
situation whereby thousands of small business owners have seen the 
value of their businesses drop by 10 to 20 percent.
  Enactment of the Installment Tax Correction Act aspect of this 
legislation will mean real relief and fairness for those who have spent 
a lifetime building a business only to see a change in tax law threaten 
their retirement.
  I urge all my colleagues to support tax fairness by supporting this 
legislation.
  Mr. RANGEL. Mr. Speaker, I yield 2\1/2\ minutes to the gentlewoman 
from Florida (Mrs. Thurman), a member of the Committee on Ways and 
Means.
  Mrs. THURMAN. Mr. Speaker, I thank the gentleman from New York (Mr. 
Rangel) for his work on this piece of legislation.
  Mr. Speaker, today in America, there are about 203,000 women working 
full time for minimum wage. These women are working to support their 
families. These are not high school students working for extra spending 
money.
  Raising the Federal minimum wage by $1 would give these mothers an 
extra $2,000 a year. That $2,000 would feed a family of four for 7 
months.
  Mr. Speaker, look around in these neighborhoods. These are the 
nursing aids who attend to our mothers and our fathers, the day care 
workers who care for our children, the clerks who help us at the 
grocery store. But do my colleagues know what? This raise is in

[[Page 2589]]

jeopardy today because the Republican leadership has attached a risky 
tax scheme and doing little for small businesses of America. I support 
raising the minimum wage and providing tax cuts for small businesses, 
but not this way.
  Today, this House is considering $122 billion tax scheme that, 
according to Citizens for Tax Justice, will give 73 percent of the tax 
cut to people who make $319,000 and higher, while doing little for 
working families and small business.
  It is irresponsible for us, once again, to be bullied into voting for 
a tax bill that is not paid for, breaking our own rules in this House. 
If this economy should falter and this surplus is not real, then we are 
going to put it back on the children and back on the grandchildren. Do 
my colleagues know what? The ones that we are raising that we want them 
to have the opportunity to have a small business will not be there 
because they will have debt because we do not pay for it.
  However, the gentleman from New York (Mr. Rangel) and Members put 
together a Democratic substitute like the rules tell us to do, paid 
for, which should be considered here today. But guess what? We are not 
even going to be given the opportunity other than talk about it. We 
will not even get any votes on it.
  It would have provided $32 billion in targeted tax cuts designed to 
help small businesses offset the cost of implementing the minimum wage. 
These targeted cuts include 100 percent deductibility for health 
insurance for self-employed, a permanent extension of the Work 
Opportunity Tax Credit, and Welfare to Work Tax Credit, and estate tax 
relief. The gentleman from Tennessee (Mr. Tanner) said it better than 
anybody.
  The SPEAKER pro tempore (Mr. Pease). Without objection, the gentleman 
from Ohio (Mr. Portman) will control the time of the gentleman from 
Texas (Mr. Archer).
  There was no objection.
  Mr. PORTMAN. Mr. Speaker, I yield 2 minutes to the gentleman from 
Pennsylvania (Mr. English).
  Mr. ENGLISH. Mr. Speaker, I thank the gentleman from Ohio (Mr. 
Portman), who has been one of our most vigorous advocates of pension 
reform, for yielding me this time. I am happy to see that this 
legislation has some of his work included.
  Mr. Speaker, I rise in strong support of this legislation. This 
package provides much needed relief to small businesses that, combined 
with an increase in the minimum wage, is a win-win situation for 
workers and entry-level positions who are trying to work their way into 
the mainstream of our strong economy.
  I have been a long-time supporter of raising the minimum wage, and 
this $1 increase that we have proposed is the equivalent of a 20 
percent raise over 3 years. That sends a strong positive message to 
working seniors, first-time workers, and those striving to work their 
way out of the welfare system.
  Combined with that minimum wage increase, this legislation provides 
much-needed tax relief that will assist small businesses and their 
workers. For example, it enhances the retirement security of all 
Americans by increasing pension portability, allowing workers over 50 
to catch up on contributions and increasing the contribution and 
benefits limits in defined contribution and benefits plans.
  It encourages job creation among small businesses through increasing 
the expense and write-off for equipment, an important pro-growth 
initiative.
  This legislation also reforms a section of the code that punishes 
people by artificially lowering the value of their pension through 
caps.
  It also creates tax incentives to lure investment back into some of 
our most depressed communities so that they can share in our economic 
prosperity. It expands incentive for the creation of affordable 
housing.
  Notwithstanding all of that, we are hearing rhetoric on the other 
side of the aisle, as incredible as it may sound, that this is all tax 
cuts for the rich. In reality, we are simply helping all American 
workers partake of the current financial prosperity of our country.
  I urge all of my colleagues to look beyond the rhetoric and to 
support this important fairness legislation.
  Mr. RANGEL. Mr. Speaker, I yield 3 minutes to the distinguished 
gentleman from Massachusetts (Mr. Neal), a member of the Committee on 
Ways and Means.
  Mr. NEAL of Massachusetts. Mr. Speaker, the Republican leadership in 
the House is finally dealing with the minimum wage issue. We are going 
to do something for millions of wage earners making $10,712 annually. I 
just cannot figure out what the long-term goal is, to kill a bill 
before it gets to the President? To get the President to veto it? Or 
simply to get this hot potato off of their hands?
  The issue is not going to go away simply because a poison pill is 
added to the minimum wage increase in the form of a tax bill, a tax 
bill that has such little support today that the Republican leadership 
did not even dare to give the gentleman from New York (Mr. Rangel) a 
substitute, because they knew that Democratic substitute, with the help 
of their own Members, would prevail.
  I support a number of items in this proposal today, but not allowing 
the Democratic substitute has stifled debate in an irresponsible way 
here. Our bill was targeted and paid for and, most importantly, had the 
most votes.
  The fact that it is not paid for today is crucial because this is 
just one of the several bills that will come to the House floor this 
year, all designed to have a dramatic revenue loss in the future, 
justified by questionable estimates about the budget situation, 
estimates that can change very quickly in any sign of a downturn. That 
is the context in which this debate takes place today.
  Moreover, there are provisions in this bill before us that overreach, 
especially in the estate and pension areas and should be opposed on the 
merits.
  In the pension area, the bill does contain a number of proposals that 
everyone supports. These proposals are in the administration's bill. 
These proposals are in my bill. They are in the Portman bill. They are 
in the Democratic Caucus bill. But there are also, in this bill today, 
many provisions lobbied extensively by the business community that are 
highly controversial; and that in the end is the problem.
  Let me read from a quote that the administration has offered on this 
proposal. ``H.R. 3832 contains pension provisions that would raise the 
maximum retirement plan contribution and compensation limits for 
business owners and executives. This would weaken the pension anti-
discrimination and top-heavy protections for moderate- and lower-income 
workers. These provisions are regressive, would not significantly 
increase plan coverage or national savings, and could lead to cuts in 
retirement benefits for moderate- and lower-income workers while 
benefits for the highly paid executives are maintained or even 
increased.''
  I cannot support this proposal. As I have suggested in the past, and 
I will suggest again today, the proponents of pension legislation 
should meet with the administration, develop a consensus package on 
these items that might well be enacted this year, especially those 
items involving pension portability. That would clear away the 
underbrush, if I may use that word, and allow us to focus on the more 
serious differences between us.
  I believe that all of us want to expand pension coverage for those 
who do not have it and want the current employer-based pension system 
to simply work better.
  Mr. PORTMAN. Mr. Speaker, I yield myself 2\1/2\ minutes to respond to 
some of the comments that were just made and talk a little bit about 
this package.
  First, I want to commend the gentleman from Texas (Chairman Archer) 
for putting this good tax relief package together.
  We have to recall where we are. We are in the process of raising the 
minimum wage, and this is simply an attempt to try to cushion the 
impact of that minimum wage on job loss in this country, because all 
the studies show

[[Page 2590]]

there will be an impact on the economy particularly among smaller 
businesses. So these proposals are focused on smaller businesses.
  In the pension area in particular, the problem we have of a gap of 
people not having pensions is primarily among smaller businesses. There 
are about 70 million Americans today who do not have pension coverage. 
That is unacceptable. That has happened increasingly with the 
administration's position that I just heard announced about pension 
reform. It will continue to happen. It will continue to have fewer and 
fewer people getting pensions because the administration seems to be 
taking the position that any kind of pension reform that would at all 
incur, increase, and expand coverage for defined contribution plans and 
defined benefit plans somehow is going to help the rich too much.
  Let me tell my colleagues about the limits that the gentleman from 
Massachusetts (Mr. Neal) just talked about. He said the administration 
is opposed to raising the limits, the contribution limits and the 
benefit limits on pensions. Somehow this would be counterproductive. It 
would hurt low-wage workers.
  Let me tell my colleagues what the limits are today. Today the limit 
is about $170,000 compensation limit under defined contribution plan 
and defined benefit plan. We propose raising it to $200,000 a year. In 
1993, under a Democrat Congress, I might say, that limit was at 
$235,000. It was reduced over time, strictly as a revenue grab, in 
order to effect the deficit we lived in and had in this country.
  If that $235,000 were adjusted to inflation today, it would be 
$290,000 limit. Now, tell me, if the Treasury Department opposes this 
pension provision because the limits are too high, why did a Democrat 
Congress have $235,000 limit that would now be almost $300,000?
  We are talking about just raising it up to $200,000 because, yes, we 
believe that those 70 million Americans who do not have a pension now, 
particularly in small businesses, where only 19 percent of small 
businesses because of the costs and the burdens and the liabilities now 
have any coverage. We believe those small businesses ought to be able 
to offer a pension plan to their employees. We want every employee in 
America to have a pension plan. That is the purpose of this 
legislation.
  It is focused on small business because that is where most of the 
problem is with regard to the pension coverage, but it is going to help 
every American be able to put more aside for retirement.
  It also provides for portability and people to take a pension from 
job to job. Finally, it provides, yes, for some common sense regulatory 
relief so that the costs and burdens are reduced for those smaller 
businesses.
  Mr. Speaker, I reserve the balance of my time.
  Mr. RANGEL. Mr. Speaker, I yield 2 minutes to the distinguished 
gentlewoman from California (Ms. Waters).
  Ms. WATERS. Mr. Speaker, I join in this discussion because I want to 
raise the question of why we are using this time to try and talk about 
the need for tax cuts for the wealthy. This is all about increasing 
minimum wage. We are being sidetracked. We are being taken off course 
while the Republicans are attempting one more time to get their 
outrageous tax cuts into law by any means necessary.
  Whether we are talking about the tax cuts that are being indicated in 
order, as they would say, to do minimum wage increase, or whether we 
are talking about the ongoing, continuing effort to just give more tax 
breaks to the rich, we find ourselves having to defend time and time 
again against trying to do more and more for the rich corporations and 
the richest Americans in this country.
  Let us force this discussion on whether or not there is a need for an 
increase in the minimum wage for the poorest of the working people in 
this Nation at a time when everyone is touting how well we are doing in 
this economy, how well people are doing in Silicon Valley. There are 
260,000 millionaires in Silicon Valley alone. My colleagues would dare 
say that we cannot have this modest increase in minimum wage until we 
do some more tax cuts for the rich. This is outrageous. We have had to 
fight our Republican friends every step of the way.
  The alternative that we have designed would, of course, take care of 
some of those areas where we could do some targeted tax cuts. This is 
not the way to do it. I would ask my friends and my colleagues to 
resist this effort to give more tax cuts to the rich.
  Mr. PORTMAN. Mr. Speaker, I yield 2 minutes to the gentleman from 
California (Mr. Calvert).

                              {time}  1630

  Mr. CALVERT. Mr. Speaker, I thank the gentleman for yielding me this 
time.
  I am a former small business owner. I understand what overregulation 
does to small business. I understand what overtaxation does to small 
business. I understand what too much litigation does to a small 
business. I understand what happens when the Government increases the 
cost to stay in business. And I know that a lot of businesses do not 
stay in business.
  A lot of small businesses are not in Silicon Valley; they are in our 
hometowns. They are our local dry cleaners, our local drive-thru 
restaurants, the local carryout. These are not big corporations. These 
are small mom and pop businesses. Matter of fact, two-thirds of the job 
creation in this country is by small businesses, and we need to help 
them. We need to help them stay in business because, without some of 
these minor changes in the Tax Code, they are not going to be around.
  What is wrong with allowing small businesses an opportunity to deduct 
their health care expenses? What is wrong with some changes in the 
death tax, which everyone agrees is a disgrace? We should not have a 
death tax in this country, a tax of up to 55 percent of the value of 
one's estate, when they have paid taxes all of their lives.
  Small business is important. And as one of the few people in the 
House that actually operated a small business, I would like to see it 
stay around, so I am hoping my colleagues will get together and vote on 
this and vote to support this Tax Relief Act.
  Mr. RANGEL. Mr. Speaker, I yield 2 minutes to the gentleman from 
Maryland (Mr. Wynn), who has committed his career to the protection of 
small business.
  Mr. WYNN. Mr. Speaker, I thank the gentleman for yielding me this 
time.
  I never cease to be amazed at how my Republican colleagues can take 
basically a good idea and turn it into a vehicle to give more tax 
relief to the very wealthy. It absolutely amazes me.
  We do have a good idea here. We ought to help small businesses. Small 
businesses are the engine of America's economy. They create half of the 
jobs and contribute to half of the gross domestic product. So there are 
things we can do to help small business. On the other hand, however, 
when we look at this Republican proposal, we find it is not small 
businesses, not the mom and pop neighborhood restaurants and groceries; 
it is the real fat cats who get the lion's share of the benefits.
  Let me talk about first what the Democrats want to do to help small 
business. First of all, we want to give 100 percent deductibility for 
health insurance. That is something small businesses want. We also want 
to increase small business deductions for investments in plants and 
equipment. We want to extend the work opportunity tax credit and the 
welfare-to-work tax credit. These are tax benefits that actually 
benefit small businesses and help them hire workers. We also want to 
address the estate tax issue, and we want to raise up to $4 million, 
the exemption, for estate taxes. So we are concerned about that issue. 
We want to give an increase in the meals deduction for small 
neighborhood restaurants, so they can benefit from that.
  There is a package of things that we want to do, that I actually 
believe some Republicans want to do, that we ought to do. That package 
is reasonable, about $36 billion, and we can pay for it with the 
offsets in the Democratic proposal. Unfortunately, the Republicans 
would not allows us to bring this proposal to the floor.

[[Page 2591]]

  Now, let us look at the Republican plan. It is bloated: $120 billion. 
And when we ask ourselves if small businesses are not benefiting from 
this, the question then becomes, who is? I can tell my colleagues who 
is: 73 percent of the benefit in the Republican plan goes to the 
richest 1 percent of Americans. These people are already doing very 
well in our current economy. They have stocks, they have bonds, they do 
not need this massive tax relief package.
  On the other hand, our approach says let us help small business; let 
us save Social Security and Medicare by being fiscally prudent. I ask 
my colleagues to consider the Democratic alternative and reject the 
Republican approach.
  Mr. PORTMAN. Mr. Speaker, I yield 2 minutes to the gentleman from New 
York (Mr. Sweeney).
  Mr. SWEENEY. Mr. Speaker, I am here to talk about a specific 
provision that is part of this bill, and I think it really points out 
the difference between what our philosophy is and what the other side 
believes in. It is the installment tax consumer credit that is part of 
this bill, repealed last year by the administration as a revenue 
enhancer.
  What the administration prefers to do is force the hard-working 
American families, those in the small business community, to pay taxes 
even before they receive payment for the sale of their business. And it 
has real human impact.
  For example, several months ago Dorothy and George Long arranged for 
the sale of their bed and breakfast in my district in Upstate New York. 
They had worked for over 30 years to build this business, and now they 
were looking forward to the sale of the business so they could retire. 
Unfortunately, they may have to reconsider those plans because they 
are, with the current structure, left with three very tough choices: 
take a loan out in order to pay for the capital gains tax immediately 
due, break their contract and face a lawsuit, or suffer the 
consequences of nonpayment of taxes.
  Mr. Speaker, I think that it is very important that we pass this bill 
today because we have to ensure that small businesses remain healthy. 
And providing for these kinds of tax reductions in small business will 
do that.
  Mr. RANGEL. Mr. Speaker, I yield 2 minutes to the gentleman from New 
Jersey (Mr. Menendez).
  Mr. MENENDEZ. Mr. Speaker, I thank the gentleman for yielding me this 
time.
  The Republican proposal we have before us today, I believe, is 
shameful. The Republicans claim that small businesses need tax breaks 
to offset an increase in the minimum wage, and we Democrats have a 
proposal that would do just that. But what Republicans are not telling 
us is that they offer the wealthiest Americans a tax cut of $123 
billion but fail to provide working families a decent wage. Under the 
Republican proposal, minimum wage workers would have to wait 3 years to 
receive a mere dollar increase in their wages.
  Tell the woman working 40 hours a week, breaking her back pressing 
garments or cleaning hotel rooms, that she has to wait 3 years to get a 
dollar increase in her wage while the wealthiest Americans are getting 
a $123 billion tax cut.
  Tell a father, laboring all day in the field or in a factory, facing 
the indignity of a poverty-level wage, that he has to wait 3 years to 
get a dollar increase in pay while the wealthy are getting a $123 
billion tax cut.
  Tell a single mom, who leaves her child in the care of strangers, 
with no idea about the quality of care they receive while she waits on 
tables, that she has to wait 3 years for a dollar increase in her wages 
while the wealthy are getting a $123 billion tax cut.
  We Democrats are not willing to tell those people who get up every 
day, work hard, play by the rules and at the end of the week find 
themselves in such circumstances that they must wait.
  Rather than proposing a timely increase in their wages, our 
Republican colleagues have opted to sacrifice these families in the 
name of tax cuts for the wealthy. This is a lose-lose scenario for 
minimum-wage workers.
  First, the Republican proposal jeopardizes their ability to provide 
for their children and denies them basic health and retirement 
security, and then Republicans propose an excessive tax cut for the 
wealthy that will jeopardize Medicare and Social Security.
  We must prevent this double jeopardy for working families.
  The SPEAKER pro tempore (Mr. Pease). Without objection, the gentleman 
from Illinois (Mr. Weller) will control the time of the gentleman from 
Ohio (Mr. Portman).
  There was no objection.
  Mr. WELLER. Mr. Speaker, I yield myself 4 minutes.
  Mr. Speaker, I rise in support of increasing the minimum wage by a 
dollar. I also rise in support of helping small business and low-wage 
workers save for their retirement. This is a good package of 
legislation, raising the minimum wage and helping small employers and 
little guys and gals who work.
  We give 100 percent deductibility for the self-employed, to make 
health insurance more affordable and increase access to health care. We 
expand the low-income housing tax credit, a public-private partnership 
to help provide affordable housing for low-income working families. We 
increase the meal deduction, which helps truck drivers and traveling 
salesmen who have to travel for their work. And we also expand pension 
opportunities, which particularly benefit working women, and that is 
one of our goals.
  But, my colleagues, I wanted to talk about one particular provision 
in this legislation, and it is legislation that works towards the goals 
of this Congress, to make our Tax Code more fair, particularly for 
working Americans. This is an issue that has been brought to my 
attention usually by a spouse of a construction worker, someone who has 
seen their spouse get up early in the morning for the last 30 years, go 
out and work, come home dead tired from back-breaking construction 
labor. These are folks who work hard, get callouses on their hands, get 
their hands dirty, but they work hard.
  This legislation addresses a fairness issue for the building trades, 
dealing with the section 415 pension limitations. Those are limitations 
on multi-employer pension funds usually managed by a building trade 
union, like the operating engineers or the laborers or the 
electricians, even maritime unions. It is important legislation because 
what this legislation does is it gives those construction workers and 
those maritime workers the pension benefits they were promised and 
deserve. Currently we have limits in section 415 of the pension code 
that prevent them from getting what they were promised. In fact, no 
matter how many hours they work, no matter how many hours they put in 
each day, whether they have overtime and what is contributed, there is 
a cap. And, unfortunately, that cap is not fair.
  And I want to thank the chairman of the Committee on Ways and Means, 
the gentleman from Texas (Mr. Archer), for including this important 
provision, which helps 10 million working Americans. When I think of 
the section 415 issue I think of the working couple that first brought 
it to my attention, Lori and Larry Kohr from Peru, Illinois. Larry's a 
retired laborer, and he recently told me, when he retired, that his 
benefit should have been just a little under $40,000 a year in pension 
benefits from his laborer's pension fund, or about $3,300 a month. But 
he was shocked to learn that once he retired he only got about half of 
it because of that 415 pension limitation.
  My colleagues, this is a fairness issue. These individuals have 
worked hard. For people like Lori and Larry Kohr, where Larry Kohr 
should be getting about $3,300 a month, Larry Kohr, like 10 million 
other construction workers, is seeing only about half what he should 
get. This Republican Congress is working to bring fairness so that 
these kind of construction workers, as well as maritime workers, get 
their full pension benefits. Right now they only get about half. We 
want to give them the full amount.
  That is the goal of this legislation. That is why I urge my 
colleagues to support H.R. 3081, to fix the 415 pension

[[Page 2592]]

limitations, to help couples like Lori and Larry Kohr of Peru, 
Illinois, to make our Tax Code more fair. Let us vote ``aye'' to help 
the self-employed make health insurance more affordable, with 100 
percent deductibility; let us help the poor find affordable housing by 
expanding the low-income housing tax credit; and let us expand pension 
opportunities, particularly to help working women; and let us help 
those traveling salespeople and truck drivers who are forced to be on 
the road to work; and let us lift that 415 pension cap.
  Mr. Speaker, I reserve the balance of my time.
  Mr. RANGEL. Mr. Speaker, I yield 3 minutes to the gentleman from 
Hawaii (Mr. Abercrombie).
  Mr. ABERCROMBIE. Mr. Speaker, I realize that not all of our 
colleagues are on the floor at the moment, but for those who are paying 
attention to this discussion here today, how is it possible for us to 
make any progress in this at all if we are going to sit here and talk 
about let us help. The gentleman who spoke previously knows perfectly 
well that the 415 provision he is talking about is in both bills.
  This is not a Republican issue or a Democratic issue, and it has been 
made that way. If those of us who are genuinely interested in the 
minimum wage, and in tax breaks for businesses that deserve it with 
respect to the minimum wage, had been allowed to carry on our 
negotiations, Republicans and Democrats alike, we would have that 
legislation on this floor and we would not have this agonizing session 
that we are having today. The reason that we are not here today on a 
bill that Republicans and Democrats can get together on is because the 
Republican leadership has said they do not want that to happen.
  How can we turn the poorest of the poor into an issue that we then 
utilize to try to hurt them because we think it is going to benefit us 
somehow? I appeal to my Republican colleagues and to those Democrats 
who may be concerned about it in terms of small business implications. 
We have crafted a bill which is essentially the Republican-Democratic 
compromise that we wanted in the first place. It is not our fault; it 
is not the fault of the gentleman from New York (Mr. Rangel) that that 
is appearing as ``the Democratic substitute.''
  I wish it would say just the substitute on this issue, because 
Republicans and Democrats can support it and take credit. The Democrats 
will say, hey, yes, we were for the minimum wage; but we were not 
hurting small business. We are actually benefiting small business with 
targeted tax credits for small business. That was not something I 
dreamed up as a Democrat. There is no such thing as a business meal 
entertainment deduction for Republicans and a spousal travel deduction 
for Democrats. It helps everybody connected with the travel industry, 
with the tourism industry, for those who want to take people off 
welfare and put them to work. That is Republicans and Democrats.
  My plea to my colleagues, Mr. Speaker, is to pass the so-called 
Democratic substitute because it is really the congressional 
substitute, to see to it that small businesses and those directly 
affected by the minimum wage will have the benefit of it. Please take 
this off the ideological lines. Mr. Bush and Mr. Gore are going to beat 
each other up for 7 months and 27 days after today.

                              {time}  1645

  The poor people in this country who deserve the tax break, the small 
business people who deserve the benefit of the minimum wage combination 
of tax incentives and a minimum wage raise will be the beneficiaries 
and we can all take credit.
  My bottom line plea to you, Mr. Speaker, and to my colleagues, 
Republicans and Democrats alike, let us put this together, a minimum 
wage increase and a small business tax incentive that makes some sense, 
that blends together. We can all claim credit for it. We can all come 
out of this institution today feeling that we have accomplished 
something not as Democrats or Republicans but as Americans who are 
concerned about other Americans.
  The SPEAKER pro tempore (Mr. Pease). Without objection, the gentleman 
from Ohio (Mr. Portman) will reclaim control of his time.
  There was no objection.
  Mr. PORTMAN. Mr. Speaker, I yield myself 30 seconds.
  Mr. Speaker, I certainly agree with my colleague the gentleman from 
Hawaii (Mr. Abercrombie) that we need to work together on these 
proposals. I would just suggest to him that many of the proposals that 
he talked about, the 415 changes from multi-employer plans that are so 
important to unions, the health care insurance for those who are self-
employed, the provisions in here for community renewal I certainly 
think should be bipartisan. The pension provisions have been bipartisan 
from the start. We have 80 Democrat cosponsors and 80 Republican 
cosponsors. I think this is sort of America's bill. There are people 
who think the Democrat bill does not do that.
  The Small Business Survival Committee has written us a letter saying 
that the Democrat alternative is a de facto tax increase on small 
businesses. We can talk more about that later.
  Mr. Speaker, I yield 3 minutes to the distinguished gentlewoman from 
New York (Mrs. Kelly).
  Mrs. KELLY. Mr. Speaker, I rise for the purpose of entering into a 
colloquy with my friend the gentleman from Ohio (Mr. Portman).
  Mr. Speaker, I am grateful for the hard work my colleagues on the 
Committee on Ways and Means have done in putting together a strong 
package of tax relief for America's small businesses.
  Unfortunately, I have been contacted by constituents concerned about 
potential interpretations of sections 235, 241 and 281 of H.R. 3081. 
They fear these could negatively affect pension benefits.
  I have written the distinguished gentleman from Texas (Mr. Archer) 
and the distinguished gentleman from Ohio (Mr. Boehner) detailing these 
concerns, which I will insert into the Record.
  Over the past months, I appreciate the time the gentleman from Ohio 
and all the members of the committee concerned with pension issues have 
spent as we have worked to ensure that these concerns are properly 
addressed.
  Mr. Speaker, I would like to get assurances from the gentleman from 
Ohio (Mr. Portman) that these sections that I have mentioned are not 
intended to harm participants.
  It is my understanding that these provisions are not intended to be 
interpreted in such a way as to reduce pension benefits, discourage 
companies from increasing pension benefits, or allow for violations of 
the Tax Code.
  So I ask my friend from the State of Ohio (Mr. Portman) is my 
understanding correct?
  Mr. PORTMAN. Mr. Speaker, will the gentlewoman yield?
  Mrs. KELLY. I yield to the gentleman from Ohio.
  Mr. PORTMAN. Mr. Speaker, I thank the gentlewoman from New York (Mrs. 
Kelly) for yielding.
  Mr. Speaker, I would say absolutely that her understanding is 
correct. In fact, just the opposite is intended by these provisions and 
will be the effect of these provisions, which is to say that they will 
expand pension coverage for American workers.
  Mrs. KELLY. Mr. Speaker, reclaiming my time, I thank the gentleman 
very much for his comments. I really appreciate his assurances and his 
continuing efforts on this legislation.
  With these efforts, we can assure concerned individuals that pensions 
are enhanced and protected by this legislation. We have the opportunity 
to level the playing field for small businesses today with this 
legislation that provides, among other things, millions of 
entrepreneurs with 100-percent health insurance deductibility next year 
and increases the business meal deduction to 60 percent.
  Most importantly, the bill repeals the unfair installment sales tax 
that has already impacted small businesses by drastically reducing 
their value and blocking their sale.
  I look forward to voting in favor of this important legislation 
today, and I

[[Page 2593]]

urge all of my colleagues to join me in strong support.
  Mr. RANGEL. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, my friend, the gentleman from Ohio (Mr. Portman) just 
got finished talking about the degree of bipartisanship that went into 
this bill; and if he is talking about his willingness to work with 
Democrats in order to reach bipartisanship, nobody in this House works 
harder than he does in order to accomplish that end.
  But my friend knows that, as relates to this particular bill, that 
his colleagues on the other side of the aisle put tax cuts on top of 
tax cuts on top of tax cuts until they were convinced that the 
President of the United States would veto this bill.
  This has nothing to do with the degree of cooperation that the 
gentleman from Ohio (Mr. Portman) has given to us in the Committee on 
Ways and Means over the years. But that small bit of bipartisanship 
that is displayed in this bill is overwhelmingly knocked out by the 
degree of partisanship to make this bill be vetoed.
  I look forward to the day that we will not be talking about one part 
of a bill but that we will be talking about an entire bill as we work 
together, Republicans and Democrats, not for our parties but for our 
Congress and for our country.
  Mr. Speaker, I yield 2 minutes to the gentleman from Maine (Mr. 
Allen).
  Mr. ALLEN. Mr. Speaker, I thank the gentleman for yielding me the 
time.
  Mr. Speaker, we need to reject this Republican tax plan. Despite its 
title, this is no small business tax cut. Moreover, this proposal would 
cut taxes before we even have the outlines of a budget resolution.
  In reality with this bill, the top one percent of taxpayers will get 
an average tax cut of $6,000 and the top one percent of taxpayers of 
those earning over $319,000 a year. The lower 60 percent get an average 
of $4 each, $4, not even enough to buy a movie ticket. For 60 percent 
of the public, this is no tax cut at all.
  Now, we are used to seeing Republican tax plans that favor the 
wealthy, but this one has to set a record. Seventy-three percent of the 
benefits go to the wealthiest one percent in this country.
  Moreover, this bill is premature. We have not passed a budget 
resolution, but the Republicans are coming in with yet another huge tax 
cut. We have done nothing in this House to secure the solvency of 
Social Security, nothing to protect the future of Medicare, nothing to 
provide prescription drug coverage for seniors, and nothing to pay down 
the national debt.
  This bill jeopardizes our ability to achieve any of these goals. We 
should reject this misleading, irresponsible Republican tax plan. And I 
have to say, simple fairness would require that we be given a chance to 
vote on the Rangel alternative Democratic plan, which was a real small 
business tax cut and which would not disrupt our ability to achieve 
other important national priorities.
  Mr. PORTMAN. Mr. Speaker, I yield 2 minutes to the gentleman from 
Illinois (Mr. Manzullo).
  Mr. MANZULLO. Mr. Speaker, as chairman of the Subcommittee on Tax, 
Finance and Exports of the Small Business Committee, this bill is the 
bare minimum we should do to help small businesses prosper. We must 
remember that our economy thrives and unemployment is low primarily 
because of small businesses.
  I want to commend the gentleman from Texas (Chairman Archer) for 
quickly resolving the installment sales issue. Without this reform, 
thousands of small business owners will have seen their lifetime of 
investment and hard work erode all because the Federal Government wants 
to collect taxes early.
  This legislation also addresses many of the unresolved priorities 
still left over from the 1995 White House Conference on Small Business. 
The number two issue at that conference was full deduction of meals 
expense. This bill increases the meals deduction to 60 percent. More 
importantly, it provides relief for our truckers by allowing them to 
deduct 80 percent of their meals expense.
  The number four issue at the conference was estate, or death tax, 
relief. This bill provides meaningful death tax reform. This will help 
small businesses pass their businesses on to the children.
  The number five issue for the conference was health care reform. This 
bill provides immediate 100 percent deductibility of health insurance 
for the self-employed.
  Finally, the number seven issue at the White House Conference on 
Small Business was pension reform. The bill contains many of the 
bipartisan reforms championed by the gentleman from Ohio (Mr. Portman) 
and the gentleman from Maryland (Mr. Cardin). The legislation is 
another in a series of tax relief bills by the Republicans.
  Contrast this to the President's budget, where he proposes 106 
separate tax increases totaling $181 billion. I will not support the 
increase of the minimum wage, which is tampering with the free 
enterprise system. But to offset that, Mr. Speaker, let us help the 
small businesses by having a very modest tax cut.
  Mr. RANGEL. Mr. Speaker, I yield 2 minutes to the gentlewoman from 
Texas (Ms. Jackson-Lee).
  Ms. JACKSON-LEE of Texas. Mr. Speaker, I thank the ranking member for 
his kindness.
  Mr. Speaker, I hope that my staff accepts my apology for discarding 
the comments that have been prepared for me and allow me to speak from 
the heart. Though, when we begin to speak about tax issues, one would 
think that our focus should be basically on the analytical numbers. But 
this is an issue of the heart.
  My hometown newspaper accounts for what we do up here every week and 
gives a recording of how we voted. Sometimes they do an excellent job, 
many times, but I take issue sometimes because they do not account for 
some of the very good legislative initiatives that are in fact 
alternatives or substitutes.
  Today I rise to support the substitute for the minimum wage, because 
it is from the heart that I speak. Today I also rise to support the 
Democratic alternative to give small businesses a real tax cut. And the 
reason, Mr. Speaker, is because Americans want us to do business here. 
They do not want us to make political havoc.
  Believe it or not, the Republican legislation does nothing to help 
small businesses with respect to tax cuts because it does not help the 
lowest of those at 2.5 million, but really this tax cut is for those 
whose net is $30 million.
  I support tax cuts for small businesses, and I go on record today 
supporting the alternative that the Democrats have offered that will 
provide estate tax relief for family farms and small businesses, give 
small businesses a greater tax increase. And, yes, I support the 
alternative for an increase in the minimum wage, Mr. Speaker. Because I 
asked a sixth grader today whether $5 was any money. It is not. And 
that is what the minimum wage is right now, $5.15.
  The Democratic alternative will give us 50 cents for 2 years, which 
means a dollar to $6.15. Can we do any less for a women who works, has 
four children, and has a disabled husband?
  Today I speak to the heart. Let us not play to the politics of this. 
Let us vote for real tax relief for small business and let us provide 
those with an income who need minimum wage.
  I would say, Mr. Speaker, let us not support bills that will be 
vetoed by the President of the United States.
  Mr. PORTMAN. Mr. Speaker, I yield 3\1/2\ minutes to the gentleman 
from Arizona (Mr. Hayworth) a member of the Committee on Ways and 
Means.
  Mr. HAYWORTH. Mr. Speaker, I thank my colleague from Ohio for 
yielding me the time.
  Mr. Speaker, let us speak from the heart. Let us engage in this 
debate. With the American people watching, Mr. Speaker, let us take a 
look at who benefits from tax reductions.
  It is sad to hear my friends on the left reminiscent of that scene in 
motion pictures. ``No tax relief, not for

[[Page 2594]]

nobody, not for no how, not for no reason'' seems to be the canard of 
the day.
  Who do they think is helped by reducing the death tax? It is the 
family farmer. It is the small business person in rural communities 
throughout Arizona and throughout America. Because time after time we 
have seen it.
  Gene Stenson, for example. His dad founded a railroad track 
manufacturing company down in Florida in 1967. But after his dad's 
death in 1976, the Stensons had to shut down a facility not in Florida 
but in North Carolina, laying off two-thirds of their 110 employees to 
pay the death tax.
  Is that compassion? Is that a tax cut only for the wealthy? No. It 
exposes the canard of the left and their philosophy that was bent on 
bankrupting this country with deficit budget after deficit budget. Now 
that we are putting our House in order for Main Street and Wall Street, 
Mr. Speaker, we want to put it in order for every street.
  Is it not compassionate to offer 100 percent health insurance 
deductibility for the self-employed? Of course it is compassionate. 
Again, we heard from my friend the gentleman from Maine (Mr. Allen) 
just a few minutes ago, saying, oh, listen, we need to get to work on 
these vital issues.
  I hear from my friends on the left how important it is to have health 
insurance coverage. This is a major step forward. Time and again I hear 
from my constituents, why can we not enjoy what major corporations 
enjoy, 100 percent deductibility of health insurance?
  This tax relief is offered. The community renewal portion of this tax 
relief legislation is something that is bipartisan in nature. It helps 
America's most low-income areas. Family development accounts help the 
working poor save for lifetime needs. The working poor, the family with 
two children earning just a little bit over $12,000. Nineteen million 
Americans qualified for the EIC in 1999, low-income housing tax credit.

                              {time}  1700

  Pension reform that my colleague from Ohio has worked on, that the 
ranking member talked about being so important in a bipartisan fashion, 
the portability to take your benefits in your personal retirement and 
move them from job to job.
  Mr. Speaker, we have a fundamental choice here. We can embrace the 
canards and the class warfare of the left to have issues to squabble 
about in the campaign, or we can embrace common sense tax relief, 
pension reform, health insurance deductibility for all Americans. That 
is the true measure of compassion, not the subjugation to the lowest 
rung of the economic ladder but the empowerment of all Americans. That 
is what we will do with this legislation.
  Mr. RANGEL. Mr. Speaker, I yield myself such time as I may consume.
  The senior Senator from Arizona would be proud of the gentleman that 
represents the 6th Congressional District of Arizona as related to 100 
percent deductibility of health insurance because that is in the 
Democratic bill and in the Republican bill and so many other things he 
speaks well of; but he would be sorely disappointed that you would just 
ignore the needs for Social Security and Medicare as you go on and take 
75 percent of that amount, of the $122 billion tax bill, and make 
certain that those who are the wealthiest benefit most. You did a 
fantastic job up until Tuesday, and I hate to see you losing those 
principles now.
  Mr. Speaker, I yield 2 minutes to the gentleman from Vermont (Mr. 
Sanders).
  Mr. SANDERS. I thank the gentleman for yielding me this time.
  Mr. Speaker, I rise in strong opposition to this Republican 
legislation and to all the proposals that the Republican Party is 
offering today. In fact, what they are offering is not only absurd but 
it is an insult to American working people. They are proposing a paltry 
increase in the minimum wage of $1 over 3 years, and at the same time 
they are proposing a huge tax break for the richest people in this 
country.
  Millions of low-wage workers are working 40 or 50 hours a week 
struggling to keep their heads above water. In terms of the purchasing 
power of the minimum wage, it is lower today than it was 20 years ago. 
And in hearing this cry of working people, the Republicans are 
proposing a 33-cent-an-hour increase in the minimum wage. But at the 
same time they are proposing a gigantic tax break for the people who do 
not need it, the people who are making over $300,000 a year. And 75 
percent of their tax proposal goes to those people.
  To add insult to injury, in my State of Vermont where the legislature 
had the decency to raise the minimum wage to at least $5.75 an hour, 
the Republican proposal will mean nothing for the next 2 years. And 
Vermont is not alone. Many other States have moved to raise the minimum 
wage. So right now, at a time when this country has the greatest gap 
between the rich and the poor of any industrialized nation, where we 
have the richest 1 percent owning more wealth than the bottom 95 
percent, where we have millions of workers working longer hours for 
lower wages than was the case 20 years ago, what the Republicans are 
saying is, that is not bad enough, let us make it worse.
  Let us reject this proposal.
  Mr. Speaker, I rise in strong opposition to H.R. 3832. This bill is 
being touted as a package of tax provisions designed to offset the 
impacts of an increase in the minimum wage on small business. Yet some 
of the pension provisions included in the bill don't have a single 
thing to do with small business tax relief and are simply new tax 
breaks that mostly accrue to the wealthiest Americans.
  The pension provisions in this legislation will not increase pension 
coverage for millions of Americans that currently lack it, and may even 
reduce coverage for lower and middle-income employees according to the 
Center on Budget and Policy Priorities.
  According to the non-partisan Institute for Taxation and Economic 
Policy:
  The 20 percent of individuals with the highest incomes would receive 
96.5 percent of the new pension tax breaks.
  By contrast, the bottom 60 percent of the population would receive 
less than one percent of the benefits of the new pension provisions.
  Last November, Treasury Secretary Summers and Labor Secretary Herman, 
criticized these pension provisions, saying that they ``could lead to 
reductions in retirement benefits for moderate and lower-income 
workers.''
  Mr. Speaker, if the Congress is really concerned about protecting the 
pensions of American workers it should quickly address the cash balance 
pension rip off scheme being implemented by hundreds of large 
corporations all over this country. In fact if this Congress is really 
concerned about protecting the pensions of American workers it should 
pass H.R. 2902, the Pension Benefits Preservation and Protection Act, 
legislation that I authored and that now has a total of 80 co-sponsors.
  Mr. Speaker, all across this country, American workers are deeply 
concerned about the status of their pension plans. That concern is well 
founded. Since 1985, despite large profits and growing surpluses in 
their pension funds, twenty percent of Fortune 500 companies and over 
300 companies in all have slashed the retirement benefits that they 
promised their employees. Many more companies are contemplating similar 
action. Not only is this trend outrageous, it is also illegal under 
current law. Cash balance schemes violate age discrimination laws 
because they cut the accrual rate of pension benefits as a worker gets 
older. Workers should not have their pension benefits reduced just 
because of their age.
  Frankly, it is simply unacceptable that during a time of record 
breaking corporate profits, huge pension fund surpluses, massive 
compensation for CEOs (including very generous retirement benefits), 
that corporate America renege on the commitments that they have made to 
workers by slashing their pensions.
  Just last month I authored comments to the Internal Revenue Service 
stating that these cash balance schemes violate the pension age 
discrimination laws. 59 other Members of Congress joined me in signing 
on to these IRS comments. These comments detail how corporations are 
stealing the benefits of their most loyal and experienced workers.
  Consider this: if a company reduced pension benefits based on race, 
or religion, or gender, the federal government would be sure to take 
appropriate action against the company. But, when it comes to enforcing 
the pension age discrimination laws, the federal government has clearly 
been asleep at the wheel. Fortunately, some of us in Congress are 
beginning to wake them up.
  Corporations currently receive over $80 billion a year in federal 
government subsidies through the tax code. American taxpayers have a 
right to expect that corporations who

[[Page 2595]]

take advantage of this special tax treatment will not blatantly violate 
the law.
  Yet, hundreds of corporations throughout the country from IBM to AT&T 
are doing just that by converting their traditional defined benefit 
pension plans to these cash balance schemes.
  Cash balance schemes are nothing but a replay of the corporate 
pension raids we experienced during the 1980's. While these companies 
claim that they are converting to cash balance plans to attract younger 
workers into their workforce, the fact of the matter is that cash 
balance plans are intentional attempts to slash the pension benefits of 
older workers.
  The reason why large corporations are targeting their older workers' 
pensions is easy to understand. Millions and millions of Americans in 
the so-called ``baby boom'' generation are rapidly approaching 
retirement age. Companies that reduce the pensions of older workers 
will thus realize tremendous cost savings when these people retire.
  Companies claim that they are converting to cash balance schemes to 
attract a younger, more mobile workforce. But, worker mobility is not 
the rationale for converting to a cash balance plan, money is. As 
11,000 people a day turn 50, which cash balance promoter Watson Wyatt 
claims will turn us into a ``Nation of Floridas,'' employers are 
looking for any way possible to reduce older workers' promised 
benefits. This is outrageous.
  But, what is even more outrageous is that they are not being honest 
to the employees whose pensions they are slashing. As Joseph Edmunds 
stated at a 1987 Conference of Consulting Actuaries, ``It is easy to 
install a cash balance plan in place of a traditional defined benefit 
plan and cover up cutbacks in future benefits.''
  Despite the protestations of cash balance promoters, cash balance 
schemes are implemented to unlawfully cut the benefits of older 
employees and to disguise those cuts by implementing a plan that makes 
it virtually impossible for employees to make an ``apples to apples'' 
comparison of their benefits under the old and new plans.
  Not only does the federal government need to enforce the laws that 
are on the books, Congress also must pass meaningful pension 
protections right now. That is why I introduced H.R. 2902. This 
legislation would primarily do three things:
  First, it would send a directive to the Secretary of Treasury to 
enforce the laws that are already on the books;
  Second, it would provide a safe harbor making cash balance plans 
legal only if employees are given the choice to remain in their old 
pension plan with detailed disclosure; and
  Third, it would provide a major disincentive for companies to slash 
the future pension benefits of employees.
  Mr. Speaker, H.R. 2902 would provide meaningful pension protection to 
millions of Americans, unlike the current bill being considered right 
now. My legislation is being supported by the Pension Rights Center, 
the National Council of Senior Citizens, the Communications Workers of 
America, the IBM Employees Benefits Action Coalition, and several other 
groups. I urge my colleagues to defeat H.R. 3832, and work with me to 
pass real pension protection.
  I include my letter to the IRS signed by 50 other Members, as 
follows:

                                    Congress of the United States,


                                     House of Representatives,

                                                   Washington, DC.
     Department of the Treasury,
     Internal Revenue Service, Ben Franklin Station, Washington, 
         DC.

     Attn: CC:DOM:CORP:R (Cash Balance Plans and Conversions).

       We, the undersigned Members of Congress, are pleased to 
     respond to your request for comments on cash balance pension 
     plans. (64 Fed. Reg. 56578.)


                              introduction

       We commend the Internal Revenue Service and Department of 
     Treasury for the decision to further evaluate your position 
     on the conversion of traditional defined benefit pension 
     plans to so-called ``cash balance'' pension plans, and for 
     soliciting public comments on this matter. Although such 
     conversions have been occurring for many years, increased 
     understanding of these conversions has raised serious 
     questions, particularly whether they violate federal anti-age 
     discrimination statutes.\1\
---------------------------------------------------------------------------
     Footnotes at end of letter.
---------------------------------------------------------------------------
       Prior to the recent, and growing, scrutiny of cash balance 
     conversions by employees, Members of Congress, and some 
     actuaries, the complexity of these plans have made it 
     understandably difficult for the cognizant federal agencies 
     to fairly evaluate the age discriminatory effect of these 
     plans. In this instance, the problem has been exacerbated by 
     what--in the most generous terms--can be described as an 
     almost complete lack of candor on the part of many proponents 
     of cash balance conversions in communications with their 
     employees and the media.\2\
       Numerous respected national journals have played a critical 
     role in bringing to light not only the age discriminatory 
     impact of these conversions but also the clear age 
     discriminatory intent of at least some cash balance backers. 
     Given the large volume of new information and concern about 
     cash balance plan conversions, we urge the Department of 
     Treasury, IRS, and all other cognizant federal agencies to 
     thoroughly reexamine the existing legal requirements for 
     defined benefit pension plans and the extent to which cash 
     balance conversions fail to comply therewith. Workers and 
     members of Congress do not have access to the full 
     documentation related to these conversions on an 
     individualized basis, making it critical that the key 
     government oversight agencies use their access to plan 
     documents to fully examine and understand the nature and 
     effect of these conversions. We urge all of the involved 
     agencies to act quickly within their respective regulatory 
     authority to remedy the significant legal irregularities that 
     appear to permeate these conversions, and if it is concluded 
     that the agencies do not have sufficient authority, to 
     propose legislation to Congress to address any outstanding 
     legal issues.
       The comments that follow address the following topics:
       (1) Cash balance conversions are often intentional attempts 
     to cut the pension benefits of older employees and increase 
     the operating income of employers.
       (2) Cash balance plans are defined benefit plans, not 
     defined contribution plans.
       (3) Cash balance plans fail to meet the requirements for 
     defined benefit plans and violate federal anti-age 
     discrimination statutes.
       (4) The ``wear-away'' feature of many cash balance 
     conversions violate federal anti-age discrimination statutes.
       (5) Cash balance conversions should therefore be 
     disqualified under existing law.
       (6) A safe harbor should be established allowing cash 
     balance plans to meet existing legal requirements only if all 
     employees are allowed to choose which pension plan works best 
     for them with detailed disclosure.
       Throughout your consideration of cash balance conversions, 
     we ask the IRS and the Department of the Treasury to bear in 
     mind, that while the United States has a ``voluntary'' 
     pension system, that system is, and should be, subject to 
     rigorous statutory and regulatory oversight. This voluntary 
     pension system receives over $80 billion a year in federal 
     government subsidies through, inter alia, the tax code. It 
     will always be the case that corporations will favor public 
     subsidies without any governmental oversight. However, the 
     taxpayers have a right to expect that corporations who take 
     advantage of this special tax treatment will adhere to 
     requirements of the law, including federal age discrimination 
     statutes. Given the substantial sums of money in corporate 
     pension plans, experience has repeatedly shown that, without 
     governmental vigilance, corporations will attempt to 
     manipulate their pension plans at the expense of their 
     employees. Cash balance conversions are just the latest 
     vehicle to accomplish that goal. In this case, federal age 
     discrimination statutes provide the IRS and other federal 
     agencies with the means to stop these schemes, which are 
     intentional efforts to wring savings from the pensions of 
     older employers.
       (1) Cash balance conversions are often intentional attempts 
     to cut the pension benefits of older employees and increase 
     the operating income of employers.
       Cash balance plans are a relatively recent innovation. The 
     first cash balance plan was implemented in 1984, according to 
     the consulting firm Watson Wyatt Worldwide.\3\ Almost 
     universally, companies implementing a cash balance plan are 
     converting from some other type of defined benefit plan.\4\ 
     To date, 22% of the Fortune 100 companies have converted to 
     some sort of hybrid pension plan, over 70% of which are cash 
     balance plans.\5\ It is estimated that 20% of those in the 
     Fortune 500 have converted to a cash balance plan.\6\
       Cash balance promoters explain the popularity of cash 
     balance conversions by arguing that cash balance plans 
     provide employers with a competitive advantage because these 
     plans better suit the desires of an increasingly mobile 
     workforce.\7\ Promoters have also stated that cash balance 
     plans are easier for employees to understand because the 
     benefit is expressed in terms of a lump sum dollar amount as 
     opposed to a monthly benefit under a traditional defined 
     benefit plan.\8\ These rationales for cash balance 
     conversions are frequently pretextual.
       In truth, a significant reason that corporations convert to 
     a cash balance plan is to cut the pension benefits of older 
     workers--workers who comprise a larger and larger percentage 
     of the workforce.\9\ That cash balance plans reduce the 
     accrual rate for older workers is not a well-kept secret. 
     Kyle N. Brown, a retirement and pension lawyer with Watson 
     Wyatt Worldwide said to a Society of Actuaries Conference in 
     October of 1998: ``The economic value that is accrued, is 
     different in hybrid plans than it is for traditional plans. 
     In essence, that is part of the reason why you want to put 
     these plans in. You know you are trying to get a different 
     pattern of accrual. Well, what that means is

[[Page 2596]]

     that for your older, longer service workers, that their rate 
     of accrual is going to go down. There is going to be a 
     reduction in their rate of accrual.''
       The reason why large corporations are targeting their older 
     workers' pensions is easy to understand. Millions and 
     millions of Americans in the so-called ``baby boomer'' 
     generation are rapidly approaching retirement age. In Watson 
     Wyatt's July 1998 edition of its Insider newsletter, the 
     aging of the U.S. labor market is carefully detailed.\10\ As 
     the newsletter demonstrates, the number of workers in the 55-
     64 age category is expected to grow by 54% in the decade from 
     1996 to 2006.\11\ Companies that target the pensions of older 
     workers will thus realize tremendous cost savings when these 
     people retire.
       In addition, Watson Wyatt's Insider dispels one of the 
     other myths advanced by cash balance proponents, namely, that 
     these plans are a response to an increasingly mobile American 
     workforce: ``Contrary to popular belief, Americans are not 
     changing jobs faster than ever before. According to an in-
     depth study of employment records by Watson Wyatt, as baby 
     boomers are driving up the average age of the workforce, job 
     mobility is decreasing.'' \12\
       Cash balance plans are thus not a response to a more mobile 
     work force. In fact, as Watson Wyatt admits, the percentage 
     of workers staying at a single employer for 10 years has 
     risen in the last ten years, as has the percentage staying 
     with the same company for 20 years.\13\
       Worker mobility is not the rationale for converting to a 
     cash balance plan, money is. As 11,000 people a day turn 50, 
     which Watson Wyatt posits will turn us into a ``Nation of 
     Floridas,'' employers need to find ways to retain them. 
     Instead of creating incentives to retain older workers, 
     companies have turned to cash balance plans, which make it 
     much more likely that older workers will have to delay 
     retirement.\14\ Employers who convert to a cash balance plan 
     thus see a two-fold benefit. Companies retain older workers 
     who can no longer afford to retire and the benefits the 
     employees do receive at retirement will be significantly 
     lower.
       Just as with the worker mobility argument, cash balance 
     promoters are disingenuous when they argue that the ``lump 
     sum'' feature of cash balance plans are easier for employees 
     to understand. To the contrary, cash balance proponents have 
     argued in favor of these plans because they make it more 
     difficult for employees to understand that their benefits are 
     being reduced.\15\
       Again, cash balance promoters have been very open amongst 
     themselves about the ability of these plans to mask benefit 
     cuts. In a July 27, 1989 letter from Kwasha Lipton to Onan 
     Corporation, the consultant notes, ``One feature which might 
     come in handy is that it is difficult for employees to 
     compare prior pension benefits formulas to the cash balance 
     approach.''
       Similarly, Joseph Edmunds stated at a 1987 Conference of 
     Consulting Actuaries, ``[I]t is easy to install a cash 
     balance plan in place of a traditional defined benefit plan 
     and cover up cutbacks in future benefits.''
       Likewise, William Torrie of Price-
     WaterhouseCoopers at the October 18-23, 1998 Society of 
     Actuaries meeting said, ``[C]onverting to a cash balance plan 
     does have an advantage of it masks a lot of the changes. . . 
     .''
       In addition, current accounting rules actually encourage 
     the practice of reducing pension benefits. Due to Financial 
     Accounting Standard (FAS) 87, companies are able to report 
     pension assets as operating income. By listing pension assets 
     as operating income, companies can increase their bottom line 
     by cutting the pension benefits of their workforce, which is 
     exactly what is happening today.\16\ This is wrong, and must 
     be put to an end immediately.
       We understand that the intended purpose of FAS 87 was to 
     require the disclosure of pension liabilities. While 
     transparency regarding an employer's pension situation--both 
     as to liabilities and surpluses--would appear to be proper, 
     clearly pension assets are not operating income.\17\ And 
     allowing them to be characterized as such creates two 
     perverse incentives. First, it encourages employers to reduce 
     pension benefits in order to create large pension surpluses. 
     Second, it distorts the financial health of the company, 
     making investors believe the company is more profitable than 
     it actually is. Surplus pension assets should be used for 
     cost of living increases for pensioned retirees, and other 
     retirement benefits. Unfortunately, that is not happening 
     today.\18\ We believe that FAS 87 should be changed to 
     require employers to list net pension cost as investment 
     income instead of operating income.\19\
       In summary, despite the protestations of cash balance 
     promoters, these conversions are implemented to unlawfully 
     cut the benefits of older employees and to disguise those 
     cuts by implementing a plan that makes it virtually 
     impossible for employees to make an ``apples to apples'' 
     comparison of their benefits under the old and new plans.\20\ 
     We ask that the Treasury Department, the IRS, and other 
     federal agencies keep the admissions of cash balance 
     promoters in mind when evaluating cash balance plans' 
     compliance with federal age discrimination statutes.\21\
       (2) Cash balance plans are defined benefit plans, not 
     defined contribution plans.
       Although there seems to be little dispute that cash balance 
     plans are defined benefit plans and not defined contribution 
     plans, we address it briefly.\22\ ERISA and the Code 
     recognize only two types of pension plans: defined benefit 
     and defined contribution plans. In the most basic terms, the 
     distinction between the two is who bears the risk of 
     investment gains and losses. In defined benefit plans, the 
     employer bears the risk and in defined contribution plans, it 
     is the participant. ERISA defines a defined contribution or 
     individual account plan as, ``[A] pension plan which provides 
     for an individual account for each participant and for 
     benefits based solely on the amount contributed to the 
     participant's account, and any income, expenses, gains, and 
     losses, and any forfeitures of accounts of other participants 
     which may be allocated to such participant's account.'' \23\
       A defined benefit plan is any other pension plan which is 
     not a defined contribution plan.\24\
       Cash balance pension plans are not defined contribution 
     plans because they are employer-funded and participants do 
     not bear the risk (nor reap the benefits) of investment gains 
     and losses. Nor, despite the fact that participants are 
     presented with hypothetical ``cash balances'' do they have 
     segregated accounts.
       Employer cash balance contributions are typically comprised 
     of two components: a pay credit and an interest credit. The 
     pay credit is generally a fixed rate of an employee's salary. 
     The interest credit is designed to mimic defined contribution 
     plans by providing a hypothetical investment return, usually 
     calculated as a fixed interest rate or tied to an index such 
     as the yield on 30-year U.S. Treasury Bonds. Because this 
     interest credit is calculated based on the difference between 
     an employee's age and normal retirement age, the amount of 
     this interest credit relative to the pay credit decreases as 
     the employee ages.
       (3) Cash balance plans fail to meet the requirements for 
     defined benefit plans and violate federal anti-age 
     discrimination statutes.
       Because cash balance plans are defined benefit plans, they 
     must comply with the letter of the relevant provisions of 
     ERISA, the Internal Revenue Code and the ADEA. All three 
     legal regimes provide that the rate of pension benefit 
     accruals not be reduced based on the employee's age.\25\ Cash 
     balance pension conversions violate these provisions because 
     the rate of benefit accrual is reduced and is reduced because 
     of the employee's age. This problem is exacerbated by plan 
     provisions commonly referred to as ``wear away,'' which 
     prevents older workers from earning new benefits under the 
     new plan until they exceed those that the employee accrued 
     under the former plan.
       As the IRS is aware, the Code and ERISA contains a detailed 
     set of standards with which defined benefit plans must 
     comply. Those standards include rules for reporting and 
     disclosure, participation and vesting, funding, fiduciary 
     responsibility, and administration and enforcement. The 
     benefit accrual requirements, which are contained in the 
     participation and vesting requirements, are fundamental and 
     critical protections to ensure that pension plan participants 
     fairly accrue and receive benefits under their pension plans. 
     The benefit accrual rules are an important assurance that 
     participants are treated fairly and that the plan sponsor 
     does not design the plan to benefit only certain types of 
     workers.
       Under section 204(b)(1)(G) of ERISA, defined benefit plans 
     are not in compliance with the law ``. . . if the 
     participant's accrued benefit is reduced on account of an 
     increase in his age or service.'' Furthermore, under ERISA 
     Sec. 204(b)(1)(H)(i) and Code Sec. 411(b)(1)(H)(i) and ADEA 
     Sec. 4(i)(1)(A), a defined benefit shall not be treated as in 
     compliance ``. . . if, under the plan, an employee's benefit 
     accrual is ceased, or the rate of an employee's benefit 
     accrual is reduced, because of the attainment of any age.''
       In addition, one of the key elements of a defined benefit 
     plan is that it promises and provides benefits in the form of 
     an annuity, a monthly or regular stream of payments at 
     retirement. ERISA Sec. 3(23) expressly requires that defined 
     benefit plans determine an individual's accrued benefit ``. . 
     . expressed in the form of an annual benefit commencing at 
     normal retirement age.'' And, Code Sec. 411(a)(7), for 
     purposes of section 411 vesting and accrual rules, defines 
     ``accrued benefit'' in the case of a defined benefit plan as 
     ``the employee's accrued benefit determined under the plan 
     and, except as provided in subsection 9(c)(3), expressed in 
     the form of an annual benefit commencing at normal retirement 
     age.'' We firmly believe that the age-neutrality of benefit 
     accruals must be assessed based upon a normal retirement age 
     annuity and not on the basis of cash balance plan 
     ``hypothetical accounts'' which have no legal status under 
     current law.
       Based upon these requirements, cash balance conversions are 
     in violation of ERISA, the Internal Revenue Code and ADEA. By 
     definition, older participants accrue benefits at a lesser 
     rate because they have a shorter period of time to earn 
     interest than younger

[[Page 2597]]

     workers do. Under a cash balance scheme, the interest credit 
     is tied directly to the employee's age.
       As Lee Sheppard observed in her January 11, 1999 article in 
     Tax Notes Today (emphasis added), ``Whether a cash balance 
     plan would satisfy the proposed [IRS] regulation depends on 
     the definition of `rate of accrual.' If rate of accrual is 
     defined by projecting the participant's benefit to an annual 
     benefit beginning at normal retirement age, then cash balance 
     plans flunk, because the size of the participant's 
     actuarially determined benefit is purely a function of his or 
     her age. Indeed, it is impossible to estimate a cash balance 
     plan participant's pension benefit without knowing his or her 
     age.''
       Professor Edward Zelinsky of the Benjamin N. Cardozo School 
     of Law came to the same conclusion in his October 1999 paper, 
     entitled, ``The Cash Balance Controversy'' (emphasis added), 
     ``As a matter of law, the typical cash balance plan violates 
     the statutory prohibition on age-based reductions in the rate 
     at which participants accrue their benefits * * *. There is 
     no dispute about the underlying arithmetic: as cash balance 
     participants age, the contributions made for them decline in 
     value in annuity terms. Moreover, cash balance arrangements 
     are defined benefit plans and therefore measure accrued 
     benefits in terms of annuity equivalents, not in terms of the 
     contributions themselves.''
       Cash balance promoters attempt to counter conclusions such 
     as Ms. Sheppard's and Professor Zelinsky's by arguing that 
     the rate of benefit accrual under a cash balance plan should 
     not be calculated by projecting the pension benefits into an 
     annuity beginning at normal retirement age. They point out 
     that neither the Code nor ERISA define ``rate of benefit 
     accrual.'' Instead, some suggest that the IRS should look at 
     the absolute dollar amount ``credited'' to employees' cash 
     balance ``accounts'' annually or that the IRS should remove 
     cash balance interest credits from its analysis.
       This argument is generally founded on statutory 
     construction that is nonsensical. The accepted canons of 
     statutory construction dictate that words and phrases should 
     not be interpreted in isolation, but rather in the context in 
     which they are used. Section 411(a)(7) of the Code requires 
     an employees ``accrued benefit'' to be expressed in terms of 
     an annual benefit commencing at normal retirement age * * 
     *.'' The term ``accrued benefit'' is used throughout section 
     411(b)(1). Cash balance promoters opine that, because the 
     term ``rate of benefit accrual'' is used instead of ``accrued 
     benefit'' in section 411(b)(1)(H)(i), Congress did not intend 
     that the IRS should evaluate compliance with 
     Sec. 411(b)(1)(H)(i) by projecting an employee's annual 
     benefit beginning at normal retirement age.
       It is not surprising that the term accrued benefit is not 
     used in Sec. 411(b)(1)(H)(i). This subparagraph is concerned 
     with the pace at which the accrued benefit grows. To insert 
     the term ``accrued benefit'' in this section would make it 
     nonsensical. However, by reference to the provisions in the 
     same paragraph, it is obvious that the benefit that is 
     accruing is the projected annual benefit at normal retirement 
     age.\26\
       Any doubt about the meaning of the language of 
     Sec. 411(b)(1)(H)(i) is resolved by comparing it to the 
     Sec. 411(b)(2)(A), which states in relevant part, ``A defined 
     contribution plan satisfies the requirements of this 
     paragraph if * * * the rate at which amounts are allocated to 
     the employee's account is not reduced, because of the 
     attainment of any age.''
       In essence, cash balance promoters argue that the IRS 
     should apply Sec. 411(b)(2)(A) in determining whether cash 
     balance conversions violate the age discrimination statute. 
     But, cash balance plans are defined benefit plans, not 
     defined contribution plans. As such, cash balance plans must 
     comply with Sec. 411(b)(1)(H)(i). A comparison of the 
     language of these two sections evidences a different 
     standard. The only interpretation that makes sense given the 
     context of Sec. 411(b)(1)(H)(i) and a comparison with the 
     language of Sec. 411(b)(2)(A) is that the rate of benefit 
     accrual is evaluated in terms of the projected annual benefit 
     at normal retirement age.
       This interpretation is borne out in the comments of Paul 
     Strella--currently at the pension consultant firm of William 
     M. Mercer and formerly a Tax Benefit Counsel at the 
     Department of Treasury--at a 1992 Enrolled Actuaries Meeting: 
     ``There is a rule in the Internal Revenue Code, along with 
     ERISA, that says that the rate of accrual, the rate of 
     benefit accrual in a pension plan can not decline merely on 
     account of increasing age. Well, a cash balance plan does 
     exactly that.''
       This view is also apparently shared by some within the IRS. 
     For example, a September 3, 1998 memorandum from the District 
     Director of the Ohio Key District in Cincinnati, Ohio to the 
     Director of Employee Plans Division in Washington, DC states 
     that at least one cash balance plan ``does not satisfy the 
     clear and straightforward requirement of Sec. 411(b)(1)(H)(i) 
     of the Code because the plan's benefit accrual rate decreases 
     as a participant attains each additional year of age.''
       (4) The ``wear-away'' feature of many cash balance 
     conversions violate federal anti-age discrimination statutes.
       In addition to violating Code Sec. 411(b)(1)(H)(i), and 
     related sections of ERISA and the ADEA, by reducing benefit 
     accruals based on age, many cash balance plans violate 
     federal age discrimination law, including Sec. 411(d)(6) of 
     the Code, through their use of the wear-away mechanism. It 
     was only during the past year that members of Congress became 
     aware that in many cash balance conversions, older workers do 
     not accrue new pension benefits until they have ``worn away'' 
     their previously earned benefits. To permit pension plans to 
     include ``wear away'' violates both the letter and spirit of 
     two key ERISA [and ADEA] principles: (1) that accrued 
     benefits cannot be reduced, and (2) that pension plans cannot 
     discriminate on the basis of age. To deny participants 
     additional accruals on the basis of years of service and 
     benefits already accrued under the plan before the amendment 
     is contrary to public policy. In this situation, benefits 
     accrued based on years of service absolutely is a proxy for 
     age. Plan wear-away provisions do not meet the ERISA/IRC 
     exception for explicit uniform limitations on benefit 
     accruals for all workers based upon a maximum number of years 
     of service. Under wear-away clauses, the only workers who do 
     not receive continued accruals are the oldest workers. To 
     claim that they always remain entitled to their accrued 
     benefit, even though every day it is being eroded and used 
     against their ability to earn new benefits, makes a mockery 
     of ERISA's accrued benefit protections.
       There is little doubt that the wear-away feature of cash 
     balance plans is targeted at older workers. The wear-away 
     takes place because the benefits the employee is entitled to 
     under the traditional defined benefit plan are greater than 
     those under the cash balance plan. By definition, the 
     employees that fit this profile are older workers because 
     benefits under a traditional defined benefit plan accrue more 
     quickly for the older, more senior workers while the rate of 
     accrual under a cash balance plan accrue more slowly for this 
     group of employees. Given the age discriminatory intent of 
     cash balance promoters, the IRS should cast a jaundiced eye 
     at their claims that the disproportionate impact of wear-away 
     on older workers is not by design.
       In our mind, the practice of wear-away is contrary to the 
     law and public policy and cannot be allowed to continue. The 
     fact that the IRS has not objected to these provisions in the 
     past, and may have given some plan sponsors prefatory 
     language refuting any age discrimination questions, should 
     not stand in the way of the IRS and other agencies fresh 
     assessment of whether cash balance plans comply with the law. 
     In light of the wealth of new information that has become 
     public in the past year, it is critical that the IRS take all 
     needed steps to ensure that all pension plans comply with the 
     law.
       (5) Cash balance conversions should therefore be 
     disqualified under existing law.
       As we have discussed, cash balance pension conversion are 
     illegal under Sec. 411(b)(1)(H) of the Internal Revenue Code, 
     Sec. 204(b)(1)(H) of ERISA, and Sec. 4(i)(1)(A) of ADEA in 
     terms of accrual rates. We have also indicated that most cash 
     balance conversions are in violation of Sec. 411(d)(6) of the 
     Internal Revenue Code dealing with wear away.
       Since, cash balance conversions are in violation of these 
     laws, we believe that the IRS should disqualify these 
     conversions under current law. Cash balance promoters have 
     appealed for regulatory relief on the grounds that they were 
     lulled into a false sense of security about the legality of 
     cash balance conversions. We have little sympathy for their 
     arguments. Much of the difficulty in uncovering the age 
     discriminatory nature of cash balance conversions lies with 
     the promoters themselves and they are entitled to no benefit 
     from the confusion of their own making.
       Finally on this point, we note that most of the arguments 
     made by cash balance promoters are policy arguments for why 
     hybrid pension plans, including cash balance plans, are a 
     positive development that deserve the support of the federal 
     government. Even if those arguments had some merit, which in 
     our strong view they do not, those arguments are 
     inappropriate in this regulatory context. Cash balance 
     conversions violate federal anti-age discrimination statutes.
       (6) A safe harbor should be established allowing cash 
     balance plans to meet existing legal requirements only if all 
     employees are allowed to choose which pension plan works best 
     for them with detailed disclosure.
       In consideration of the goals of the age discrimination 
     regimes in the Code, ERISA, and the ADEA, and based on our 
     considerable consultation with employees affected by cash 
     balance conversions, we also believe that a safe harbor 
     should be established that would protect the tax-exempt 
     status of cash balance conversions if the employers offer all 
     current employees the choice to remain in the traditional 
     defined benefit plan. We believe that such a safe harbor 
     would come the closest to proverbial ``win-win'' outcome for 
     all stakeholders in the cash balance pension debate.
       The safe harbor that we are recommending would necessarily 
     require the employer to provide a detailed individualized 
     statement

[[Page 2598]]

     allowing the employees to easily compare between the 
     traditional defined benefit plan and the cash balance plan. 
     If the company does not want to provide these individualized 
     statements, the company may be exempted from this requirement 
     only if they allow their employees to choose which pension 
     plan works best for them on the date that they leave the 
     company. On this date, the company must also allow the 
     employees to compare exactly how much they would receive 
     under the traditional defined benefit plan and the cash 
     balance plan.
       Due to the complexities involved, we believe that companies 
     that have already converted to cash balance plans should be 
     given at least 90 days to make the above changes in their 
     pension plan. As we noted above, from a policy standpoint we 
     believe this represents a middle ground that would most 
     effectively address the concerns of all involved. For the 
     employers, their pension plans would continue to enjoy tax-
     exempt status. And, for the employees, they would be able to 
     continue to receive the pension benefits that were promised 
     to them.
       We do not, however, offer here an opinion about whether the 
     IRS has the authority to implement such a safe harbor under 
     current federal law. If the IRS determines that it does not 
     have the authority to do so, we stand ready to support an IRS 
     request to implement the necessary statutory changes.
       Thank you for giving us this opportunity to express our 
     views. We look forward to working with you to address the 
     serious age discriminatory impact of cash balance 
     conversions.
           Sincerely,
         Bernard Sanders, George Miller, William Clay, Martin 
           Frost, Barney Frank, Edward J. Markey, Patsy Mink, 
           Marcy Kaptur, Peter J. Visclosky, Rush D. Holt, Carolyn 
           B. Maloney, Lynn C. Woolsey, Sherrod Brown, John 
           Conyers, Jr., Jerrold Nadler, Martin Olav Sabo, Nancy 
           Pelosi, Luis V. Gutierrez, John Elias Baldacci, Cynthia 
           A. McKinney, Donald M. Payne, Peter A. DeFazio.
         Tammy Baldwin, Lane Evans, Frank Pallone, Jr., Sheila 
           Jackson-Lee, Tom Lantos, Steven R. Rothman, Dennis J. 
           Kucinich, Janice D. Schakowsky, Eleanor Holmes Norton, 
           Robert A. Brady, Corrine Brown, Michael P. Forbes, Gary 
           L. Ackerman, John Joseph Moakley, James P. McGovern, 
           John F. Tierney, Neil Abercrombie, Bob Filner.
         Michael F. Doyle, Major R. Owens, Michael E. Capuano, 
           Danny K. Davis, Alcee L. Hastings, Carolyn McCarthy, 
           Bobby Rush, Barbara Lee, Ron Klink, Tom Barrett, John 
           W. Olver, Bennie G. Thompson, Sanford D. Bishop, Jr., 
           Ted Strickland, Jesse L. Jackson, Jr., Bobby Scott, 
           Stephanie Tubbs Jones, Pat Danner, James Traficant, 
           Bill Luther.


                               footnotes

     \1\ These anti-age discrimination statutes include not only 
     the ADEA, but also the Internal Revenue Code, and ERISA as 
     amended.
     \2\ Outside pension advisors who promote the cash balance 
     concept as a way to cut pension benefits were well aware of 
     the age discriminatory impact of these conversions as 
     evidenced by comments made in correspondence and at actuarial 
     meetings. For instance, comments made at numerous American 
     Society of Actuaries meetings bear out the widespread 
     understanding that cash balance conversions targeted the 
     benefits of older workers. This does not, however, in any way 
     absolve the many corporations--including many Fortune 500 
     companies--who have made these conversions and who all 
     ostensibly have sufficient inhouse expertise to understand 
     the impact of these plans. We are not aware of any companies 
     who have implemented a cash balance conversion based on the 
     advice of outside consultations but who lacked a full 
     understanding of the ramifications for their older workers. 
     If they do exist, they have yet to come forward.
     \3\ See www.watsonwyatt.com/homepage/us/news/pres_rel/Jan99/
hybrid-tm.htm.
     \4\ Based on unconfirmed anecdotal evidence, there may be one 
     or two companies that have implemented a cash balance ``from 
     scratch.'' However, given the hundreds of companies that have 
     implemented conversions, federal agencies' review of cash 
     balance plans should focus on them in the context of 
     conversions.
     \5\ See www.watsonwyatt.com/homepage/us/news/pres_rel/Jan99/
hybrid-tm.htm.
     \6\ Daniel Eisenberg, ``The Big Pension Swap,'' Time Magazine 
     (April 19, 1999) at 36 (``20% of Fortune 500 companies, 
     including AT&T and Xerox, now offer these plans which cover 
     close to 10 million workers nationwide.'').
     \7\ Ellen Schultz, ``The Young and Vestless,'' The Wall 
     Street Journal (December 16, 1999) at A1. (``Employers . . . 
     increasingly acknowledge that switching to the new plans does 
     reduce benefits for many veteran employees. But compensating 
     for this, they say, is that the plans are better for a 
     younger, more mobile workforce.'').
     \8\ The ERISA Industry Committee, Understanding Cash Balance 
     Plan: (``Unlike traditional defined benefit plans, cash 
     balance plans provide an easily understood account balance 
     for each participant.'').
     \9\ There is also growing evidence that cash balance 
     conversions do not benefit younger workers. Ellen Shultz, 
     ``The Young and Vestless.'' The Wall Street Journal (December 
     16, 1999) at A1. (``Many younger workers are no more likely 
     to collect a benefit from these new-fangled plans than they 
     are from traditional pensions. And when they do collect, they 
     often fare only a little better under a cash-balance 
     system.''
     \10\ See www.watsonwyatt.com/hompage/us/new/Insider/6_98.HTM.
     \11\ See id.
     \12\ See id. (emphasis added).
     \13\ See id.
     \14\See www.watsonwyatt.com/homepage/us/res/workmgmt-tm.htm 
     (``Are you paying for performance or for tenure and age:'') 
     (emphasis added).
     \15\ The authors understand that no current federal law 
     prevents a company from reducing future pension benefits. 
     However, federal law prohibits such cuts from being 
     implemented in an age discriminatory fashion. In this case, 
     companies are using cash balance plans to conceal 
     impermissible age discrimination.
     \16\ Ellen Shultz, ``Joy of Overfunding: Companies Reap a 
     Gain Off Fat Pension Plans,'' The Wall Street Journal (June 
     15, 1999) at A1. (``Thanks to an accounting rule that is 
     little known to either shareholders or analysts, and that was 
     written for a very different era, there is a way to gain from 
     the pension surplus. The rule provides that if investment 
     returns on pension assets exceed the pension plans' current 
     costs, a company can report the excess as a credit on its 
     income statement. Voila: higher earnings.'').
     \17\ Ellen Shultz, ``How Pension Surpluses Lift Profits,'' 
     The Wall Street Journal (September 20, 1999) at C1. 
     (``Pension income isn't what you would consider operating 
     income at these companies; it is more along the lines of 
     investment income.'').
     \18\ Ellen Shultz, ``Joy of Overfunding: Companies Reap a 
     Gain Off Fat Pension Plans,'' The Wall Street Journal (June 
     15, 1999) at A1. (``In the early 1980s, 60% of large 
     companies provided regular cost-of-living increases for 
     pensioned retirees; today, with the plans in better financial 
     shape, fewer than 4% do.)
     \19\ A September 17, 1999 Bear Stearns Study, entitled 
     ``Retirement Benefits Impact Operating Income,'' reached a 
     similar conclusion. (``We . . . recommend that the components 
     of net pension cost be disaggregated for purposes of 
     financial analysis.)
     \20\ While not the focus of these comments, the authors do 
     believe that current federal law needs to be amended to 
     increase the disclosure requirements when companies decrease 
     their employees' future pension benefits.
     \21\ In light of these statements, in the event of litigation 
     challenging the legality of cash balance conversions, the 
     authors believe plaintiffs would have little difficulty 
     establishing the discriminatory intent of the actuaries and 
     companies promoting cash balance plans.
     \22\ The authors have omitted a lengthy discussion of the 
     differences between defined contribution and defined benefit 
     plans because the IRS is well versed in those distinctions.
     \23\ ERISA Sec. 3(34).
     \24\ ERISA Sec. 3(35) (describing a defined benefit plan as 
     ``a pension plan other than an individual account plan.'')
     \25\ See ERISA Sec. 204(b)(1)(H)(i), Code 
     Sec. 411(b)(1)(H)(i) and ADEA Sec. 4(i)(1)(A).
     \26\ See, e.g., NRLB v. Federbush Co. Inc., 121 F. 2d 954, 
     957 (2d 1941) (``Words are not pebbles in alien 
     juxtaposition; they have only a communal existence; and not 
     only does the meaning of each interpenetrate the other, but 
     all in their aggregate take their purport from the setting in 
     which they are used. . . .'')

  Mr. PORTMAN. Mr. Speaker, I yield myself 1 minute to respond briefly. 
We are going to hear a lot about tax cuts for the rich from the other 
side apparently. I would just like to remind Members about what is 
actually in this legislation. There is health insurance for those who 
are self-employed. Those are people who are primarily small 
businesspeople. These are not the rich. There is community renewal here 
for our very poorest neighborhoods, rural and urban neighborhoods 
around America. Those are the people who will benefit. With regard to 
the low-income tax credit, that is going to benefit not the rich; it is 
going to benefit people who need the benefit of government help in 
housing.
  With regard to pensions, and I see my colleague here from North 
Dakota. Let us look at the benefits. Seventy-seven percent of the 
people who are currently participating in pensions make less than 
$50,000 a year. These are not rich people. These are people who need 
our help. I would just say, I have now had a chance to look at the 
Democratic alternative, as I have been sitting here, in more detail. It 
provides a net $8 million in tax relief as I see it over 5 years. The 
Republican alternative provides through all those items I just 
mentioned about $48 billion worth of needed tax relief that is going to 
help all Americans.
  Mr. Speaker, I yield 1 minute to the gentleman from New York (Mr. 
Reynolds).
  Mr. REYNOLDS. Mr. Speaker, I think my colleague from Ohio outlined 
specifically that anyone who tries to sell this tax plan as a tax cut 
for the rich has not read the legislation introduced by my Republican 
colleagues. This bill clearly goes after taking an opportunity to take 
care of middle America and our low-income families, whether it is 
addressing low-income tax credits or housing or more particularly 
looking at those people who pay insurance.
  To have an opportunity as self-employed individuals to begin to have 
some relief on the cost of paying for that insurance while self-
employed is an opportunity that this bill begins to address. Quite 
frankly we need to do more than what the $28 billion that has been 
afforded in this tax package has done for Americans.

[[Page 2599]]


  Mr. RANGEL. Mr. Speaker, I yield 2 minutes to the distinguished 
gentleman from North Dakota (Mr. Pomeroy).
  Mr. POMEROY. Mr. Speaker, I thank the gentleman for yielding me the 
time. I want to begin by commending the gentleman from Ohio (Mr. 
Portman), who is truly a leader in retirement savings initiatives. How 
I wish that the provisions in this bill that reflect his very good work 
were before us in a fair and thoroughly considered way. I think we 
could have a 100 percent vote out of this House as we advance the 
opportunities for Americans to save for retirement. But unfortunately, 
that is anything but the bill that is in front of us.
  They will talk about this good thing, and they will talk about that 
good thing and let us recognize them for what they are, window dressing 
on a bill, the heart of which is an estate tax cut giving direct tax 
benefit to the wealthiest people in the country. It is a fine thing to 
do, but is that our first priority for tax relief?
  Some will say our farmers need this, and I want to contrast in the 
balance of my remarks their plan versus our plan as it regards farmers. 
An analysis of their proposal shows that farms under $13 million, farms 
and small businesses with assets under $13 million fare better under 
the Democrat substitute. The Democrat substitute effectively takes up 
to $4 million for estate tax relief. Checking with the census on data 
in North Dakota, the State I represent, 99.7 percent of the farms fare 
better under the Democrat plan because they are under that $13 million 
figure. That lets us know the amount in their plan that goes toward the 
wealthiest, the very wealthiest people in this country.
  Only this majority could take what was initially designed to be 
minimum wage legislation and lard it up with a huge windfall for the 
wealthiest people in this country. I particularly resent saying that 
theirs is the one that helps the family farmer. If Members want to help 
the family farmer, vote for the Democrat substitute that effectively 
takes estate tax relief to $4 million, not their plan.
  The SPEAKER pro tempore (Mr. Pease). Without objection, the gentleman 
from Arizona (Mr. Hayworth) will control the time of the gentleman from 
Ohio (Mr. Portman).
  There was no objection.
  Mr. HAYWORTH. Mr. Speaker, I yield myself 1 minute to make a couple 
of points in response to my good friend from North Dakota. I am pleased 
that he embraces the notion of death tax relief for family farms. I am 
sorry he neglected to offer us the name of the source for his analysis 
that smaller farms would be helped. I look forward to a response on 
their side on their time with that information.
  What I would also like to point out is correspondence that the 
Speaker has received from the Small Business Survival Committee, Mr. 
Speaker. It reads, and I quote, ``The alternative offered by the 
minority, the alternative is a de facto tax increase on small 
businesses, that are the leading source of new jobs and economic 
expansion in America. The alternative to the tax plan being considered 
today would severely jeopardize the financial security of the small 
business community.''

  I would reiterate that when we take a look at the package being 
offered as the alternative, Mr. Speaker, it offers a net $8 million of 
tax relief as opposed to the majority common sense plan, $48 billion in 
tax relief.
  Mr. Speaker, I reserve the balance of my time.
  Mr. RANGEL. Mr. Speaker, I yield 2 minutes to the gentleman from 
California (Mr. Sherman).
  Mr. SHERMAN. Mr. Speaker, this budget-busting, Social Security-
risking tax bill would cause the sheriff of Nottingham to cringe in 
embarrassment because it is the most regressive tax bill in recent 
history. Three-quarters of the benefits go to the top 1 percent, a 
group of people with an average income of $900,000. Its estate tax 
provisions are even more regressive. We are denounced for class warfare 
rhetoric, but this bill is a sneak attack against working Americans.
  Mr. Speaker, in the spirit of today's game shows, this bill does not 
ask who wants to be a millionaire, nor does it ask who wants to marry a 
multimillionaire. It asks who wants to give huge tax breaks to multi-
multimillionaires. And I emphasize ``million heirs,'' because the 
breaks go chiefly not to those who are rich because of their efforts 
but those who become rich because of their clever selection of parents.
  Ninety-five percent of Americans get 13 bucks out of this bill. There 
are some pennies for average Americans. But the top 1 percent get 
$6,000 of tax relief, or as we say in L.A., dinner at Spagos. This bill 
is so obnoxious, so regressive, that it is being packaged in the 
rhetoric of talking about the average beauty shop owner. But to get the 
benefits, you need an estate of $4 million and more. That is a lot of 
beauty shops. And then they take this deceptively packaged tax bill and 
they feel they cannot conceal it enough, so they wrap it in an increase 
in the minimum wage. This bill provides over $100 billion of tax relief 
to the superrich, and it provides $11 billion of wage increases to 
those who make $5.15 an hour.
  Mr. Speaker, I include for the Record the following documents from 
the Citizens for Tax Justice:

 House GOP Minimum Wage Plan Offers $11 in Upper-Income Tax Breaks for 
                 Every $1 in Wage Hikes for Low Earners

       The House GOP leadership's $123 billion tax-cut/minimum 
     wage plan, to be voted on this week, would give upper-income 
     taxpayers $11 in tax breaks over the next decade for every 
     dollar in increased wages paid to low-wage workers.
       Unbalanced Acts, a joint analysis of the GOP proposal by 
     Citizens for Tax Justice and the Economic Policy Institute, 
     finds:
       Over the next decade, the proposed tax cuts will total 
     $122.8 billion. Over the same period, wage increases stemming 
     from the $1 boost in the minimum wage will total only $11.2 
     billion. This means that over ten years, for every dollar in 
     higher wages for low-wage workers, $10.90 in upper-income tax 
     breaks will be provided.
       Almost all the tax cuts (91.4%) would go to the best-off 
     tenth of all taxpayers. In fact, the top one percent of all 
     taxpayers, those making more than $319,000 a year, would get 
     almost three-quarters of the tax reductions. Their average 
     annual tax cut under the plan would be $6,128 each (in 1999 
     dollars). That compares to only a $4 average tax cut for the 
     bottom 60 percent.
       While the tax bill's permanent tax cuts grow to $17.6 
     billion by 2010, the effect of the minimum wage proposals 
     will be totally eroded by inflation after 2006.
       ``The minimum wage hike will allow low-wage workers to 
     share in the gains of this economic recovery, while the 
     proposed tax cuts will needlessly provide a second helping of 
     the economic pie to the wealthiest taxpayers,'' said EPI Vice 
     President Lawrence Mishel.
       ``It's ridiculous that a minimum wage bill supposedly 
     designed to aid low-wage workers would actually give its 
     biggest benefits to the highest-income people in the 
     country.'' said Citizens for Tax Justice, director Robert S. 
     McIntyre.
       EPI's minimum wage analysis compares the wage hikes under 
     the GOP plan, which would boost the minimum wage by $1 over 
     three years, to the wages that affected workers would earn if 
     their wages merely keep up with inflation over the next 
     decade. The GOP's three-year phase-in of the wage boost 
     provides an $11.2 billion gain to these workers over ten 
     years--$3.8 billion less than the Bonior-Kennedy proposal's 
     two-year implementation plan, which would produce a total of 
     $15 billion in higher wages.
       The distributional effects of the tax cuts were analyzed by 
     CTJ using the Institution on Taxation and Economic Policy Tax 
     Model. The $123 billion estimated ten-year cost of the tax 
     cuts is based on preliminary, March 1, 2000 estimates from 
     the Joint Committee on Taxation. (The tax cut plan would, 
     among other things: cut estate taxes by $79 billion over ten 
     years--representing almost two-thirds of the total proposed 
     tax cuts; increase the write-off for business meals to 60% of 
     cost from 50% under current law; provide added tax breaks for 
     pensions and 401(k) plans; increase the limits on immediate 
     write-offs of business capital investments; speed up the date 
     when 100% of self-employed health insurance can be deducted; 
     restore a loophole for installment sales that was repealed in 
     1999; expand enterprise zones; expand the tax credit for 
     investors in low-income housing; expand the tax credit for 
     investors in low-income housing; and augment tax breaks for 
     private tax-exempt bonds.)
       A table detailing the distributional effects of the tax 
     cuts follows:

[[Page 2600]]



                                             EFFECTS OF THE TAX CUTS IN THE HOUSE GOP 2000 MINIMUM WAGE BILL
                                               [Annual effects at 1999 levels; $-billion except averages.]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                              Percent of
          Income group                   Income range            Average     Estate tax   Corporate    Pensions &   Total tax   Average tax   total tax
                                                                  income        cuts      tax breaks     401Ks         cuts         cut          cut
--------------------------------------------------------------------------------------------------------------------------------------------------------
Lowest 20%.....................  Less than $13,600...........       $8,600         -0.0         -0.0         -0.0         -0.0           -1         0.3%
Second 20%.....................  13,600-24,400...............       18,800         -0.0         -0.1         -0.0         -0.1           -4         0.9%
Middle 20%.....................  24,400-39,300...............       31,100         -0.0         -0.2         -0.0         -0.2           -7          1.7
Fourth 20%.....................  39,300-64,900...............       50,700         -0.0         -0.3         -0.0         -0.3          -13          3.0
Next 15%.......................  64,900-130,000..............       86,800         -0.0         -0.4         -0.1         -0.6          -29         5.3%
Next 4%........................  130,000-319,000.............      183,000         -0.8         -0.5         -0.4         -1.7         -329        15.7%
Top 1%.........................  319,000 or more.............      915,000         -5.7         -1.4         -0.7         -7.7       -6,128        73.1%
                                                                           -----------------------------------------------------------------------------
All............................  ............................  ...........         -6.5         -2.8         -1.2        -10.6          -83       100.0%
Addendum:
    Bottom 60%.................  Less than $39,300...........      $19,500          0.0         -0.3         -0.0         -0.3           -4         2.8%
    Top 10%....................  92,500 or more..............      218,000         -6.5         -2.0         -1.1         -9.7         -765        91.4%
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notes: Figures show the annual effects of the approximately $123 billion in tax cuts over the next 10 years included in the GOP minimum wage increase
  plan to be voted on by the House on March 9 or 10. All provisions are measured as fully effective, at 1999 income levels. Distributional figures do
  not include the faster phase-in of the self-employed health insurance deduction.
Source: Institute on Taxation and Economic Policy Tax Model. Citizens for Tax Justice, March 7, 2000.

       The report, Unbalanced Acts, is available on-line at both 
     www.epinet.org and www.ctj.org. It can also be obtained by 
     calling 1-800-374-4844.
                                  ____


                            Unbalanced Acts


        a comparison of the proposed minimum wage and tax bills

     (By Jared Bernstein, Robert S. McIntyre, and Lawrence Mishel)

       The good news is that an increase in the federal minimum 
     wage looks like a real possibility. How good the news is, 
     however, depends on which of the two competing proposals wins 
     out. The differences between the two proposals are not 
     insignificant, especially when considering the billions of 
     dollars in tax cuts in which the GOP leadership has couched 
     its minimum wage proposal. A comparison of the size and 
     phase-in periods of the competing minimum wage proposals in 
     relation to the proposed $123 billion GOP tax cut package 
     finds that:
       The $123 billion in tax reductions proposed by the House 
     GOP leadership over the 2000-10 period is nearly 11 times 
     greater than the $11.2 billion in wage hikes that would be 
     generated by its accompanying minimum wage proposal.
       Over the course of a decade, for every dollar in higher 
     wages generated for low-wage workers by the House GOP plan, 
     $10.90 in tax cuts will be provided, mostly for those with 
     the highest incomes.
       While the tax bill's permanent tax cuts grow to $17.6 
     billion in fiscal year 2010, the effect of both of the 
     minimum wage proposals will be totally eroded by inflation 
     after fiscal year 2006.
       The Bonior-Kennedy minimum wage proposal's two-year 
     implementation plan providers a total of $15 billion in 
     higher wages, while the GOP plan's three-year schedule 
     provides an $11.2 billion gain to these workers, or $3.8 
     billion less.
       Ninety-one percent of the gains from the GOP's proposed tax 
     reductions are targeted to the wealthiest 10%, with 73.1% 
     accruing to the richest 1% of households. In contrast, the 
     minimum wage proposals are designed to aid the lowest-income 
     workers.


    an analysis of the gains from the tax and minimum wage proposals

       Quantifying the aggregate wage gains over the next 10 years 
     under both the Bonior-Kennedy and the House GOP minimum wage 
     proposals (see appendix for methodology) allows for a clear 
     comparison of the proposed minimum wage increases and the 
     proposed tax legislation (Table 1).

  TABLE 1.--COMPARISON OF ANNUAL AND CUMULATIVE IMPACT OF HOUSE GOP TAX
                     AND MINIMUM WAGE PLANS, 2000-10
                          [amounts in billions]
------------------------------------------------------------------------
                                       House GOP         Comparison of
                                 --------------------  House GOP tax and
                                                         min wage plan
                                                     -------------------
                                                                Ratio of
           Fiscal year                                          tax cuts
                                  Tax cuts  Min wage              to MW
                                                       (1)-(2)  plan (in
                                                                percent)
                                                                 (1)/(2)
------------------------------------------------------------------------
Annual impact:
    2000........................      $0.5      $0.7     -$0.2        73
    2001........................       2.4       1.7       0.7       142
    2002........................       9.2       3.2       6.1       292
    2003........................      10.6       2.7       7.9       395
    2004........................      10.8       1.7       9.1       626
    2005........................      12.3       0.9      11.4     1,301
    2006........................      13.4       0.4      13.0     3,421
    2007........................      14.4  ........      14.4     (\1\)
    2008........................      15.2  ........      15.2     (\1\)
    2009........................      16.3  ........      16.3     (\1\)
    2010........................      17.6  ........      17.5     (\1\)
Cumulative impact:
    2000-10.....................     122.8      11.2     111.6     1,093
    2000-05.....................      45.8      10.8      35.0       422
------------------------------------------------------------------------
\1\ Cannot calculate ratio with zero as denominator.
Source: EPI/Joint Committee on Taxation.

       The GOP minimum wage proposal would be phased in over three 
     years, with two annual increases of $0.33 and one of $0.34; 
     the Bonior-Kennedy plan would involve two annual $0.50 
     increases. After the full implementation of these increases, 
     the effects of the minimum wage hike will decline as 
     inflation continues its ongoing erosion of the value of the 
     minimum wage. After fiscal year 2006, inflation will have 
     eroded the new minimum to the point that it will represent no 
     improvement over the current level. Since it takes the GOP 
     plan an additional year to push the minimum wage to the $6.15 
     level, the $11.2 billion in cumulative gains under the House 
     GOP plan are significantly less than the $15 billion impact 
     of the Bonior-Kennedy plan.
       Ultimately, though, the size of the GOP's proposed tax cuts 
     quickly dwarfs that of either minimum wage proposal. By 
     fiscal year 2002, the $9.2 billion in proposed tax cuts are 
     nearly three times as large as the cumulative $3.2 billion in 
     minimum wage hikes up to that point. The annual tax cuts 
     eventually rise to $17.6 billion in 2010, but the minimum 
     wage increase's effect falls to zero after 2006. Thus, the 
     tax cuts grow over time and are permanent, but the minimum 
     wage legislation, while important, has but a temporary impact 
     because neither of the current proposals guarantee further 
     increases after the $6.15 level is reached. (Indexing the 
     minimum wage to inflation or wage growth would remedy this 
     problem of minimum wage erosion.)
       The 10-year impact of the House GOP tax legislation--$122.8 
     billion over the 2000-10 period--is 10.9 times as large as 
     the $11.2 billion in total wage hikes that the GOP's minimum 
     wage boost would produce. Thus, over the course of 10 years, 
     for every dollar in higher wages generated for low-wage 
     workers by the House GOP plan, $10.90 in tax cuts will be 
     provided for mostly those with the highest incomes in the 
     nation.


           the distributional impact of the gop tax proposal

       The distributional assessment of the tax plan (Table 2) is 
     based on the Institute on Taxation and Economic Policy Tax 
     Model, Among other things, the GOP tax cuts would:
       Cut the top estate tax rate from 55% to 48%; eliminate the 
     5% surtax that recaptures the benefits of the lower estate 
     tax rates; reduce other estate tax rates by 2 percentage 
     points; and replace the credit against estate taxes with an 
     exemption (worth more to the largest estates). The $79 
     billion in estate tax cuts over 10 years are almost two-
     thirds of the total tax cuts proposed in the bill.
       In crease the write-off for business meals from 50% to 60% 
     of cost under current law.
       Provide added tax breaks for pensions and 401(k) plans.
       Increase the limits on immediate write-offs of business 
     capital investments.
       Speed up the date when 100% of self-employed health 
     insurance can be deducted.
       Restore a loophole for installment sales that was repealed 
     in 1999.
       Expand enterprise zones.
       Provide tax breaks for timber companies.
       Expenad the tax credit for investors in low-income housing.
       Augment tax breaks for private tax-exempt bonds.
       Table 2 shows that almost all of the benefits of the tax 
     legislation (91.4%) would accrue to the wealthiest 10% of the 
     population. In fact, the wealthiest 1% would get 73.1% of the 
     proposed tax reductions.
       A one-dollar increase in the minimum wage provides no 
     economic rationale for tax cuts of the magnitude proposed in 
     the GOP legislation. Yet, as with the last minimum wage 
     increase, Congress again intends to use this opportunity to 
     implement a regressive tax cut. As the above analysis has 
     shown, the benefits to the wealthy from this proposal far 
     outweigh the benefits of the wage increase.
  

[[Page 2601]]




                                        TABLE 2.--EFFECTS OF THE TAX CUTS IN THE HOUSE GOP 2000 MINIMUM WAGE BILL
                                               [Annual effects at 1999 levels; $ billion except averages]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                              Percent of
            Income group                    Income range         Average     Estate tax   Corporate    Pensions &   Total tax   Average tax   total tax
                                                                  income        cuts      tax breaks     401Ks         cuts         cut          cut
--------------------------------------------------------------------------------------------------------------------------------------------------------
Lowest 20%..........................  Less than $13,600......       $8,600         $0.0         $0.0         $0.0         $0.0          $-1          0.3
Second 20%..........................  13,600-24,400..........       18,800          0.0         -0.1          0.0         -0.1           -4          0.9
Middle 20%..........................  24,400-39,300..........       31,100          0.0         -0.2          0.0         -0.2           -7          1.7
Fourth 20%..........................  39,300-64,900..........       50,700          0.0         -0.3          0.0         -0.3          -13          3.0
Next 15%............................  64,900-130,000.........       86,800          0.0         -0.4         -0.1         -0.6          -29          5.3
Next 4%.............................  130,000-319,000........      183,000         -0.8         -0.5         -0.4         -1.7         -329         15.7
Top 1%..............................  319,000 or more........      915,000         -5.7         -1.4         -0.7         -7.7       -6,128         73.1
                                                                           -----------------------------------------------------------------------------
      All...........................  .......................  ...........         -6.5         -2.8         -1.2        -10.6          -83        100.0
Addendum:
    Bottom 60%......................  Less than $39,300......       19,500          0.0         -0.3          0.0         -0.3           -4          2.8
    Top 10%.........................  $92,500 or more........      218,000         -6.5         -2.0         -1.1         -9.7         -765         91.4
--------------------------------------------------------------------------------------------------------------------------------------------------------
Figures show the annual effects of the approximately $123 billion in tax cuts over the next 10 years included in the GOP minimum wage increase plan to
  be voted on by the House on March 9 or 10. All provisions are measured as fully effective, at 1999 income levels. Distributional figures do not
  include the faster phase-in of the self-employed health insurance deduction. Source: Institute on Taxation and Economic Policy Tax Model. Citizens for
  Tax Justice, March 7, 2000.

             appendix: minimum wage simulation methodology

       To determine the aggregate wages generated by a minimum 
     wage increase, one needs to identify the hourly wages and 
     weekly hours of workers in the ``affected range,'' i.e., 
     those whose wages fall below the proposed new minimum wage. 
     We identify those in the ``affected range'' by ``aging'' the 
     1999 hourly wage distribution found in the Outgoing Rotation 
     Group files of the Current Population Survey by a 2.5% rate 
     of inflation (the long-term rate projected by the 
     Congressional Budget Office). Our analysis assumes that in 
     the absence of a minimum wage increase, low-wage workers 
     would maintain their real wage, seeing no improvement or 
     deterioration. This assumes wage growth depletes the size of 
     the working population in the affected range, as some 
     workers' wages will eventually exceed that of the newly 
     established minimum wage. (The minimum wage would rise in two 
     annual $0.50 increments in the Bonior-Kennedy version and two 
     $0.33 annual increments and a $0.34 increment in House GOP 
     plan). When those earning $5.15 in 1999 see their earnings 
     reach $6.15, then the minimum wage legislation no longer has 
     any effect, which under our assumptions would take place 
     eight years from now. We assume that the minimum wage 
     increases take effect in April of the relevant year.
       The aggregate wage benefit is computed for workers in the 
     affected range as the difference between their simulated wage 
     level and the new minimum ($6.15 in later years; other values 
     in the transition years) multiplied by their average weekly 
     hours for 52 weeks. We increase the wage gain to reflect a 
     labor force growing by 1% annually.
       The wage gains associated with minimum wage increases in 
     this simulation would be smaller (larger) if we assumed 
     either a faster (slower) inflation rate or real wage gains 
     (declines).

  Mr. HAYWORTH. Mr. Speaker, I yield myself 1 minute in brief response 
to my colleague from California. Mr. Speaker, it was interesting to 
listen to the litany of game shows. Perhaps one we might call on our 
friends on the left to actually watch and live up to is the game show 
``To Tell the Truth'' because that seems to be sadly, noticeably absent 
from the litany of lines we are hearing today from the left.
  My friend from California and others in this Chamber are well aware 
that small business owners, family farmers, actually create jobs for 
other Americans, so reducing the tax bite, saying death to the death 
tax actually empowers Americans to keep their jobs, rather than seeing 
family farms sold off to pay off a huge tax bill, and the same thing 
with businesses.
  Mr. Speaker, I yield 4\1/2\ minutes to the gentleman from New York 
(Mr. Lazio), a member of the Committee on Commerce.
  Mr. LAZIO. Mr. Speaker I want to thank the gentleman from Arizona, I 
want to thank the chairman of the Committee on Ways and Means for his 
leadership in bringing this to the floor, and I want to thank the 
Republicans and Democrats that helped shape this bill. These tax 
provisions that represent, let us put this in perspective, about 1 
percent of the non-Social Security surplus that we will generate, about 
one penny out of every dollar.
  This Small Business Tax fairness Act that is under debate today was 
drafted in the spirit of mutual respect, Republicans and Democrats not 
presuming to know what the final product was; but we have come together 
to try and craft something from the start. This bill was introduced by 
myself and cosponsored by colleagues from both sides of the aisle. I 
want to, if I can, pay special tribute to the gentleman from Illinois 
(Mr. Shimkus), who played a key role in drafting this legislation. 
Additional Republican cosponsors included the gentleman from Illinois 
(Mr. Weller), the gentleman from Pennsylvania (Mr. Sherwood), and the 
gentleman from Mississippi (Mr. Pickering). And on the Democratic side 
of the aisle, the gentleman from California (Mr. Condit) and the 
gentleman from Alabama (Mr. Cramer) helped craft this bill, were 
involved from the beginning. Additional Democratic cosponsors, 
including the gentleman from Georgia (Mr. Bishop), the gentleman from 
Mississippi (Mr. Shows), and the gentleman from Minnesota (Mr. 
Peterson), also played key roles.

                              {time}  1715

  These Members came together in the spirit of bipartisan cooperation. 
They gathered with goodwill to come to grips with a complex and 
tangible problem.
  This bill represents a credible and honest effort to find a workable 
balance between the contending viewpoints that are found both in this 
House and in the American public at large.
  We came to the table with the realization that a wage increase was 
fair but we also came to the table with a desire to protect the small 
business people who will end up bearing the direct burden of any wage 
increase that we pass here today. We wanted to avoid the real life 
situations in which low-wage workers would be laid off because of the 
increased pressure this bill places on small employers' bottom lines.
  In short, we wanted to find a win/win. In fact, Mr. Speaker, that is 
exactly what we have done.
  Mr. Speaker, we all wish to ensure that American workers at the 
bottom of the economic ladder are fairly compensated for their hard and 
honest labor. Yet we must also recognize that Federal wage mandates 
imposed from on high in Washington can have a particularly negative 
impact on the small businesses where these very same low-wage earners 
are employed.
  For those who wish to say that they want to balance the minimum wage 
increase with tax relief for America's small businesses, they can do 
that here today. For those who say that they favor letting the self-
employed deduct health insurance costs, they can do precisely that 
today. For those who say they wish to vote for low-income housing tax 
credits, they can do precisely that today. If, however, they wish to 
conjure up reasons to vote against this bill, they may be able to do 
that.
  Mr. Speaker, we here in Washington are about to impose higher payroll 
payments upon mom and pop stores throughout the country. Is it not only 
fair that we should also offer these same small business owners Federal 
help and not make them shoulder this burden alone?
  I would like to know what the opponents of this bill find so 
objectionable about provisions that help small business owners offer 
pensions to their workers. I would like to understand why anyone would 
oppose the community renewal provisions of this bill that

[[Page 2602]]

help bring hope to America's most economically troubled regions. What 
is wrong with balancing this wage increase that elevates salaries at 
double the rate of inflation, with aid to the small businesses who in 
the end will be forced to pay the bill for what we pass here on Capitol 
Hill?
  Mr. Speaker, the energy of entrepreneurs, people who have the courage 
to risk all to realize their vision and dreams, should be rewarded, not 
punished. Do we really wish to leave the owners of small computer 
firms, restaurants, and mom and pop stores hanging out on a limb where 
we shove them off alone? I think not, Mr. Speaker. Let us offer those 
owners of mom and pop stores a helping hand.
  In the beginning, I must admit that I was a bit perturbed and 
perplexed and even puzzled by the opposition to this bill; but upon 
reflection, I am not so perplexed after all.
  No, Mr. Speaker, I am neither perplexed nor puzzled by the opposition 
to this bill.
  I remain, however, perturbed. I am perturbed by the fact that many of 
the people in opposition would be motivated by the other ``P'' word: 
Politics, to injure the small business owners and workers who form the 
backbone of the American economy.
  This bill represents an honest and good faith effort in which 
representatives from both sides of the partisan divide came together to 
achieve the best possible results, and the best possible result is 
precisely what we shall achieve here on the floor of the Chamber today 
when we pass this bill.
  Mr. Speaker, we are first and foremost public servants. Let us put 
election year political jockeying aside and do what the people of 
America expect us to do. Let us do what we came here to Washington to 
do. Let us make people's lives better. Let us pass this bill.
  Mr. RANGEL. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, I do not care how much time they give my friend, the 
gentleman from New York (Mr. Lazio), to speak. He has to be pretty hard 
put to find any bipartisanship on the tax provisions in this bill. We 
can rest assured if there was any attempt, we would not find 90 percent 
of the tax cuts going to 10 percent of the highest income people here. 
If we did have a bipartisanship, we would not find three-fourths of the 
tax cuts going to the highest income people.
  Let me say this to my friend, the gentleman from Arizona (Mr. 
Hayworth). He came pretty close to calling one of our colleagues a liar 
that was speaking. He came very, very close. I do hope that a 
reflection on the Record might bring out the best that he has in his 
personality and his character so that we can continue to work together 
as friends in this legislature, notwithstanding the TV shows that he 
watches.
  Mr. Speaker, I yield 2 minutes to my friend, the gentleman from 
California (Mr. Filner).
  Mr. FILNER. Mr. Speaker, there they go again. The majority is once 
again bringing up legislation that purports to help the average hard-
working, taxpaying American but in reality is just more relief for 
their well-to-do friends and business partners.
  The gentleman from Arizona (Mr. Hayworth) watches television. He is 
telling his friends that the price is right, yet he is putting all of 
America into jeopardy.
  We cannot continue to widen the gap between those who have and those 
who have less. Just like the majority's so-called marriage penalty 
relief, this tax cut/minimum wage increase does just that. It actually 
widens the income gap.
  Billions and billions in tax cut benefits for the majority's rich 
friends and one dollar to America's working people; one dollar to 
America's working people.
  All Americans should share in the prosperity of this booming economy, 
not just America's corporate CEOs. The Democratic substitute would 
allow those at the low end of the wage scale to share in this 
prosperity. I urge my colleagues on both sides of the aisle to remember 
the priorities of the average American. Let us raise the minimum wage, 
save Social Security and Medicare, pay down the national debt and stop 
helping the wealthy under the pretense of helping the average hard-
working American.
  Mr. Speaker, the saying goes, a rising tide lifts all boats but it is 
very clear that if this is approved the majority's proposal will leave 
an awful lot of smaller boats stuck in the muck of economic misery.
  Defeat this bill and let us have all America set sail on the ship of 
prosperity.
  Mr. HAYWORTH. Mr. Speaker, I yield myself 1 minute to respond to some 
of the rhetorical fireworks in the past couple of minutes.
  Mr. Speaker, I appreciate my good friend, the ranking member of the 
committee, the gentleman from New York (Mr. Rangel), and I am sorry 
that he felt it necessary to offer a personal attack by way of 
rhetoric, but we will look past that and go to the facts because as we 
know facts are stubborn things.
  When we examine the alternative offered by the minority, it is 
actually cruel because it offers tax relief with one hand and takes it 
away with the other. I point specifically to two increases, two estate 
tax increases, in the Democratic alternative; and I would point out, 
Mr. Speaker, that Americans for Tax Reform have sent a letter to the 
chairman of the Committee on Ways and Means where they state 
specifically the Democratic alternative would result in new taxes on 
estates, corporate income, and capital gains alone.
  So I think that is important to remember.
  Mr. RANGEL. Mr. Speaker, I yield 1 minute to the gentleman from 
Maryland (Mr. Cummings).
  Mr. CUMMINGS. Mr. Speaker, America's labor force is the backbone of 
our flourishing economy. Without the efforts of workers in America's 
industries, big business could not thrive. When we do our job, we 
receive due compensation. The American people should be no different. 
It is our job to ensure that America's workers are not taken advantage 
of.
  It is convenient for big business to forget those whose labor helps 
their companies thrive. Well, it is our job to remind them. It is our 
job to ensure that the minimum wage levels will afford our Nation's 
workforce with a decent life-style. It is our job to ensure that the 
Social Security trust fund is intact when they retire.
  It amazes me that while colleagues on the other side of the aisle 
profess to raise the minimum wage, they continue in their quest to 
provide careless tax benefits to the wealthy and threaten the Social 
Security trust fund.
  Raising the minimum wage over the course of 3 years is not enough. 
Our workers deserve more. Our workers deserve better. America's workers 
are doing their jobs and now is the time that we do ours.
  Mr. Speaker, I urge that we reject this bill and fully support the 
Democratic alternative.
  Mr. HAYWORTH. Mr. Speaker, I yield 2 minutes to the gentleman from 
California (Mr. Royce).
  Mr. ROYCE. Mr. Speaker, I thank the gentleman from Arizona (Mr. 
Hayworth) for yielding me this time.
  Mr. Speaker, small businesses are the backbone of our economy. They 
employ over half the private workforce in this country. They contribute 
half of all sales. They are responsible for half the private gross 
domestic product in the United States.
  Now, what this bill will provide is needed relief for small business 
and for America's workers. The new tax relief provisions will create 
new jobs. They will promote continued economic growth. They will 
continue to promote the type of employment policies in which people can 
find jobs.
  The reforms in the pension system will enhance retirement security. 
The acceleration of the 100 percent health deduction for the self-
employed will help ensure that workers will be able to afford quality 
health care in the private marketplace.
  It is time to remove some of the government ties that still bind the 
engine behind America's unprecedented economic prosperity. It is small 
business that leads to this prosperity, and I urge my colleagues to 
pass this bill.

[[Page 2603]]


  Mr. RANGEL. Mr. Speaker, I yield 1\1/2\ minutes to the distinguished 
gentleman from Mississippi (Mr. Taylor).
  Mr. TAYLOR of Mississippi. Mr. Speaker, on the 29th of September, 1.4 
million Americans will go to the mailbox looking for their paycheck. 
They are the young people who serve in the Army, the Navy, the Air 
Force and the Marines. It will not be there because the same people who 
claim to be for national defense, the same people who claim that there 
is this huge surplus out there, have seen to it that they are not going 
to get paid until two days later, October 1. That is so there can be an 
accounting gimmick and their pay counts against next year's budget and 
not this year's budget.
  Now, if one is a Congressman and they make about $130,000, waiting 2 
extra days for their pay is no big deal but if one is an E-4 with a 
child and a wife waiting that extra weekend to buy the Pampers or the 
baby formula, it is a big deal.
  So the same folks who did this are saying we have over $100 billion 
to give away in tax breaks, 90 percent of which is going to the richest 
Americans, but we do not have enough for someone if they serve in the 
Armed Forces, and we are going to delay their pay. That is how much we 
think of them.
  It gets even worse. If one served their Nation honorably, they were 
promised health care for the rest of their life if they served 20 
years. Those same people who show up at the base hospitals they are 
being told, we are sorry, there is not enough money to take care of 
them; they are to go out and fend for themselves on Medicare; but there 
is $120 billion in tax breaks for the wealthiest Americans.
  It gets even worse. For 3 years the same folks who are saying there 
is all this money laying around, that is why we have to have these tax 
breaks, froze the budget for the VA. They froze it.
  Mr. Speaker, if there is not enough money to take care of those who 
need it the most, then there is not tax breaks for the least.
  Mr. HAYWORTH. Mr. Speaker, I yield myself 1 minute in response to my 
colleague, the gentleman from Mississippi (Mr. Taylor), with whom I see 
eye to eye on many issues of national security.
  I appreciate his points but it is interesting that it is somewhat of 
a selective outrage at the majority in this legislative body because I 
can remember the President of the United States, Mr. Speaker, visiting 
this Chamber for a State of the Union message and in outlining budget 
priorities failed to even articulate just a bit of rhetoric for those 
veterans who have served our country.
  Indeed, as the record reflects, it was the majority adding 
$1,700,000,000 in health care benefits for our veterans. The other 
irony, I would point out to my friends in the minority, is this, just a 
few short months ago they embraced tax relief to the tune of $300 
billion and yet now, Mr. Speaker, they tell us it is risky to propose 
real tax relief of even $48 billion to help America's working families.

                              {time}  1730

  Mr. RANGEL. Mr. Speaker, I yield 1\1/2\ minutes to the gentleman from 
Texas (Mr. Stenholm).
  Mr. STENHOLM. Mr. Speaker, I need to remind my colleague from Arizona 
that it is the House's responsibility to deal with the House's 
business. The gentleman from Mississippi was talking about what we do, 
not what the President does, and that needs to be taken into account.
  What we are about to do today is add-to. When we add up all of the 
tax cuts that have now been proposed by the majority in the House and 
the Senate, it is $500 billion. This is money that is saying our debt 
continues to go up and the risk to Social Security increases with every 
bill that is passed like the one before us today.
  Mr. Speaker, we do not with small businesses any favors or family 
farmers any favors by enacting a tax cut which brings them minimal 
relief, minimal relief at the same time it undermines the fiscal 
discipline that has produced the longest economic expansion period in 
the history of our country. The Democratic alternative would provide an 
immediate $4 million exclusion for estate tax that would exempt more 
than 90 percent of the family farms from paying any estate tax at all.
  I would welcome the opportunity today on this floor to debate between 
the bill of the majority and the bill of the minority on a line-by-line 
basis. Then the rhetoric would stop, I say to my friend from Arizona, 
and we could have an honest discussion. Why would you not permit an 
honest discussion of these issues? Why do you pass over the fact that 
the statement of the gentleman from Mississippi was 100 percent true? 
Why do you continue to do that with rhetoric? Why is it so important to 
continue to discuss tax cuts when we ought to be debating the very 
issues that we seem to all be agreed to.
  Vote against this bill and vote for the motion to recommit.
  Mr. Speaker, I rise in opposition to this fiscally irresponsible tax 
bill and in strong support of the Democratic alternative which will be 
offered as the motion to recommit.
  I said on many occasions that the tax bill that this body passed and 
the President vetoed last year was the most fiscally irresponsible 
legislation in my 21 years in Congress. We are well on our way to 
replicating that dubious achievement this year. If we pass this bill 
today, the total cost of tax bills passed by the House or the Senate to 
date will total nearly $500 billion when the interest costs are taken 
into account. More costly tax bills stand in line to follow.
  The tax bill before us is simply a political document that never will 
become law. Worse, this tax bill put forward by the Majority does not 
provide meaningful relief from the estate taxes for small businesses 
and farmers. It may be a good deal for wealthy individuals with estates 
of $10 million or more, but it doesn't do much for the vast majority of 
small businesses and family farmers in my district.
  We do small businesses, family farmers and ranchers no favor by 
enacting a tax cut which brings them minimal relief at the same time it 
undermines the fiscal discipline which has produced the longest 
economic expansion period in the history of our country.
  The Democratic alternative developed by Charlie Rangel and John 
Tanner is a fiscally responsible tax proposal which would provide real 
and meaningful tax relief for the largest number of small businesses. 
Incidentally, it also could be signed into law.
  The Democratic alternative would provide an immediate $4 million 
exclusion for the estate tax which would exempt more than 90% of family 
owned farms from paying any estate tax at all. There are 193,024 family 
farmers in the State of Texas with farms valued at less than 5 million 
dollars who would benefit from the estate tax relief in the Democratic 
substitute. The bill before us does very little for these family farms.
  The Democratic alternative contains several other important tax 
breaks for small businesses that I have long supported. It immediately 
implements the 100% deduction of health insurance for the self-
employed. It makes permanent both the Work Opportunity Credit and the 
Welfare-to-Work Credit for businesses which hire disadvantaged workers. 
It increases the business meal deduction and the first-year 100% 
deduction for investment expenses. And, importantly, the Democratic 
alternative will maintain the fiscal discipline that has produced our 
strong economy because the tax cuts in the Democratic alternative are 
paid for. No wonder the small business community has been so impressed 
with this proposal.
  The President has promised that he will sign into law the Democratic 
tax package. The fact that the leadership left only a procedural vote 
to indicate support of this amendment raises the question of what is 
more important to them: actually providing tax relief to small 
businesses or keeping a political issue alive.
  Vote against this bill and vote for the motion to recommit so we can 
pass business tax relief which genuinely has been targeted towards 
small businesses and which can be signed into law.
  Mr. HAYWORTH. Mr. Speaker, I yield myself 1 minute.
  In response to my colleague from Texas, the reason we engage in this 
debate, and it is good that there are honest, philosophical 
differences; but I think all Members of the House, Mr. Speaker, need to 
be reminded that the money we are talking about does not belong to the 
Federal Government; it serves no higher purpose when we leave it in the 
hands of Washington bureaucrats, and the best way to empower all 
Americans is to make sure that all Americans hold on to more of their 
hard-earned money.

[[Page 2604]]

  I would be happy to point out again that if we examine the 
alternative offered by the minority, it offers tax relief in one hand, 
it takes it away with estate tax increases on the other hand. The net 
tax relief of the minority package is a total of $8 million as opposed 
to $48 billion of comprehensive relief offered by a bipartisan 
majority. Again, I would point out that many Members of the minority, 
just a few short weeks ago, embraced a $300 billion tax relief package.
  Mr. RANGEL. Mr. Speaker, I yield 10 seconds to the gentleman from 
Texas (Mr. Stenholm) to respond to what the gentleman from Arizona just 
alleged.
  Mr. STENHOLM. Mr. Speaker, I appreciate my friend's comments. I would 
also point out that we have a $5.6 trillion debt that needs to be 
addressed. That is what we are talking about on this side. Pay down the 
debt first, and then let us deal with tax cuts and other priorities.
  Mr. HAYWORTH. Mr. Speaker, I yield myself 30 seconds.
  The SPEAKER pro tempore (Mr. Pease). The gentleman from New York (Mr. 
Rangel) controls the time.
  Mr. RANGEL. Mr. Speaker, I yield 1 minute to the gentleman from 
California (Mr. Baca).
  Mr. BACA. Mr. Speaker, I rise in behalf of the working families. I am 
speaking about the $1 increase in the minimum wage over the next 2 
years, and I oppose the passage of the tax scheme provision, the 
Republican tax bill, H.R. 3081, that benefits the wealthy. We are 
talking about a cost over 10 years of $122 billion. That is not being 
fiscally responsible. We are talking about the need to be fiscally 
responsible, and we have that responsibility. We have the 
responsibility to do the death tax reduction. This bill is not dealing 
with the death tax reduction. We have the responsibility to working 
families, families right now that need an increase. There are many 
individuals that are struggling right now.
  I myself come from a poor family and know what it is like to 
struggle, when one is just making minimum wage. Many of our students 
that are up in the gallery and others are saying look, we need an 
increase right now. We want to make sure that we can afford to put food 
on the table. We want to enjoy the same things that other individuals 
enjoy. We want to enjoy the quality of life. We want to make sure that 
we do not have to struggle like many others. We are very fortunate in 
our country that we have the ability for those of us who earn the 
money, but for those individuals that are poor and disadvantaged, we 
need to help them.
  Mr. Speaker, I rise today to speak on behalf of working families 
across America.
  I am speaking about a one-dollar increase in minimum wage over the 
next two years and opposing the passage of the tax provisions of the 
Republican tax bill, H.R. 3081.
  The minimum wage proposal would benefit millions of families and 
allow them some comfort and economic dignity.
  40% of minimum wage workers are the sole breadwinners in their 
families.
  It is our responsibility to allow everyone--everyone--a chance at the 
American Dream and opportunity to bridge together and help improve the 
quality of life for all Americans.
  The working people of America--the ones who built this country--
deserve the opportunity to provide for themselves and their family.
  You can't raise a family on $5.15 an hour.
  You can't house a family on $5.15 an hour.
  And you certainly can't put a decent roof over their heads for $5.15 
an hour.
  Parents who are forced to work two jobs are unable to spend much time 
with their children. That is wrong.
  Democrats have been pushing for an increase since January of 1998 and 
it has taken the Republican leadership too long to respond.
  How can they give themselves a $4,600 pay raise last year and then 
deny Labor a $1 pay raise over two years?
  Republicans have used up all their excuses.
  Now is the time to give these Americans a raise.
  This issue is not about politics but about women . . . about children 
. . . and most importantly . . . about fairness.
  Why should we vote for open markets in China and then deny the 
American worker his overdue benefits?
  Why should we vote for a tax bill that will benefit only the wealthy 
and do nothing for the working class?
  These votes are simple . . . yes to minimum wage and no to the tax.
  I say we pass the minimum wage bill and change the slanted tax bill . 
. . and give laboring Americans the dignity to live.


                Announcement by the Speaker Pro Tempore

  The SPEAKER pro tempore. Members are reminded not to address comments 
about occupants of the gallery.
  Mr. HAYWORTH. Mr. Speaker, I yield myself 1 minute. Welcome, my 
colleague from California, to this Chamber and to the debate. To my 
colleagues on the left and my friend from Texas, whom I guess left the 
Chamber, I would simply point out again that facts are stubborn things.
  It is a fact that we have paid down over $140 billion of this debt. 
It is a fact that the budgeteers not here in Congress, but down at the 
other end of Pennsylvania Avenue at the White House who assessed what 
has transpired here with our budget, say that in 1999, for the first 
time since 1960, the United States Government offered a budget surplus 
over and above those funds of the Social Security Trust Fund. I would 
remind my colleagues that it was the efforts of this majority to lock 
away 100 percent of the Social Security surplus for Social Security in 
stark contrast to previous majorities in earlier years where that 
Social Security money was spent just as fast as it could be printed.
  Mr. RANGEL. Mr. Speaker, I yield 1\1/2\ minutes to the gentleman from 
New Jersey (Mr. Holt).
  Mr. HOLT. Mr. Speaker, this week I visited a beautiful farm, 85 acres 
in Holmdel, New Jersey, the Garden State. This property is one of the 
largest parcels of undeveloped land in that township. The farm has 
survived two world wars, the Great Depression, the advent of the 
technological revolution, and the factory farm. But today, because of 
the estate tax, family members may have to sell the property to 
developers. This is true even though some of the survivors would like 
to keep the land in the family and preserve it as open space and 
farmland.
  Well, when a government policy robs families of their heritage and 
forces communities to develop land instead of preserving it, something 
needs to be changed. I am proud to cosponsor the legislation introduced 
by the gentleman from New York (Mr. Rangel) that would help mitigate 
this unfair tax which hits so many in New Jersey.
  The Rangel small business tax package would relieve the estate tax 
burden for family-owned farms and small businesses, and also includes 
other helpful tax cuts, including a provision to make permanent the 
work opportunity and welfare-to-work tax credits. The proposal would 
also accelerate 100 percent health insurance deduction for the self-
employed and increase the tax deductions for business expenses. This is 
a responsible package to preserve family farms and small businesses and 
is compatible with efforts to shore up Social Security and Medicare and 
pay down the debt.
  Central New Jersey supports eliminating the estate tax for family-
owned farms and businesses. I urge my colleagues to support responsible 
estate tax relief.
  Mr. HAYWORTH. Mr. Speaker, I yield 2 minutes to the gentleman from 
California (Mr. Gary Miller).
  Mr. GARY MILLER of California. Mr. Speaker, this bill is about 
cleaning up neighborhoods and helping people afford housing. It would 
increase the State authority for the low-income housing tax credit from 
$1.25 per person to $1.65 per person, and it will index that cap to 
inflation. What does that mean to people in your district and mine 
struggling to afford housing?
  Here are some statistics: the current credit on caps is $1.25 per 
person. It has not been changed since 1986, which means that while 
housing is currently affordable and the buying power of taxpayers has 
been decreased by almost 50 percent, it is not what it used to be. Mr. 
Speaker, 12 million Americans who are eligible for this program are not 
benefiting, which means that they are paying a very high portion of 
their income for rent or they are living in substandard housing.
  Also, this legislation helps distressed areas by creating renewal 
communities with pro-growth tax initiatives to create jobs, encourage 
personal savings,

[[Page 2605]]

and clean up neighborhoods on former industrial sites so new businesses 
can grow.
  Some people have said this tax cut is for the rich, but obviously 
that is not true. The truth is that those who argue against this kind 
of a tax cut are simply against any kind of a tax cut. They are 
terrified about letting any money get away from the Government because 
they honestly believe government is a solution to all of our problems.
  Mr. Speaker, I urge all of my colleagues to support this bill that 
will help people improve their communities and afford housing.
  Mr. RANGEL. Mr. Speaker, I yield myself such time as I may consume.
  For someone to say that Democrats are against any tax cuts, they 
obviously did not read the substitute. We have $36 billion worth of tax 
cuts here. The only difference is that we give a clear, no-tax status 
to those people who have estates that are $4 million tax free and we 
give relief up to $13 million. The Republicans have most all of their 
tax cut going to people in higher incomes. So one cannot say that when 
we look at the substitute, we have a $36 billion tax cut there, that we 
do not believe in tax cuts.
  The truth of the matter is that the majority does not believe in a 
one-dollar increase in the minimum wage, because if they did believe in 
it, they would have worked out in a bipartisan way how we could bring 
the President to sign a bill. It is as simple as that. As a matter of 
fact, if they had just stopped at $36 billion, we could have walked out 
of here, men and women, Republican and Democrats, going to our home 
districts and saying, not only did we help those that work every day, 
even though it is at near-poverty wages, but we gave relief to small 
employers who may not be able to afford that $1. That is what we could 
have done. That could have been the beginning of us working together 
toward other tax cuts after we take care of Social Security and 
Medicare and affordable drugs, after we make certain that we protect 
the patient's right to be able to sue, after we do those basic things, 
again, not as the majority and minority, not as Republicans and 
Democrats, but as Members of Congress working together to improve the 
quality of life for most Americans, especially working Americans.
  There will be enough differences for us to go to the polls and to 
campaign, but we do not have to fight on each and every issue. Why 
cannot the majority take a deep breath, get a life, and try to do some 
of the things that the senior Senator from Arizona was saying. Be 
responsible. Stop thinking only in terms of tax cuts.
  The American people say, I want a tax cut. They are saying, that is 
my money. But we have a responsibility to take care of that over $5 
billion of Federal debt that we have to pay down. We have to take care 
of Medicare. We have to take care of Social Security. While we are at 
it, they say, yes, take care of cutting my taxes; but during this 
period of prosperity, do not deny the working poor a $1 increase in the 
minimum wage.
  So I suggest to the other side that they know that they have begged 
for a veto. The worst thing that could happen to my colleagues is for 
the President to decide not to be held hostage and to swallow these 
irresponsible tax cuts, but that is not going to happen. Because it was 
this President that has led us to this period of prosperity and he is 
not going to allow politically motivated Members of this House to drive 
them into doing something this irresponsible because he wants a minimum 
wage.
  Mr. Speaker, it is not too late for my colleagues to change their 
wayward ways and to attempt to sit down and to work with Democrats and 
to work with the President and to do the right thing. My Republican 
colleagues could not get this 800-pound gorilla off the floor last 
year, and you will not be able to do it this year.
  Mr. HAYWORTH. Mr. Speaker, I yield myself such time as I may consume.
  I thank my colleague from New York. I thought for a moment there he 
was engaged in self-analysis when he talked about playing politics and 
who was holding whom hostage over reasonable relief for working 
Americans when it comes to taxation.
  Again, facts are stubborn things. It is worth noting that this 
Congress together, in a bipartisan fashion, joined to create a lockbox 
for Social Security that kept the Social Security surplus, 100 percent 
of it, intact and reserved for Social Security; that it is this 
Congress, working together, that paid down $143 billion of a $5 
trillion national debt that hangs over the heads of our children; that 
it is this common sense Congress, working in a bipartisan fashion, with 
sober, business-minded friends in the minority in a bipartisan fashion 
to offer reasonable tax relief and search for a way to find common 
ground. Indeed, that is what this legislation provides.
  Mr. Speaker, we offer tax relief for working Americans. We offer 
empowerment for the economically downtrodden. We offer a way to say 
death to the death tax and make sure that people stay gainfully 
employed and that family farms and small businesses are not sold off to 
satisfy the insatiable desire of those who always seek for the public 
Treasury personal funds. That, in the final analysis, is what this 
debate comes down to, Mr. Chairman. It is this question: To whom does 
the money belong? Does it belong to Washington bureaucrats, or does it 
belong to the American people who work hard, pay their taxes, and play 
by the rules?
  Mr. Speaker, a bipartisan majority supports the notion that the money 
belongs to the people who earn it, who work hard and play by the rules, 
and who deserve to have a good chunk of their money stay in their 
pockets.
  In conclusion, I would simply point out that the minority alternative 
offers, are we ready for this, a net tax relief package of $8 million 
as opposed to broad-based tax relief of $48 billion under the 
bipartisan majority plan.

                              {time}  1745

  That is what we must work for, economic empowerment, not only through 
wages, but allowing all Americans to keep more of their hard-earned 
money. That is why I am pleased to support the commonsense majority 
plan that passed out of the Committee on Ways and Means and comes to 
this floor for the consideration of all my colleagues.
  Mr. MOORE. Mr. Speaker, I rise today in support of H.R. 3832, the 
Small Business Tax Fairness Act of 2000.
  I have long been a supporter of targeted tax relief that will help 
sustain the growth of economy, support the continued health of our 
nation's small businesses, restore and rehabilitate our rural and urban 
communities, and provide incentives for individuals to save for their 
retirement.
  While I would have included provisions that differ somewhat from this 
version had I drafted this bill myself, I strongly support the 
following provisions that will benefit small businesses and the self 
employed, low-income and rural areas, and the working poor and middle-
income America:
  100 Percent Deductibility of Health Insurance Costs: This provision 
will level the playing field for the self-employed and reduce the 
burden on the over 44 million Americans currently without health 
insurance.
  Small Business Expensing: A majority of our nation's small businesses 
exceed the current small-business expensing limits in only three 
months. This bill would raise the threshold from $20,000 to $30,000, 
which will free up capital resources for additional investment in small 
businesses to expand and create new jobs.
  Installment Sales Tax Correction: Last year, Congress passed and the 
President signed into law a bill that provided much needed tax relief 
to individuals and businesses through extending certain tax credits. 
Unfortunately, this law contained a provision, which will be repealed 
by H.R. 3832, that prohibits small businesses that use accrual 
accounting methods from selling assets in installments.
  Community Development and Low-Income Assistance: The measure also 
provides for the creation of ``renewal communities'' to assist low-
income and rural areas with tax relief that will help spur economic 
growth. Additionally, the bill includes an expansion of the low-income 
housing tax credit to help build and support more low-income housing 
for the working poor.
  Enhancing Retirement Security: In an increasingly mobile workforce, 
it is critically important that we allow for shorter vesting schedules 
and increased portability of retirement benefits between jobs. This 
bill does

[[Page 2606]]

that. By removing artificial and administrative barriers, these 
provisions will make it significantly easier for working Americans to 
save and invest for their retirement. Other provisions in this bill 
will increase limits on employer-sponsored retirement plans, increase 
pension opportunities for women who have historically been left out of 
retirement savings plans, and provide new and expanded opportunities 
for all Americans to save and invest for their future.
  This bill also reduces the estate tax. While I support providing 
estate tax relief to American families, small business owners, and 
farmers who have worked their entire lives to transfer a portion of 
their estates upon their death, I do not advocate a full repeal of the 
estate tax. I therefore object to the provision in Section 302 of the 
bill that expresses the sense of Congress that the estate tax should be 
repealed. Simply, a full repeal of the estate tax will have budget 
implications that this country simply cannot afford. With over $200 
billion in lost revenue, this has the potential to put this country 
back on the wrong fiscal track of increased deficit spending and an 
exploding national debt.
  Mr. Speaker, this year the House of Representatives has already 
passed a $182 billion marriage penalty relief bill. I supported that 
measure because that bill provided needed tax relief for married 
couples by reducing the marriage tax penalty while strengthening the 
financial resources of the American family and fostering economic 
prosperity into the 21st century. Today, we will likely pass a $122 
billion tax relief bill. That brings the total tax relief approved by 
the House to date up to $304 billion or a little more than 30 percent 
of the projected on budget surplus of $930 billion.
  I warned the House when we passed the marriage penalty tax and I will 
warn the House again today: This Congress has yet to act on a budget 
resolution and, as such, has no knowledge about how this legislation 
will fit into our other collective commitments to extend the solvency 
of Social Security and Medicare and reduce our national debt. Although 
the majority claims to support retiring the publicly held debt, they 
have begun the session by scheduling several tax bills funded by the 
projected budget surplus without giving any consideration to the impact 
that the bills will have on the ability to retire our $5.6 trillion 
national debt.
  We can, we should, and we have cut taxes. I have supported these 
bills because each has had a relatively modest cost when considered in 
isolation; and I will support one more bill--clean legislation that 
will increase the deductible contribution limits to Individual 
Retirement Accounts. Today, the Wall Street Journal reported that the 
majority is contemplating bringing a bill to the floor that would 
increase IRA limits to $5,000. I have such a bill and I urge the 
leadership in both parties to consider H.R. 802 because it will help 
increase national savings and encourage individual private retirement 
accounts to supplement Social Security benefits.
  I am concerned, however, that the total costs of these bills will be 
nearly as much as the vetoed tax bill, and could even be more 
expensive. These tax cuts, however, must be made in the context of a 
fiscally responsible budget that eliminated the publicly held debt, 
strengthens Social Security and Medicare, and addresses our other other 
priorities. While I will be supporting this legislation, I will also be 
redoubling my efforts to push fiscal responsibility--to call for a plan 
I voted for last summer that would reserve 50 percent of on-budget 
surpluses for debt reduction, 25 percent for securing Social Security 
and protecting Medicare, and 25 percent for tax cuts.
  We have exceeded that threshold and I urge the leadership to 
recognize that enough is enough. I urge my colleagues to move forward 
in a bipartisan manner to address these other important issues and 
place all of our priorities in context of a responsible budget 
resolution.
  Ms. JACKSON-LEE of Texas. Mr. Speaker, today I rise in strong 
opposition to the Small Business Tax Legislation coupled with the 
Minimum Wage Increase bill. This Republican Tax Bill is a poison pill 
designed to defeat the increase in the minimum wage--the President has 
indicated that he would veto the Republican tax bill even if it were 
included in legislation increasing minimum wage.
  I have long supported estate tax relief for American families; 
however, this bill is not a responsible measure in providing such 
relief. I reject the Republican bill and its solution to estate tax 
relief and strongly support the Democratic alternative.
  The Democratic alternative provides greater tax relief to small 
businesses in the following respects:
  A. It liberalizes and makes permanent the Work Opportunity Tax 
Credit, a credit that will directly benefit many small businesses 
employing minimum wage workers. The Republican bill does nothing.
  B. It provides far greater estate tax relief for family farms and 
small businesses than the Republican bill. The overwhelming percentage 
of estates with farms and small business interests will receive greater 
estate tax relief.
  C. It provides small businesses a greater increase in the business 
meal deduction than the Republican bill.
  D. It contains provisions identical to those contained in the 
Republican bill on priority issues such as 100% deductibility for 
health insurance premiums for the self employed, increase in small 
business expensing, and repeal of the provision enacted last year 
changing installment method.
  E. The Democratic alternative will be signed by the President. 
Therefore, these priority provisions actually could become law if the 
Democratic alternative passes. Otherwise, they merely will be contained 
in yet another bill vetoed by the President.
  During 1995 and 1996, the House Republicans alone defeated meaningful 
reforms that would have stopped a few extraordinarily wealthy 
individuals from gaining large tax benefits by renouncing their 
allegiance to this country.
  The House Republicans succeeded in overcoming the opposition of the 
Senate Republicans and Democrats, the Administration, and the House 
Democrats. They insisted on tax expatriation legislation with many 
loopholes that enable wealthy individuals to turn their backs on this 
country and walk away with large accumulations of wealth.
  The Democratic alternative contains provisions that effectively will 
eliminate the tax expatriation loophole. Voting for the Republican bill 
will be a vote to place the interests of wealthy expatriates ahead of 
minimum wage workers.
  The Democratic alternative also contains provisions to close down the 
aggressive use of corporate tax shelters. Again, voting for the 
Republican bill is a vote to place the interests of large corporations 
using aggressive tax avoidance schemes ahead of minimum wage workers.
  The Republican bill would cost approximately $122 billion over the 
next 10 years and is part of their strategy to enact their 
irresponsible $800 billion tax bill in a piecemeal fashion. The 
Republicans once again are asking the House to vote for tax cuts before 
knowing whether there is a budget framework that will protect Social 
Security and Medicare, provide a prescription drug benefit, and pay 
down the national debt. These are the priorities of our constituents. 
How can we support a bill that threatens fiscal discipline and the 
welfare of our families?
  The Small Business Tax Legislation bill, is highly misleading. The 
overwhelming bulk of the tax relief contained in the Republican bill 
will go to the estates of extremely wealthy individuals and not to 
small businesses.
  According to the Center On Budget and Policy Priorities this 
Republican sponsored bill contains an array of tax cuts that would 
mostly benefit high-income individuals, and likely lead to reductions 
in pension benefits for lower-income working families.
  The pension provisions mentioned in this bill would be a major 
expansion of pension-related tax preferences for high-income persons. 
The proposed pension changes relax some provisions of current law that 
limit contributions that highly paid individuals may make to pension 
plans, as well as the amount of the pension payments that such high-
income individuals receive when they retire.
  Some of the pension provisions in this bill would reduce the pension 
coverage for lower- and middle-income workers. For example, increasing 
pension contribution limits for well compensated executives and owners, 
then they could maintain contributions for their own pension plans 
while reducing contributions for other employees.
  The estate tax reductions in this legislation would go to the estates 
of wealthy people who are investors with extensive holdings in real 
estate and/or stocks or other financial instruments and who were NOT 
owners of small businesses. An estate tax reduction of this magnitude 
would not justify an offset for the effects of a higher minimum wage on 
small businesses.
  The Minimum Wage legislation rightfully seeks to increase the minimum 
wage from $5.15 to $6.15 an hour for the millions of hard working 
people in our country. However, the coupling of this minimum wage 
increase with alleged small business tax measures is a poor match. 
According to the Center On Budget and Policy Priorities there is little 
evidence that modest minimum-wage increases have significant negative 
effects on small businesses.
  Voting for this Republican bill is a vote to place the interests of 
large corporations using

[[Page 2607]]

aggressive tax avoidance schemes ahead of minimum wage workers. I will 
always advocate for the benefit of those hardworking Americans that so 
desperately need a minimum wage increase and tax cut.
  Mr. BENTSEN. Mr. Speaker, I rise in opposition to H.R. 3081, the 
``Wage Employment Growth Act of 1999.'' The short title of the 
Republican bill is highly misleading. My Republican colleagues assert 
that this measure is targeted to offset the financial hardship on small 
businesses resulting from increasing the minimum wage.
  The GOP bill would cost approximately $122 billion over the next ten 
years and is part of Republicans' strategy to enact their failed and 
irresponsible $800 billion tax bill incrementally. This is the second 
tax bill the House has considered this year, spending the projected 
surplus before we have even passed a budget resolution to determine the 
nation's overall tax spending and debt reduction plans. The Republican 
leadership seems intent on scoring political points rather than 
governing. They determine fiscal policy by election strategy not 
financial prudence.
  H.R. 3081 also purports to promote the establishment of pension plans 
by small employers. As an advocate for removing barriers to employer-
sponsored pension programs, I am disappointed with what the Republicans 
have set out before us. Mr. Blunt (D-Mo.) and I have sponsored H.R. 
352, a measure aimed at helping small business owners set up pension 
plans so their employees may save for their retirement. H.R. 352 
proposes to ease the regulatory and administrative burdens on small 
businesses and includes a five-year tax credit for employers that 
establishes any type of qualified retirement plan. Many of the main 
concepts in H.R. 352 were incorporated in H.R. 1102 which was 
supposedly subsumed into H.R. 3081. Unfortunately, what has emerged 
from the Republicans does not resemble H.R. 352 nor does it encourage 
small business employers to help their employees save for retirement.
  Today, only 21 percent of all individuals employed by small 
businesses with less than 100 employees participate in an employer-
sponsored plan, compared to 64 percent of those who work for businesses 
with more than 100 employees. The Republican bill squanders an 
unprecedented opportunity to address an impending crisis--the 
retirement of nearly 76 million Baby Boomers. Even as incomes rise, we 
have an abysmally low savings rate of 3.8 percent of disposable 
personal income. If the economy slows in the near future, that figure 
may rise by only one or two percentage points, which is still low by 
historical standards.
  There are many provisions in H.R. 3081 which are meritorious and 
should be enacted by the House including resolving the question of 
installment sales, estate tax which really helps family-owned 
businesses and farms and expands pension opportunities. But, Congress 
must first adopt a budget plan which prudently allocates the projected 
budget surplus which does not lead us toward renewed deficit spending.
  As a member of the Budget Committee, I continue to advocate that 
Congress preserve the budget surplus and use it to pay off the national 
debt while strengthening Social Security. The $3.7 trillion dollar 
public debt is a tremendous burden on the economy. By forcing the 
government to borrow money in private markets, the debt drives up 
interest rates and takes investment capital away from private 
companies, thereby reducing productivity. As interest payments on the 
debt grow, it saps both private investment and vital programs such as 
Medicare and education. Regrettably, H.R. 3081 jeopardizes our ability 
to protect Social Security and Medicare and pay down the national debt.
  Mr. WELDON of Florida. Mr. Speaker, today I rise in support of the 
Small Business Tax Fairness Act and increasing the federal minimum wage 
one dollar over three years.
  The nearly 3 million small business owners and their employees in the 
state of Florida deserve this tax fairness package, which will save 
American small business owners $45.3 billion over the next five years. 
Let's remember that most Americans work for small businesses and 
strengthening them will help us create good jobs here in America. 
Liberals who oppose this package use outrageous language to describe 
our proposal which will help not only the owners of small businesses 
and farms, but their employees.
  The Small Business Tax Fairness Act continues the Republican 
commitment to rework the tax code to provide tax fairness to all hard-
working Americans. Tragically, owners of mom and pop stores, 
restaurants, and farms have been unfairly saddled with these tax 
burdens for decades. They are called ``rich'' because of their 
holdings; but almost all of them would agree that those holdings are 
necessary tools and materials for the success of their businesses.
  For example a tractor and a plow can easily cost upwards of $50,000. 
Helping farmers to purchase new farm equipment may be labeled as a tax 
cut for the rich by liberal opponents of this bill. But, because of 
their narrow vision and interest in partisan rhetoric they fail to 
acknowledge and see everyone who benefits. I can guarantee you that the 
benefits flow to American workers who manufactured the tractor, the 
truckers who shipped it, the miners who mined the raw materials, and 
those who work in the factory where the tires and other components are 
made, The tax relief package clearly is good for all Americans.
  With regard to estate taxes, as someone who represents Florida, I 
know about the loss of farm land and open spaces. Estate taxes force 
too many families to sell the farmland to developers just to pay the 
taxes. I have seen it time and again in my congressional district where 
families have been forced to sell citrus farms in order to pay estate 
taxes when a parent dies. The bill provides some tax relief that will 
help farmers and their families keep the family farm.
  The bill also encourages savings. We have the lowest savings rate in 
American history. Our bill helps Americans save money for the future. 
It helps make pension plans more portable so that American workers who 
have placed money in a company pension plan can move to another job 
more easily without losing all that they have put in a pension plan. 
This will help all American workers and their families.
  We provide Americans with a tax deduction for the purchase of health 
insurance so that they are not impoverished when faced with a serious 
illness. I am disappointed that the liberals have labeled as a ``tax 
break for the rich,'' a bill that allows the uninsured to fully deduct 
the costs of purchasing health insurance premiums. I think we should be 
about helping the uninsured, not sticking it to them.
  We also authorize HUD to designate 15 ``renewal communities'' in both 
urban and rural areas. This will help these economically depressed 
communities recover.
  We also increase the business meal deduction to 60%. This will spur 
economic growth. It will help the waiter, the waitress, and the cook 
who will have more customers.
  Not only does our package spur economic growth by providing this tax 
relief, but it provides a reasonable increase in the minimum wage. As 
in the base bill, I support raising the minimum wage by a dollar over 
the next three years. The phased-in wage increase will help employees 
and it will give those small businesses who operate at the margins an 
opportunity to adjust so that they can remain competitive and ensure 
that jobs are not lost.
  I would ask my colleagues to support this bill.
  Mrs. MINK of Hawaii. Mr. Speaker, I rise in opposition to the H.R. 
3081.
  H.R. 3081 provides irresponsible tax cuts that will do nothing to 
help the people that need it the most--the working families.
  Instead, H.R. 3081 will spend over $100 billion of the taxpayer's 
money over the next ten years to provide tax relief to some of the 
wealthiest families.
  In contrast, the Democratic tax proposal focuses on working families.
  It would raise the estate tax exclusion for family farms and 
businesses to $4 million. Under current law, it is now $1.3 million. 
With this change, the Democrats would be helping families save their 
businesses so it can be passed on to the next generation.
  This would help the neighborhood pharmacist pass his drug store on to 
his daughter. It would help the Mom and Pop store continue thriving 
with a son or daughter. It would allow the family farm to stay in the 
family.
  The Democratic substitute will repeal a provision that currently 
disallows a business deduction for travel expenses incurred when your 
spouse or child accompanies you on a business trip. This deduction 
would allow the family to spend more time together. It would make it 
easier for a working mom to take her daughter on a business trip with 
her. It would make it easier for a husband and father to include his 
family. It would help keep the family together.
  The Democrats are committed to putting families first. Our tax 
proposals focus on the family.
  In addition, it provides an exclusion for postsecondary educational 
benefits provided for employee's children; it provides funding for 
school construction; it extends the Work Opportunity and the welfare-
to-work tax credits. And it makes changes to Section 415 affecting 
pensions to help workers save for retirement.
  And it does all of this and more at a cost of $30 billion over ten 
years--a fraction of the cost of the Republican bill.

[[Page 2608]]

  Perhaps that is why the Republicans would not allow the Democrats to 
offer this tax proposal as a substitute to their bill. We have targeted 
our tax cuts to help the people that really need it and at a cost that 
is much more responsible.
  The Republicans want their bill or no bill. We have another choice. 
The motion to recommit will give you the opportunity to vote for the 
Democratic substitute.
  We are experiencing great financial times right now; some Americans 
are getting rich, but most poor working families are getting nowhere.
  Since 1979, 98 percent of the increase in incomes in America has gone 
to the top 20 percent.
  We must not enact irresponsible tax cuts that will benefit only the 
wealthiest families in this country as a trade-off for a $1 minimum 
wage increase spread over 3 years.
  I urge a ``no'' vote on H.R. 3081 and an ``aye'' vote on the motion 
to recommit.
  Mr. BALLENGER. Mr. Speaker, I am pleased that the House is voting on 
a package of tax relief designed to help America's small businessmen 
and women shoulder the burden of another increase in the federal 
minimum wage.
  Congress has already voted on many of the changes contained in the 
Small Business Tax Fairness Act (H.R. 3081) in the context of previous 
Republican-authored tax relief bills which either died in the other 
body or were vetoed by President Clinton. In the interest of protecting 
the small businesses and the jobs they create in my congressional 
district and around the nation, I believe this bill is needed and must 
accompany any proposed increase in the federal minimum wage. As such, I 
applaud Ways and Means Committee Chairman Bill Archer for his 
persistence in fighting for tax relief in this context as well as for 
measures which he championed to relieve the tax burden on working 
families.
  Although I believe the $45.8 billion price tag of H.R. 3081 is modest 
in comparison to earlier bills, it makes some important changes in the 
tax code which will help to insure the strength of the small business 
sector, the backbone of the American economy. First, the bill further 
reduces over five years a tax, created in 1916 in order to break up and 
redistribute a concentration of the nation's wealth, which was used to 
help fund World War I. This war was won in 1918, but the tax on estates 
remains. It is important to note that this tax penalizes not only so-
called rich families, but the workers employed by these family 
businesses or farms if the 55% federal tax rate destroys or financially 
cripples these enterprises. I found this fact to be startling, only 
one-third of family-owned businesses survive into the next generation 
in many cases because of this so-called death tax.
  In addition, Congress needs to correct a problem created by Public 
Law 106-170 and once again allow accrual basis businesses to use the 
installment method of accounting on the sale of assets and the 
business. Congressional Republicans have continued the fight to provide 
the self-employed with 100 percent deductibility for their health 
insurance costs and have included it in this bill. As a small 
businessman myself, I know the importance of the increase from $19,000 
to $30,000 in the amount of equipment eligible for expensing which H.R. 
3081 seeks. Needless to say, the comprehensive package of pension 
reforms in the bill have widespread support and include provisions 
which in the past enjoyed the support of business and labor.
  I've mentioned the changes in H.R. 3081 which my constituents have 
consistently advocated. I hope we will see a large bipartisan majority 
voting for this tax relief package today. It is in everyone's interest 
to see to it that our nation's small businesses continue to flourish.
  The SPEAKER pro tempore (Mr. Pease). All time having expired, 
pursuant to House Resolution 434, the previous question is ordered on 
the bill, as amended.
  The question is on the engrossment and third reading of the bill.
  The bill was ordered to be engrossed and read a third time, and was 
read the third time.


                           Motion to Recommit

  Mr. RANGEL. Mr. Speaker, I offer a motion to recommit.
  The SPEAKER pro tempore. Is the gentleman opposed to the bill?
  Mr. RANGEL. Yes, Mr. Speaker.
  The SPEAKER pro tempore. The Clerk will report the motion.
  The Clerk read as follows:

       Mr. Rangel moves to recommit the bill, H.R. 3081, to the 
     Committee on Ways and Means with instructions to report the 
     same forthwith back to the House with the following 
     amendment:
       Strike all after the enacting clause, and insert the 
     following:

         TITLE II--AMENDMENTS OF INTERNAL REVENUE CODE OF 1986

     SEC. 200. SHORT TITLE.

       (a) Short Title.--This title may be cited as the ``Small 
     Business Tax Relief Act of 2000''.
       (b) Table of Contents.--

         TITLE II--AMENDMENTS OF INTERNAL REVENUE CODE OF 1986

Sec. 200. Table of contents.

Subtitle A--Permanent Extension of Work Opportunity Credit and Welfare-
                             to-Work Credit

Sec. 201. Work opportunity credit and welfare-to-work credit; repeal of 
              age limitation on eligibility of food stamp recipients.

  Subtitle B--Deduction for 100 Percent of Health Insurance Costs of 
                       Self-Employed Individuals

Sec. 211. Deduction for 100 percent of health insurance costs of self-
              employed individuals.

                     Subtitle C--Pension Provisions

Sec. 221. Treatment of multiemployer plans under section 415.
Sec. 222. Early retirement limits for certain plans.
Sec. 223. Certain post-secondary educational benefits provided by an 
              employer to children of employees excludable from gross 
              income as a scholarship.

                    Subtitle D--Business Tax Relief

Sec. 231. Increase in expense treatment for small businesses.
Sec. 232. Small businesses allowed increased deduction for meal and 
              entertainment expenses.
Sec. 233. Restoration of deduction for travel expenses of spouse, etc. 
              accompanying taxpayer on business travel.
Sec. 234. Increased credit and amortization deduction for reforestation 
              expenditures.
Sec. 235. Repeal of modification of installment method.

         Subtitle E--Expansion of Incentives for Public Schools

Sec. 241. Expansion of incentives for public schools.

   Subtitle F--Increased Estate Tax Relief for Family-Owned Business 
                               Interests

Sec. 251. Increase in estate tax benefit for family-owned business 
              interests.

                      Subtitle G--Revenue Offsets

             Part I--Revision of Tax Rules on Expatriation

Sec. 261. Revision of tax rules on expatriation.

          Part II--Disallowance of Noneconomic Tax Attributes


  SUBPART A--DISALLOWANCE OF NONECONOMIC TAX ATTRIBUTES; INCREASE IN 
     PENALTY WITH RESPECT TO DISALLOWED NONECONOMIC TAX ATTRIBUTES

Sec. 266. Disallowance of noneconomic tax attributes.
Sec. 267. Increase in substantial underpayment penalty with respect to 
              disallowed noneconomic tax attributes.
Sec. 268. Penalty on marketed tax avoidance strategies which have no 
              economic substance, etc.
Sec. 269. Effective dates.


  SUBPART B--LIMITATIONS ON IMPORTATION OR TRANSFER OF BUILT-IN LOSSES

Sec. 271. Limitation on importation of built-in losses.
Sec. 272. Disallowance of partnership loss transfers.

                 Part III--Estate and Gift Tax Offsets

Sec. 276. Valuation rules for transfers involving nonbusiness assets.
Sec. 277. Correction of technical error affecting largest estates.

                         Part IV--Other Offsets

Sec. 281. Consistent amortization periods for intangibles.
Sec. 282. Modification of foreign tax credit carryover rules.
Sec. 283. Recognition of gain on transfers to swap funds.
       (c) Coordination with Budget Rules.--If, without regard to 
     this sentence, any provision of this Act would result in an 
     increase or decrease in revenue in fisal year 2001, 
     notwithstanding any other provision of this Act, such 
     provision shall be first effective on October 1, 2001, except 
     that the determination of amounts required to be paid (or 
     refunds required to be allowed) on or after such date shall 
     be made as if this sentence had not been enacted.

Subtitle A--Permanent Extension of Work Opportunity Credit and Welfare-
                             to-Work Credit

     SEC. 201. WORK OPPORTUNITY CREDIT AND WELFARE-TO-WORK CREDIT; 
                   REPEAL OF AGE LIMITATION ON ELIGIBILITY OF FOOD 
                   STAMP RECIPIENTS.

       (a) Permanent Extension.--
       (1) In general.--
       (A) Section 51(c) of the Internal Revenue Code of 1986 is 
     amended by striking paragraph (4).

[[Page 2609]]

       (B) Section 51A of such Code is amended by striking 
     subsection (f).
       (2) Effective date.--The amendments made by this subsection 
     shall apply to individuals who begin work for the employer 
     after December 31, 2001.
       (b) Repeal of Age Limitation on Eligibility of Food Stamp 
     Recipients.--
       (1) In general.--Subparagraph (A) of section 51(d)(8) of 
     such Code is amended to read as follows:
       ``(A) In general.--The term `qualified food stamp 
     recipient' means any individual who is certified by the 
     designated local agency as being a member of a family--
       ``(i) receiving assistance under a food stamp program under 
     the Food Stamp Act of 1977 for the 6-month period ending on 
     the hiring date, or
       ``(ii) receiving such assistance for at least 3 months of 
     the 5-month period ending on the hiring date, in the case of 
     a member of a family who ceases to be eligible for such 
     assistance under section 6(o) of the Food Stamp Act of 
     1977.''
       (2) Effective date.--The amendment made by this subsection 
     shall apply to individuals who begin work for the employer 
     after the date of the enactment of this Act.

  Subtitle B--Deduction for 100 Percent of Health Insurance Costs of 
                       Self-Employed Individuals

     SEC. 211. DEDUCTION FOR 100 PERCENT OF HEALTH INSURANCE COSTS 
                   OF SELF-EMPLOYED INDIVIDUALS.

       (a) In General.--Paragraph (1) of section 162(l) of the 
     Internal Revenue Code of 1986 is amended to read as follows:
       ``(1) Allowance of deduction.--In the case of an individual 
     who is an employee within the meaning of section 401(c)(1), 
     there shall be allowed as a deduction under this section an 
     amount equal to 100 percent of the amount paid during the 
     taxable year for insurance which constitutes medical care for 
     the taxpayer and the taxpayer's spouse and dependents.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     2000.

                     Subtitle C--Pension Provisions

     SEC. 221. TREATMENT OF MULTIEMPLOYER PLANS UNDER SECTION 415.

       (a) Compensation Limit.--Paragraph (11) of section 415(b) 
     of the Internal Revenue Code of 1986 (relating to limitation 
     for defined benefit plans) is amended to read as follows:
       ``(11) Special limitation rule for governmental and 
     multiemployer plans.--In the case of a governmental plan (as 
     defined in section 414(d)) or a multiemployer plan (as 
     defined in section 414(f)), subparagraph (B) of paragraph (1) 
     shall not apply.''.
       (b) Combining and Aggregation of Plans.--
       (1) Combining of plans.--Subsection (f) of section 415 of 
     such Code (relating to combining of plans) is amended by 
     adding at the end the following:
       ``(3) Exception for multiemployer plans.--Notwithstanding 
     paragraph (1) and subsection (g), a multiemployer plan (as 
     defined in section 414(f)) shall not be combined or 
     aggregated with any other plan maintained by an employer for 
     purposes of applying the limitations established in this 
     section, except that such plan shall be combined or 
     aggregated with another plan which is not such a 
     multiemployer plan solely for purposes of determining whether 
     such other plan meets the requirements of subsection 
     (b)(1)(A).''.
       (2) Conforming amendment for aggregation of plans.--
     Subsection (g) of section 415 of such Code (relating to 
     aggregation of plans) is amended by striking ``The 
     Secretary'' and inserting ``Except as provided in subsection 
     (f)(3), the Secretary''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to years beginning after December 31, 1999.

     SEC. 222. EARLY RETIREMENT LIMITS FOR CERTAIN PLANS.

       (a) In General.--Subparagraph (F) of section 415(b)(2) of 
     the Internal Revenue Code of 1986 is amended to read as 
     follows:
       ``(F) Multiemployer plans and plans maintained by 
     governments and tax exempt organizations.--In the case of a 
     governmental plan (within the meaning of section 414(d)), a 
     plan maintained by an organization (other than a governmental 
     unit) exempt from tax under this subtitle, a multiemployer 
     plan (as defined in section 414(f)), or a qualified merchant 
     marine plan--
       ``(i) subparagraph (C) shall be applied--

       ``(I) by substituting `age 62' for `social security 
     retirement age' each place it appears, and
       ``(II) as if the last sentence thereof read as follows: 
     `The reduction under this subparagraph shall not reduce the 
     limitation of paragraph (1)(A) below (i) 80 percent of such 
     limitation as in effect for the year, or (ii) if the benefit 
     begins before age 55, the equivalent of such 80 percent 
     amount for age 55.', and

       ``(ii) subparagraph (D) shall be applied by substituting 
     `age 65' for `social security retirement age' each place it 
     appears.

     For purposes of this subparagraph, the term `qualified 
     merchant marine plan' means a plan in existence on January 1, 
     1986, the participants in which are merchant marine officers 
     holding licenses issued by the Secretary of Transportation 
     under title 46, United States Code.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to years beginning after December 31, 1999.

     SEC. 223. CERTAIN POST-SECONDARY EDUCATIONAL BENEFITS 
                   PROVIDED BY AN EMPLOYER TO CHILDREN OF 
                   EMPLOYEES EXCLUDABLE FROM GROSS INCOME AS A 
                   SCHOLARSHIP.

       (a) In General.--Section 117 of the Internal Revenue Code 
     of 1986 (relating to qualified scholarships) is amended by 
     adding at the end the following:
       ``(e) Employer-Provided Post-Secondary Educational Benefits 
     Provided to Children of Employees.--
       ``(1) In general.--In determining whether any amount is a 
     qualified scholarship for purposes of subsection (a), the 
     fact that such amount is provided in connection with an 
     employment relationship shall be disregarded if--
       ``(A) such amount is provided by the employer to a child 
     (as defined in section 151(c)(3)) of an employee or former 
     employee of such employer,
       ``(B) such amount is provided pursuant to a plan which 
     meets the nondiscrimination requirements of subsection 
     (d)(3), and
       ``(C) amounts provided under such plan are in addition to 
     any other compensation payable to employees and such plan 
     does not provide employees with a choice between such amounts 
     and any other benefit.

     For purposes of subparagraph (C), the business practices of 
     the employer (as well as such plan) shall be taken into 
     account.
       ``(2) Dollar limitations.--
       ``(A) Per child.--The amount excluded from the gross income 
     of the employee by reason of paragraph (1) for a taxable year 
     with respect to amounts provided to each child of such 
     employee shall not exceed $2,000.
       ``(B) Aggregate limit.--The amount excluded from the gross 
     income of the employee by reason of paragraph (1) for a 
     taxable year (after the application of subparagraph (A)) 
     shall not exceed the excess of the dollar amount contained in 
     section 127(a)(2) over the amount excluded from the 
     employee's gross income under section 127 for such year.
       ``(3) Principal shareholders and owners.--Paragraph (1) 
     shall not apply to any amount provided to any child of any 
     individual if such individual (or such individual's spouse) 
     owns (on any day of the year) more than 5 percent of the 
     stock or of the capital or profits interest in the employer.
       ``(4) Special rules of application.--In the case of an 
     amount which is treated as a qualified scholarship by reason 
     of this subsection--
       ``(A) subsection (a) shall be applied without regard to the 
     requirement that the recipient be a candidate for a degree, 
     and
       ``(B) subsection (b)(2)(A) shall be applied by substituting 
     `section 529(e)(5)' for `section 170(b)(1)(A)(ii)'.
       ``(5) Certain other rules to apply.--Rules similar to the 
     rules of paragraphs (4), (5), and (7) of section 127(c) shall 
     apply for purposes of this subsection.''
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     2000.

                    Subtitle D--Business Tax Relief

     SEC. 231. INCREASE IN EXPENSE TREATMENT FOR SMALL BUSINESSES.

       (a) In General.--Paragraph (1) of section 179(b) of the 
     Internal Revenue Code of 1986 (relating to dollar limitation) 
     is amended to read as follows:
       ``(1) Dollar limitation.--The aggregate cost which may be 
     taken into account under subsection (a) for any taxable year 
     shall not exceed $30,000.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     2000.

     SEC. 232. SMALL BUSINESSES ALLOWED INCREASED DEDUCTION FOR 
                   MEAL AND ENTERTAINMENT EXPENSES.

       (a) In General.--Subsection (n) of section 274 (relating to 
     only 50 percent of meal and entertainment expenses allowed as 
     deduction) is amended by adding at the end the following new 
     paragraph:
       ``(4) Special rule for small businesses.--
       ``(A) In general.--In the case of any taxpayer which is a 
     small business, paragraph (1) shall be applied by 
     substituting for `50 percent'--
       ``(i) `55 percent' in the case of taxable years beginning 
     in 2001 and 2002, and
       ``(ii) `60 percent' in the case of taxable years beginning 
     in 2003, 2004, 2005 and 2006, and
       ``(iii) `65 percent' in the case of taxable years beginning 
     after 2006.
       ``(B) Small business.--For purposes of this paragraph, the 
     term `small business' means, with respect to expenses paid or 
     incurred during any taxable year--
       ``(i) any C corporation which meets the requirements of 
     section 55(e)(1) for such year, and
       ``(ii) any S corporation, partnership, or sole 
     proprietorship which would meet such requirements if it were 
     a C corporation.''
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to taxable years beginning after December 31, 
     2000.

[[Page 2610]]



     SEC. 233. RESTORATION OF DEDUCTION FOR TRAVEL EXPENSES OF 
                   SPOUSE, ETC. ACCOMPANYING TAXPAYER ON BUSINESS 
                   TRAVEL.

       (a) In General.--Subsection (m) of section 274 of the 
     Internal Revenue Code of 1986 (relating to additional 
     limitations on travel expenses) is amended by striking 
     paragraph (3).
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     2000.

     SEC. 234. INCREASED CREDIT AND AMORTIZATION DEDUCTION FOR 
                   REFORESTATION EXPENDITURES.

       (a) Increase in Credit.--Paragraph (1) of section 48(b) of 
     the Internal Revenue Code of 1986 (relating to reforestation 
     credit) is amended by striking ``10 percent'' and inserting 
     ``20 percent''.
       (b) Reduction in Amortization Period.--Subsection (a) of 
     section 194 of such Code (relating to amortization of 
     reforestation expenditures) is amended--
       (1) by striking ``84 months'' and inserting ``36 months'', 
     and
       (2) by striking ``84-month period'' and inserting ``36-
     month period''.
       (c) Increase in Maximum Amount Which May Be Amortized.--
     Paragraph (1) of section 194(b) of such Code is amended by 
     striking ``$10,000 ($5,000'' and inserting ``$20,000 
     ($10,000''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2000.

     SEC. 235. REPEAL OF MODIFICATION OF INSTALLMENT METHOD.

       (a) In General.--Subsection (a) of section 536 of the 
     Ticket to Work and Work Incentives Improvement Act of 1999 
     (relating to modification of installment method and repeal of 
     installment method for accrual method taxpayers) is repealed 
     effective with respect to sales and other dispositions 
     occurring on or after the date of the enactment of such Act.
       (b) Applicability.--The Internal Revenue Code of 1986 shall 
     be applied and administered as if that subsection (and the 
     amendments made by that subsection) had not been enacted.

         Subtitle E--Expansion of Incentives for Public Schools

     SEC. 241. EXPANSION OF INCENTIVES FOR PUBLIC SCHOOLS.

       (a) In General.--Chapter 1 of the Internal Revenue Code of 
     1986 is amended by adding at the end the following new 
     subchapter:

         ``Subchapter X--Public School Modernization Provisions

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

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

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

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

       ``(a) Allowance of Credit.--In the case of a taxpayer who 
     holds a qualified public school modernization bond on a 
     credit allowance date of such bond which occurs during the 
     taxable year, there shall be allowed as a credit against the 
     tax imposed by this chapter for such taxable year an amount 
     equal to the sum of the credits determined under subsection 
     (b) with respect to credit allowance dates during such year 
     on which the taxpayer holds such bond.
       ``(b) Amount of Credit.--
       ``(1) In general.--The amount of the credit determined 
     under this subsection with respect to any credit allowance 
     date for a qualified public school modernization bond is 25 
     percent of the annual credit determined with respect to such 
     bond.
       ``(2) Annual credit.--The annual credit determined with 
     respect to any qualified public school modernization bond is 
     the product of--
       ``(A) the applicable credit rate, multiplied by
       ``(B) the outstanding face amount of the bond.
       ``(3) Applicable credit rate.--For purposes of paragraph 
     (1), the applicable credit rate with respect to an issue is 
     the rate equal to an average market yield (as of the day 
     before the date of issuance of the issue) on outstanding 
     long-term corporate debt obligations (determined under 
     regulations prescribed by the Secretary).
       ``(4) Special rule for issuance and redemption.--In the 
     case of a bond which is issued during the 3-month period 
     ending on a credit allowance date, the amount of the credit 
     determined under this subsection with respect to such credit 
     allowance date shall be a ratable portion of the credit 
     otherwise determined based on the portion of the 3-month 
     period during which the bond is outstanding. A similar rule 
     shall apply when the bond is redeemed.
       ``(c) Limitation Based on Amount of Tax.--
       ``(1) In general.--The credit allowed under subsection (a) 
     for any taxable year shall not exceed the excess of--
       ``(A) the sum of the regular tax liability (as defined in 
     section 26(b)) plus the tax imposed by section 55, over
       ``(B) the sum of the credits allowable under part IV of 
     subchapter A (other than subpart C thereof, relating to 
     refundable credits).
       ``(2) Carryover of unused credit.--If the credit allowable 
     under subsection (a) exceeds the limitation imposed by 
     paragraph (1) for such taxable year, such excess shall be 
     carried to the succeeding taxable year and added to the 
     credit allowable under subsection (a) for such taxable year.
       ``(d) Qualified Public School Modernization Bond; Credit 
     Allowance Date.--For purposes of this section--
       ``(1) Qualified public school modernization bond.--The term 
     `qualified public school modernization bond' means--
       ``(A) a qualified zone academy bond, and
       ``(B) a qualified school construction bond.
       ``(2) Credit allowance date.--The term `credit allowance 
     date' means--
       ``(A) March 15,
       ``(B) June 15,
       ``(C) September 15, and
       ``(D) December 15.
     Such term includes the last day on which the bond is 
     outstanding.
       ``(e) Other Definitions.--For purposes of this subchapter--
       ``(1) Local educational agency.--The term `local 
     educational agency' has the meaning given to such term by 
     section 14101 of the Elementary and Secondary Education Act 
     of 1965. Such term includes the local educational agency that 
     serves the District of Columbia but does not include any 
     other State agency.
       ``(2) Bond.--The term `bond' includes any obligation.
       ``(3) State.--The term `State' includes the District of 
     Columbia and any possession of the United States.
       ``(4) Public school facility.--The term `public school 
     facility' shall not include--
       ``(A) any stadium or other facility primarily used for 
     athletic contests or exhibitions or other events for which 
     admission is charged to the general public, or
       ``(B) any facility which is not owned by a State or local 
     government or any agency or instrumentality of a State or 
     local government.
       ``(f) Credit Included in Gross Income.--Gross income 
     includes the amount of the credit allowed to the taxpayer 
     under this section (determined without regard to subsection 
     (c)) and the amount so included shall be treated as interest 
     income.
       ``(g) Bonds Held by Regulated Investment Companies.--If any 
     qualified public school modernization bond is held by a 
     regulated investment company, the credit determined under 
     subsection (a) shall be allowed to shareholders of such 
     company under procedures prescribed by the Secretary.
       ``(h) Credits May Be Stripped.--Under regulations 
     prescribed by the Secretary--
       ``(1) In general.--There may be a separation (including at 
     issuance) of the ownership of a qualified public school 
     modernization bond and the entitlement to the credit under 
     this section with respect to such bond. In case of any such 
     separation, the credit under this section shall be allowed to 
     the person who on the credit allowance date holds the 
     instrument evidencing the entitlement to the credit and not 
     to the holder of the bond.
       ``(2) Certain rules to apply.--In the case of a separation 
     described in paragraph (1), the rules of section 1286 shall 
     apply to the qualified public school modernization bond as if 
     it were a stripped bond and to the credit under this section 
     as if it were a stripped coupon.
       ``(i) Treatment for Estimated Tax Purposes.--Solely for 
     purposes of sections 6654 and 6655, the credit allowed by 
     this section to a taxpayer by reason of holding a qualified 
     public school modernization bonds on a credit allowance date 
     shall be treated as if it were a payment of estimated tax 
     made by the taxpayer on such date.
       ``(j) Credit May Be Transferred.--Nothing in any law or 
     rule of law shall be construed to limit the transferability 
     of the credit allowed by this section through sale and 
     repurchase agreements.
       ``(k) Reporting.--Issuers of qualified public school 
     modernization bonds shall submit reports similar to the 
     reports required under section 149(e).
       ``(l) Penalty on Contractors Failing To Pay Prevailing 
     Wage.--
       ``(1) In general.--If any contractor on any project funded 
     by any qualified public school modernization bond has failed, 
     during any portion of such contractor's taxable year, to pay 
     prevailing wages that would be required under section 439 of 
     the General Education Provisions Act if such funding were an 
     applicable program under such section, the tax imposed by 
     chapter 1 on such contractor for such taxable year shall be 
     increased by 200 percent of the amount involved in such 
     failure.
       ``(2) Amount involved.--For purposes of paragraph (1), the 
     amount involved with respect to any failure is the excess of 
     the amount of wages such contractor would be so required to 
     pay under such section over the amount of wages paid.
       ``(3) Abatement of tax if failure corrected.--If a failure 
     to pay prevailing wages is corrected within a reasonable 
     period, then any tax imposed by paragraph (1) with respect to 
     such failure (including interest, additions to the tax, and 
     additional amounts)

[[Page 2611]]

     shall not be assessed, and if assessed the assessment shall 
     be abated, and if collected shall be credited or refunded as 
     an overpayment.
       ``(4) No credits against tax.--The tax imposed by paragraph 
     (1) shall not be treated as a tax imposed by this chapter for 
     purposes of determining--
       ``(A) the amount of any credit allowable under this 
     chapter, or
       ``(B) the amount of the minimum tax imposed by section 55.
       ``(m) Termination.--This section shall not apply to any 
     bond issued after December 31, 2004.

             ``PART II--QUALIFIED SCHOOL CONSTRUCTION BONDS

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

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

       ``(a) Qualified School Construction Bond.--For purposes of 
     this subchapter, the term `qualified school construction 
     bond' means any bond issued as part of an issue if--
       ``(1) 95 percent or more of the proceeds of such issue are 
     to be used for the construction, rehabilitation, or repair of 
     a public school facility or for the acquisition of land on 
     which such a facility is to be constructed with part of the 
     proceeds of such issue,
       ``(2) the bond is issued by a State or local government 
     within the jurisdiction of which such school is located,
       ``(3) the issuer designates such bond for purposes of this 
     section, and
       ``(4) the term of each bond which is part of such issue 
     does not exceed 15 years.
       ``(b) Limitation on Amount of Bonds Designated.--The 
     maximum aggregate face amount of bonds issued during any 
     calendar year which may be designated under subsection (a) by 
     any issuer shall not exceed the sum of--
       ``(1) the limitation amount allocated under subsection (d) 
     for such calendar year to such issuer, and
       ``(2) if such issuer is a large local educational agency 
     (as defined in subsection (e)(4)) or is issuing on behalf of 
     such an agency, the limitation amount allocated under 
     subsection (e) for such calendar year to such agency.
       ``(c) National Limitation on Amount of Bonds Designated.--
     There is a national qualified school construction bond 
     limitation for each calendar year. Such limitation is--
       ``(1) $11,000,000,000 for 2001,
       ``(2) except as provided in subsection (f), zero after 
     2001.
       ``(d) Half of Limitation Allocated Among States.--
       ``(1) In general.--One-half of the limitation applicable 
     under subsection (c) for any calendar year shall be allocated 
     among the States under paragraph (2) by the Secretary. The 
     limitation amount allocated to a State under the preceding 
     sentence shall be allocated by the State to issuers within 
     such State and such allocations may be made only if there is 
     an approved State application.
       ``(2) Allocation formula.--The amount to be allocated under 
     paragraph (1) for any calendar year shall be allocated among 
     the States in proportion to the respective amounts each such 
     State received for Basic Grants under subpart 2 of part A of 
     title I of the Elementary and Secondary Education Act of 1965 
     (20 U.S.C. 6331 et seq.) for the most recent fiscal year 
     ending before such calendar year. For purposes of the 
     preceding sentence, Basic Grants attributable to large local 
     educational agencies (as defined in subsection (e)) shall be 
     disregarded.
       ``(3) Minimum allocations to states.--
       ``(A) In general.--The Secretary shall adjust the 
     allocations under this subsection for any calendar year for 
     each State to the extent necessary to ensure that the sum 
     of--
       ``(i) the amount allocated to such State under this 
     subsection for such year, and
       ``(ii) the aggregate amounts allocated under subsection (e) 
     to large local educational agencies in such State for such 
     year,
     is not less than an amount equal to such State's minimum 
     percentage of the amount to be allocated under paragraph (1) 
     for the calendar year.
       ``(B) Minimum percentage.--A State's minimum percentage for 
     any calendar year is the minimum percentage described in 
     section 1124(d) of the Elementary and Secondary Education Act 
     of 1965 (20 U.S.C. 6334(d)) for such State for the most 
     recent fiscal year ending before such calendar year.
       ``(4) Allocations to certain possessions.--The amount to be 
     allocated under paragraph (1) to any possession of the United 
     States other than Puerto Rico shall be the amount which would 
     have been allocated if all allocations under paragraph (1) 
     were made on the basis of respective populations of 
     individuals below the poverty line (as defined by the Office 
     of Management and Budget). In making other allocations, the 
     amount to be allocated under paragraph (1) shall be reduced 
     by the aggregate amount allocated under this paragraph to 
     possessions of the United States.
       ``(5) Allocations for indian schools.--In addition to the 
     amounts otherwise allocated under this subsection, 
     $200,000,000 for calendar year 2001 shall be allocated by the 
     Secretary of the Interior for purposes of the construction, 
     rehabilitation, and repair of schools funded by the Bureau of 
     Indian Affairs. In the case of amounts allocated under the 
     preceding sentence, Indian tribal governments (as defined in 
     section 7871) shall be treated as qualified issuers for 
     purposes of this subchapter.
       ``(6) Approved state application.--For purposes of 
     paragraph (1), the term `approved State application' means an 
     application which is approved by the Secretary of Education 
     and which includes--
       ``(A) the results of a recent publicly-available survey 
     (undertaken by the State with the involvement of local 
     education officials, members of the public, and experts in 
     school construction and management) of such State's needs for 
     public school facilities, including descriptions of--
       ``(i) health and safety problems at such facilities,
       ``(ii) the capacity of public schools in the State to house 
     projected enrollments, and
       ``(iii) the extent to which the public schools in the State 
     offer the physical infrastructure needed to provide a high-
     quality education to all students, and
       ``(B) a description of how the State will allocate to local 
     educational agencies, or otherwise use, its allocation under 
     this subsection to address the needs identified under 
     subparagraph (A), including a description of how it will--
       ``(i) give highest priority to localities with the greatest 
     needs, as demonstrated by inadequate school facilities 
     coupled with a low level of resources to meet those needs,
       ``(ii) use its allocation under this subsection to assist 
     localities that lack the fiscal capacity to issue bonds on 
     their own, and
       ``(iii) ensure that its allocation under this subsection is 
     used only to supplement, and not supplant, the amount of 
     school construction, rehabilitation, and repair in the State 
     that would have occurred in the absence of such allocation.
     Any allocation under paragraph (1) by a State shall be 
     binding if such State reasonably determined that the 
     allocation was in accordance with the plan approved under 
     this paragraph.
       ``(e) Half of Limitation Allocated Among Largest School 
     Districts.--
       ``(1) In general.--One-half of the limitation applicable 
     under subsection (c) for any calendar year shall be allocated 
     under paragraph (2) by the Secretary among local educational 
     agencies which are large local educational agencies for such 
     year. No qualified school construction bond may be issued by 
     reason of an allocation to a large local educational agency 
     under the preceding sentence unless such agency has an 
     approved local application.
       ``(2) Allocation formula.--The amount to be allocated under 
     paragraph (1) for any calendar year shall be allocated among 
     large local educational agencies in proportion to the 
     respective amounts each such agency received for Basic Grants 
     under subpart 2 of part A of title I of the Elementary and 
     Secondary Education Act of 1965 (20 U.S.C. 6331 et seq.) for 
     the most recent fiscal year ending before such calendar year.
       ``(3) Allocation of unused limitation to state.--The amount 
     allocated under this subsection to a large local educational 
     agency for any calendar year may be reallocated by such 
     agency to the State in which such agency is located for such 
     calendar year. Any amount reallocated to a State under the 
     preceding sentence may be allocated as provided in subsection 
     (d)(1).
       ``(4) Large local educational agency.--For purposes of this 
     section, the term `large local educational agency' means, 
     with respect to a calendar year, any local educational agency 
     if such agency is--
       ``(A) among the 100 local educational agencies with the 
     largest numbers of children aged 5 through 17 from families 
     living below the poverty level, as determined by the 
     Secretary using the most recent data available from the 
     Department of Commerce that are satisfactory to the 
     Secretary, or
       ``(B) 1 of not more than 25 local educational agencies 
     (other than those described in subparagraph (A)) that the 
     Secretary of Education determines (based on the most recent 
     data available satisfactory to the Secretary) are in 
     particular need of assistance, based on a low level of 
     resources for school construction, a high level of enrollment 
     growth, or such other factors as the Secretary deems 
     appropriate.
       ``(5) Approved local application.--For purposes of 
     paragraph (1), the term `approved local application' means an 
     application which is approved by the Secretary of Education 
     and which includes--
       ``(A) the results of a recent publicly-available survey 
     (undertaken by the local educational agency or the State with 
     the involvement of school officials, members of the public, 
     and experts in school construction and management) of such 
     agency's needs for public school facilities, including 
     descriptions of--
       ``(i) the overall condition of the local educational 
     agency's school facilities, including health and safety 
     problems,
       ``(ii) the capacity of the agency's schools to house 
     projected enrollments, and
       ``(iii) the extent to which the agency's schools offer the 
     physical infrastructure needed to provide a high-quality 
     education to all students,

[[Page 2612]]

       ``(B) a description of how the local educational agency 
     will use its allocation under this subsection to address the 
     needs identified under subparagraph (A), and
       ``(C) a description of how the local educational agency 
     will ensure that its allocation under this subsection is used 
     only to supplement, and not supplant, the amount of school 
     construction, rehabilitation, or repair in the locality that 
     would have occurred in the absence of such allocation.
     A rule similar to the rule of the last sentence of subsection 
     (d)(6) shall apply for purposes of this paragraph.
       ``(f) Carryover of Unused Limitation.--If for any calendar 
     year--
       ``(1) the amount allocated under subsection (d) to any 
     State, exceeds
       ``(2) the amount of bonds issued during such year which are 
     designated under subsection (a) pursuant to such allocation,
     the limitation amount under such subsection for such State 
     for the following calendar year shall be increased by the 
     amount of such excess. A similar rule shall apply to the 
     amounts allocated under subsection (d)(5) or (e).
       ``(g) Special Rules Relating to Arbitrage.--
       ``(1) In general.--A bond shall not be treated as failing 
     to meet the requirement of subsection (a)(1) solely by reason 
     of the fact that the proceeds of the issue of which such bond 
     is a part are invested for a temporary period (but not more 
     than 36 months) until such proceeds are needed for the 
     purpose for which such issue was issued.
       ``(2) Binding commitment requirement.--Paragraph (1) shall 
     apply to an issue only if, as of the date of issuance, there 
     is a reasonable expectation that--
       ``(A) at least 10 percent of the proceeds of the issue will 
     be spent within the 6-month period beginning on such date for 
     the purpose for which such issue was issued, and
       ``(B) the remaining proceeds of the issue will be spent 
     with due diligence for such purpose.
       ``(3) Earnings on proceeds.--Any earnings on proceeds 
     during the temporary period shall be treated as proceeds of 
     the issue for purposes of applying subsection (a)(1) and 
     paragraph (1) of this subsection.

               ``PART III--INCENTIVES FOR EDUCATION ZONES

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

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

       ``(a) Qualified Zone Academy Bond.--For purposes of this 
     subchapter--
       ``(1) In general.--The term `qualified zone academy bond' 
     means any bond issued as part of an issue if--
       ``(A) 95 percent or more of the proceeds of such issue are 
     to be used for a qualified purpose with respect to a 
     qualified zone academy established by a local educational 
     agency,
       ``(B) the bond is issued by a State or local government 
     within the jurisdiction of which such academy is located,
       ``(C) the issuer--
       ``(i) designates such bond for purposes of this section,
       ``(ii) certifies that it has written assurances that the 
     private business contribution requirement of paragraph (2) 
     will be met with respect to such academy, and
       ``(iii) certifies that it has the written approval of the 
     local educational agency for such bond issuance, and
       ``(D) the term of each bond which is part of such issue 
     does not exceed 15 years.
     Rules similar to the rules of section 1400G(g) shall apply 
     for purposes of paragraph (1).
       ``(2) Private business contribution requirement.--
       ``(A) In general.--For purposes of paragraph (1), the 
     private business contribution requirement of this paragraph 
     is met with respect to any issue if the local educational 
     agency that established the qualified zone academy has 
     written commitments from private entities to make qualified 
     contributions having a present value (as of the date of 
     issuance of the issue) of not less than 10 percent of the 
     proceeds of the issue.
       ``(B) Qualified contributions.--For purposes of 
     subparagraph (A), the term `qualified contribution' means any 
     contribution (of a type and quality acceptable to the local 
     educational agency) of--
       ``(i) equipment for use in the qualified zone academy 
     (including state-of-the-art technology and vocational 
     equipment),
       ``(ii) technical assistance in developing curriculum or in 
     training teachers in order to promote appropriate market 
     driven technology in the classroom,
       ``(iii) services of employees as volunteer mentors,
       ``(iv) internships, field trips, or other educational 
     opportunities outside the academy for students, or
       ``(v) any other property or service specified by the local 
     educational agency.
       ``(3) Qualified zone academy.--The term `qualified zone 
     academy' means any public school (or academic program within 
     a public school) which is established by and operated under 
     the supervision of a local educational agency to provide 
     education or training below the postsecondary level if--
       ``(A) such public school or program (as the case may be) is 
     designed in cooperation with business to enhance the academic 
     curriculum, increase graduation and employment rates, and 
     better prepare students for the rigors of college and the 
     increasingly complex workforce,
       ``(B) students in such public school or program (as the 
     case may be) will be subject to the same academic standards 
     and assessments as other students educated by the local 
     educational agency,
       ``(C) the comprehensive education plan of such public 
     school or program is approved by the local educational 
     agency, and
       ``(D)(i) such public school is located in an empowerment 
     zone or enterprise community (including any such zone or 
     community designated after the date of the enactment of this 
     section), or
       ``(ii) there is a reasonable expectation (as of the date of 
     issuance of the bonds) that at least 35 percent of the 
     students attending such school or participating in such 
     program (as the case may be) will be eligible for free or 
     reduced-cost lunches under the school lunch program 
     established under the National School Lunch Act.
       ``(4) Qualified purpose.--The term `qualified purpose' 
     means, with respect to any qualified zone academy--
       ``(A) constructing, rehabilitating, or repairing the public 
     school facility in which the academy is established,
       ``(B) acquiring the land on which such facility is to be 
     constructed with part of the proceeds of such issue,
       ``(C) providing equipment for use at such academy,
       ``(D) developing course materials for education to be 
     provided at such academy, and
       ``(E) training teachers and other school personnel in such 
     academy.
       ``(b) Limitations on Amount of Bonds Designated.--
       ``(1) In general.--There is a national zone academy bond 
     limitation for each calendar year. Such limitation is--
       ``(A) $400,000,000 for 1998,
       ``(B) $400,000,000 for 1999,
       ``(C) $400,000,000 for 2000,
       ``(D) $1,400,000,000 for 2001,
       ``(E) except as provided in paragraph (3), zero after 2001.
       ``(2) Allocation of limitation.--
       ``(A) Allocation among states.--
       ``(i) 1998, 1999, and 2000 limitations.--The national zone 
     academy bond limitations for calendar years 1998, 1999, and 
     2000 shall be allocated by the Secretary among the States on 
     the basis of their respective populations of individuals 
     below the poverty line (as defined by the Office of 
     Management and Budget).
       ``(ii) Limitation after 2000.--The national zone academy 
     bond limitation for any calendar year after 2000 shall be 
     allocated by the Secretary among the States in the manner 
     prescribed by section 1400G(d); except that in making the 
     allocation under this clause, the Secretary shall take into 
     account--

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

       ``(B) Allocation to local educational agencies.--The 
     limitation amount allocated to a State under subparagraph (A) 
     shall be allocated by the State education agency to qualified 
     zone academies within such State.
       ``(C) Designation subject to limitation amount.--The 
     maximum aggregate face amount of bonds issued during any 
     calendar year which may be designated under subsection (a) 
     with respect to any qualified zone academy shall not exceed 
     the limitation amount allocated to such academy under 
     subparagraph (B) for such calendar year.
       ``(3) Carryover of unused limitation.--If for any calendar 
     year--
       ``(A) the limitation amount under this subsection for any 
     State, exceeds
       ``(B) the amount of bonds issued during such year which are 
     designated under subsection (a) (or the corresponding 
     provisions of prior law) with respect to qualified zone 
     academies within such State,
     the limitation amount under this subsection for such State 
     for the following calendar year shall be increased by the 
     amount of such excess.''.
       (b) Reporting.--Subsection (d) of section 6049 of such Code 
     (relating to returns regarding payments of interest) is 
     amended by adding at the end the following new paragraph:
       ``(8) Reporting of credit on qualified public school 
     modernization bonds.--
       ``(A) In general.--For purposes of subsection (a), the term 
     `interest' includes amounts includible in gross income under 
     section 1400F(f) and such amounts shall be treated as paid on 
     the credit allowance date (as defined in section 
     1400F(d)(2)).
       ``(B) Reporting to corporations, etc.--Except as otherwise 
     provided in regulations, in the case of any interest 
     described in subparagraph (A) of this paragraph, subsection 
     (b)(4) of this section shall be applied without regard to 
     subparagraphs (A), (H), (I), (J), (K), and (L)(i).
       ``(C) Regulatory authority.--The Secretary may prescribe 
     such regulations as are necessary or appropriate to carry out 
     the purposes of this paragraph, including regulations which 
     require more frequent or more detailed reporting.''
       (c) Other Conforming Amendments.--

[[Page 2613]]

       (1) Subchapter U of chapter 1 of such Code is amended by 
     striking part IV, by redesignating part V as part IV, and by 
     redesignating section 1397F as section 1397E.
       (2) The table of subchapters for chapter 1 of such Code is 
     amended by adding at the end the following new item:

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

``Part IV. Regulations.''

       (d) Effective Dates.--
       (1) In general.--Except as otherwise provided in this 
     subsection, the amendments made by this section shall apply 
     to obligations issued after December 31, 2000.
       (2) Repeal of restriction on zone academy bond holders.--In 
     the case of bonds to which section 1397E of the Internal 
     Revenue Code of 1986 (as in effect before the date of the 
     enactment of this Act) applies, the limitation of such 
     section to eligible taxpayers (as defined in subsection 
     (d)(6) of such section) shall not apply after the date of the 
     enactment of this Act.

   Subtitle F--Increased Estate Tax Relief for Family-Owned Business 
                               Interests

     SEC. 251. INCREASE IN ESTATE TAX BENEFIT FOR FAMILY-OWNED 
                   BUSINESS INTERESTS.

       (a) Transfer to Credit Provisions.--Section 2057 of the 
     Internal Revenue Code of 1986 (relating to family-owned 
     business interests) is hereby moved to part II of subchapter 
     A of chapter 11 of such Code, inserted after section 2010, 
     and redesignated as section 2010A.
       (b) Increase in Credit; Surviving Spouse Allowed Unused 
     Credit of Decedent.--Subsection (a) of section 2010A of such 
     Code, as redesignated by subsection (a) of this section, is 
     amended to read as follows:
       ``(a) Increase in United Credit.--For purposes of 
     determining the unified credit under section 2010 in the case 
     of an estate of a decedent to which this section applies--
       ``(1) In general.--The applicable exclusion amount under 
     section 2010(c) shall be increased (but not in excess of 
     $2,000,000) by the adjusted value of the qualified family-
     owned business interests of the decedent which are described 
     in subsection (b)(2) and for which no deduction is allowed 
     under section 2056.
       ``(2) Treatment of unused limitation of predeceased 
     spouse.--In the case of a decedent--
       ``(A) having no surviving spouse, but
       ``(B) who was the surviving spouse of a decedent--
       ``(i) who died after December 31, 2000, and
       ``(ii) whose estate met the requirements of subsection 
     (b)(1) other than subparagraph (B) thereof,
     there shall be substituted for `$2,000,000' in paragraph (1) 
     an amount equal to the excess of $4,000,000 over the 
     exclusion equivalent of the credit allowed under section 2010 
     (as increased by this section) to the estate of the decedent 
     referred to in subparagraph (B). For purposes of the 
     preceding sentence, the exclusion equivalent of the credit is 
     the amount on which a tentative tax under section 2001(c) 
     equal to such credit would be imposed.''
       (c) Conforming Amendments.--
       (1) The table of sections for part IV of subchapter A of 
     chapter 11 of such Code is amended by striking the item 
     relating to section 2057.
       (2) Paragraph (10) of section 2031(c) of such Code is 
     amended by striking ``section 2057(e)(3)'' and inserting 
     ``section 2010A(e)(3)''.
       (3) The table of sections for part II of subchapter A of 
     chapter 11 of such Code is amended by inserting after the 
     item relating to section 2010 the following new item:

``Sec. 2010A. Family-owned business interests.''

       (d) Effective date.--The amendments made by this section 
     shall apply to estates of decedents dying after December 31, 
     2000.

                      Subtitle G--Revenue Offsets

             PART I--REVISION OF TAX RULES ON EXPATRIATION

     SEC. 261. REVISION OF TAX RULES ON EXPATRIATION.

       (a) In General.--Subpart A of part II of subchapter N of 
     chapter 1 of the Internal Revenue Code of 1986 is amended by 
     inserting after section 877 the following new section:

     ``SEC. 877A. TAX RESPONSIBILITIES OF EXPATRIATION.

       ``(a) General Rules.--For purposes of this subtitle--
       ``(1) Mark to market.--Except as provided in subsection 
     (f), all property of a covered expatriate to whom this 
     section applies shall be treated as sold on the day before 
     the expatriation date for its fair market value.
       ``(2) Recognition of gain or loss.--In the case of any sale 
     under paragraph (1)--
       ``(A) notwithstanding any other provision of this title, 
     any gain arising from such sale shall be taken into account 
     for the taxable year of the sale, and
       ``(B) any loss arising from such sale shall be taken into 
     account for the taxable year of the sale to the extent 
     otherwise provided by this title, except that section 1091 
     shall not apply to any such loss.
     Proper adjustment shall be made in the amount of any gain or 
     loss subsequently realized for gain or loss taken into 
     account under the preceding sentence.
       ``(3) Exclusion for certain gain.--The amount which would 
     (but for this paragraph) be includible in the gross income of 
     any individual by reason of this section shall be reduced 
     (but not below zero) by $600,000. For purposes of this 
     paragraph, allocable expatriation gain taken into account 
     under subsection (f)(2) shall be treated in the same manner 
     as an amount required to be includible in gross income.
       ``(b) Election To Defer Tax.--
       ``(1) In general.--If the taxpayer elects the application 
     of this subsection with respect to any property treated as 
     sold by reason of subsection (a), the payment of the 
     additional tax attributable to such property shall be 
     postponed until the due date of the return for the taxable 
     year in which such property is disposed of (or, in the case 
     of property disposed of in a transaction in which gain is not 
     recognized in whole or in part, until such other date as the 
     Secretary may prescribe).
       ``(2) Determination of tax with respect to property.--For 
     purposes of paragraph (1), the additional tax attributable to 
     any property is an amount which bears the same ratio to the 
     additional tax imposed by this chapter for the taxable year 
     solely by reason of subsection (a) as the gain taken into 
     account under subsection (a) with respect to such property 
     bears to the total gain taken into account under subsection 
     (a) with respect to all property to which subsection (a) 
     applies.
       ``(3) Termination of postponement.--No tax may be postponed 
     under this subsection later than the due date for the return 
     of tax imposed by this chapter for the taxable year which 
     includes the date of death of the expatriate (or, if earlier, 
     the time that the security provided with respect to the 
     property fails to meet the requirements of paragraph (4), 
     unless the taxpayer corrects such failure within the time 
     specified by the Secretary).
       ``(4) Security.--
       ``(A) In general.--No election may be made under paragraph 
     (1) with respect to any property unless adequate security is 
     provided with respect to such property.
       ``(B) Adequate security.--For purposes of subparagraph (A), 
     security with respect to any property shall be treated as 
     adequate security if--
       ``(i) it is a bond in an amount equal to the deferred tax 
     amount under paragraph (2)(A) for the property, or
       ``(ii) the taxpayer otherwise establishes to the 
     satisfaction of the Secretary that the security is adequate.
       ``(5) Waiver of certain rights.--No election may be made 
     under paragraph (1) unless the taxpayer consents to the 
     waiver of any right under any treaty of the United States 
     which would preclude assessment or collection of any tax 
     imposed by reason of this section.
       ``(6) Elections.--An election under paragraph (1) shall 
     only apply to property described in the election and, once 
     made, is irrevocable. An election may be under paragraph (1) 
     with respect to an interest in a trust with respect to which 
     gain is required to be recognized under subsection (f)(1).
       ``(7) Interest.--For purposes of section 6601, the last 
     date for the payment of tax shall be determined without 
     regard to the election under this subsection.
       ``(c) Covered Expatriate.--For purposes of this section--
       ``(1) In general.--The term `covered expatriate' means an 
     expatriate who meets the requirements of subparagraph (A) or 
     (B) of section 877(a)(2).
       ``(2) Exceptions.--An individual shall not be treated as a 
     covered expatriate if--
       ``(A) the individual--
       ``(i) became at birth a citizen of the United States and a 
     citizen of another country and, as of the expatriation date, 
     continues to be a citizen of, and is taxed as a resident of, 
     such other country, and
       ``(ii) has been a resident of the United States (as defined 
     in section 7701(b)(1)(A)(ii)) for not more than 8 taxable 
     years during the 15-taxable year period ending with the 
     taxable year during which the expatriation date occurs, or
       ``(B)(i) the individual's relinquishment of United States 
     citizenship occurs before such individual attains age 18\1/
     2\, and
       ``(ii) the individual has been a resident of the United 
     States (as so defined) for not more than 5 taxable years 
     before the date of relinquishment.
       ``(d) Section Not To Apply to Certain Property.--This 
     section shall not apply to the following property:
       ``(1) United states real property interests.--Any United 
     States real property interest (as defined in section 
     897(c)(1)), other than stock of a United States real property 
     holding corporation which does not, on the day before the 
     expatriation date, meet the requirements of section 
     897(c)(2).
       ``(2) Interest in certain retirement plans.--
       ``(A) In general.--Any interest in a qualified retirement 
     plan (as defined in section 4974(c)), other than any interest 
     attributable to contributions which are in excess of any 
     limitation or which violate any condition for tax-favored 
     treatment.
       ``(B) Foreign pension plans.--

[[Page 2614]]

       ``(i) In general.--Under regulations prescribed by the 
     Secretary, interests in foreign pension plans or similar 
     retirement arrangements or programs.
       ``(ii) Limitation.--The value of property which is treated 
     as not sold by reason of this subparagraph shall not exceed 
     $500,000.
       ``(e) Definitions.--For purposes of this section--
       ``(1) Expatriate.--The term `expatriate' means--
       ``(A) any United States citizen who relinquishes his 
     citizenship, and
       ``(B) any long-term resident of the United States who--
       ``(i) ceases to be a lawful permanent resident of the 
     United States (within the meaning of section 7701(b)(6)), or
       ``(ii) commences to be treated as a resident of a foreign 
     country under the provisions of a tax treaty between the 
     United States and the foreign country and who does not waive 
     the benefits of such treaty applicable to residents of the 
     foreign country.
       ``(2) Expatriation date.--The term `expatriation date' 
     means--
       ``(A) the date an individual relinquishes United States 
     citizenship, or
       ``(B) in the case of a long-term resident of the United 
     States, the date of the event described in clause (i) or (ii) 
     of paragraph (1)(B).
       ``(3) Relinquishment of citizenship.--A citizen shall be 
     treated as relinquishing his United States citizenship on the 
     earliest of--
       ``(A) the date the individual renounces his United States 
     nationality before a diplomatic or consular officer of the 
     United States pursuant to paragraph (5) of section 349(a) of 
     the Immigration and Nationality Act (8 U.S.C. 1481(a)(5)),
       ``(B) the date the individual furnishes to the United 
     States Department of State a signed statement of voluntary 
     relinquishment of United States nationality confirming the 
     performance of an act of expatriation specified in paragraph 
     (1), (2), (3), or (4) of section 349(a) of the Immigration 
     and Nationality Act (8 U.S.C. 1481(a)(1)-(4)),
       ``(C) the date the United States Department of State issues 
     to the individual a certificate of loss of nationality, or
       ``(D) the date a court of the United States cancels a 
     naturalized citizen's certificate of naturalization.
     Subparagraph (A) or (B) shall not apply to any individual 
     unless the renunciation or voluntary relinquishment is 
     subsequently approved by the issuance to the individual of a 
     certificate of loss of nationality by the United States 
     Department of State.
       ``(4) Long-term resident.--The term `long-term resident' 
     has the meaning given to such term by section 877(e)(2).
       ``(f) Special Rules Applicable to Beneficiaries' Interests 
     in Trust.--
       ``(1) In general.--Except as provided in paragraph (2), if 
     an individual is determined under paragraph (3) to hold an 
     interest in a trust on the day before the expatriation date--
       ``(A) the individual shall not be treated as having sold 
     such interest,
       ``(B) such interest shall be treated as a separate share in 
     the trust, and
       ``(C)(i) such separate share shall be treated as a separate 
     trust consisting of the assets allocable to such share,
       ``(ii) the separate trust shall be treated as having sold 
     its assets on the day before the expatriation date for their 
     fair market value and as having distributed all of its assets 
     to the individual as of such time, and
       ``(iii) the individual shall be treated as having 
     recontributed the assets to the separate trust.
     Subsection (a)(2) shall apply to any income, gain, or loss of 
     the individual arising from a distribution described in 
     subparagraph (C)(ii).
       ``(2) Special rules for interests in qualified trusts.--
       ``(A) In general.--If the trust interest described in 
     paragraph (1) is an interest in a qualified trust--
       ``(i) paragraph (1) and subsection (a) shall not apply, and
       ``(ii) in addition to any other tax imposed by this title, 
     there is hereby imposed on each distribution with respect to 
     such interest a tax in the amount determined under 
     subparagraph (B).
       ``(B) Amount of tax.--The amount of tax under subparagraph 
     (A)(ii) shall be equal to the lesser of--
       ``(i) the highest rate of tax imposed by section 1(e) for 
     the taxable year which includes the day before the 
     expatriation date, multiplied by the amount of the 
     distribution, or
       ``(ii) the balance in the deferred tax account immediately 
     before the distribution determined without regard to any 
     increases under subparagraph (C)(ii) after the 30th day 
     preceding the distribution.
       ``(C) Deferred tax account.--For purposes of subparagraph 
     (B)(ii)--
       ``(i) Opening balance.--The opening balance in a deferred 
     tax account with respect to any trust interest is an amount 
     equal to the tax which would have been imposed on the 
     allocable expatriation gain with respect to the trust 
     interest if such gain had been included in gross income under 
     subsection (a).
       ``(ii) Increase for interest.--The balance in the deferred 
     tax account shall be increased by the amount of interest 
     determined (on the balance in the account at the time the 
     interest accrues), for periods after the 90th day after the 
     expatriation date, by using the rates and method applicable 
     under section 6621 for underpayments of tax for such periods.
       ``(iii) Decrease for taxes previously paid.--The balance in 
     the tax deferred account shall be reduced--

       ``(I) by the amount of taxes imposed by subparagraph (A) on 
     any distribution to the person holding the trust interest, 
     and
       ``(II) in the case of a person holding a nonvested 
     interest, to the extent provided in regulations, by the 
     amount of taxes imposed by subparagraph (A) on distributions 
     from the trust with respect to nonvested interests not held 
     by such person.

       ``(D) Allocable expatriation gain.--For purposes of this 
     paragraph, the allocable expatriation gain with respect to 
     any beneficiary's interest in a trust is the amount of gain 
     which would be allocable to such beneficiary's vested and 
     nonvested interests in the trust if the beneficiary held 
     directly all assets allocable to such interests.
       ``(E) Tax deducted and withheld.--
       ``(i) In general.--The tax imposed by subparagraph (A)(ii) 
     shall be deducted and withheld by the trustees from the 
     distribution to which it relates.
       ``(ii) Exception where failure to waive treaty rights.--If 
     an amount may not be deducted and withheld under clause (i) 
     by reason of the distributee failing to waive any treaty 
     right with respect to such distribution--

       ``(I) the tax imposed by subparagraph (A)(ii) shall be 
     imposed on the trust and each trustee shall be personally 
     liable for the amount of such tax, and
       ``(II) any other beneficiary of the trust shall be entitled 
     to recover from the distributee the amount of such tax 
     imposed on the other beneficiary.

       ``(F) Disposition.--If a trust ceases to be a qualified 
     trust at any time, a covered expatriate disposes of an 
     interest in a qualified trust, or a covered expatriate 
     holding an interest in a qualified trust dies, then, in lieu 
     of the tax imposed by subparagraph (A)(ii), there is hereby 
     imposed a tax equal to the lesser of--
       ``(i) the tax determined under paragraph (1) as if the day 
     before the expatriation date were the date of such cessation, 
     disposition, or death, whichever is applicable, or
       ``(ii) the balance in the tax deferred account immediately 
     before such date.
     Such tax shall be imposed on the trust and each trustee shall 
     be personally liable for the amount of such tax and any other 
     beneficiary of the trust shall be entitled to recover from 
     the covered expatriate or the estate the amount of such tax 
     imposed on the other beneficiary.
       ``(G) Definitions and special rule.--For purposes of this 
     paragraph--
       ``(i) Qualified trust.--The term `qualified trust' means a 
     trust--

       ``(I) which is organized under, and governed by, the laws 
     of the United States or a State, and
       ``(II) with respect to which the trust instrument requires 
     that at least 1 trustee of the trust be an individual citizen 
     of the United States or a domestic corporation.

       ``(ii) Vested interest.--The term `vested interest' means 
     any interest which, as of the day before the expatriation 
     date, is vested in the beneficiary.
       ``(iii) Nonvested interest.--The term `nonvested interest' 
     means, with respect to any beneficiary, any interest in a 
     trust which is not a vested interest. Such interest shall be 
     determined by assuming the maximum exercise of discretion in 
     favor of the beneficiary and the occurrence of all 
     contingencies in favor of the beneficiary.
       ``(iv) Adjustments.--The Secretary may provide for such 
     adjustments to the bases of assets in a trust or a deferred 
     tax account, and the timing of such adjustments, in order to 
     ensure that gain is taxed only once.
       ``(3) Determination of beneficiaries' interest in trust.--
       ``(A) Determinations under paragraph (1).--For purposes of 
     paragraph (1), a beneficiary's interest in a trust shall be 
     based upon all relevant facts and circumstances, including 
     the terms of the trust instrument and any letter of wishes or 
     similar document, historical patterns of trust distributions, 
     and the existence of and functions performed by a trust 
     protector or any similar advisor.
       ``(B) Other determinations.--For purposes of this section--
       ``(i) Constructive ownership.--If a beneficiary of a trust 
     is a corporation, partnership, trust, or estate, the 
     shareholders, partners, or beneficiaries shall be deemed to 
     be the trust beneficiaries for purposes of this section.
       ``(ii) Taxpayer return position.--A taxpayer shall clearly 
     indicate on its income tax return--

       ``(I) the methodology used to determine that taxpayer's 
     trust interest under this section, and
       ``(II) if the taxpayer knows (or has reason to know) that 
     any other beneficiary of such trust is using a different 
     methodology to determine such beneficiary's trust interest 
     under this section.

[[Page 2615]]

       ``(g) Termination of Deferrals, Etc.--In the case of any 
     covered expatriate, notwithstanding any other provision of 
     this title--
       ``(1) any period during which recognition of income or gain 
     is deferred shall terminate on the day before the 
     expatriation date, and
       ``(2) any extension of time for payment of tax shall cease 
     to apply on the day before the expatriation date and the 
     unpaid portion of such tax shall be due and payable at the 
     time and in the manner prescribed by the Secretary.
       ``(h) Regulations.--The Secretary shall prescribe such 
     regulations as may be necessary or appropriate to carry out 
     the purposes of this section.''
       (b) Tax on Gifts and Bequests Received By United States 
     Citizens and Residents From Expatriates.--
       (1) In general.--Subtitle B of the Internal Revenue Code of 
     1986 (relating to estate and gift taxes) is amended by 
     inserting after chapter 13 the following new chapter:

           ``CHAPTER 13A--GIFTS AND BEQUESTS FROM EXPATRIATES

``Sec. 2681. Imposition of tax.

     ``SEC. 2681. IMPOSITION OF TAX.

       ``(a) In General.--If, during any calendar year, any United 
     States citizen or resident receives any covered gift or 
     bequest, there is hereby imposed a tax equal to the product 
     of--
       ``(1) the highest rate of tax specified in the table 
     contained in section 2001(c) as in effect on the date of such 
     receipt, and
       ``(2) the value of such covered gift or bequest.
       ``(b) Tax To Be Paid by Recipient.--The tax imposed by 
     subsection (a) on any covered gift or bequest shall be paid 
     by the person receiving such gift or bequest.
       ``(c) Exception for Certain Gifts.--Subsection (a) shall 
     apply only to the extent that the covered gifts and bequests 
     received during the calendar year exceed $10,000.
       ``(d) Tax Reduced By Foreign Gift or Estate Tax.--The tax 
     imposed by subsection (a) on any covered gift or bequest 
     shall be reduced by the amount of any gift or estate tax paid 
     to a foreign country with respect to such covered gift or 
     bequest.
       ``(e) Covered Gift or Bequest.--
       ``(1) In general.--For purposes of this chapter, the term 
     `covered gift or bequest' means--
       ``(A) any property acquired by gift directly or indirectly 
     from an individual who, at the time of such acquisition, was 
     an expatriate, and
       ``(B) any property acquired by bequest, devise, or 
     inheritance directly or indirectly from an individual who, at 
     the time of death, was an expatriate.
       ``(2) Exceptions for transfers otherwise subject to estate 
     or gift tax.--Such term shall not include--
       ``(A) any property shown on a timely filed return of tax 
     imposed by chapter 12 which is a taxable gift by the 
     expatriate, and
       ``(B) any property shown on a timely filed return of tax 
     imposed by chapter 11 of the estate of the expatriate.
       ``(3) Transfers in trust.--Any covered gift or bequest 
     which is made in trust shall be treated as made to the 
     beneficiaries of such trust in proportion to their respective 
     interests in such trust (as determined under section 
     877A(f)(3)).
       ``(f) Expatriate.--For purposes of this section, the term 
     `expatriate' has the meaning given to such term by section 
     877A(e)(1).''.
       (2) Clerical amendment.--The table of chapters for subtitle 
     B of such Code is amended by inserting after the item 
     relating to chapter 13 the following new item:

``Chapter 13A. Gifts and bequests from expatriates.''
       (c) Definition of Termination of United States 
     Citizenship.--Section 7701(a) of such Code is amended by 
     adding at the end the following new paragraph:
       ``(47) Termination of united states citizenship.--
       ``(A) In general.--An individual shall not cease to be 
     treated as a United States citizen before the date on which 
     the individual's citizenship is treated as relinquished under 
     section 877A(e)(3).
       ``(B) Dual citizens.--Under regulations prescribed by the 
     Secretary, subparagraph (A) shall not apply to an individual 
     who became at birth a citizen of the United States and a 
     citizen of another country.''
       (d) Conforming Amendment.--Paragraph (1) of section 
     6039G(d) of such Code is amended by inserting ``or 877A'' 
     after ``section 877''.
       (e) Clerical Amendment.--The table of sections for subpart 
     A of part II of subchapter N of chapter 1 of such Code is 
     amended by inserting after the item relating to section 877 
     the following new item:

``Sec. 877A. Tax responsibilities of expatriation.''.

       (f) Effective Date.--
       (1) In general.--Except as provided in this subsection, the 
     amendments made by this section shall apply to expatriates 
     (within the meaning of section 877A(e) of the Internal 
     Revenue Code of 1986, as added by this section) whose 
     expatriation date (as so defined) occurs on or after March 9, 
     2000.
       (2) Gifts and bequests.--Chapter 13A of the Internal 
     Revenue Code of 1986 (as added by subsection (b)) shall apply 
     to covered gifts and bequests (as defined in section 2681 of 
     such Code, as so added) received on or after March 9, 2000.

          PART II--DISALLOWANCE OF NONECONOMIC TAX ATTRIBUTES

  Subpart A--Disallowance of Noneconomic Tax Attributes; Increase in 
     Penalty With Respect to Disallowed Noneconomic Tax Attributes

     SEC. 266. DISALLOWANCE OF NONECONOMIC TAX ATTRIBUTES.

       Section 7701 of the Internal Revenue Code of 1986 is 
     amended by redesignating subsection (m) as subsection (n) and 
     by inserting after subsection (l) the following new 
     subsection:
       ``(m) Disallowance of Noneconomic Tax Attributes.--
       ``(1) In general.--In determining liability for any tax 
     under subtitle A, noneconomic tax attributes shall not be 
     allowed.
       ``(2) Noneconomic tax attribute.--For purposes of this 
     subsection, a noneconomic tax attribute is any deduction, 
     loss, or credit claimed to result from any transaction 
     unless--
       ``(A) the transaction changes in a meaningful way (apart 
     from Federal income tax consequences) the taxpayer's economic 
     position, and
       ``(B)(i) the present value of the reasonably expected 
     potential income from the transaction (and the taxpayer's 
     risk of loss from the transaction) are substantial in 
     relationship to the present value of the tax benefits 
     claimed, or
       ``(ii) in the case of a transaction which is in substance 
     the borrowing of money or the acquisition of financial 
     capital, the deductions claimed with respect to the 
     transaction for any period are not significantly in excess of 
     the economic return for such period realized by the person 
     lending the money or providing the financial capital.
       ``(3) Presumption of noneconomic tax attributes.--For 
     purposes of paragraph (2), the following factors shall give 
     rise to a presumption that a transaction fails to meet the 
     requirements of paragraph (2):
       ``(A) The fact that the payments, liabilities, or assets 
     that purport to create a loss (or other benefit) for tax 
     purposes are not reflected to any meaningful extent on the 
     taxpayer's books and records for financial reporting 
     purposes.
       ``(B) The fact that the transaction results in an 
     allocation of income or gain to a tax-indifferent party which 
     is substantially in excess of such party's economic income or 
     gain from the transaction.
       ``(4) Treatment of built-in loss.--The determination of 
     whether a transaction results in the realization of a built-
     in loss shall be made under subtitle A as if this subsection 
     had not been enacted. For purposes of the preceding sentence, 
     the term `built-in loss' means any loss or deduction to the 
     extent that such loss or deduction had economically been 
     incurred before such transaction is entered into and to the 
     extent that the loss or deduction was economically borne by 
     the taxpayer.
       ``(5) Definition and special rules.--For purposes of this 
     subsection--
       ``(A) Tax-indifferent party.--The term `tax-indifferent 
     party' means any person or entity exempt from tax under 
     subtitle A. A person shall be treated as a tax-indifferent 
     party with respect to a transaction if, by reason of such 
     person's method of accounting, the items taken into account 
     with respect to the transaction have no substantial impact on 
     such person's liability under subtitle A.
       ``(B) Series of related transaction.--A transaction which 
     is part of a series of related transactions shall be treated 
     as meeting the requirements of paragraph (2) only if--
       ``(i) such transaction meets such requirements without 
     regard to the other transactions, and
       ``(ii) such transactions, if treated as 1 transaction, 
     would meet such requirements.
     A similar rule shall apply to a multiple step transaction 
     with each step being treated as a separate related 
     transaction.
       ``(C) Normal business transactions.--In the case of a 
     transaction which is an integral part of a taxpayer's trade 
     or business and which is entered into in the normal course of 
     such trade or business, the determination of the potential 
     income from such transaction shall be made by taking into 
     account its relationship to the overall trade or business of 
     the taxpayer.
       ``(D) Treatment of fees.--In determining whether there is 
     risk of loss from a transaction (and the amount thereof), 
     potential loss of fees and other transaction expenses shall 
     be disregarded.
       ``(E) Treatment of economic return enhancements.--The 
     following shall be treated as economic returns and not tax 
     benefits:
       ``(i) The credit under section 29 (relating to credit for 
     producing fuel from a nonconventional source).
       ``(ii) The credit under section 42 (relating to low-income 
     housing credit).
       ``(iii) The credit under section 45 (relating to 
     electricity produced from certain renewable resources).
       ``(iv) The credit under section 1397E (relating to credit 
     to holders of qualified zone academy bonds) or any similar 
     program hereafter enacted.
       ``(v) Any other tax benefit specified in regulations.

[[Page 2616]]

       ``(F) Exceptions for nonbusiness transactions.--
       ``(i) Individuals.--In the case of an individual, this 
     subsection shall only apply to transactions entered into in 
     connection with a trade or business or activity engaged in 
     for profit.
       ``(ii) Charitable transfers.--This subsection shall not 
     apply in determining the amount allowable as a deduction 
     under section 170, 545(b)(2), 556(b)(2), or 642(c).
       ``(6) Economic substance doctrine, etc., not affected.--The 
     provisions of this subsection shall not be construed as 
     altering or supplanting any rule of law referred to in 
     section 6662(i)(2)(B) and the requirements of this subsection 
     shall be construed as being in addition to any such rule of 
     law.''

     SEC. 267. INCREASE IN SUBSTANTIAL UNDERPAYMENT PENALTY WITH 
                   RESPECT TO DISALLOWED NONECONOMIC TAX 
                   ATTRIBUTES.

       (a) In General.--Section 6662 of the Internal Revenue Code 
     of 1986 (relating to imposition of accuracy-related penalty) 
     is amended by adding at the end the following new subsection:
       ``(i) Increase in Penalty in Case of Disallowed Noneconomic 
     Tax Attributes.--
       ``(1) In general.--In the case of the portion of the 
     underpayment to which this subsection applies--
       ``(A) subsection (a) shall be applied with respect to such 
     portion by substituting `40 percent' for `20 percent', and
       ``(B) subsection (d)(2)(B) and section 6664(c) shall not 
     apply.
       ``(2) Underpayments to which subsection applies.--This 
     subsection shall apply to an underpayment to which this 
     section applies by reason of paragraph (1) or (2) of 
     subsection (b) but--
       ``(A) only to the extent that such underpayment is 
     attributable to--
       ``(i) the disallowance of any noneconomic tax attribute 
     (determined under section 7701(m)), or
       ``(ii) the disallowance of any other benefit--

       ``(I) because of a lack of economic substance or business 
     purpose for the transaction giving rise to the claimed 
     benefit,
       ``(II) because the form of the transaction did not reflect 
     its substance, or
       ``(III) because of any other similar rule of law, and

       ``(B) only if the underpayment so attributable exceeds 
     $1,000,000.
       ``(3) Increase in penalty not to apply if compliance with 
     disclosure requirements.--Paragraph (1)(A) shall not apply if 
     the taxpayer--
       ``(A) discloses to the Secretary within 30 days after the 
     closing of the transaction appropriate documents describing 
     the transaction, and
       ``(B) files with the taxpayer's return of tax imposed by 
     subtitle A--
       ``(i) a statement verifying that such disclosure has been 
     made,
       ``(ii) a detailed description of the facts, assumptions of 
     facts, and factual conclusions with respect to the business 
     or economic purposes or objectives of the transaction that 
     are relied upon to support the manner in which it is reported 
     on the return,
       ``(iii) a description of the due diligence performed to 
     ascertain the accuracy of such facts, assumptions, and 
     factual conclusions,
       ``(iv)(I) a statement (signed by the senior financial 
     officer of the corporation under penalty of perjury) that the 
     facts, assumptions, or factual conclusions relied upon in 
     reporting the transaction are true and correct as of the date 
     the return is filed, to the best of such officer's knowledge 
     and belief, and
       ``(II) if the actual facts varied materially from the 
     facts, assumptions, or factual conclusions relied upon, a 
     statement describing such variances,
       ``(v) copies of any written material provided in connection 
     with the offer of the transaction to the taxpayer by a third 
     party,
       ``(vi) a full description of any express or implied 
     agreement or arrangement with any advisor, or with any 
     offeror, that the fee payable to such person would be 
     contingent or subject to possible reimbursement, and
       ``(vii) a full description of any express or implied 
     warranty from any person with respect to the anticipated tax 
     results from the transaction.''
       (b) Modifications to Penalty on Substantial Understatement 
     of Income Tax.--
       (1) Modification of threshold.--Subparagraph (A) of section 
     6662(d)(2) of such Code is amended to read as follows:
       ``(A) In general.--For purposes of this section, there is a 
     substantial understatement of income tax for any taxable year 
     if the amount of the understatement for the taxable year 
     exceeds the lesser of--
       ``(i) $1,000,000, or
       ``(ii) the greater of 10 percent of the tax required to be 
     shown on the return for the taxable year or $5,000.''
       (2) Reduction of penalty on account of disclosure not to 
     apply to tax shelters.--Subparagraph (C) of section 
     6662(d)(2) of such Code is amended by striking clause (ii), 
     by redesignating clause (iii) as clause (ii), and by striking 
     clause (i) and inserting the following new clause:
       ``(i) In general.--Subparagraph (B) shall not apply to any 
     item attributable to a tax shelter.''
       (c) Treatment of Amended Returns.--Subsection (a) of 
     section 6664 of such Code is amended by adding at the end the 
     following new sentence: ``For purposes of this subsection, an 
     amended return shall be disregarded if such return is filed 
     on or after the date the taxpayer is first contacted by the 
     Secretary regarding the examination of the return.''

     SEC. 268. PENALTY ON MARKETED TAX AVOIDANCE STRATEGIES WHICH 
                   HAVE NO ECONOMIC SUBSTANCE, ETC.

       (a) Penalty.--
       (1) In general.--Section 6700 of the Internal Revenue Code 
     of 1986 (relating to promoting abusive tax shelters, etc.) is 
     amended by redesignating subsection (c) as subsection (d) and 
     by inserting after subsection (b) the following new 
     subsection:
       ``(c) Penalty on Substantial Promoters for Promoting Tax 
     Avoidance Strategies Which Have No Economic Substance, Etc.--
       ``(1) Imposition of penalty.--Any substantial promoter of a 
     tax avoidance strategy shall pay a penalty in the amount 
     determined under paragraph (2) with respect to such strategy 
     if any tax benefit attributable to such strategy (or any 
     similar strategy promoted by such promoter) is not allowable 
     by reason of any rule of law referred to in section 
     6662(i)(2)(A).
       ``(2) Amount of penalty.--The penalty under paragraph (1) 
     with respect to a promoter of a tax avoidance strategy is an 
     amount equal to 100 percent of the gross income derived (or 
     to be derived) by such promoter from such strategy.
       ``(3) Tax avoidance strategy.--For purposes of this 
     subsection, the term `tax avoidance strategy' means any 
     entity, plan, arrangement, or transaction a significant 
     purpose of the structure of which is the avoidance or evasion 
     of Federal income tax.
       ``(4) Substantial promoter.--For purposes of this 
     subsection --
       ``(A) In general.--The term `substantial promoter' means, 
     with respect to any tax avoidance strategy, any promoter if--
       ``(i) such promoter offers such strategy to more than 1 
     potential participant, and
       ``(ii) such promoter may receive fees in excess of 
     $1,000,000 in the aggregate with respect to such strategy.
       ``(B) Aggregation rules.--For purposes of this paragraph--
       ``(i) Related persons.--A promoter and all persons related 
     to such promoter shall be treated as 1 person.
       ``(ii) Similar strategies.--All similar tax avoidance 
     strategies of a promoter shall be treated as 1 tax avoidance 
     strategy.
       ``(C) Promoter.--The term `promoter' means any person who 
     participates in the promotion, offering, or sale of the tax 
     avoidance strategy.
       ``(D) Related person.--Persons are related if they bear a 
     relationship to each other which is described in section 
     267(b) or 707(b).
       ``(4) Coordination with subsection (a).--No penalty shall 
     be imposed by this subsection on any promoter with respect to 
     a tax avoidance strategy if a penalty is imposed under 
     subsection (a) on such promoter with respect to such 
     strategy.''
       (2) Conforming amendment.--Subsection (d) of section 6700 
     of such Code is amended--
       (A) by striking ``Penalty'' and inserting ``Penalties'', 
     and
       (B) by striking ``penalty'' the first place it appears in 
     the text and inserting ``penalties''.
       (b) Increase in Penalty on Promoting Abusive Tax 
     Shelters.--The first sentence of section 6700(a) of such Code 
     is amended by striking ``a penalty equal to'' and all that 
     follows and inserting ``a penalty equal to the greater of 
     $1,000 or 100 percent of the gross income derived (or to be 
     derived) by such person from such activity.''

     SEC. 269. EFFECTIVE DATES.

       (a) In General.--Except as provided in subsections (b) and 
     (c), the amendments made by this subpart shall apply to 
     transactions after the date of the enactment of this Act.
       (b) Section 267.--The amendments made by subsections (b) 
     and (c) of section 267 shall apply to taxable years ending 
     after the date of the enactment of this Act.
       (c) Section 268.--The amendments made by subsection (a) of 
     section 268 shall apply to any tax avoidance strategy (as 
     defined in section 6700(c) of the Internal Revenue Code of 
     1986, as amended by this title) interests in which are 
     offered to potential participants after the date of the 
     enactment of this Act.

  Subpart B--Limitations on Importation or Transfer of Built-in Losses

     SEC. 271. LIMITATION ON IMPORTATION OF BUILT-IN LOSSES.

       (a) In General.--Section 362 of the Internal Revenue Code 
     of 1986 (relating to basis to corporations) is amended by 
     adding at the end the following new subsection:
       ``(e) Limitation on Importation of Built-in Losses.--
       ``(1) In general.--If in any transaction described in 
     subsection (a) or (b) there would (but for this subsection) 
     be an importation of a net built-in loss, the basis of each 
     property described in paragraph (2) which is acquired in such 
     transaction shall (notwithstanding subsections (a) and (b)) 
     be its fair market value immediately after such transaction.
       ``(2) Property described.--For purposes of paragraph (1), 
     property is described in this paragraph if--

[[Page 2617]]

       ``(A) gain or loss with respect to such property is not 
     subject to tax under this subtitle in the hands of the 
     transferor immediately before the transfer, and
       ``(B) gain or loss with respect to such property is subject 
     to such tax in the hands of the transferee immediately after 
     such transfer.

     In any case in which the transferor is a partnership, the 
     preceding sentence shall be applied by treating each partner 
     in such partnership as holding such partner's proportionate 
     share of the property of such partnership.
       ``(3) Importation of net built-in loss.--For purposes of 
     paragraph (1), there is an importation of a net built-in loss 
     in a transaction if the transferee's aggregate adjusted bases 
     of property described in paragraph (2) which is transferred 
     in such transaction would (but for this subsection) exceed 
     the fair market value of such property immediately after such 
     transaction.''
       (b) Comparable Treatment Where Liquidation.--Paragraph (1) 
     of section 334(b) of such Code (relating to liquidation of 
     subsidiary) is amended to read as follows:
       ``(1) In general.--If property is received by a corporate 
     distributee in a distribution in a complete liquidation to 
     which section 332 applies (or in a transfer described in 
     section 337(b)(1)), the basis of such property in the hands 
     of such distributee shall be the same as it would be in the 
     hands of the transferor; except that the basis of such 
     property in the hands of such distributee shall be the fair 
     market value of the property at the time of the 
     distribution--
       ``(A) in any case in which gain or loss is recognized by 
     the liquidating corporation with respect to such property, or
       ``(B) in any case in which the liquidating corporation is a 
     foreign corporation, the corporate distributee is a domestic 
     corporation, and the corporate distributee's aggregate 
     adjusted bases of property described in section 362(e)(2) 
     which is distributed in such liquidation would (but for this 
     subparagraph) exceed the fair market value of such property 
     immediately after such liquidation.''
       (c) Effective Date.--The amendments made by this section 
     shall apply to transactions after the date of the enactment 
     of this Act.

     SEC. 272. DISALLOWANCE OF PARTNERSHIP LOSS TRANSFERS.

       (a) Treatment of Contributed Property With Built-in Loss.--
     Paragraph (1) of section 704(c) of the Internal Revenue Code 
     of 1986 is amended by striking ``and'' at the end of 
     subparagraph (A), by striking the period at the end of 
     subparagraph (B) and inserting ``, and'', and by adding at 
     the end the following:
       ``(C) if any property so contributed has a built-in loss--
       ``(i) such built-in loss shall be taken into account only 
     in determining the amount of items allocated to the 
     contributing partner, and
       ``(ii) except as provided in regulations, in determining 
     the amount of items allocated to other partners, the basis of 
     the contributed property in the hands of the partnership 
     shall be treated as being equal to its fair market value 
     immediately after the contribution.
     For purposes of subparagraph (C), the term `built-in loss' 
     means the excess of the adjusted basis of the property over 
     its fair market value immediately after the contribution.''
       (b) Adjustment to Basis of Partnership Property on Transfer 
     of Partnership Interest If There is Substantial Built-in 
     Loss.--
       (1) Adjustment required.--Subsection (a) of section 743 of 
     such Code (relating to optional adjustment to basis of 
     partnership property) is amended by inserting before the 
     period ``or unless the partnership has a substantial built-in 
     loss immediately after such transfer''.
       (2) Adjustment.--Subsection (b) of section 743 of such Code 
     is amended by inserting ``or with respect to which there is a 
     substantial built-in loss immediately after such transfer'' 
     after ``section 754 is in effect''.
       (3) Substantial built-in loss.--Section 743 of such Code is 
     amended by adding at the end the following new subsection:
       ``(d) Substantial Built-in Loss.--For purposes of this 
     section, a partnership has a substantial built-in loss with 
     respect to a transfer of an interest in a partnership if the 
     transferee partner's proportionate share of the adjusted 
     basis of the partnership property exceeds 110 percent of the 
     basis of such partner's interest in the partnership.''
       (4) Clerical amendments.--
       (A) The section heading for section 743 of such Code is 
     amended to read as follows:

     ``SEC. 743. ADJUSTMENT TO BASIS OF PARTNERSHIP PROPERTY WHERE 
                   SECTION 754 ELECTION OR SUBSTANTIAL BUILT-IN 
                   LOSS.''

       (B) The table of sections for subpart C of part II of 
     subchapter K of chapter 1 of such Code is amended by striking 
     the item relating to section 743 and inserting the following 
     new item:

``Sec. 743. Adjustment to basis of partnership property where section 
              754 election or substantial built-in loss.''

       (c) Adjustment to Basis of Undistributed Partnership 
     Property If There is Substantial Basis Reduction.--
       (1) Adjustment required.--Subsection (a) of section 734 of 
     such Code (relating to optional adjustment to basis of 
     undistributed partnership property) is amended by inserting 
     before the period ``or unless there is a substantial downward 
     adjustment''.
       (2) Adjustment.--Subsection (b) of section 734 of such Code 
     is amended by inserting ``or unless there is a substantial 
     downward adjustment'' after ``section 754 is in effect''.
       (3) Substantial downward adjustment.--Section 734 of such 
     Code is amended by adding at the end the following new 
     subsection:
       ``(d) Substantial Downward Adjustment.--For purposes of 
     this section, there is a substantial downward adjustment with 
     respect to a distribution if the sum of the amounts described 
     in subparagraphs (A) and (B) of subsection (b)(2) exceeds 10 
     percent of the aggregate adjusted basis of partnership 
     property immediately after the distribution.''
       (4) Clerical amendments.--
       (A) The section heading for section 734 of such Code is 
     amended to read as follows:

     ``SEC. 734. ADJUSTMENT TO BASIS OF UNDISTRIBUTED PARTNERSHIP 
                   PROPERTY WHERE SECTION 754 ELECTION OR 
                   SUBSTANTIAL BASIS REDUCTION.''

       (B) The table of sections for subpart B of part II of 
     subchapter K of chapter 1 of such Code is amended by striking 
     the item relating to section 734 and inserting the following 
     new item:

``Sec. 734. Adjustment to basis of undistributed partnership property 
              where section 754 election or substantial basis 
              reduction.''

       (d) Effective Dates.--
       (1) Subsection (a).--The amendment made by subsection (a) 
     shall apply to contributions made after the date of the 
     enactment of this Act.
       (2) Subsection (b).--The amendments made by subsection (a) 
     shall apply to transfers after the date of the enactment of 
     this Act.
       (3) Subsection (c).--The amendments made by subsection (a) 
     shall apply to distributions after the date of the enactment 
     of this Act.

                 PART III--ESTATE AND GIFT TAX OFFSETS

     SEC. 276. VALUATION RULES FOR TRANSFERS INVOLVING NONBUSINESS 
                   ASSETS.

       (a) In General.--Section 2031 of the Internal Revenue Code 
     of 1986 (relating to definition of gross estate) is amended 
     by redesignating subsection (d) as subsection (e) and by 
     inserting after subsection (c) the following new subsection:
       ``(d) Valuation Rules for Certain Transfers of Nonbusiness 
     Assets.--For purposes of this chapter and chapter 12--
       ``(1) In general.--In the case of the transfer of any 
     interest in an entity other than an interest which is 
     actively traded (within the meaning of section 1092), the 
     value of such interest shall be determined by taking into 
     account--
       ``(A) the value of such interest's proportionate share of 
     the nonbusiness assets of such entity (and no valuation 
     discount shall be allowed with respect to such nonbusiness 
     assets), plus
       ``(B) the value of such entity determined without regard to 
     the value taken into account under subparagraph (A).
       ``(2) Nonbusiness assets.--For purposes of this 
     subsection--
       ``(A) In general.--The term `nonbusiness asset' means any 
     asset which is not used in the active conduct of 1 or more 
     trades or businesses.
       ``(B) Exception for certain passive assets.--Except as 
     provided in subparagraph (C), a passive asset shall not be 
     treated for purposes of subparagraph (A) as used in the 
     active conduct of a trade or business unless--
       ``(i) the asset is property described in paragraph (1) or 
     (4) of section 1221(a) or is a hedge with respect to such 
     property, or
       ``(ii) the asset is real property used in the active 
     conduct of 1 or more real property trades or businesses 
     (within the meaning of section 469(c)(7)(C)) in which the 
     transferor materially participates and with respect to which 
     the transferor meets the requirements of section 
     469(c)(7)(B)(ii).
     For purposes of clause (ii), material participation shall be 
     determined under the rules of section 469(h), except that 
     section 469(h)(3) shall be applied without regard to the 
     limitation to farming activity.
       ``(C) Exception for working capital.--Any asset (including 
     a passive asset) which is held as a part of the reasonably 
     required working capital needs of a trade or business shall 
     be treated as used in the active conduct of a trade or 
     business.
       ``(3) Passive asset.--For purposes of this subsection, the 
     term `passive asset' means any--
       ``(A) cash or cash equivalents,
       ``(B) except to the extent provided by the Secretary, stock 
     in a corporation or any other equity, profits, or capital 
     interest in any entity,
       ``(C) evidence of indebtedness, option, forward or futures 
     contract, notional principal contract, or derivative,
       ``(D) asset described in clause (iii), (iv), or (v) of 
     section 351(e)(1)(B),
       ``(E) annuity,

[[Page 2618]]

       ``(F) real property used in 1 or more real property trades 
     or businesses (as defined in section 469(c)(7)(C)),
       ``(G) asset (other than a patent, trademark, or copyright) 
     which produces royalty income,
       ``(H) commodity,
       ``(I) collectible (within the meaning of section 401(m)), 
     or
       ``(J) any other asset specified in regulations prescribed 
     by the Secretary.
       ``(4) Look-thru rules.--
       ``(A) In general.--If a nonbusiness asset of an entity 
     consists of a 10-percent interest in any other entity, this 
     subsection shall be applied by disregarding the 10-percent 
     interest and by treating the entity as holding directly its 
     ratable share of the assets of the other entity. This 
     subparagraph shall be applied successively to any 10-percent 
     interest of such other entity in any other entity.
       ``(B) 10-percent interest.--The term `10-percent interest' 
     means--
       ``(i) in the case of an interest in a corporation, 
     ownership of at least 10 percent (by vote or value) of the 
     stock in such corporation,
       ``(ii) in the case of an interest in a partnership, 
     ownership of at least 10 percent of the capital or profits 
     interest in the partnership, and
       ``(iii) in any other case, ownership of at least 10 percent 
     of the beneficial interests in the entity.
       ``(5) Coordination with subsection (b).--Subsection (b) 
     shall apply after the application of this subsection.''
       (b) Effective Date.--The amendments made by this section 
     shall apply to transfers after the date of the enactment of 
     this Act.

     SEC. 277. CORRECTION OF TECHNICAL ERROR AFFECTING LARGEST 
                   ESTATES.

       (a) In General.--Paragraph (2) of section 2001(c) of the 
     Internal Revenue Code of 1986 is amended by striking 
     ``$10,000,000'' and all that follows and inserting 
     ``$10,000,000. The amount of the increase under the preceding 
     sentence shall not exceed the sum of the applicable credit 
     amount under section 2010(c) (as increased by section 2010A) 
     and $359,200.''
       (b) Effective Date.--The amendment made by this section 
     shall apply to estates of decedents dying, and gifts made, 
     after December 31, 2000.

                         PART IV--OTHER OFFSETS

     SEC. 281. CONSISTENT AMORTIZATION PERIODS FOR INTANGIBLES.

       (a) Start-Up Expenditures.--
       (1) Allowance of deduction.--Paragraph (1) of section 
     195(b) of the Internal Revenue Code of 1986 (relating to 
     start-up expenditures) is amended to read as follows:
       ``(1) Allowance of Deduction.--If a taxpayer elects the 
     application of this subsection with respect to any start-up 
     expenditures--
       ``(A) the taxpayer shall be allowed a deduction for the 
     taxable year in which the active trade or business begins in 
     an amount equal to the lesser of--
       ``(i) the amount of start-up expenditures with respect to 
     the active trade or business, or
       ``(ii) $5,000, reduced (but not below zero) by the amount 
     by which such start-up expenditures exceed $50,000, and
       ``(B) the remainder of such start-up expenditures shall be 
     allowed as a deduction ratably over the 180-month period 
     beginning with the month in which the active trade or 
     business begins.''
       (2) Conforming amendment.--Subsection (b) of section 195 is 
     amended by striking ``Amortize'' and inserting ``Deduct'' in 
     the heading.
       (b) Organizational Expenditures.--Subsection (a) of section 
     248 of such Code (relating to organizational expenditures) is 
     amended to read as follows:
       ``(a) Election to Deduct.--If a corporation elects the 
     application of this subsection (in accordance with 
     regulations prescribed by the Secretary) with respect to any 
     organizational expenditures--
       ``(1) the corporation shall be allowed a deduction for the 
     taxable year in which the corporation begins business in an 
     amount equal to the lesser of--
       ``(A) the amount of organizational expenditures with 
     respect to the taxpayer, or
       ``(B) $5,000, reduced (but not below zero) by the amount by 
     which such organizational expenditures exceed $50,000, and
       ``(2) the remainder of such organizational expenditures 
     shall be allowed as a deduction ratably over the 180-month 
     period beginning with the month in which the corporation 
     begins business.''
       (c) Treatment of Organizational and Syndication Fees or 
     Partnerships.--Section 709(b) of such Code (relating to 
     amortization of organization fees) is amended by 
     redesignating paragraph (2) as paragraph (4) and by amending 
     paragraph (1) to read as follows:
       ``(1) Allowance of deduction.--If a taxpayer elects the 
     application of this subsection (in accordance with 
     regulations prescribed by the Secretary) with respect to any 
     organizational expenses--
       ``(A) the taxpayer shall be allowed a deduction for the 
     taxable year in which the partnership begins business in an 
     amount equal to the lesser of--
       ``(i) the amount of organizational expenses with respect to 
     the partnership, or
       ``(ii) $5,000, reduced (but not below zero) by the amount 
     by which such organizational expenses exceed $50,000, and
       ``(B) the remainder of such organizational expenses shall 
     be allowed as a deduction ratably over the 180-month period 
     beginning with the month in which the partnership begins 
     business.
       ``(2) Dispositions before close of amortization period.--In 
     any case in which a partnership is liquidated before the end 
     of the period to which paragraph (1)(B) applies, any deferred 
     expenses attributable to the partnership which were not 
     allowed as a deduction by reason of this section may be 
     deducted to the extent allowable under section 165.''
       (d) Conforming Amendment.--Subsection (b) of section 709 of 
     such Code is amended by striking ``Amortization'' and 
     inserting ``Deduction'' in the heading.
       (e) Effective Date.--The amendments made by this section 
     shall apply to amounts paid or incurred after the date of the 
     enactment of this Act.

     SEC. 282. MODIFICATION OF FOREIGN TAX CREDIT CARRYOVER RULES.

       (a) In General.--Section 904(c) of the Internal Revenue 
     Code of 1986 (relating to limitation on credit) is amended--
       (1) by striking ``in the second preceding taxable year,'', 
     and
       (2) by striking ``or fifth'' and inserting ``fifth, sixth, 
     or seventh''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to credits arising in taxable years beginning 
     after December 31, 2000.

     SEC. 283. RECOGNITION OF GAIN ON TRANSFERS TO SWAP FUNDS.

       (a) Interests Similar to Preferred Stock Treated as 
     Stock.--Clause (vi) of section 351(e)(1)(B) of the Internal 
     Revenue Code of 1986 (relating to transfer of property to an 
     investment company) is amended to read as follows:
       ``(vi) except as otherwise provided in regulations 
     prescribed by the Secretary--

       ``(I) any interest in an entity if the return on such 
     interest is limited and preferred, and
       ``(II) interests (not described in subclause (I)) in any 
     entity if substantially all of the assets of such entity 
     consist (directly or indirectly) of any assets described in 
     subclause (I), any preceding clause, or clause (viii).''

       (b) Certain Transfers Deemed To Be to Investment 
     Companies.--Subsection (e) of section 351 of such Code is 
     amended by adding at the end the following new paragraph:
       ``(3) Transfers of marketable securities to certain 
     corporations.--A transfer of property to a corporation if--
       ``(A) such property is marketable securities (as defined in 
     section 731(c)(2)), other than a diversified portfolio of 
     securities,
       ``(B) such corporation--
       ``(i) is registered under the Investment Company Act of 
     1940 as an investment company, or is exempt from registration 
     as a investment company under section 3(c)(7) of such Act 
     because interests in such corporation are offered to 
     qualified purchasers within the meaning of section 2(a)(51) 
     of such Act, or
       ``(ii) is formed or availed of for purposes of allowing 
     persons who have significant blocks of marketable securities 
     with unrealized appreciation to diversify those holdings 
     without recognition of gain, and
       ``(C) the transfer results, directly or indirectly, in 
     diversification of the transferor's interest.''
       (c) Transfers to Partnerships.--Subsection (b) of section 
     721 of such Code is amended to read as follows:
       ``(b) Special Rule.--Subsection (a) shall not apply to gain 
     realized on a transfer of property to a partnership if, were 
     the partnership incorporated--
       ``(1) such partnership would be treated as an investment 
     company (within the meaning of section 351), or
       ``(2) section 351 would not apply to such transfer by 
     reason of section 351(e)(3).''
       (d) Effective Date.--
       (1) In general.--The amendments made by this section shall 
     apply to transfers after March 8, 2000.
       (2) Binding contracts.--The amendments made by this section 
     shall not apply to any transfer pursuant to a written binding 
     contract in effect on August 4, 1999, and at all times 
     thereafter before such transfer if such contract provides for 
     the transfer of a fixed amount of property.

  Mr. RANGEL (during the reading). Mr. Speaker, I ask unanimous consent 
that the motion to instruct be considered as read and printed in the 
Record.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from New York?
  There was no objection.
  The SPEAKER pro tempore. Pursuant to the rule, the gentleman from New 
York (Mr. Rangel) is recognized for 5 minutes in support of his motion 
to recommit.
  Mr. RANGEL. Mr. Speaker, if the Republicans want to have reform with 
results, if the Republicans really want to give some aid and assistance 
and comfort to the working poor, if the Republicans want to give a $1 
increase in the minimum wage and at the same time

[[Page 2619]]

give substantial relief to the employers that will be required to do 
this, they would support the motion to recommit.
  Why? Because they would know that this motion to recommit would send 
to the President a bill that would do these things, and it would be a 
bill that would be signed by the President of the United States.
  I know that many on the other side do not like the President. The 
question is, do they care for the American people and the working poor? 
He is still the President, and we have to work with him until the end 
of the year. If we want any bills at all to pass, we should be 
cooperating with Democrats and the President in order to get it done.
  They just cannot pile $122 billion on a tax bill and forget the $5 
trillion debt that we have and just move on, thinking that ultimately, 
before the year's end, they would have accomplished in piecemeal what 
they could not do last year with the $800 billion tax cut.
  Mr. Speaker, I am suggesting that we do have an opportunity to vote 
on the motion to recommit. It incorporates most of the things that the 
Republicans would want done, some of the provisions we have worked with 
in a bipartisan way, and just rejects out of hand the irresponsible tax 
cuts, most of which go to the richest Americans that we have.
  We still have an opportunity to deal with some of the serious 
questions of Medicare, social security, giving assistance in 
prescription drugs to our elderly, protecting a Patients' Bill of 
Rights. Democrats cannot do this alone, and we know in their hearts 
these are the issues they would want to address, but they just cannot 
do it by going into the Republican cloakroom and coming out with these 
imaginary, creative ideas without consulting with the minority and the 
President of the United States.
  Is it not time we stop playing these political games? There is enough 
politics to go around between now and the election. Let us not play 
with the poorest of the poor, who are working every day to maintain 
their self-esteem, to provide food and clothing, pay their rent, get 
shelter for their kids. Let us not play around with social security and 
Medicare.
  Let us do the right thing by the American people and support the 
motion to recommit. This could truly be a beginning, a beginning in 
saying that now that we have the presidential primaries behind us, that 
the candidates can stop going after each other on a personal basis and 
decide how they are going to address these issues to the American 
people on the question of issues and not personalities.
  We in the House, where truly the people should govern, should set the 
examples for our presidential candidates by dealing with the issues, 
and not personality and not politics. We do not get this opportunity 
often, but this is the beginning of a new era, we would believe. The 
Members of the Committee on Ways and Means would like to be working 
together in dealing with tax policy.
  We resent the idea that tax bills are coming out from the Committee 
on Rules and other standing committees without hearings, without 
debate, to just bring things to the floor because it passed the 
majority in the last year. What we should do is separate the question 
of taxes and deal with the question of minimum wage.
  That is why we are here in this body encouraging people not to go on 
welfare but to work, work for their families, work for their 
communities, work for their country, and we will give them a decent 
wage with which to do it so they would not think about going on 
welfare.
  But we cannot have it both ways. We are talking about $6.15. Is there 
anyone here that would like to send anybody in their family out to the 
work market to earn $6.15? Give America a break, vote for the motion to 
recommit.
  The SPEAKER pro tempore. Is the gentleman from Arizona (Mr. Hayworth) 
opposed to the motion to recommit?
  Mr. HAYWORTH. I most certainly am, Mr. Speaker.
  The SPEAKER pro tempore. The gentleman from Arizona (Mr. Hayworth) is 
recognized for 5 minutes on the motion to recommit.
  Mr. HAYWORTH. Mr. Speaker, I always listen with great interest to my 
colleague, the gentleman from New York (Mr. Rangel), my close personal 
friend.
  He said just a few minutes ago, we cannot have it both ways. Indeed, 
that is true. Sadly, this motion to recommit says to the American 
people, Mr. Speaker, ``Wait, wait for tax relief. We believe it is 
important, perhaps not as important as a bipartisan majority of this 
House. We believe it is important, but you need to wait a while 
longer.''
  This legislation also, or this motion to recommit, offers tax relief 
with one hand and takes it away with the other.
  Mr. Speaker, the American people have spoken loudly and clearly about 
the unfairness of the death tax. A recent issue of USA Today describes 
it thusly, quoting now:
  ``Taxes aren't popular to begin with. But of all the ways Uncle Sam 
takes a cut, none may be detested more than the tax levied on an estate 
after someone dies.
  ``The idea of the government reaching into the grave and grabbing 37 
to 60 percent of the wealth accumulated during a lifetime is, well, 
ghoulish to many. It's the depressing confluence of the only two things 
in this world that Benjamin Franklin noted were `certain.' ''
  Mr. Speaker, we remember the statement of Dr. Franklin. He said, ``In 
this life, two things are inevitable, death and taxes.'' But Mr. 
Speaker, I think even Dr. Franklin, if he had the powers of prescience, 
could not begin to fathom that the constitutional Republic he helped to 
found would one day tax its citizens upon their death.
  Mr. Speaker, a bipartisan majority of this House believes quite 
clearly there should be no taxation without respiration. Yet, with the 
motion to recommit, the minority in this House asks us to wait a bit 
longer.
  I said earlier, in somewhat hyperbolic fashion, that, quoting the old 
movie line, sadly, our friends on the left say ``No tax relief, not for 
nobody, nohow.'' That is the essence of their motion to recommit, 
because it once again delays, delays tax relief for the American 
people.
  The record speaks quite clearly that this commonsense majority in 
Congress has delivered tax relief in the past, even as we have paid 
down the debt hanging over the heads of our children, even as we have 
walled off 100 percent of the social security surplus for social 
security.
  Today we said to those businesses that are going to be affected, you 
deserve tax relief; to the self-employed, you deserve 100 percent 
deductibility of insurance; and no, you need not wait until there is 
beachfront property in Yuma, Arizona. You need not wait for the 
physically improbable to finally get tax relief, because, Mr. Speaker, 
we understand what the American people are saying loudly and clearly: 
Yes, save Medicare and social security; yes, improve education by 
empowering parents and teachers and getting funds into the classroom; 
yes, let us make sure we provide for our national security, so grossly 
neglected by the current administration.
  But Mr. Speaker, the American people also say to us, let us provide 
financial security. Let us build on this prosperity by recognizing this 
simple truth: that the money earned by Americans belongs not to the 
Treasury of the United States and Washington bureaucrats, but to the 
people who earn it.
  The legislation supported by the majority will enact that tax relief 
now. The alternative offered by the minority in this motion to recommit 
says yet again, let us delay and delay and delay some more. Sadly, Mr. 
Speaker, actions speak louder than words. The verbiage and the numbers, 
when we strip them all away, show an antipathy toward the simple notion 
that Americans should keep more of their hard-earned money.
  Mr. Speaker, in conclusion, I would call on my colleagues to reject 
this motion to recommit. Vote for real tax relief and real prosperity 
for all Americans.

[[Page 2620]]

  The SPEAKER pro tempore. Without objection, the previous question is 
ordered on the motion to recommit.
  There was no objection.
  The SPEAKER pro tempore. The question is on the motion to recommit.
  The question was taken; the Speaker pro tempore announced that the 
noes appeared to have it.
  Mr. RANGEL. Mr. Speaker, I object to the vote on the ground that a 
quorum is not present and make the point of order that a quorum is not 
present.
  The SPEAKER pro tempore. Evidently a quorum is not present.
  The Sergeant at Arms will notify absent Members.
  Pursuant to clause 9 of rule XX, the Chair will reduce to 5 minutes 
the minimum time for any electronic vote on the question of passage.
  The vote was taken by electronic device, and there were--yeas 207, 
nays 218, not voting 9, as follows:

                             [Roll No. 40]

                               YEAS--207

     Abercrombie
     Ackerman
     Allen
     Andrews
     Baca
     Baird
     Baldacci
     Baldwin
     Barrett (WI)
     Becerra
     Bentsen
     Berkley
     Berman
     Berry
     Bishop
     Blagojevich
     Blumenauer
     Bonior
     Borski
     Boswell
     Boucher
     Boyd
     Brady (PA)
     Brown (FL)
     Brown (OH)
     Capps
     Capuano
     Cardin
     Carson
     Clay
     Clayton
     Clement
     Clyburn
     Condit
     Conyers
     Costello
     Coyne
     Cramer
     Crowley
     Cummings
     Danner
     Davis (FL)
     Davis (IL)
     DeFazio
     DeGette
     Delahunt
     DeLauro
     Deutsch
     Dicks
     Dingell
     Dixon
     Doggett
     Dooley
     Doyle
     Edwards
     Engel
     Eshoo
     Etheridge
     Evans
     Farr
     Fattah
     Filner
     Forbes
     Ford
     Frank (MA)
     Frost
     Gejdenson
     Gephardt
     Gonzalez
     Gordon
     Green (TX)
     Gutierrez
     Hall (OH)
     Hall (TX)
     Hastings (FL)
     Hill (IN)
     Hilliard
     Hinchey
     Hinojosa
     Hoeffel
     Holden
     Holt
     Hooley
     Hoyer
     Inslee
     Jackson (IL)
     Jackson-Lee (TX)
     Jefferson
     John
     Jones (OH)
     Kanjorski
     Kaptur
     Kennedy
     Kildee
     Kilpatrick
     Kind (WI)
     Kleczka
     Klink
     Kucinich
     LaFalce
     Lampson
     Lantos
     Larson
     Lee
     Levin
     Lewis (GA)
     Lofgren
     Lowey
     Lucas (KY)
     Luther
     Maloney (CT)
     Maloney (NY)
     Markey
     Mascara
     Matsui
     McCarthy (MO)
     McCarthy (NY)
     McDermott
     McGovern
     McIntyre
     McKinney
     McNulty
     Meehan
     Meek (FL)
     Meeks (NY)
     Menendez
     Millender-McDonald
     Miller, George
     Minge
     Mink
     Moakley
     Mollohan
     Moore
     Moran (VA)
     Morella
     Murtha
     Nadler
     Napolitano
     Neal
     Oberstar
     Obey
     Olver
     Ortiz
     Owens
     Pallone
     Pascrell
     Pastor
     Payne
     Pelosi
     Peterson (MN)
     Phelps
     Pickett
     Pomeroy
     Price (NC)
     Rahall
     Rangel
     Reyes
     Rivers
     Rodriguez
     Roemer
     Rothman
     Roybal-Allard
     Rush
     Sabo
     Sanchez
     Sanders
     Sandlin
     Sawyer
     Schakowsky
     Scott
     Serrano
     Sherman
     Shows
     Sisisky
     Skelton
     Slaughter
     Smith (WA)
     Snyder
     Spratt
     Stabenow
     Stark
     Stenholm
     Strickland
     Stupak
     Tanner
     Tauscher
     Taylor (MS)
     Thompson (CA)
     Thompson (MS)
     Thurman
     Tierney
     Towns
     Turner
     Udall (CO)
     Udall (NM)
     Velazquez
     Visclosky
     Waters
     Watt (NC)
     Waxman
     Weiner
     Wexler
     Weygand
     Wise
     Woolsey
     Wu
     Wynn

                               NAYS--218

     Aderholt
     Archer
     Armey
     Bachus
     Baker
     Ballenger
     Barcia
     Barr
     Barrett (NE)
     Bartlett
     Barton
     Bass
     Bateman
     Bereuter
     Biggert
     Bilbray
     Bilirakis
     Bliley
     Blunt
     Boehlert
     Boehner
     Bonilla
     Bono
     Brady (TX)
     Bryant
     Burr
     Burton
     Buyer
     Callahan
     Calvert
     Camp
     Campbell
     Canady
     Cannon
     Castle
     Chabot
     Chambliss
     Chenoweth-Hage
     Coble
     Coburn
     Collins
     Combest
     Cook
     Cox
     Crane
     Cubin
     Cunningham
     Davis (VA)
     Deal
     DeLay
     DeMint
     Diaz-Balart
     Dickey
     Doolittle
     Dreier
     Duncan
     Dunn
     Ehlers
     Ehrlich
     Emerson
     English
     Everett
     Ewing
     Fletcher
     Foley
     Fossella
     Fowler
     Franks (NJ)
     Frelinghuysen
     Gallegly
     Gekas
     Gibbons
     Gilchrest
     Gillmor
     Gilman
     Goode
     Goodlatte
     Goodling
     Goss
     Graham
     Green (WI)
     Greenwood
     Gutknecht
     Hansen
     Hastings (WA)
     Hayes
     Hayworth
     Hefley
     Herger
     Hill (MT)
     Hilleary
     Hobson
     Hoekstra
     Horn
     Hostettler
     Houghton
     Hulshof
     Hunter
     Hutchinson
     Hyde
     Isakson
     Istook
     Jenkins
     Johnson (CT)
     Johnson, Sam
     Jones (NC)
     Kasich
     Kelly
     King (NY)
     Kingston
     Knollenberg
     Kolbe
     Kuykendall
     LaHood
     Largent
     Latham
     LaTourette
     Lazio
     Leach
     Lewis (CA)
     Lewis (KY)
     Linder
     Lipinski
     LoBiondo
     Lucas (OK)
     Manzullo
     Martinez
     McCrery
     McHugh
     McInnis
     McIntosh
     McKeon
     Metcalf
     Mica
     Miller (FL)
     Miller, Gary
     Moran (KS)
     Myrick
     Nethercutt
     Ney
     Northup
     Norwood
     Nussle
     Ose
     Oxley
     Packard
     Paul
     Pease
     Peterson (PA)
     Petri
     Pickering
     Pitts
     Pombo
     Porter
     Portman
     Pryce (OH)
     Quinn
     Radanovich
     Ramstad
     Regula
     Reynolds
     Riley
     Rogan
     Rogers
     Rohrabacher
     Ros-Lehtinen
     Roukema
     Royce
     Ryan (WI)
     Ryun (KS)
     Salmon
     Sanford
     Saxton
     Sensenbrenner
     Sessions
     Shadegg
     Shaw
     Shays
     Sherwood
     Shimkus
     Shuster
     Simpson
     Skeen
     Smith (MI)
     Smith (NJ)
     Smith (TX)
     Souder
     Stearns
     Stump
     Sununu
     Sweeney
     Talent
     Tancredo
     Tauzin
     Taylor (NC)
     Terry
     Thomas
     Thornberry
     Thune
     Tiahrt
     Toomey
     Traficant
     Upton
     Vitter
     Walden
     Walsh
     Wamp
     Watkins
     Watts (OK)
     Weldon (FL)
     Weldon (PA)
     Weller
     Whitfield
     Wicker
     Wilson
     Wolf
     Young (AK)
     Young (FL)

                             NOT VOTING--9

     Cooksey
     Ganske
     Granger
     Johnson, E. B.
     McCollum
     Scarborough
     Schaffer
     Spence
     Vento

                              {time}  1820

  Messrs. THOMAS, LAZIO, QUINN, BARTLETT of Maryland, FRANKS of New 
Jersey, and YOUNG of Alaska changed their vote from ``yea'' to ``nay.''
  Mr. DIXON and Mr. HALL of Texas changed their vote from ``nay'' to 
``yea.''
  So the motion to recommit was rejected.
  The result of the vote was announced as above recorded.
  The SPEAKER pro tempore (Mr. Pease). The question is on the passage 
of the bill.
  The question was taken; and the Speaker pro tempore announced that 
the ayes appeared to have it.


                             Recorded Vote

  Mr. ARCHER. Mr. Speaker, I demand a recorded vote.
  A recorded vote was ordered.
  The SPEAKER pro tempore. This is a 5-minute vote.
  The vote was taken by electronic device, and there were--ayes 257, 
noes 169, not voting 9, as follows:

                             [Roll No. 41]

                               AYES--257

     Aderholt
     Archer
     Armey
     Bachus
     Baird
     Baker
     Ballenger
     Barcia
     Barr
     Barrett (NE)
     Bartlett
     Barton
     Bass
     Bateman
     Bereuter
     Berkley
     Biggert
     Bilbray
     Bilirakis
     Bishop
     Bliley
     Blunt
     Boehlert
     Boehner
     Bonilla
     Bono
     Boswell
     Boucher
     Brady (TX)
     Bryant
     Burr
     Burton
     Buyer
     Callahan
     Calvert
     Camp
     Campbell
     Canady
     Cannon
     Capps
     Castle
     Chabot
     Chambliss
     Chenoweth-Hage
     Coble
     Coburn
     Collins
     Combest
     Condit
     Cook
     Cox
     Cramer
     Crane
     Cubin
     Cunningham
     Danner
     Davis (VA)
     Deal
     DeLay
     DeMint
     Diaz-Balart
     Dickey
     Dooley
     Doolittle
     Dreier
     Duncan
     Dunn
     Ehlers
     Ehrlich
     Emerson
     English
     Etheridge
     Everett
     Ewing
     Fletcher
     Foley
     Forbes
     Fossella
     Fowler
     Franks (NJ)
     Frelinghuysen
     Gallegly
     Ganske
     Gekas
     Gibbons
     Gilchrest
     Gillmor
     Gilman
     Goode
     Goodlatte
     Goodling
     Gordon
     Goss
     Graham
     Green (WI)
     Greenwood
     Hall (OH)
     Hall (TX)
     Hansen
     Hastert
     Hastings (WA)
     Hayes
     Hayworth
     Hefley
     Herger
     Hill (MT)
     Hilleary
     Hobson
     Hoekstra
     Holt
     Hooley
     Horn
     Hostettler
     Houghton
     Hulshof
     Hunter
     Hutchinson
     Hyde
     Inslee
     Isakson
     Istook
     Jefferson
     Jenkins
     John
     Johnson (CT)
     Johnson, Sam
     Jones (NC)
     Kasich
     Kelly
     King (NY)
     Kingston
     Knollenberg
     Kolbe
     Kuykendall
     LaHood
     Largent
     Latham
     LaTourette
     Lazio
     Leach
     Lewis (CA)
     Lewis (KY)
     Linder
     LoBiondo
     Lucas (KY)
     Lucas (OK)
     Maloney (CT)
     Manzullo
     Martinez
     McCarthy (NY)
     McCrery
     McHugh
     McInnis
     McIntosh
     McIntyre
     McKeon
     Metcalf
     Mica
     Miller (FL)
     Miller, Gary
     Moore
     Moran (KS)
     Morella
     Myrick
     Nethercutt
     Ney
     Northup
     Norwood
     Nussle
     Ose
     Oxley
     Packard
     Paul
     Pease
     Peterson (MN)
     Peterson (PA)
     Petri
     Pickering
     Pickett
     Pitts
     Pombo
     Porter
     Portman

[[Page 2621]]


     Price (NC)
     Pryce (OH)
     Quinn
     Radanovich
     Ramstad
     Regula
     Reynolds
     Riley
     Rivers
     Roemer
     Rogan
     Rogers
     Rohrabacher
     Ros-Lehtinen
     Roukema
     Royce
     Ryan (WI)
     Ryun (KS)
     Salmon
     Sanchez
     Sandlin
     Sanford
     Saxton
     Sensenbrenner
     Sessions
     Shadegg
     Shaw
     Shays
     Sherwood
     Shimkus
     Shows
     Shuster
     Simpson
     Sisisky
     Skeen
     Smith (MI)
     Smith (NJ)
     Smith (TX)
     Smith (WA)
     Souder
     Stearns
     Stump
     Sununu
     Sweeney
     Talent
     Tancredo
     Tauscher
     Tauzin
     Taylor (NC)
     Terry
     Thomas
     Thompson (CA)
     Thornberry
     Thune
     Tiahrt
     Toomey
     Traficant
     Upton
     Vitter
     Walden
     Walsh
     Wamp
     Watkins
     Watts (OK)
     Weldon (FL)
     Weldon (PA)
     Weller
     Whitfield
     Wicker
     Wilson
     Wolf
     Wu
     Young (AK)
     Young (FL)

                               NOES--169

     Abercrombie
     Ackerman
     Allen
     Andrews
     Baca
     Baldacci
     Baldwin
     Barrett (WI)
     Becerra
     Bentsen
     Berman
     Berry
     Blagojevich
     Blumenauer
     Bonior
     Borski
     Boyd
     Brady (PA)
     Brown (FL)
     Brown (OH)
     Capuano
     Cardin
     Carson
     Clay
     Clayton
     Clement
     Clyburn
     Conyers
     Costello
     Coyne
     Crowley
     Cummings
     Davis (FL)
     Davis (IL)
     DeFazio
     DeGette
     Delahunt
     DeLauro
     Deutsch
     Dicks
     Dingell
     Dixon
     Doggett
     Doyle
     Edwards
     Engel
     Eshoo
     Evans
     Farr
     Fattah
     Filner
     Ford
     Frank (MA)
     Frost
     Gejdenson
     Gephardt
     Gonzalez
     Green (TX)
     Gutierrez
     Gutknecht
     Hastings (FL)
     Hill (IN)
     Hilliard
     Hinchey
     Hinojosa
     Hoeffel
     Holden
     Hoyer
     Jackson (IL)
     Jackson-Lee (TX)
     Jones (OH)
     Kanjorski
     Kaptur
     Kennedy
     Kildee
     Kilpatrick
     Kind (WI)
     Kleczka
     Klink
     Kucinich
     LaFalce
     Lampson
     Lantos
     Larson
     Lee
     Levin
     Lewis (GA)
     Lipinski
     Lofgren
     Lowey
     Luther
     Maloney (NY)
     Markey
     Mascara
     Matsui
     McCarthy (MO)
     McDermott
     McGovern
     McKinney
     McNulty
     Meehan
     Meek (FL)
     Meeks (NY)
     Menendez
     Millender-McDonald
     Miller, George
     Minge
     Mink
     Moakley
     Mollohan
     Moran (VA)
     Murtha
     Nadler
     Napolitano
     Neal
     Oberstar
     Obey
     Olver
     Ortiz
     Owens
     Pallone
     Pascrell
     Pastor
     Payne
     Pelosi
     Phelps
     Pomeroy
     Rahall
     Rangel
     Reyes
     Rodriguez
     Rothman
     Roybal-Allard
     Rush
     Sabo
     Sanders
     Sawyer
     Schakowsky
     Scott
     Serrano
     Sherman
     Skelton
     Slaughter
     Snyder
     Spratt
     Stabenow
     Stark
     Stenholm
     Stupak
     Tanner
     Taylor (MS)
     Thompson (MS)
     Thurman
     Tierney
     Towns
     Turner
     Udall (CO)
     Udall (NM)
     Velazquez
     Visclosky
     Waters
     Watt (NC)
     Waxman
     Weiner
     Wexler
     Weygand
     Wise
     Woolsey
     Wynn

                             NOT VOTING--9

     Cooksey
     Granger
     Johnson, E. B.
     McCollum
     Scarborough
     Schaffer
     Spence
     Strickland
     Vento

                              {time}  1832

  So the bill was passed.
  The result of the vote was announced as above recorded.
  A motion to reconsider was laid on the table.

                          ____________________