[House Report 106-246]
[From the U.S. Government Publishing Office]






106th Congress                                                   Report
  1st Session           HOUSE OF REPRESENTATIVES                106-246

======================================================================




 
PROVIDING FOR THE CONSIDERATION OF H.R. 2488, THE FINANCIAL FREEDOM ACT 
                                OF 1999

                                _______
                                

    July 21 (legislative day, July 20, 1999.--Referred to the House 
                   Calendar and ordered to be printed

                                _______


Ms. Pryce of Ohio, from the Committee on Rules, submitted the following

                              R E P O R T

                       [To accompany H. Res. 256]

    The Committee on Rules, having had under consideration 
House Resolution 256 by a nonrecord vote, report the same to 
the House with the recommendation that the resolution be 
adopted.

                  SUMMARY OF PROVISIONS OF RESOLUTION

    The resolution provides for the consideration of H.R. 2488, 
the ``Financial Freedom Act of 1999,'' under a structured rule. 
The rule provides two hours of debate in the House divided 
equally between the chairman and ranking minority member of the 
Committee on Ways and Means. The rule waives all points of 
order against consideration of the bill.
    The rule makes in order the amendment recommended by the 
Committee on Ways and Means, as modified by the amendments 
printed in Part A of this report. The rule further provides for 
consideration of an amendment in the nature of a substitute 
offered by Representative Rangel or his designee printed in 
Part B of this report which shall be considered as read and 
shall be debatable for one hour equally divided and controlled 
by the proponent and an opponent. The rule also waives all 
points of order against the amendment printed in Part B of this 
report.
    Finally the rule provides one motion to recommit with or 
without instructions.
    The waiver of all points of order against consideration of 
the bill includes a waiver of clause 3(c)(2) of rule XIII 
(requiring the inclusion in the report of a statement on 
certain budget matters if the measures includes new budget, 
entitlement or credit authority or an increase or decrease in 
revenue), clause 3(c)(3) of rule XIII (requiring the inclusion 
in the report of a CBO cost estimate), clause 3(e)(1)(B) of 
rule XIII (requiring the inclusion in the report of a 
comparative print showing the changes in existing law as called 
for under the reported bill) and section 311(a) of the 
Congressional Budget Act of 1974 (prohibiting consideration of 
legislation or an amendment that would cause the total level of 
new budget authority or outlays in the most recent budget 
resolution to be exceeded or would cause revenues to be less).
    The waivers of clauses 3(c)(2) and (3) of rule XIII are 
necessary because the report of the Committee on Ways and Means 
(H. Rept. 106-238) did not include a cost estimate as required 
by section 308 of the Congressional Budget Act or a CBO cost 
estimate as it was not available. However, the CBO cost 
estimate is included in this report. The report also did not 
include a Ramseyer print, necessitating the waiver of clause 
3(e)(1)(B) of rule XIII. Finally, the bill as reported by the 
Ways and Means Committee causes a breach in the revenue floor 
allocated to the committee over the next five fiscal years.
    The waivers of all points of order against the amendment 
printed in Part B of this report includes a waiver of clause 7 
of rule XVI (prohibiting nongermane amendments) as the 
provisions of the amendment in nature of a substitute relating 
to school construction are not germane to the bill as modified 
by the amendments printed in Part A of this report.
    The following is the CBO cost estimate on H.R. 2488 
provided for the Committee on Ways and Means on July 20, 1999.

                                     U.S. Congress,
                               Congressional Budget Office,
                                     Washington, DC, July 20, 1999.
Hon. Bill Archer,
Chairman, Committee on Ways and Means,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 2488, the 
Financial Freedom Act of 1999.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Hester 
Grippando.
            Sincerely,
                                          Barry B. Anderson
                                    (For Dan L. Crippen, Director.)
    Enclosure.

               CONGRESSIONAL BUDGET OFFICE COST ESTIMATE

H.R. 2488--Financial Freedom Act of 1999

    Summary: H.R. 2488 would provide for a variety of phased-in 
tax reductions, including a 10 percent across-the-board cut in 
income tax rates and a repeal of the alternative minimum tax, 
an increase in the standard deduction for married couples, an 
exclusion for some interest and dividend income, a new 
deduction for some health insurance expenses, a reduction in 
the capital gains rate, and a repeal of estate taxes. The 
Congressional Budget Office and the Joint Committee on Taxation 
(JCT) estimate that H.R. 2488 would decrease government 
receipts by $4.5 billion in fiscal year 2000, by about $200 
billion over the 2000-2004 period, and by about $860 billion 
over the 2000-2009 period. In addition, the legislation would 
increase direct spending by $25 million over the 2000-2004 
period and by $73 million over the 2000-2009 period. Because 
the bill would affect receipts and their spending, pay-as-you-
go procedures would apply.
    H.R. 2488 contains two new intergovernmental mandates, the 
costs of which would not exceed the threshold for 
intergovernmental mandates ($50 million in fiscal year 1996, 
adjusted annually for inflation) established in the Unfunded 
Mandates Reform (UMRA). The bill also contains 11 new private-
sector mandates. The costs of those mandates would exceed the 
threshold established by UMRA for private-sector mandates ($100 
million in fiscal year 1996, adjusted annually for inflation) 
in fiscal years 2000 through 2004.
    Estimated cost to the Federal Government: The estimated 
budgetary impact of the bill in the following table.

----------------------------------------------------------------------------------------------------------------
                                                             By fiscal year in millions of dollars--
                                               -----------------------------------------------------------------
                                                   1999       2000       2001       2002       2003       2004
----------------------------------------------------------------------------------------------------------------
                                               CHANGES IN REVENUES

Estimated revenues
    On-Budget.................................          0     -4,543    -25,515    -46,728    -57,713    -65,259
    Off-Budget................................          0          0        -31        -46        -49        -52
                                               -----------------------------------------------------------------
      Total change in Revenues................          0     -4,543    -25,546    -46,774    -57,762    -65,311

                                           CHANGES IN DIRECT SPENDING

Estimated Budget Authority....................          0          2          0          2          2          6
Estimated Outlays.............................          0          2          2          6          5          9
----------------------------------------------------------------------------------------------------------------
Note.--Implementing the bill would also increase spending subject to appropriation, but CBO estimated that such
  costs would not be significant.

Sourced: Congressional Budget Office and Joint Committee on Taxation.

    Basis of estimate: All estimates, with the exception of the 
following provisions, were prepared by JCT.
            Revenues
    Accelerate the Repeal of the FUTA Surtax.--The Federal 
Unemployment Tax Act (FUTA) imposes on employers an effective 
tax of 0.8 percent on this first $7,000 in wages paid annually 
to each employee. This 0.8 percent includes a 0.2 percent 
surtax scheduled to expire on December 31, 2007. The bill would 
accelerate the expiration date to December 31, 2004.
    Revenues from the FUTA tax are deposited into federal 
unemployment trust funds, which are statutorily capped. Under 
current law, CBO projects that the amounts in the federal trust 
funds will exceed the caps beginning in 2003. Amounts above the 
caps are transferred to state unemployment compensation trust 
funds. Since the state funds are included in the unified 
federal budget, this transfer will have no net budgetary 
effect. However, CBO expects that states would respond to this 
transfer by lowering their unemployment taxes so that their 
trust fund balances would remain constant.
    The bill would lower the amount of revenues deposited into 
the federal trust funds and thus would reduce the amounts 
flowing to the state funds. CBO assumes that in the year 
following each lowered transfer, states would respond by not 
lowering their unemployment taxes as much as they would have, 
thus increasing revenues relative to current law. CBO estimates 
that the measure would reduce governmental receipts by $1,029 
million in fiscal year 2005 and by lesser amounts in 2006 and 
2007. CBO estimates increases of receipts in fiscal years 2008 
and 2009. Over the 2005-2009 period, CBO estimates that the 
measure would have no net impact on governmental receipts.
    IRS Users Fees.--The bill would adjust and extend the 
authority of the Internal Revenue Service (IRS) to charge 
taxpayers fees for certain rulings by the Office of the Chief 
Counsel and by the Office for Employee Plans and Exempt 
Organizations. The bill would eliminate the fee the IRS 
currently charges on determination letter requests regarding 
small business pension plans beginning on December 31, 2000. 
The bill also would extend for six years beyond its current 
expiration date of September 30, 2003, the authority of the IRS 
to charge taxpayers fees for certain rulings. CBO estimates 
that the adjustment and extension of IRS fees would increase 
governmental receipts by $5 million over fiscal years 2001 
through 2004 and by $244 million during the 2001-2009 period, 
net of income and payroll tax offsets. CBO based its estimates 
on recent collections data and on information from the IRS.
            Federal spending
    IRS User Fees.--H.R. 2488 would adjust and extend the 
authority of the IRS to charge taxpayers fees for certain 
rulings by the Office of the Chief Counsel and by the Office 
for Employee Plans and Exempt Organizations. The IRS has the 
authority to retain and spend a small portion of these fees 
without further appropriation. CBO estimates that the 
adjustment and extension of fees would decrease direct spending 
by $1 million over the 2001-2004 period but would increase 
direct spending by $9 million over the 2001-2009 period.
    Sport Fish Restoration.--Repealing the excise tax on 
fishing tackle boxes would reduce budget authority of the Sport 
Fish Restoration account. CBO estimates that this provision 
would reduce mandatory federal outlays by $1 million in fiscal 
year 2001, by $2 million in fiscal year 2002, and by $3 million 
annually beginning in fiscal year 2003.
    National Vaccine Injury Compensation Fund and Medicaid.--
The bill would add conjugate vaccines against streptococcus 
pneumoniae to the list of taxable vaccines and thus would allow 
for compensation for injuries related to those vaccines from 
the National Vaccine injury Compensation Trust Fund. CBO 
estimates that this provision would increaseoutlays by $4 
million over the 2000-2004 period. This provision would also increase 
federal Medicaid outlays by $21 million over the 2000-2004 period 
because Medicaid would be required to pay the excise tax on purchases 
of vaccines against streptococcus pneumoniae. The federal government 
purchases about one-half of all vaccines through its Vaccines for 
Children program.
    Also, by adding conjugate vaccines against streptococcus 
pneumoniae to the list of taxable vaccines, the bill would 
increase the cost of vaccines purchased under section 317 of 
the Public Health Service Act. Section 317 authorizes grants to 
states for the purchase of vaccines under federal contracts 
with vaccine manufacturers. Any increase in spending under this 
section would be subject to the annual appropriation process; 
CBO estimates that the additional costs would not be 
significant.
    Reduced PBGC Premiums for New Plans.--Under current law, 
single-employer defined benefit pension plans pay two types of 
annual premiums to the Pension Benefit Guaranty Corporation 
(PBGC). All covered plans are subject to a flat-rate premium of 
$19 per participant. In addition, underfunded plans must also 
pay a variable premium that depends on the amount by which the 
plan's liabilities exceed its assets.
    H.R. 2488 would reduce the flat-rate premium from $19 to $5 
per participant for plans established by employers with 100 or 
fewer participants during the first five years of the plan's 
operation. According to information obtained from the PBGC, 
approximately 3,000 plans would qualify for this reduction. 
Those plans contain an average of about 10 participants each. 
CBO estimates that the premium change would reduce PBGC's 
premium income, which is classified as an offsetting 
collection, by about $0.4 million annually beginning in 2002 or 
by about $1.3 million over the 200-2004 period.
    Reduction of Additional PBGC Premium for New and Small 
Plans.--H.R. 2488 would make two changes affecting the 
variable-rate premium paid by underfunded plans. First, for all 
new plans that are underfunded, the bill would phase in the 
variable-rate premium the plans must pay. In the first year, 
they would pay nothing. In the succeeding four years, they 
would pay 20 percent, 40 percent, 60 percent, and 80 percent, 
respectively, of the full amount. In the sixth and later years, 
they would pay the full variable-rate premium determined by 
their funding status. On the basis of information on premium 
payments to the PBGC in 1996-1997, CBO estimates that this 
change would affect the premiums of approximately 400 plans 
each year. It would reduce PBGC's total premium receipts by 
about $4.2 million over the 2000-2004 period.
    The bill would also reduce the variable-rate premium paid 
by all underfunded plans (not just new plans) established by 
employers with 25 or fewer employees. Under the bill, the 
variable-rate premium per participant paid by those plans would 
not exceed $5 multiplied by the number of participants in the 
plan. CBO estimates that approximately 8,300 plans would have 
their premium payments to PBGC reduced by this provision in 
2000. Premium receipts by the PBGC would decline by $1.5 
million in 2002 and by about $4.6 million over the 2000-2004 
period.
    Missing Plan Participants.--The legislation would expand 
the missing participant program. The Retirement Protection Act 
of 1994 established a missing participant program at PBGC for 
terminating defined benefit plans. The bill would expand the 
program to include terminating multiemployer plans, defined 
benefit plans not covered by PBGC, and defined contribution 
plans.
    The budgetary impact of this provision would be less than 
$0.5 million annually. PBGC does not expect a high volume of 
missing participants as a result of this proposal, and the 
administrative costs of expanding the program would not be 
high. The net budgetary effect of increased benefit payments 
would also be small. Amounts paid by a pension plan to PBGC for 
missing participants are held in PBGC's trust fund, which is 
off-budget. Amounts paid out by PBGC to participants at the 
time they are located are funded in the same manner as benefit 
payments to participants in plans for which PBGC is the 
trustee--partially by the trust fund and partially by on-budget 
revolving funds.
    Rules for Substantial Owner Benefits in Terminated Plans.--
The legislation would simplify the guarantee and asset 
allocation rules as they relate to terminated plans involving a 
substantial owner (ownership interest of at least 10 percent). 
All owners other than majority owners (those with an ownership 
interest of 50 percent or more) would be treated the same as 
other participants, thus receiving a more generous guarantee 
than under current law. Majority owners would be subject to 
simplified special rules. The guarantee for majority owners 
would be phased in at the rate of 1/10 for each year that the 
plan has been in effect, which is faster than the current-law 
phase-in, but the nonguaranteed benefits of majority owners 
would be given a lower priority in the allocation of assets. 
Only about one-third of the plans taken over by PBGC involve 
substantial owners, and the change in benefits paid out by PBGC 
to owner-employees under this provision would be less than $0.5 
million in each year.
    Pay-as-you-go considerations: The Balanced Budget and 
Emergency Deficit Control Act sets up pay-as-you-go procedures 
for legislation affecting direct spending or receipts. The net 
changes in governmental receipts and outlays that are subject 
to pay-as-you-go procedures are shown in the following table. 
Only changes affecting on-budget outlays and receipts affect 
the pay-as-you-goscorecard. For the purposes of enforcing pay-
as-you-go procedures, only the effects in the current year, the budget 
year, and the succeeding four years are counted.

----------------------------------------------------------------------------------------------------------------
                                                      By fiscal year, in millions of dollars--
                                   -----------------------------------------------------------------------------
                                        1999         2000         2001         2002         2003         2004
----------------------------------------------------------------------------------------------------------------
Changes in receipts...............            0       -4,543      -25,515      -46,728      -57,713      -65,259
Changes in outlays................            0            2            2            6            5            9
----------------------------------------------------------------------------------------------------------------


----------------------------------------------------------------------------------------------------------------
                                                             By fiscal year, in millions of dollars--
                                                ----------------------------------------------------------------
                                                     2005         2006         2007         2008         2009
----------------------------------------------------------------------------------------------------------------
Changes in receipts............................      -89,787     -104,672     -114,128     -151,827     -203,233
Changes in Outlays.............................           10           10           10           10           10
----------------------------------------------------------------------------------------------------------------

    Estimated impact on State, local, and tribal governments: 
JCT has determined that the provisions that would add 
strepococcus pneumoniae to the list of taxable vaccines and 
would impose a 1.5 percent surtax on state and local entities 
that deal in distilled spirits are intergovernmental mandates. 
JCT estimates that the cost of these mandates would not exceed 
the threshold specified in UMRA ($50 million in fiscal year 
1996, adjusted for inflation). Other sections of the bill 
reviewed by CBO (sections 803, 1205, 1206, 1208) contain no 
intergovernmental mandates as defined in UMRA. Section 803 
would move the expiration date of the federal unemployment 
surtax back three years and would have implications for state 
unemployment compensation programs as noted above.
    Estimated impact on the private sector: JCT has determined 
that 11 provisions in H.R. 2488 contain private-sector 
mandates. The bill would:
          Add certain vaccines against streptococcus pneumoniae 
        to the list of taxable vaccines;
          Impose a 10 percent vote of value test;
          Change the treatment of income and services provided 
        by taxable subsidiaries of real estate investment 
        trusts (REITs);
          Impose a 1.5 percent surtax on wholesale dealers of 
        distilled spirits;
          Require reporting of information regarding 
        cancellation of indebtedness by nonbank financial 
        institutions;
          Impose a limitation on prefunding of certain employee 
        benefits;
          Modify the treatment of certain closely held REITs;
          Prevent the conversion of ordinary income or short-
        term capital gains into income eligible for long-term 
        capital gains rates;
          Repeal the installment method for most taxpayers 
        using the accrual basis;
          Limit the use of the nonaccrual experience method of 
        accounting; and
          Exclude like-kind exchange property from 
        nonrecognition treatment on the sale of a personal 
        residence.
    JCT estimates that the cost of the private-sector mandates 
would exceed the threshold established in UMRA ($100 million in 
fiscal year 1996, adjusted annually for inflation) in each 
fiscal year of the 2000-2004 period.

                                    ESTIMATED COST OF PRIVATE-SECTOR MANDATES
----------------------------------------------------------------------------------------------------------------
                                                               By fiscal year, in millions of dollars--
                                                     -----------------------------------------------------------
                                                        1999      2000      2001      2002      2003      2004
----------------------------------------------------------------------------------------------------------------
Cost to the private sector..........................        22       671     1,011       828       575       337
----------------------------------------------------------------------------------------------------------------
Source: Joint Committee on Taxation.

    Estimate prepared by: Federal Revenues: Hester Grippando 
(for IRS fees) and Noah Meyerson (for FUTA); Federal spending: 
Tami Ohler (for pensions), Jeanne De Sa (for National Vaccine 
Injury Compensation Fund and Medicaid), Deb Reis (for Sport 
Fish Restoration), and John Righter (for IRS fees).
    Estimate approved by: Robert A. Sunshine, Deputy Assistant 
Director for Budget Analysis; G. Thomas Woodward, Assistant 
Director for Tax Analysis.

Part A: Summary of Amendment Modifying the Amendment Recommended by the 
                      Committee on Ways and Means

    Section 101 (10 percent reduction in individual income tax 
rates) would be modified to phase in the 10-percent across-the-
board rate reduction as follows: 1.0 percent for 2001 through 
2003, 2.5 percent for 2004, 5.0 percent for 2005 through 2007, 
7.5 percent for 2008, and 10 percent for 2009 and thereafter.
    Section 121 (repeal of individual alternative minimum tax 
on individuals) would be modified so that, during the period 
when the individual alternative minimum tax (``AMT'') is being 
phased out, taxpayers would pay the following percentages of 
individual AMT liability: 80 percent in 2005, 70 percent in 
2006, 60 percent in 2007, 50 percent in 2008, and 0 percent in 
2009 and thereafter.
    Section 201 (exemption of certain interest and dividend 
income from tax) would be modified to provide the following 
exclusion from income: $50 ($100 in the case of a married 
couple filing a joint return) for 2001 through 2002, $100 ($200 
in the case of a married couple filing a joint return) for 2003 
through 2004, and $200 ($400 in the case of a married couple 
filing a joint return) for 2005 and thereafter.
    Section 301 (reduction in corporate capital gain tax rate) 
would be modified to reduce the tax on capital gains of 
corporations to 30 percent in 2005 and thereafter.
    Section 302(a) (repeal of alternative minimum tax on 
corporations) would be modified to allow AMT credit carryovers 
to offset the current year's minimum tax liability as follows: 
20 percent in 2005, 30 percent in 2006, 40 percent in 2007, 50 
percent in 2008, and 100 percent in 2009 and thereafter.
    Section 601 (repeal of estate, gift, and generation-
skipping taxes) and section 611 (additional reductions of 
estate and gift tax rates) would be modified to phase in the 
repeal of the estate, gift, and generation-skipping taxes as 
follows: in 2001, repeal rates in excess of 53 percent; in 
2002, repeal rates in excess of 50 percent; in 2003 through 
2006, reduce all rates by 1 percentage point per year, in 2007, 
reduce all rates by 1.5 percentage point; and in 2008, reduce 
all rates by 2 percentage points.
    Section 1205 (reduced PBGC premium for new plans of small 
employers), section 1206 (reduction of additional PBGC premium 
for new and small plans), 1243 (missing participants), and 
section 1254 (substantial owner benefits in terminated plans) 
would be deleted.
    A new provision would be added to Title XII--Provisions 
Relating to Pensions--to provide that the 100 percent of 
compensation limitation does not apply to multiemployer defined 
benefit pension plans. The modification would be effective with 
respect to years beginning after December 31, 2000.
    A new Title XVII--Commitment to Debt Reduction would be 
added. This title contains a provision regarding the commitment 
of the Congress to debt reduction. The provision would reflect 
the sense of the Congress that: (1) the national debt of the 
United States held by the public is $3.619 trillion as of 
fiscal year 1999; (2) the Federal budget is projected to 
produce a surplus each year in the next 10 fiscal years; (3) 
refunding taxes and reducing the national debt held by the 
public will assure continued economic growth and financial 
freedom for future generations; and (4) the national debt held 
by the public shall be reduced from $3.619 trillion to a level 
below $1.61 trillion by fiscal year 2009.
    A new Title XVIII--Budgetary Treatment would be added. This 
title contains a provision that would provide that, upon 
enactment of the Act, the Director of the Office of Management 
and Budget shall not make any estimate of the changes in direct 
spending outlays and receipts under section 252(d) of the 
Balanced Budget and Emergency Deficit Control Act of 1985 
resulting from the enactment of the Act.

     Part B: Summary of Rep. Rangel's Amendment in the Nature of a 
                Substitute Made in Order Under the Rule

    The amendment in the nature of a substitute contains the 
following provisions:
    Marriage penalty relief provided by adjusting the standard 
deduction and by addressing the marriage penalty in the earned 
income tax credit.
    Modifications to the minimum tax in order to ensure that 
middle income families receive the full benefit of the per-
child family credit, the education credit, dependent care 
credit and other nonrefundable credits.
    Tax relief for families with children under age 5 for 
purposes of assisting these families in meeting costs of child 
care, health care, and other expenses. The relief would be 
provided through a $250 increase in the per-child family 
credit.
    Tax relief to families residing in States that use retail 
sales taxes rather than income taxes to fund their State 
government.
    A school construction and modernization initiative that 
would provide $25 billion in free-or-interest-cost funds for 
public school construction and modernization costs.
    Permanent extension of the expiring provisions including 
the research credit, the Work Opportunity Tax Credit, the 
Welfare to Work Credit, subpart F exclusion for active 
financing, and the exclusion for employer-provided educational 
assistance. In addition, the exclusion, for employer-provided 
education assistance would be expanded to include graduate 
study.
    Assistance to families in meeting the cost of long-term 
care by providing an annual income tax credit of $1,000 for 
each individual with long-term care needs. This provision 
contrasts with the Committee bill under which 77 percent of 
American families would be entitled to tax relief of $400 or 
less.
    Important community development initiatives such as an 
increase in the low-income housing tax credit program and the 
new markets tax credit proposed by the President to revitalize 
depressed areas.
    Acceleration of the $1 million estate tax exclusion and 100 
percent deductibility for the health insurance costs of the 
self-employed, as well as an increase in the costs which small 
businesses can expense rather than capitalize.

 PART A: TEXT OF AMENDMENTS MODIFYING THE AMENDMENT RECOMMENDED BY THE 
                      COMMITTEE ON WAYS AND MEANS

  Page 10, strike the table after line 18 and insert the 
following:

        ``For taxable years beginning                     The applicable
          in calendar year--                             percentage is--
          2001 through 2003...................................      1.0 
          2004................................................      2.5 
          2005 through 2007...................................      5.0 
          2008................................................      7.5 
          2009 and thereafter.................................    10.0. 

        In the case of taxable years beginning in calendar year 
        2001, the rounding referred to in the preceding 
        sentence shall be to the next highest tenth.''
  Page 16, line 24, strike ``2007'' and insert ``2008''.
  Page 17, line 7, strike ``2002'' and insert ``2004''.
  Page 17, line 8, strike ``2008'' and insert ``2009''.
  Page 17, strike the table after line 13 and insert the 
following new table:

    ``For taxable years beginning                         The applicable
      in calendar year--                                 percentage is--
      2005....................................................      80  
      2006....................................................      70  
      2007....................................................      60  
      2008....................................................   50.''  

  Page 18, lines 18 and 19, strike ``2007'' and insert 
``2008''.
  Page 20, strike lines 1 through 6 and insert the following:
                  ``(A) in the case of any taxable year 
                beginning in 2001 or 2002, $50 ($100 in the 
                case of a joint return),
                  ``(B) in the case of any taxable year 
                beginning in 2003 or 2004, $100 ($200 in the 
                case of a joint return), and
                  ``(C) in the case of any taxable year 
                beginning after 2004, $200 ($400 in the case of 
                a joint return).
  Page 38, strike line 24 and all that follows through page 40, 
line 17, and insert the following:
          ``(2) a tax of 30 percent of the net capital gain 
        (or, if less, taxable income).
  ``(b) Cross References.--For computation of the alternative 
tax--
          ``(1) in the case of life insurance companies, see 
        section 801(a)(2),
          ``(2) in the case of regulated investment companies 
        and their shareholders, see section 852(b)(3)(A) and 
        (D), and
          ``(3) in the case of real estate investment trusts, 
        see section 857(b)(3)(A).''
  (b) Technical Amendments.--
          (1) Paragraphs (1) and (2) of section 1445(e) are 
        each amended by striking ``35 percent'' and inserting 
        ``30 percent''.
          (2)(A) The second sentence of section 7518(g)(6)(A) 
        is amended by striking ``34 percent'' and inserting 
        ``30 percent''.
          (B) The second sentence of section 607(h)(6)(A) of 
        the Merchant Marine Act, 1936, is amended by striking 
        ``34 percent'' and inserting ``30 percent''.
  (c) Effective Dates.--
          (1) In general.--Except as provided in paragraph (2), 
        the amendments made by this section shall apply to 
        taxable years beginning after December 31, 2004.
          (2) Withholding.--The amendment made by subsection 
        (b)(1) shall apply to amounts paid after December 31, 
        2004.
  Page 41, strike line 16 and all that follows through the end 
of the page and insert the following:
          ``(2) Corporations for taxable years beginning after 
        2004.--In the case of a corporation for any taxable 
        year beginning after 2004 and before 2009, the 
        limitation under paragraph (1) shall be increased by 
        the applicable percentage (determined in accordance 
        with the following table) of the tentative minimum tax 
        for the taxable year.

    ``For taxable years beginning                         The applicable
      in calendar year--                                 percentage is--
      2005....................................................      20  
      2006....................................................      30  
      2007....................................................      40  
      2008....................................................     50.  

  Page 42, line 17, strike ``2002'' and insert ``2004''.
  Page 42, line 24, strike ``2007'' and insert ``2008''.
  Page 85, strike line 20 and all that follows through page 88, 
line 7, and insert the following new section:

SEC. 611. ADDITIONAL REDUCTIONS OF ESTATE AND GIFT TAX RATES.

  (a) Maximum Rate of Tax Reduced to 50 Percent.--
          (1) In general.--The table contained in section 
        2001(c)(1) is amended by striking the 2 highest 
        brackets and inserting the following:

  ``Over $2,500,000.$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 2004 and before 2009--
                  ``(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 
          2005................................................      3.0 
          2006................................................      4.0 
          2007................................................      5.5 
          2008................................................      7.5.

                  ``(C) Coordination with income tax rates.--
                The reductions under subparagraph (A)--
                          ``(i) shall not reduce any rate under 
                        paragraph (1) below the lowest rate in 
                        section 1(c), and
                          ``(ii) shall not reduce the highest 
                        rate under paragraph (1) below the 
                        highest rate in section 1(c).
                  ``(D) Coordination with credit for state 
                death taxes.--Rules similar to the rules of 
                subparagraph (A) shall apply to the table 
                contained in section 2011(b) except that the 
                Secretary shall prescribe percentage point 
                reductions which maintain the proportionate 
                relationship (as in effect before any reduction 
                under this paragraph) between the credit under 
                section 2011 and the tax rates under subsection 
                (c).''
  (d) Effective Dates.--
          (1) Subsections (a) and (b).--The amendments made by 
        subsections (a) and (b) shall apply to estates of 
        decedents dying, and gifts made, after December 31, 
        2000.
          (2) Subsection (c).--The amendment made by subsection 
        (c) shall apply to estates of decedents dying, and 
        gifts made, after December 31, 2004.
  Page 278, strike line 1 and all that follows through page 
282, line 6.
  Page 334, strike line 6 and all that follows through page 
336, line 13.
  Page 345, strike line 10 and all that follows through page 
349, line 15.
  Page 358, after line 2, insert the following new section:

SEC. 1264. TREATMENT OF MULTIEMPLOYER PLANS UNDER SECTION 415.

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

                TITLE XVII--COMMITMENT TO DEBT REDUCTION

SEC. 1701. COMMITMENT TO DEBT REDUCTION.

  It is the sense of the Congress that--
          (1) the national debt of the United States held by 
        the public is $3.619 trillion as of fiscal year 1999,
          (2) the Federal budget is projected to produce a 
        surplus each year in the next 10 fiscal years,
          (3) refunding taxes and reducing the national debt 
        held by the public will assure continued economic 
        growth and financial freedom for future generations, 
        and
          (4) the national debt held by the public shall be 
        reduced from $3.619 trillion to a level below $1.61 
        trillion by fiscal year 2009.

                    TITLE XVIII--BUDGETARY TREATMENT

SEC. 1801. EXCLUSION OF EFFECTS OF THIS ACT FROM PAYGO SCORECARD.

  Upon the enactment of this Act, the Director of the Office of 
Management and Budget shall not make any estimate of changes in 
direct spending outlays and receipts under section 252(d) of 
the Balanced Budget and Emergency Deficit Control Act of 1985 
resulting from the enactment of this Act.
  Conform the section numbering and the table of contents 
accordingly.

PART B: TEXT OF AMENDMENT TO BE OFFERED BY REPRESENTATIVE RANGEL OF NEW 
                           YORK OR A DESIGNEE

  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE; ETC.

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

Sec. 1. Short title; etc.
Sec. 2. Tax reductions contingent on social security and medicare 
          solvency certifications.

                    TITLE I--TAX RELIEF FOR FAMILIES

Sec. 101. Marriage penalty relief.
Sec. 102. Nonrefundable personal credits fully allowed against regular 
          tax liability and minimum tax liability.
Sec. 103. Increase in child tax credit.
Sec. 104. Deduction of State and local general sales taxes in lieu of 
          State and local income taxes.

                   TITLE II--INCENTIVES FOR EDUCATION

Sec. 201. Expansion of incentives for public schools.
Sec. 202. Extension of exclusion for employer-provided educational 
          assistance; exclusion to apply to assistance for graduate 
          education.

        TITLE III--INCENTIVES FOR HEALTH CARE AND LONG-TERM CARE

Sec. 301. Long-term care tax credit.
Sec. 302. Deduction for 100 percent of health insurance costs of self-
          employed individuals.

      TITLE IV--PERMANENT EXTENSION OF CERTAIN EXPIRING PROVISIONS

Sec. 401. Research credit.
Sec. 402. Work opportunity and welfare-to-work credits.
Sec. 403. Subpart F exemption for active financing income.
Sec. 404. Expensing of environmental remediation costs.

               TITLE V--COMMUNITY DEVELOPMENT INITIATIVES

Sec. 501. Increase in State ceiling on low-income housing credit.
Sec. 502. New markets tax credit.
Sec. 503. Credit to holders of Better America Bonds.

                   TITLE VI--SMALL BUSINESS INCENTIVES

Sec. 601. Acceleration of $1,000,000 estate tax exclusion.
Sec. 602. Increase in expense treatment for small businesses.

                      TITLE VII--PENSION PROVISIONS

Sec. 701. Treatment of multiemployer plans under section 415.
Sec. 702. Actuarial reduction only for benefits beginning before age 62 
          in case of benefits under multiemployer plans.

                       TITLE VIII--REVENUE OFFSETS

Sec. 801. Returns relating to cancellations of indebtedness by 
          organizations lending money.
Sec. 802. Extension of Internal Revenue Service user fees.
Sec. 803. Limitations on welfare benefit funds of 10 or more employer 
          plans.
Sec. 804. Increase in elective withholding rate for nonperiodic 
          distributions from deferred compensation plans.
Sec. 805. Controlled entities ineligible for REIT status.
Sec. 806. Treatment of gain from constructive ownership transactions.
Sec. 807. Transfer of excess defined benefit plan assets for retiree 
          health benefits.
Sec. 808. Modification of installment method and repeal of installment 
          method for accrual method taxpayers.
Sec. 809. Limitation on use of nonaccrual experience method of 
          accounting.
Sec. 810. Exclusion of like-kind exchange property from nonrecognition 
          treatment on the sale of a principal residence.
Sec. 811. Disallowance of noneconomic tax attributes.

     TITLE IX--NATIONAL COMMISSION ON TAX REFORM AND SIMPLIFICATION

Sec. 901. Establishment.
Sec. 902. Functions.
Sec. 903. Administration.
Sec. 904. General.

SEC. 2. TAX REDUCTIONS CONTINGENT ON SOCIAL SECURITY AND MEDICARE 
                    SOLVENCY CERTIFICATIONS.

  (a) In General.--Notwithstanding any other provision of this 
Act, no provision of this Act (or amendment made thereby) shall 
take effect until there is--
          (1) a social security certification,
          (2) a Medicare certification, and
          (3) a balanced budget certification.
  (b) Extension of Expiring Provisions and Revenue Offsets Not 
Affected.--
          (1) In general.--Except as provided in paragraph (2), 
        sections 102, 202, title IV, and title VIII shall take 
        effect without regard to the provisions of subsection 
        (a).
          (2) Only 2-year extension of certain provisions if no 
        solvency and budget determinations.--
                  (A) In general.--If, as of January 1, 2002, 
                all of the certifications under subsection (a) 
                have not been made--
                          (i) section 26 of the Internal 
                        Revenue Code of 1986 shall be applied 
                        to taxable years beginning during the 
                        suspension period without regard to the 
                        amendment made by section 102,
                          (ii) section 127 of such Code shall 
                        not apply with respect to courses 
                        beginning during the suspension period,
                          (iii) sections 41 and 198 of such 
                        Code shall not apply to amounts paid or 
                        incurred during the suspension period,
                          (iv) sections 51 and 51A of such Code 
                        shall not apply to individuals who 
                        begin work for the employer during the 
                        suspension period, and
                          (v) sections 953(e) and 954(h) of 
                        such Code shall not apply to taxable 
                        years beginning during the suspension 
                        period.
                  (B) Suspension period.--For purposes of 
                subparagraph (A), the suspension period is the 
                period beginning on January 1, 2002, and ending 
                on the earliest date that all of the 
                certifications under subsection (a) have been 
                made.
  (c) Definitions.--For purposes of this subsection--
          (1) Social security solvency certification.--The term 
        ``social security solvency certification'' means a 
        certification by the Board of Trustees of the Social 
        Security Trust Funds that the Federal Old-Age and 
        Survivors Insurance Trust Fund and the Federal 
        Disability Insurance Trust Fund are in actuarial 
        balance for the 75-year period utilized in the most 
        recent annual report of such Board of Trustees pursuant 
        to section 201(c)(2) of the Social Security Act (42 
        U.S.C. 401(c)(2)).
          (2) Medicare solvency certification.--For purposes of 
        this subsection, the term ``Medicare solvency 
        certification'' means a certification by the Board of 
        Trustees of the Federal Hospital Insurance Trust Fund 
        that such Trust Fund is in actuarial balance until the 
        year 2027.
          (3) Balanced budget certification.--There is a 
        balanced budget certification if the Director of the 
        Office of Management and Budget certifies that the tax 
        reductions made by this Act will not create an on-
        budget deficit for any fiscal year in the period 2000 
        through 2009 after taking into account non-Social-
        Security deficit amounts necessary for the 
        certifications under paragraphs (1) and (2).

                    TITLE I--TAX RELIEF FOR FAMILIES

SEC. 101. MARRIAGE PENALTY RELIEF.

  (a) Standard Deduction.--
          (1) In general.--Paragraph (2) of section 63(c) 
        (relating to standard deduction) is amended--
                  (A) by striking ``$5,000'' in subparagraph 
                (A) and inserting ``twice the dollar amount in 
                effect under subparagraph (C) for the taxable 
                year'',
                  (B) by adding ``or'' at the end of 
                subparagraph (B),
                  (C) by striking ``in the case of'' and all 
                that follows in subparagraph (C) and inserting 
                ``in any other case.'', and
                  (D) by striking subparagraph (D).
          (2) Technical amendments.--
                  (A) Subparagraph (B) of section 1(f)(6) is 
                amended by striking ``(other than with'' and 
                all that follows through ``shall be applied'' 
                and inserting ``(other than with respect to 
                sections 63(c)(4) and 151(d)(4)(A)) shall be 
                applied''.
                  (B) Paragraph (4) of section 63(c) is amended 
                by adding at the end the following flush 
                sentence:
        ``The preceding sentence shall not apply to the amount 
        referred to in paragraph (2)(A).''.
  (b) Earned Income Credit.--Subsection (a) of section 32 
(relating to credit for earned income) is amended by adding at 
the end the following new paragraph:
          ``(3) Reduction of marriage penalty.--
                  ``(A) In general.--In the case of a joint 
                return, the phaseout amount under this section 
                shall be such amount (determined without regard 
                to this paragraph) increased by $2,500 ($2,000 
                in the case of taxable years beginning during 
                2000).
                  ``(B) Inflation adjustment.--In the case of 
                any taxable year beginning in a calendar year 
                after 2001, the $2,500 amount contained in 
                subparagraph (A) shall be increased by an 
                amount equal to the product of--
                          ``(i) such dollar amount, and
                          ``(ii) the cost-of-living adjustment 
                        determined under section 1(f)(3) for 
                        the calendar year in which the taxable 
                        year begins, determined by substituting 
                        `calendar year 2000' for `calendar year 
                        1992' in subparagraph (B) thereof.
                If any increase determined under the preceding 
                sentence is not a multiple of $50, such 
                increase shall be rounded to the next lowest 
                multiple of $50.''
  (c) Effective Date.--The amendments made by this section 
shall apply to taxable years beginning after December 31, 1999.
  (d) Phasein of Increase in Basic Standard Deduction.--In the 
case of taxable years beginning during 2000--
          (1) there shall be taken into account under 
        subparagraph (A) section 63(c)(2) of the Internal 
        Revenue Code of 1986 only one-half of the increase 
        which would (but for this subsection) apply, and
          (2) the basic standard deduction for a married 
        individual filing a separate return shall be one-half 
        of the amount applicable under such subparagraph.

SEC. 102. NONREFUNDABLE PERSONAL CREDITS FULLY ALLOWED AGAINST REGULAR 
                    TAX LIABILITY AND MINIMUM TAX LIABILITY.

  (a) In General.--Subsection (a) of section 26 (relating to 
limitation based on amount of tax) is amended to read as 
follows:
  ``(a) Limitation Based on Amount of Tax.--The aggregate 
amount of credits allowed by this subpart for the taxable year 
shall not exceed the sum of--
          ``(1) the taxpayer's regular tax liability for the 
        taxable year, and
          ``(2) the tax imposed for the taxable year by section 
        55(a).''.
  (b) Child Credit.--Subsection (d) of section 24 is amended by 
striking paragraph (2) and by redesignating paragraph (3) as 
paragraph (2).
  (c) Effective Date.--The amendments made by this section 
shall apply to taxable years beginning after December 31, 1998.

SEC. 103. INCREASE IN CHILD TAX CREDIT.

  (a) In General.--Subsection (a) of section 24 (relating to 
child tax credit), as amended by section 301, is amended by 
adding at the end the following new sentence:
``In the case of a qualifying child who has not attained age 5 
as of the close of the calendar year in which the taxable year 
of the taxpayer begins, paragraph (1) shall be applied by 
substituting `$750' for `$500'.''
  (b) Effective Date.--The amendments made by this section 
shall apply to taxable years beginning after December 31, 2000.

SEC. 104. DEDUCTION OF STATE AND LOCAL GENERAL SALES TAXES IN LIEU OF 
                    STATE AND LOCAL INCOME TAXES.

  (a) In General.--Subsection (b) of section 164 is amended by 
adding at the end thereof the following new paragraph:
          ``(5) General sales taxes.--For purposes of 
        subsection (a)--
                  ``(A) Election to deduct state and local 
                sales taxes in lieu of state and local income 
                taxes.--
                          ``(i) In general.--At the election of 
                        the taxpayer for the taxable year, 
                        subsection (a) shall be applied--
                                  ``(I) without regard to the 
                                reference to State and local 
                                income taxes,
                                  ``(II) as if State and local 
                                general sales taxes were 
                                referred to in a paragraph 
                                thereof, and
                                  ``(III) without regard to the 
                                last sentence.
                  ``(B) Definition of general sales tax.--The 
                term `general sales tax' means a tax imposed at 
                one rate in respect of the sale at retail of a 
                broad range of classes of items.
                  ``(C) Special rules for food, etc.--In the 
                case of items of food, clothing, medical 
                supplies, and motor vehicles--
                          ``(i) the fact that the tax does not 
                        apply in respect of some or all of such 
                        items shall not be taken into account 
                        in determining whether the tax applies 
                        in respect of a broad range of classes 
                        of items, and
                          ``(ii) the fact that the rate of tax 
                        applicable in respect of some or all of 
                        such items is lower than the general 
                        rate of tax shall not be taken into 
                        account in determining whether the tax 
                        is imposed at one rate.
                  ``(D) Items taxed at different rates.--Except 
                in the case of a lower rate of tax applicable 
                in respect of an item described in subparagraph 
                (C), no deduction shall be allowed under this 
                paragraph for any general sales tax imposed in 
                respect of an item at a rate other than the 
                general rate of tax.
                  ``(E) Compensating use taxes.--A compensating 
                use tax in respect of an item shall be treated 
                as a general sales tax. For purposes of the 
                preceding sentence, the term `compensating use 
                tax' means, in respect of any item, a tax 
                which--
                          ``(i) is imposed on the use, storage, 
                        or consumption of such item, and
                          ``(ii) is complementary to a general 
                        sales tax, but only if a deduction is 
                        allowable under this paragraph in 
                        respect of items sold at retail in the 
                        taxing jurisdiction which are similar 
                        to such item.
                  ``(F) Special rule for motor vehicles.--In 
                the case of motor vehicles, if the rate of tax 
                exceeds the general rate, such excess shall be 
                disregarded and the general rate shall be 
                treated as the rate of tax.
                  ``(G) Separately stated general sales 
                taxes.--If the amount of any general sales tax 
                is separately stated, then, to the extent that 
                the amount so stated is paid by the consumer 
                (otherwise than in connection with the 
                consumer's trade or business) to his seller, 
                such amount shall be treated as a tax imposed 
                on, and paid by, such consumer.
                  ``(H) Amount of deduction to be determined 
                under tables.--
                          ``(i) In general.--The amount of the 
                        deduction allowed by this paragraph 
                        shall be determined under tables 
                        prescribed by the Secretary.
                          ``(ii) Requirements for tables.--The 
                        tables prescribed under clause (i) 
                        shall reflect the provisions of this 
                        paragraph and shall be based on the 
                        average consumption by taxpayers on a 
                        State-by-State basis, as determined by 
                        the Secretary, taking into account 
                        filing status, number of dependents, 
                        adjusted gross income, and rates of 
                        State and local general sales 
                        taxation.''.
  (b) Effective Date.--The amendments made by this section 
shall apply to taxable years beginning after December 31, 1999.

                   TITLE II--INCENTIVES FOR EDUCATION

SEC. 201. EXPANSION OF INCENTIVES FOR PUBLIC SCHOOLS.

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

         ``Subchapter X--Public School Modernization Provisions

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

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

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

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

  ``(a) Allowance of Credit.--In the case of a taxpayer who 
holds a qualified public school modernization bond on a credit 
allowance date of such bond which occurs during the taxable 
year, there shall be allowed as a credit against the tax 
imposed by this chapter for such taxable year an amount equal 
to the sum of the credits determined under subsection (b) with 
respect to credit allowance dates during such year on which the 
taxpayer holds such bond.
  ``(b) Amount of Credit.--
          ``(1) In general.--The amount of the credit 
        determined under this subsection with respect to any 
        credit allowance date for a qualified public school 
        modernization bond is 25 percent of the annual credit 
        determined with respect to such bond.
          ``(2) Annual credit.--The annual credit determined 
        with respect to any qualified public school 
        modernization bond is the product of--
                  ``(A) the applicable credit rate, multiplied 
                by
                  ``(B) the outstanding face amount of the 
                bond.
          ``(3) Applicable credit rate.--For purposes of 
        paragraph (1), the applicable credit rate with respect 
        to an issue is the rate equal to an average market 
        yield (as of the day before the date of issuance of the 
        issue) on outstanding long-term corporate debt 
        obligations (determined under regulations prescribed by 
        the Secretary).
          ``(4) Special rule for issuance and redemption.--In 
        the case of a bond which is issued during the 3-month 
        period ending on a credit allowance date, the amount of 
        the credit determined under this subsection with 
        respect to such credit allowance date shall be a 
        ratable portion of the credit otherwise determined 
        based on the portion of the 3-month period during which 
        the bond is outstanding. A similar rule shall apply 
        when the bond is redeemed.
  ``(c) Limitation Based on Amount of Tax.--
          ``(1) In general.--The credit allowed under 
        subsection (a) for any taxable year shall not exceed 
        the excess of--
                  ``(A) the sum of the regular tax liability 
                (as defined in section 26(b)) plus the tax 
                imposed by section 55, over
                  ``(B) the sum of the credits allowable under 
                part IV of subchapter A (other than subpart C 
                thereof, relating to refundable credits).
          ``(2) Carryover of unused credit.--If the credit 
        allowable under subsection (a) exceeds the limitation 
        imposed by paragraph (1) for such taxable year, such 
        excess shall be carried to the succeeding taxable year 
        and added to the credit allowable under subsection (a) 
        for such taxable year.
  ``(d) Qualified Public School Modernization Bond; Credit 
Allowance Date.--For purposes of this section--
          ``(1) Qualified public school modernization bond.--
        The term `qualified public school modernization bond' 
        means--
                  ``(A) a qualified 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) Termination.--This section shall not apply to any bond 
issued after September 30, 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 2000,
          ``(2) $11,000,000,000 for 2001, and
          ``(3) 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 2000, and $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,
                  ``(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. 1400I. Corporate contributions to specialized training 
                  centers.

``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) $1,000,000,000 for 2000,
                  ``(D) $1,400,000,000 for 2001, and
                  ``(E) except as provided in paragraph (3), 
                zero after 2001.
          ``(2) Allocation of limitation.--
                  ``(A) Allocation among states.--
                          ``(i) 1998 and 1999 limitations.--The 
                        national zone academy bond limitations 
                        for calendar years 1998 and 1999 shall 
                        be allocated by the Secretary among the 
                        States on the basis of their respective 
                        populations of individuals below the 
                        poverty line (as defined by the Office 
                        of Management and Budget).
                          ``(ii) Limitation after 1999.--The 
                        national zone academy bond limitation 
                        for any calendar year after 1999 shall 
                        be allocated by the Secretary among the 
                        States in the manner prescribed by 
                        section 1400G(d); except that in making 
                        the allocation under this clause, the 
                        Secretary shall take into account--
                                  ``(I) Basic Grants 
                                attributable to large local 
                                educational agencies (as 
                                defined in section 1400G(e)).
                                  ``(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.

``SEC. 1400I. CORPORATE CONTRIBUTIONS TO SPECIALIZED TRAINING CENTERS.

  ``(a) General Rule.--For purposes of section 38, in the case 
of a corporation, the specialized training center credit 
determined under this section is an amount equal to 50 percent 
of the amount of the designated qualified contributions made by 
the taxpayer during the taxable year to a specialized training 
center.
  ``(b) Definitions.--For purposes of this section--
          ``(1) Specialized training center.--The term 
        `specialized training center' means any qualified zone 
        academy (as defined in section 1400H(a)(3))--
                  ``(A) which is located in an empowerment zone 
                or enterprise community, or
                  ``(B) which is located in proximity to such a 
                zone or community and a significant number of 
                the students attending such academy have their 
                principal place of abode in such zone or 
                community.
          ``(2) Designated qualified contributions.--The term 
        `designated qualified contribution' means any 
        contribution--
                  ``(A) which is made pursuant to an agreement 
                under which the taxpayer participates in the 
                design of the academic program of the 
                specialized training center, and
                  ``(B) which is designated under subsection 
                (c).
  ``(c) Designation of Contributions.--
          ``(1) Limitation on amount designated.--The maximum 
        amount of contributions made which may be designated 
        under this subsection with respect to all specialized 
        training centers located an empowerment zone or 
        enterprise community shall not exceed--
                  ``(A) $8,000,000 in the case of an 
                empowerment zone, and
                  ``(B) $2,000,000 in the case of an enterprise 
                community.
          ``(2) Designations.--Designations under this 
        subsection shall be made (in consultation with the 
        local educational agency) by the local government 
        agency responsible for implementing the strategic plan 
        described in section 1391(f)(2) for the empowerment 
        zone or enterprise community.
  ``(d) Value of Contributions.--The amount of any designated 
qualified contribution which may be taken into account under 
this section shall be--
          ``(1) the amount of such contribution which would be 
        allowed as a deduction under section 170 without regard 
        to section 280C(d), or
          ``(2) in the case of a contribution of services 
        performed on the premises of a specialized training 
        center by an employee of the taxpayer, the amount of 
        wages (as defined in section 3306(b) but without regard 
        to any dollar limitation contained in such section) 
        paid by the taxpayer for such services.''
  (b) Reporting.--Subsection (d) of section 6049 (relating to 
returns regarding payments of interest) is amended by adding at 
the end the following new paragraph:
          ``(8) Reporting of credit on qualified public school 
        modernization bonds.--
                  ``(A) In general.--For purposes of subsection 
                (a), the term `interest' includes amounts 
                includible in gross income under section 
                1400F(f) and such amounts shall be treated as 
                paid on the credit allowance date (as defined 
                in section 1400F(d)(2)).
                  ``(B) Reporting to corporations, etc.--Except 
                as otherwise provided in regulations, in the 
                case of any interest described in subparagraph 
                (A) of this paragraph, subsection (b)(4) of 
                this section shall be applied without regard to 
                subparagraphs (A), (H), (I), (J), (K), and 
                (L)(i).
                  ``(C) Regulatory authority.--The Secretary 
                may prescribe such regulations as are necessary 
                or appropriate to carry out the purposes of 
                this paragraph, including regulations which 
                require more frequent or more detailed 
                reporting.''
  (c) Conforming Amendments Related to Credit for Corporate 
Contributions to Specialized Training Centers.--
          (1) Denial of double benefit.--Section 280C is 
        amended by adding at the end the following new 
        subsection:
  ``(d) Credit for Corporate Contributions to Specialized 
Training Centers.--No deduction shall be allowed for that 
portion of the designated qualified contributions (as defined 
in section 1400I(b)) made during the taxable year which is 
equal to the credit determined for the taxable year under 
section 1400I(a). Paragraph (3) of subsection (b) shall apply 
for purposes of this subsection.''
          (2) Credit to be part of general business credit.--
                  (A) Section 38(b) is amended--
                          (i) by striking ``plus'' at the end 
                        of paragraph (11),
                          (ii) by striking the period at the 
                        end of paragraph (12) and inserting ``, 
                        plus'', and
                          (iii) by adding at the end the 
                        following new paragraph:
          ``(13) in the case of a corporation, the specialized 
        training center credit determined under section 
        1400I(a).''
                  (B) Subsection (d) of section 39 (relating to 
                carryback and carryforward of unused credits) 
                is amended by adding at the end the following 
                new paragraph:
          ``(9) No carryback of section 1400i credit before 
        january 1, 2000.--No portion of the unused business 
        credit for any taxable year which is attributable to 
        the credit determined under section 1400I may be 
        carried back to a taxable year beginning before January 
        1, 2000.''.
  (d) Other Conforming Amendments.--
          (1) Subchapter U of chapter 1 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 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 
        is amended by striking the last 2 items and inserting 
        the following item:

        ``Part IV. Regulations.''

  (e) Application of Certain Labor Standards on Construction 
Projects Financed Under Public School Modernization Program.--
Section 439 of the General Education Provisions Act (relating 
to labor standards) is amended--
          (1) by inserting ``(a)'' before ``All laborers and 
        mechanics'', and
          (2) by adding at the end the following:
  ``(b)(1) For purposes of this section, the term `applicable 
program' also includes the qualified zone academy bond 
provisions enacted by section 226 of the Taxpayer Relief Act of 
1997 and the program established by section 2 of the Public 
School Modernization Act of 1999.
  ``(2) A State or local government participating in a program 
described in paragraph (1) shall--
          ``(A) in the awarding of contracts, give priority to 
        contractors with substantial numbers of employees 
        residing in the local education area to be served by 
        the school being constructed; and
          ``(B) include in the construction contract for such 
        school a requirement that the contractor give priority 
        in hiring new workers to individuals residing in such 
        local education area.
  ``(3) In the case of a program described in paragraph (1), 
nothing in this subsection or subsection (a) shall be construed 
to deny any tax credit allowed under such program. If amounts 
are required to be withheld from contractors to pay wages to 
which workers are entitled, such amounts shall be treated as 
expended for construction purposes in determining whether the 
requirements of such program are met.''.
  (f) Employment and Training Activities Relating to 
Construction or Reconstruction of Public School Facilities.--
          (1) In general.--Section 134 of the Workforce 
        Investment Act of 1998 (29 U.S.C. 2864) is amended by 
        adding at the end the following:
  ``(f) Local Employment and Training Activities Relating to 
Construction or Reconstruction of Public School Facilities.--
          ``(1) In general.--In order to provide training 
        services related to construction or reconstruction of 
        public school facilities receiving funding assistance 
        under an applicable program, each State shall establish 
        a specialized program of training meeting the following 
        requirements:
                  ``(A) The specialized program provides 
                training for jobs in the construction industry.
                  ``(B) The program is designed to provide 
                trained workers for projects for the 
                construction or reconstruction of public school 
                facilities receiving funding assistance under 
                an applicable program.
                  ``(C) The program is designed to ensure that 
                skilled workers (residing in the area to be 
                served by the school facilities) will be 
                available for the construction or 
                reconstruction work.
          ``(2) Coordination.--The specialized program 
        established under paragraph (1) shall be integrated 
        with other activities under this Act, with the 
        activities carried out under the National 
        Apprenticeship Act of 1937 by the State Apprenticeship 
        Council or through the Bureau of Apprenticeship and 
        Training in the Department of Labor, as appropriate, 
        and with activities carried out under the Carl D. 
        Perkins Vocational and Technical Education Act of 1998. 
        Nothing in this subsection shall be construed to 
        require services duplicative of those referred to in 
        the preceding sentence.
          ``(3) Applicable program.--In this subsection, the 
        term `applicable program' has the meaning given the 
        term in section 439(b) of the General Education 
        Provisions Act (relating to labor standards).''.
          (2) State plan.--Section 112(b)(17)(A) of the 
        Workforce Investment Act of 1998 (29 U.S.C. 
        2822(b)(17)(A)) is amended--
                  (A) in clause (iii), by striking ``and'' at 
                the end;
                  (B) by redesignating clause (iv) as clause 
                (v); and
                  (C) by inserting after clause (iii) the 
                following:
                          ``(iv) how the State will establish 
                        and carry out a specialized program of 
                        training under section 134(f); and''.
  (g) 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, 1999.
          (2) Credit for corporate contributions to specialized 
        training centers.--Section 1400I of the Internal 
        Revenue Code of 1986 (as added by this section) shall 
        apply to taxable years beginning after December 31, 
        1999.
          (3) 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.
          (4) Application of labor standards; training 
        program.--The amendments made by subsections (e) and 
        (f) shall take effect on the date of the enactment of 
        this Act.

SEC. 202. EXTENSION OF EXCLUSION FOR EMPLOYER-PROVIDED EDUCATIONAL 
                    ASSISTANCE; EXCLUSION TO APPLY TO ASSISTANCE FOR 
                    GRADUATE EDUCATION.

  (a) Permanent Extension.--Subsection (d) of section 127 is 
hereby repealed.
  (b) Exclusion To Apply to Graduate Students.--The last 
sentence of section 127(c)(1) is amended by striking 
``hobbies'' and all that follows and inserting ``hobbies.''
  (c) Effective Date.--The amendments made by this section 
shall apply to courses beginning after May 31, 2000.

        TITLE III--INCENTIVES FOR HEALTH CARE AND LONG-TERM CARE

SEC. 301. LONG-TERM CARE TAX CREDIT.

  (a) Allowance of Credit.--
          (1) In general.--Section 24(a) (relating to allowance 
        of child tax credit) is amended to read as follows:
  ``(a) Allowance of Credit.--There shall be allowed as a 
credit against the tax imposed by this chapter for the taxable 
year an amount equal to the sum of--
          ``(1) $500 multiplied by the number of qualifying 
        children of the taxpayer, plus
          ``(2) $1,000 multiplied by the number of applicable 
        individuals with respect to whom the taxpayer is an 
        eligible caregiver for the taxable year.''
          (2) Additional credit for taxpayer with 3 or more 
        separate credit amounts.--So much of section 24(d) as 
        precedes paragraph (1)(A) thereof is amended to read as 
        follows:
  ``(d) Additional Credit for Taxpayers With 3 or More Separate 
Credit Amounts.--
          ``(1) In general.--If the sum of the number of 
        qualifying children of the taxpayer and the number of 
        applicable individuals with respect to which the 
        taxpayer is an eligible caregiver is 3 or more for any 
        taxable year, the aggregate credits allowed under 
        subpart C shall be increased by the lesser of--''.
          (3) Conforming amendments.--
                  (A) The heading for section 32(n) is amended 
                by striking ``Child'' and inserting ``Family 
                Care''.
                  (B) The heading for section 24 is amended to 
                read as follows:

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

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

``Sec. 24. Family care credit.''.

  (b) Definitions.--Section 24(c) (defining qualifying child) 
is amended to read as follows:
  ``(c) Definitions.--For purposes of this section--
          ``(1) Qualifying child.--
                  ``(A) In general.--The term `qualifying 
                child' means any individual if--
                          ``(i) the taxpayer is allowed a 
                        deduction under section 151 with 
                        respect to such individual for the 
                        taxable year,
                          ``(ii) such individual has not 
                        attained the age of 17 as of the close 
                        of the calendar year in which the 
                        taxable year of the taxpayer begins, 
                        and
                          ``(iii) such individual bears a 
                        relationship to the taxpayer described 
                        in section 32(c)(3)(B).
                  ``(B) Exception for certain noncitizens.--The 
                term `qualifying child' shall not include any 
                individual who would not be a dependent if the 
                first sentence of section 152(b)(3) were 
                applied without regard to all that follows 
                `resident of the United States'.
          ``(2) Applicable individual.--
                  ``(A) In general.--The term `applicable 
                individual' means, with respect to any taxable 
                year, any individual who has been certified, 
                before the due date for filing the return of 
                tax for the taxable year (without extensions), 
                by a physician (as defined in section 
                1861(r)(1) of the Social Security Act) as being 
                an individual with long-term care needs 
                described in subparagraph (B) for a period--
                          ``(i) which is at least 180 
                        consecutive days, and
                          ``(ii) a portion of which occurs 
                        within the taxable year.
                Such term shall not include any individual 
                otherwise meeting the requirements of the 
                preceding sentence unless within the 39\1/2\ 
                month period ending on such due date (or such 
                other period as the Secretary prescribes) a 
                physician (as so defined) has certified that 
                such individual meets such requirements.
                  ``(B) Individuals with long-term care 
                needs.--An individual is described in this 
                subparagraph if the individual meets any of the 
                following requirements:
                          ``(i) The individual is at least 6 
                        years of age and--
                                  ``(I) is unable to perform 
                                (without substantial assistance 
                                from another individual) at 
                                least 3 activities of daily 
                                living (as defined in section 
                                7702B(c)(2)(B)) due to a loss 
                                of functional capacity, or
                                  ``(II) requires substantial 
                                supervision to protect such 
                                individual from threats to 
                                health and safety due to severe 
                                cognitive impairment and is 
                                unable to perform at least 1 
                                activity of daily living (as so 
                                defined) or to the extent 
                                provided in regulations 
                                prescribed by the Secretary (in 
                                consultation with the Secretary 
                                of Health and Human Services), 
                                is unable to engage in age 
                                appropriate activities.
                          ``(ii) The individual is at least 2 
                        but not 6 years of age and is unable 
                        due to a loss of functional capacity to 
                        perform (without substantial assistance 
                        from another individual) at least 2 of 
                        the following activities: eating, 
                        transferring, or mobility.
                          ``(iii) The individual is under 2 
                        years of age and requires specific 
                        durable medical equipment by reason of 
                        a severe health condition or requires a 
                        skilled practitioner trained to address 
                        the individual's condition to be 
                        available if the individual's parents 
                        or guardians are absent.
          ``(3) Eligible caregiver.--
                  ``(A) In general.--A taxpayer shall be 
                treated as an eligible caregiver for any 
                taxable year with respect to the following 
                individuals:
                          ``(i) The taxpayer.
                          ``(ii) The taxpayer's spouse.
                          ``(iii) An individual with respect to 
                        whom the taxpayer is allowed a 
                        deduction under section 151 for the 
                        taxable year.
                          ``(iv) An individual who would be 
                        described in clause (iii) for the 
                        taxable year if section 151(c)(1)(A) 
                        were applied by substituting for the 
                        exemption amount an amount equal to the 
                        sum of the exemptionamount the standard 
deduction under section 63(c)(2)(C), and any additional standard 
deduction under section 63(c)(3) which would be applicable to the 
individual if clause (iii) applied.
                          ``(v) An individual who would be 
                        described in clause (iii) for the 
                        taxable year if--
                                  ``(I) the requirements of 
                                clause (iv) are met with 
                                respect to the individual, and
                                  ``(II) the requirements of 
                                subparagraph (B) are met with 
                                respect to the individual in 
                                lieu of the support test of 
                                section 152(a).
                  ``(B) Residency test.--The requirements of 
                this subparagraph are met if an individual has 
                as his principal place of abode the home of the 
                taxpayer and--
                          ``(i) in the case of an individual 
                        who is an ancestor or descendant of the 
                        taxpayer or the taxpayer's spouse, is a 
                        member of the taxpayer's household for 
                        over half the taxable year, or
                          ``(ii) in the case of any other 
                        individual, is a member of the 
                        taxpayer's household for the entire 
                        taxable year.
                  ``(C) Special rules where more than 1 
                eligible caregiver.--
                          ``(i) In general.--If more than 1 
                        individual is an eligible caregiver 
                        with respect to the same applicable 
                        individual for taxable years ending 
                        with or within the same calendar year, 
                        a taxpayer shall be treated as the 
                        eligible caregiver if each such 
                        individual (other than the taxpayer) 
                        files a written declaration (in such 
                        form and manner as the Secretary may 
                        prescribe) that such individual will 
                        not claim such applicable individual 
                        for the credit under this section.
                          ``(ii) No agreement.--If each 
                        individual required under clause (i) to 
                        file a written declaration under clause 
                        (i) does not do so, the individual with 
                        the highest modified adjusted gross 
                        income (as defined in section 32(c)(5)) 
                        shall be treated as the eligible 
                        caregiver.
                          ``(iii) Married individuals filing 
                        separately.--In the case of married 
                        individuals filing separately, the 
                        determination under this subparagraph 
                        as to whether the husband or wife is 
                        the eligible caregiver shall be made 
                        under the rules of clause (ii) (whether 
                        or not one of them has filed a written 
                        declaration under clause (i)).''.
  (c) Identification Requirements.--
          (1) In general.--Section 24(e) is amended by adding 
        at the end the following new sentence: ``No credit 
        shall be allowed under this section to a taxpayer with 
        respect to any applicable individual unless the 
        taxpayer includes the name and taxpayer identification 
        number of such individual, and the identification 
        number of the physician certifying such individual, on 
        the return of tax for the taxable year.''.
          (2) Assessment.--Section 6213(g)(2)(I) is amended--
                  (A) by inserting ``or physician 
                identification'' after ``correct TIN'', and
                  (B) by striking ``child'' and inserting 
                ``family care''.
  (d) Effective Date.--The amendments made by this section 
shall apply to taxable years beginning after December 31, 1999.

SEC. 302. 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, his spouse, and dependents.''
  (b) Effective Date.--The amendment made by this section shall 
apply to taxable years beginning after December 31, 1999.

      TITLE IV--PERMANENT EXTENSION OF CERTAIN EXPIRING PROVISIONS

SEC. 401. RESEARCH CREDIT.

  (a) Permanent Extension.--
          (1) In general.--Section 41 is amended by striking 
        subsection (h).
          (2) Conforming amendment.--Paragraph (1) of section 
        45C(b) is amended by striking subparagraph (D).
          (3) Effective date.--The amendments made by this 
        subsection shall apply to amounts paid or incurred 
        after June 30, 1999.
  (b) Increase in Percentages Under Alternative Incremental 
Credit.--
          (1) In general.--Subparagraph (A) of section 41(c)(4) 
        is amended--
                  (A) by striking ``1.65 percent'' and 
                inserting ``2.65 percent'',
                  (B) by striking ``2.2 percent'' and inserting 
                ``3.2 percent'', and
                  (C) by striking ``2.75 percent'' and 
                inserting ``3.75 percent''.
          (2) Effective date.--The amendments made by this 
        subsection shall apply to taxable years beginning after 
        June 30, 1999.

SEC. 402. WORK OPPORTUNITY AND WELFARE-TO-WORK CREDITS.

  (a) Work Opportunity Credit.--Subsection (c) of section 51 is 
amended by striking paragraph (4).
  (b) Welfare-to-Work Credit.--Section 51A is amended by 
striking subsection (f).
  (c) Effective Date.--The amendments made by this section 
shall apply to individuals who begin work for the employer 
after June 30, 1999.

SEC. 403. SUBPART F EXEMPTION FOR ACTIVE FINANCING INCOME.

  (a) Exempt Insurance Income.--Section 953(e) is amended by 
striking paragraph (10) and by redesignating paragraph (11) as 
paragraph (10).
  (b) Foreign Personal Holding Company Income.--Section 954(h) 
is amended by striking paragraph (9).
  (c) Effective Date.--The amendments made by this section 
shall apply to taxable years beginning after December 31, 1999.

SEC. 404. EXPENSING OF ENVIRONMENTAL REMEDIATION COSTS.

  Section 198 is amended by striking subsection (h).

               TITLE V--COMMUNITY DEVELOPMENT INITIATIVES

SEC. 501. INCREASE IN STATE CEILING ON LOW-INCOME HOUSING CREDIT.

  (a) In General.--Clause (i) of section 42(h)(3)(C) is amended 
by striking ``$1.25'' and inserting ``$1.75''.
  (b) Adjustment of State Ceiling for Increases in Cost-of-
Living.--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) Cost-of-living adjustment.--
                          ``(i) In general.--In the case of a 
                        calendar year after 2000, the dollar 
                        amount contained in subparagraph (C)(i) 
                        shall be increased by an amount equal 
                        to--
                                  ``(I) such dollar amount, 
                                multiplied by
                                  ``(II) the cost-of-living 
                                adjustment determined under 
                                section 1(f)(3) for such 
                                calendar year by substituting 
                                `calendar year 1999' for 
                                `calendar year 1992' in 
                                subparagraph (B) thereof.
                          ``(ii) Rounding.--If any increase 
                        under clause (i) is not a multiple of 5 
                        cents, such increase shall be rounded 
                        to the next lowest multiple of 5 
                        cents.''.
  (c) Effective Date.--The amendments made by this section 
shall apply to calendar years after 1999.

SEC. 502. NEW MARKETS TAX CREDIT.

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

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

  ``(a) Allowance of Credit.--
          ``(1) In general.--For purposes of section 38, in the 
        case of a taxpayer who holds a qualified equity 
        investment on a credit allowance date of such 
        investment which occurs during the taxable year, the 
        new markets tax credit determined under this section 
        for such taxable year is an amount equal to 6 percent 
        of the amount paid to the qualified community 
        development entity for such investment at its original 
        issue.
          ``(2) Credit allowance date.--The term `credit 
        allowance date' means, with respect to any qualified 
        equity investment--
                  ``(A) the date on which such investment is 
                initially made, and
                  ``(B) each of the 4 anniversary dates of such 
                date thereafter.
  ``(b) Qualified Equity Investment.--For purposes of this 
section--
          ``(1) In general.--The term `qualified equity 
        investment' means any equity investment in a qualified 
        community development entity if--
                  ``(A) such investment is acquired by the 
                taxpayer at its original issue (directly or 
                through an underwriter) solely in exchange for 
                cash,
                  ``(B) substantially all of such cash is used 
                by the qualified community development entity 
                to make qualified low-income community 
                investments, and
                  ``(C) such investment is designated for 
                purposes of this section by the qualified 
                community development entity.
        Such term shall not include any equity investment 
        issued by a qualified community development entity more 
        than 5 years after the date that such entity receives 
        an allocation under subsection (f). Any allocation not 
        used within such 5-year period may be reallocated by 
        the Secretary under subsection (f).
          ``(2) Limitation.--The maximum amount of equity 
        investments issued by a qualified community development 
        entity which may be designated under paragraph (1)(C) 
        by such entity shall not exceed the portion of the 
        limitation amount allocated under subsection (f) to 
        such entity.
          ``(3) Safe harbor for determining use of cash.--The 
        requirement of paragraph (1)(B) shall be treated as met 
        if at least 85 percent of the aggregate gross assets of 
        the qualified community development entity are invested 
        in qualified low-income community investments.
          ``(4) Treatment of subsequent purchasers.--The term 
        `qualified equity investment' includes any equity 
        investment which would (but for paragraph (1)(A)) be a 
        qualified equity investment in the hands of the 
        taxpayer if such investment was a qualified equity 
        investment in the hands of a prior holder.
          ``(5) Redemptions.--A rule similar to the rule of 
        section 1202(c)(3) shall apply for purposes of this 
        subsection.
          ``(6) Equity investment.--The term `equity 
        investment' means--
                  ``(A) any stock in a qualified community 
                development entity which is a corporation, and
                  ``(B) any capital interest in a qualified 
                community development entity which is a 
                partnership.
  ``(c) Qualified Community Development Entity.--For purposes 
of this section--
          ``(1) In general.--The term `qualified community 
        development entity' means any domestic corporation or 
        partnership if--
                  ``(A) the primary mission of the entity is 
                serving, or providing investment capital for, 
                low-income communities or low-income persons,
                  ``(B) the entity maintains accountability to 
                residents of low-income communities through 
                representation on governing or advisory boards 
                or otherwise, and
                  ``(C) the entity is certified by the 
                Secretary for purposes of this section as being 
                a qualified community development entity.
          ``(2) Special rules for certain organizations.--The 
        requirements of paragraph (1) shall be treated as met 
        by--
                  ``(A) any specialized small business 
                investment company (as defined in section 
                1044(c)(3)), and
                  ``(B) any community development financial 
                institution (as defined in section 103 of the 
                Community Development Banking and Financial 
                Institutions Act of 1994 (12 U.S.C. 4702)).
  ``(d) Qualified Low-Income Community Investments.--For 
purposes of this section--
          ``(1) In general.--The term `qualified low-income 
        community investment' means--
                  ``(A) any equity investment in, or loan to, 
                any qualified active low-income community 
                business,
                  ``(B) the purchase from another community 
                development entity of any loan made by such 
                entity which is a qualified low-income 
                community investment if the amount received by 
                such other entity from such purchase is used by 
                such other entity to make qualified low-income 
                community investments,
                  ``(C) financial counseling and other services 
                specified in regulations prescribed by the 
                Secretary to businesses located in, and 
                residents of, low-income communities, and
                  ``(D) any equity investment in, or loan to, 
                any qualified community development entity if 
                substantially all of the investment or loan is 
                used by such entity to make qualified low-
                income community investments described in 
                subparagraphs (A), (B), and (C).
          ``(2) Qualified active low-income community 
        business.--
                  ``(A) In general.--For purposes of paragraph 
                (1), the term `qualified active low-income 
                community business' means, with respect to any 
                taxable year, any corporation or partnership if 
                for such year--
                          ``(i) at least 50 percent of the 
                        total gross income of such entity is 
                        derived from the active conduct of a 
                        qualified business within any low-
                        income community,
                          ``(ii) a substantial portion of the 
                        use of the tangible property of such 
                        entity (whether owned or leased) is 
                        within any low-income community,
                          ``(iii) a substantial portion of the 
                        services performed for such entity by 
                        its employees are performed in any low-
                        income community,
                          ``(iv) less than 5 percent of the 
                        average of the aggregate unadjusted 
                        bases of the property of such entity is 
                        attributable to collectibles (as 
                        defined in section 408(m)(2)) other 
                        than collectibles that are held 
                        primarily for sale to customers in the 
                        ordinary course of such business, and
                          ``(v) less than 5 percent of the 
                        average of the aggregate unadjusted 
                        bases of the property of such entity is 
                        attributable to nonqualified financial 
                        property (as defined in section 
                        1397B(e)).
                  ``(B) Proprietorship.--Such term shall 
                include any business carried on by an 
                individual as a proprietor if such business 
                would meet the requirements of subparagraph (A) 
                were it incorporated.
                  ``(C) Portions of business may be qualified 
                active low-income community business.--The term 
                `qualified active low-income community 
                business' includes any trades or businesses 
                which would qualify as a qualified active low-
                income community business if such trades or 
                businesses were separately incorporated.
          ``(3) Qualified business.--For purposes of this 
        subsection, the term `qualified business' has the 
        meaning given to such term by section 1397B(d); except 
        that--
                  ``(A) in lieu of applying paragraph (2)(B) 
                thereof, the rental to others of real property 
                located in any low-income community shall be 
                treated as a qualified business if there are 
                substantial improvements located on such 
                property,
                  ``(B) paragraph (3) thereof shall not apply, 
                and
                  ``(C) such term shall not include any 
                business if a significant portion of the equity 
                interests in such business are held by any 
                person who holds a significant portion of the 
                equity investments in the community development 
                entity.
  ``(e) Low-Income Community.--For purposes of this section--
          ``(1) In general.--The term `low-income community' 
        means any population census tract if--
                  ``(A) the poverty rate for such tract is at 
                least 20 percent, or
                  ``(B)(i) in the case of a tract not located 
                within a metropolitan area, the median family 
                income for such tract does not exceed 80 
                percent of statewide median family income, or
                  ``(ii) in the case of a tract located within 
                a metropolitan area, the median family income 
                for such tract does not exceed 80 percent of 
                the greater of statewide median family income 
                or the metropolitan area median family income.
          ``(2) Areas not within census tracts.--In the case of 
        an area which is not tracted for population census 
        tracts, the equivalent county divisions (as defined by 
        the Bureau of the Census for purposes of defining 
        poverty areas) shall be used for purposes of 
        determining poverty rates and median family income.
  ``(f) National Limitation on Amount of Investments 
Designated.--
          ``(1) In general.--There is a new markets tax credit 
        limitation of $1,200,000,000 for each of calendar years 
        2000 through 2004.
          ``(2) Allocation of limitation.--The limitation under 
        paragraph (1) shall be allocated by the Secretary among 
        qualified community development entities selected by 
        the Secretary. In making allocations under the 
        preceding sentence, the Secretary shall give priority 
        to entities with records of having successfully 
        provided capital or technical assistance to 
        disadvantaged businesses or communities.
          ``(3) Carryover of unused limitation.--If the new 
        markets tax credit limitation for any calendar year 
        exceeds the aggregate amount allocated under paragraph 
        (2) for such year, such limitation for the succeeding 
        calendar year shall be increased by the amount of such 
        excess.
  ``(g) Recapture of Credit In Certain Cases.--
          ``(1) In general.--If, at any time during the 5-year 
        period beginning on the date of the original issue of a 
        qualified equity investment in a qualified community 
        development entity, there is a recapture event with 
        respect to such investment, then the tax imposed by 
        this chapter for the taxable year in which such event 
        occurs shall be increased by the credit recapture 
        amount.
          ``(2) Credit recapture amount.--For purposes of 
        paragraph (1), the credit recapture amount is an amount 
        equal to the sum of--
                  ``(A) the aggregate decrease in the credits 
                allowed to the taxpayer under section 38 for 
                all prior taxable years which would have 
                resulted if no credit had been determined under 
                this section with respect to such investment, 
                plus
                  ``(B) interest at the overpayment rate 
                established under section 6611 on the amount 
                determined under subparagraph (A) for each 
                prior taxable year for the period beginning on 
                the due date for filing the return for the 
                prior taxable year involved.
        No deduction shall be allowed under this chapter for 
        interest described in subparagraph (B).
          ``(3) Recapture event.--For purposes of paragraph 
        (1), there is a recapture event with respect to an 
        equity investment in a qualified community development 
        entity if--
                  ``(A) such entity ceases to be a qualified 
                community development entity,
                  ``(B) the proceeds of the investment cease to 
                be used as required of subsection (b)(1)(B), or
                  ``(C) such investment is redeemed by such 
                entity.
          ``(4) Special rules.--
                  ``(A) Tax benefit rule.--The tax for the 
                taxable year shall be increased under paragraph 
                (1) only with respect to credits allowed by 
                reason of this section which were used to 
                reduce tax liability. In the case of credits 
                not so used to reduce tax liability, the 
                carryforwards and carrybacks under section 39 
                shall be appropriately adjusted.
                  ``(B) No credits against tax.--Any increase 
                in tax under this subsection shall not be 
                treated as a tax imposed by this chapter for 
                purposes of determining the amount of any 
                credit under this chapter or for purposes of 
                section 55.
  ``(h) Basis Reduction.--The basis of any qualified equity 
investment shall be reduced by the amount of any credit 
determined under this section with respect to such investment.
  ``(i) Regulations.--The Secretary shall prescribe such 
regulations as may be appropriate to carry out this section, 
including regulations--
          ``(1) which limit the credit for investments which 
        are directly or indirectly subsidized by other Federal 
        benefits (including the credit under section 42 and the 
        exclusion from gross income under section 103),
          ``(2) which prevent the abuse of the provisions of 
        this section through the use of related parties,
          ``(3) which impose appropriate reporting requirements
          ``(4) which apply the provisions of this section to 
        newly formed entities.''
  (b) Credit Made Part of General Business Credit.--
          (1) In general.--Subsection (b) of section 38 is 
        amended by striking ``plus'' at the end of paragraph 
        (12), by striking the period at the end of paragraph 
        (13) and inserting ``, plus'', and by adding at the end 
        the following new paragraph:
          ``(14) the new markets tax credit determined under 
        section 45D(a).''
          (2) Limitation on carryback.--Subsection (d) of 
        section 39 is amended by adding at the end the 
        following new paragraph:
          ``(10) No carryback of new markets tax credit before 
        january 1, 2000.--No portion of the unused business 
        credit for any taxable year which is attributable to 
        the credit under section 45D may be carried back to a 
        taxable year ending before January 1, 2000.''
  (c) Deduction for Unused Credit.--Subsection (c) of section 
196 is amended by striking ``and'' at the end of paragraph (7), 
by striking the period at the end of paragraph (8) and 
inserting ``, and'', and by adding at the end the following new 
paragraph:
          ``(9) the new markets tax credit determined under 
        section 45D(a).''
  (d) Clerical Amendment.--The table of sections for subpart D 
of part IV of subchapter A of chapter 1 is amended by adding at 
the end the following new item:

        ``Sec. 45D. New markets tax credit.''

  (e) Effective Date.--The amendments made by this section 
shall apply to investments made after December 31, 1999.

SEC. 503. CREDIT TO HOLDERS OF BETTER AMERICA BONDS.

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

``SEC. 30B. CREDIT TO HOLDERS OF BETTER AMERICA BONDS.

  ``(a) Allowance of Credit.--In the case of a taxpayer who 
holds a Better America Bond on a credit allowance date 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 Better America 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 Better America 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) Better America Bond.--For purposes of this section--
          ``(1) In general.--The term `Better America Bond' 
        means any bond issued as part of an issue if--
                  ``(A) 95 percent or more of the proceeds of 
                such issue are to be used for any qualified 
                purpose,
                  ``(B) the bond is issued by a State or local 
                government within the jurisdiction of which the 
                qualified purpose of the issue is to be carried 
                out,
                  ``(C) the issuer designates such bond for 
                purposes of this section,
                  ``(D) the term of each bond which is part of 
                such issue does not exceed 15 years,
                  ``(E) the requirements of section 147(f) are 
                met with respect to such issue, and
                  ``(F) except in the case of the proceeds of 
                such issue which are to be used for the 
                qualified purpose described in paragraph 
                (2)(A)(iv), the payment of the principal of 
                such issue is secured by taxes of general 
                applicability imposed by a general purpose 
                governmental unit.
          ``(2) Qualified purpose.--
                  ``(A) In general.--The term `qualified 
                purpose' means any of the following:
                          ``(i) The acquisition of land for use 
                        as open space, wetlands, public parks, 
                        or greenways, and the provision of 
                        visitor facilities (such as campgrounds 
                        and hiking or biking trails) for land 
                        so used, but only if--
                                  ``(I) such land and 
                                facilities are to be owned by 
                                the issuer or a qualified 
                                owner, and
                                  ``(II) the initial owner of 
                                such land and facilities 
                                records pursuant to State law a 
                                qualified restrictive covenant 
                                with respect to such land and 
                                facilities.
                          ``(ii) The remediation of land 
                        acquired under clause (i) (or other 
                        publicly owned land) to enhance water 
                        quality by--
                                  ``(I) restoring hydrology or 
                                planting trees or other 
                                vegetation,
                                  ``(II) undertaking reasonable 
                                measures to control erosion,
                                  ``(III) restoring wetlands, 
                                or
                                  ``(IV) remediating conditions 
                                caused by the prior disposal of 
                                toxic or other waste.
                          ``(iii) The acquisition by the issuer 
                        or any qualified owner of any 
                        restriction on privately owned open 
                        land which prevents commercial 
                        development and any substantial change 
                        in the use or character of the land if 
                        such restriction would, if contributed 
                        by the owner of the open land to a 
                        qualified organization (as defined in 
                        section 170(h)(3)), be a qualified 
                        conservation contribution (as defined 
                        in section 170(h)).
                          ``(iv) The environmental assessment 
                        and remediation of real property owned 
                        by any State or local government if--
                                  ``(I) such property was 
                                acquired by such government as 
                                a result of being abandoned by 
                                the prior owner, and
                                  ``(II) such property is 
                                located in an area at or on 
                                which there has been a release 
                                (or threat of release) or 
                                disposal of any hazardous 
                                substance (as defined in 
                                section 198).
                  ``(B) Remediation of national priorities 
                listed sites not qualified purpose.--
                Subparagraph (A)(ii) shall not apply to 
                remediation of any site which is on, or 
                proposed for, the national priorities list 
                under section 105(a)(8)(B) of the Comprehensive 
                Environmental Response, Compensation, and 
                Liability Act of 1980.
                  ``(C) Qualified owner.--For purposes of this 
                paragraph, the term `qualified owner' means any 
                organization described in section 501(c)(3) 
                whose exempt purpose includes environmental 
                protection.
                  ``(D) Qualified restrictive covenant.--For 
                purposes of subparagraph (A)(i)(II), the term 
                `qualified restrictive covenant' means, with 
                respect to land or facilities, any covenant 
                which prohibits the person who owns such land 
                or facilities at the end of the term of the 
                bond from selling or otherwise permitting a use 
                of such land or facilities which is not 
                described in subparagraph (A) unless--
                          ``(i) a reasonable period is allowed 
                        for a qualified owner to purchase such 
                        land or facilities,
                          ``(ii) the purchase price is not 
                        greater than the price originally paid 
                        in conjunction with the expenditure of 
                        bond proceeds, and
                          ``(iii) the purchaser records 
                        pursuant to State law a covenant with 
                        respect to the purchased land and 
                        facilities which protects in perpetuity 
                        the use of such land and facilities for 
                        a use described in subparagraph (A).
          ``(3) Public availability requirement, etc.--
                  ``(A) In general.--The term `Better America 
                Bond' shall not include any bond which is part 
                of an issue if--
                          ``(i) any portion of the proceeds of 
                        the issue are to be used for any 
                        private business use (as defined in 
                        section 141(b)(6)), or
                          ``(ii) the payment of the principal 
                        of, or the interest on, any portion of 
                        such proceeds is (under the terms of 
                        such issue or any underlying 
                        arrangement) directly or indirectly 
                        secured or to be derived as described 
                        in subparagraph (A) or (B) of section 
                        141(b)(2).
                  ``(B) Exception.--Subparagraph (A) shall not 
                apply to proceeds used for a qualified purpose 
                described in paragraph (2)(A)(iv).
  ``(d) Limitation on Amount of Bonds Designated.--
          ``(1) In general.--The maximum aggregate face amount 
        of bonds issued during any calendar year which may be 
        designated under subsection (c)(1) by any issuer shall 
        not exceed the limitation amount allocated under 
        paragraph (3) for such calendar year to such issuer.
          ``(2) National limitation on amount of bonds 
        designated.--There is a national Better America Bond 
        limitation for each calendar year. Such limitation is--
                  ``(A) $1,900,000,000 for each of calendar 
                years 2000, 2001, 2002, 2003, and 2004, and
                  ``(B) except as provided in paragraph (4), 
                zero after 2004.
          ``(3) Allocation of limitation among states and local 
        governments.--
                  ``(A) In general.--The national Better 
                America Bond limitation for any calendar year 
                shall be allocated by the EPA Administrator to 
                States and local governments having approved 
                applications. As part of the competitive 
                application process, the Environmental 
                Protection Agency should, when possible, 
                allocate such limitation on a per capita basis.
                  ``(B) Approved application.--For purposes of 
                subparagraph (A), the term `approved 
                application' means an application which is 
                approved by the EPA Administrator and includes 
                such information as the EPA Administrator shall 
                specify.
          ``(4) Carryover of unused limitation.--If for any 
        calendar year--
                  ``(A) the amount allocated under paragraph 
                (4) to any State or local government, exceeds
                  ``(B) the amount of bonds issued during such 
                year which are designated under subsection 
                (c)(1) pursuant to such allocation,
        the limitation amount under paragraph (3) for such 
        State or local government for the following calendar 
        year shall be increased by the amount of such excess.
  ``(e) 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.
  ``(f) Other Definitions.--For purposes of this section--
          ``(1) 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.
          ``(2) Bond.--The term `bond' includes any obligation.
          ``(3) State.--The term `State' includes the District 
        of Columbia, any possession of the United States, and 
        any Indian tribal government (within the meaning of 
        section 7871).
          ``(4) Local government.--The term `local government' 
        means--
                  ``(A) any county, city, town, township, 
                parish, village, or other general purpose 
                political subdivision of a State, and
                  ``(B) any combination of political 
                subdivisions described in subparagraph (A) 
                recognized by the EPA Administrator.
          ``(5) EPA administrator.--The term `EPA 
        Administrator' means the Administrator of the 
        Environmental Protection Agency.
  ``(g) Credit Included in Gross Income.--Gross income includes 
the amount of the credit allowed to the taxpayer under this 
section (determined without regard to subsection (e)) and the 
amount so included shall be treated as interest income.
  ``(h) Special Rules Relating to Arbitrage.--
          ``(1) In general.--A bond shall not be treated as 
        failing to meet the requirements of subsection (c)(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) Reasonable expectation and binding commitment 
        requirements.--Paragraph (1) shall apply to an issue 
        only if, as of the date of issuance--
                  ``(A) the issuer reasonably expects that--
                          ``(i) at least 95 percent of the 
                        proceeds of the issue will be spent for 
                        a qualified purpose within the 3-year 
                        period beginning on such date, and
                          ``(ii) property financed with such 
                        proceeds will be used for qualified 
                        purposes for at least 15 years after 
                        being so financed,
                  ``(B) there is a binding commitment with a 
                third party to spend at least 10 percent of the 
                proceeds of the issue for qualified purposes 
                within the 6-month period beginning on such 
                date, and
                  ``(C) the issuer reasonably expects that the 
                remaining proceeds of the issue will be spent 
                with due diligence for qualified purposes.
          ``(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 (c)(1) and paragraph (1) of this subsection.
  ``(i) Denial of Deduction for Environmental Remediation 
Expenditures.--Expenditures financed by any Better America Bond 
shall not be allowed as a deduction under section 198.
  ``(j) Other Special Rules.--
          ``(1) Bonds held by regulated investment companies.--
        If any Better America Bond is held by a regulated 
        investment company, the credit determined under 
        subsection (a) shall be allowed to shareholders of such 
        company under procedures prescribed by the Secretary.
          ``(2) Credits may be stripped.--Under regulations 
        prescribed by the Secretary--
                  ``(A) In general.--There may be a separation 
                (including at issuance) of the ownership of a 
                Better America Bond and the entitlement to the 
                credit under this section with respect to such 
                bond. In case of any such separation, the 
                credit under this section shall be allowed to 
                the person who on the credit allowance date 
                holds the instrument evidencing the entitlement 
                to the credit and not to the holder of the 
                bond.
                  ``(B) Certain rules to apply.--In the case of 
                a separation described in subparagraph (A), the 
                rules of section 1286 shall apply to the Better 
                America Bond as if it were a stripped bond and 
                to the credit under this section as if it were 
                a stripped coupon.
          ``(3) Treatment for estimated tax purposes.--Solely 
        for purposes of sections 6654 and 6655, the credit 
        allowed by this section to a taxpayer by reason of 
        holding a Better America Bond on a credit allowance 
        date shall be treated as if it were a payment of 
        estimated tax made by the taxpayer on such date.
          ``(4) 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.
          ``(5) Reporting.--Issuers of Better America Bonds 
        shall submit reports similar to the reports required 
        under section 149(e).
  ``(k) Recapture of Portion of Credit Where Cessation of 
Qualified Use.--
          ``(1) In general.--If any bond which when issued 
        purported to be a Better America Bond ceases to meet 
        the requirements of subsection (c), the issuer shall 
        pay to the United States (at the time required by the 
        Secretary) an amount equal to the aggregate of the 
        credits allowable under this section (determined 
        without regard to subsection (e)) for taxable years 
        ending during the calendar year in which such cessation 
        occurs and the 2 preceding calendar years.
          ``(2) Failure to pay.--If the issuer fails to timely 
        pay the amount required by paragraph (1) with respect 
        to any issue, the tax imposed by this chapter on each 
        holder of any bond which is part of such issue shall be 
        increased (for the taxable year of the holder in which 
        such cessation occurs) by the aggregate decrease in the 
        credits allowed under this section to such holder for 
        taxable years beginning in such 3 calendar years which 
        would have resulted solely from denying any credit 
        under this section with respect to such issue for such 
        taxable years.
          ``(3) Special rules.--
                  ``(A) Tax benefit rule.--The tax for the 
                taxable year shall be increased under paragraph 
                (2) only with respect to credits allowed by 
                reason of this section which were used to 
                reduce tax liability. In the case of credits 
                not so used to reduce tax liability, the 
                carryforwards and carrybacks under section 39 
                shall be appropriately adjusted.
                  ``(B) No credits against tax.--Any increase 
                in tax under paragraph (2) shall not be treated 
                as a tax imposed by this chapter for purposes 
                of determining--
                          ``(i) the amount of any credit 
                        allowable under this part, or
                          ``(ii) the amount of the tax imposed 
                        by section 55.
  ``(l) Termination.--This section shall not apply to any bond 
issued after December 31, 2004.''
  (b) Reporting.--Subsection (d) of section 6049 (relating to 
returns regarding payments of interest) is amended by adding at 
the end the following new paragraph:
          ``(8) Reporting of credit on better america bonds.--
                  ``(A) In general.--For purposes of subsection 
                (a), the term `interest' includes amounts 
                includible in gross income under section 30B(g) 
                and such amounts shall be treated as paid on 
                the credit allowance date (as defined in 
                section 30B(f)(1)).
                  ``(B) Reporting to corporations, etc.--Except 
                as otherwise provided in regulations, in the 
                case of any interest described in subparagraph 
                (A) of this paragraph, subsection (b)(4) of 
                this section shall be applied without regard to 
                subparagraphs (A), (H), (I), (J), (K), and 
                (L)(i).
                  ``(C) Regulatory authority.--The Secretary 
                may prescribe such regulations as are necessary 
                or appropriate to carry out the purposes of 
                this paragraph, including regulations which 
                require more frequent or more detailed 
                reporting.''
  (c) Conforming Amendment.--The table of sections for subpart 
B of part IV of subchapter A of chapter 1 is amended by adding 
at the end the following new item:

        ``Sec. 30B. Credit to holders of Better America Bonds.''

  (d) Effective Date.--The amendments made by this section 
shall apply to obligations issued after December 31, 1999.
  (e) Guidelines for Applications.--Not later than January 1, 
2000, guidelines specifying the criteria to be used in 
approving applications under section 30B(d)(3) of the Internal 
Revenue Code of 1986 (as added by this Act) shall be developed 
and published by the Administrator of the Environmental 
Protection Agency in the Federal Register.

                  TITLE VI--SMALL BUSINESS INCENTIVES

SEC. 601. ACCELERATION OF $1,000,000 ESTATE TAX EXCLUSION.

  (a) Estate Tax Credit.--
          (1) Subsection (a) of section 2010 (relating to 
        unified credit against estate tax) is amended by 
        striking ``the applicable credit amount'' and inserting 
        ``$345,800''.
          (2) Paragraph (2) of section 2001(c) is amended by 
        striking ``$10,000,000'' and all that follows and 
        inserting ``$10,000,000. The amount of the increase 
        under the preceding sentence shall not exceed 
        $705,000.''
          (3)(A) Subparagraph (A) of section 2057(a)(3) is 
        amended by striking `` the applicable exclusion amount 
        under section 2010 shall be $625,000'' and inserting 
        ``the credit under section 2010 shall be $202,050''.
          (B) Subparagraph (B) of section 2057(a)(3) is amended 
        to read as follows:
                  ``(B) Increase in unified credit if deduction 
                is less than $675,000.--If the deduction 
                allowed by this section is less than $675,000, 
                the amount of the credit under section 2010 
                shall be equal to the lesser of $345,800 or 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 computed were equal to the sum 
                of--
                          ``(i) the excess of $675,000 over the 
                        amount of the deduction allowed, and
                          ``(ii) $625,000.''
          (4) Subparagraph (A) of section 2102(c)(3) is amended 
        by striking ``the applicable credit amount in effect 
        under section 2010(c) for the calendar year which 
        includes the date of death'' and inserting 
        ``$345,800''.
          (5) Paragraph (1) of section 6018(a) is amended by 
        striking ``the applicable exclusion amount in effect 
        under section 2010(c) for the calendar year which 
        includes the date of death'' and inserting 
        ``$1,000,000''.
          (6)(A) Subparagraph (A) of section 6601(j)(2) is 
        amended to read as follows:
                  ``(A) $345,800, or''.
          (B) Paragraph (3) of section 6601(j) is amended--
                  (i) by striking ``$1,000,000'' each place it 
                occurs and inserting ``$345,800'', and
                  (ii) by striking ``$10,000'' each place it 
                appears and inserting ``$1,000''.
  (b) Unified Gift Tax Credit.--Paragraph (1) of section 
2505(a) is amended to read as follows:
          ``(1) $345,800, reduced by''.
  (c) Effective Date.--The amendments made by this section 
shall apply to the estates of decedents dying, and gifts made, 
after December 31, 1999.

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

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

                     TITLE VII--PENSION PROVISIONS

SEC. 701. 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) Exemption for Survivor and Disability Benefits.--
Subparagraph (I) of section 415(b)(2) (relating to limitation 
for defined benefit plans) is amended--
          (1) by inserting ``or a multiemployer plan (as 
        defined in section 414(f))'' after ``section 414(d))'' 
        in clause (i),
          (2) by inserting ``or multiemployer plan'' after 
        ``governmental plan'' in clause (ii), and
          (3) by inserting ``and multiemployer'' after 
        ``governmental'' in the heading.
  (c) Combining and Aggregation of Plans.--
          (1) Combining of plans.--Subsection (f) of section 
        415 (relating to combining of plans) is amended by 
        adding at the end the following:
          ``(3) Exception for multiemployer plans.--
        Notwithstanding paragraph (1) and subsection (g), a 
        multiemployer plan (as defined in section 414(f)) shall 
        not be combined or aggregated with any other plan 
        maintained by an employer for purposes of applying the 
        limitations established in this section, 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 (relating to aggregation 
        of plans) is amended by striking ``The Secretary'' and 
        inserting ``Except as provided in subsection (f)(3), 
        the Secretary''.
  (d) Effective Date.--The amendments made by this section 
shall apply to years beginning after December 31, 1999.

SEC. 702. ACTUARIAL REDUCTION ONLY FOR BENEFITS BEGINNING BEFORE AGE 62 
                    IN CASE OF BENEFITS UNDER MULTIEMPLOYER PLANS.

  (A) In General.--Subparagraph (F) of section 415(b)(2) is 
amended to read as follows:
                  ``(F) Multiemployer plans and plans 
                maintained by governments and tax exempt 
                organizations.--
                          ``(i) In general.--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 by substituting `age 
                                62' for `social security 
                                retirement age' each place it 
                                appears, and 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) 
                                $75,000 if the benefit begins 
                                at or after age 55, or (ii) if 
                                the benefit begins before age 
                                55, the equivalent of the 
                                $75,000 limitation for age 
                                55.', and
                                  ``(II) subparagraph (D) shall 
                                be applied by substituting `age 
                                65' for `social security 
                                retirement age' each place it 
                                appears.
                          ``(ii) Special rule for multiemployer 
                        plans.--In the case of a multiemployer 
                        plan (as so defined), the $75,000 
                        amount referred to in clause (i)(I) 
                        shall in no event be less than the 
                        amount equal to 80 percent of the 
                        dollar limit under paragraph (1)(A).
                          ``(iii) Definitions.--For purposes of 
                        this subparagraph--
                                  ``(I) Qualified merchant 
                                marine plan.--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.
                                  ``(II) Exempt organization 
                                plan covering 50 percent of its 
                                employees.--A plan shall be 
                                treated as a plan maintained by 
                                an organization (other than a 
                                governmental unit) exempt from 
                                tax under this subtitle if at 
                                least 50 percent of the 
                                employees benefiting under the 
                                plan are employees of an 
                                organization (other than a 
                                governmental unit) exempt from 
                                tax under this subtitle. If 
                                less than 50 percent of the 
                                employees benefiting under a 
                                plan are employees of an 
                                organization (other than a 
                                governmental unit) exempt from 
                                tax under this subtitle, the 
                                plan shall be treated as a plan 
                                maintained by an organization 
                                (other than a governmental 
                                unit) exempt from tax under 
                                this subtitle only with respect 
                                to employees of such an 
                                organization.''.
  (b) Effective Date.--The amendment made by this section shall 
apply to years beginning after December 31, 1999.

                      TITLE VIII--REVENUE OFFSETS

SEC. 801. RETURNS RELATING TO CANCELLATIONS OF INDEBTEDNESS BY 
                    ORGANIZATIONS LENDING MONEY.

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

SEC. 802. EXTENSION OF INTERNAL REVENUE SERVICE USER FEES.

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

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

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

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

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

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

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

SEC. 803. LIMITATIONS ON WELFARE BENEFIT FUNDS OF 10 OR MORE EMPLOYER 
                    PLANS.

  (a) Benefits to Which Exception Applies.--Section 
419A(f)(6)(A) (relating to exception for 10 or more employer 
plans) is amended to read as follows:
                  ``(A) In general.--This subpart shall not 
                apply to a welfare benefit fund which is part 
                of a 10 or more employer plan if the only 
                benefits provided through the fund are 1 or 
                more of the following:
                          ``(i) Medical benefits.
                          ``(ii) Disability benefits.
                          ``(iii) Group term life insurance 
                        benefits which do not provide for any 
                        cash surrender value or other money 
                        that can be paid, assigned, borrowed, 
                        or pledged for collateral for a loan.
                The preceding sentence shall not apply to any 
                plan which maintains experience-rating 
                arrangements with respect to individual 
                employers.''
  (b) Limitation on Use of Amounts for Other Purposes.--Section 
4976(b) (defining disqualified benefit) is amended by adding at 
the end the following new paragraph:
          ``(5) Special rule for 10 or more employer plans 
        exempted from prefunding limits.--For purposes of 
        paragraph (1)(C), if--
                  ``(A) subpart D of part I of subchapter D of 
                chapter 1 does not apply by reason of section 
                419A(f)(6) to contributions to provide 1 or 
                more welfare benefits through a welfare benefit 
                fund under a 10 or more employer plan, and
                  ``(B) any portion of the welfare benefit fund 
                attributable to such contributions is used for 
                a purpose other than that for which the 
                contributions were made,
        then such portion shall be treated as reverting to the 
        benefit of the employers maintaining the fund.''
  (c) Effective Date.--The amendments made by this section 
shall apply to contributions paid or accrued after June 9, 
1999, in taxable years ending after such date.

SEC. 804. INCREASE IN ELECTIVE WITHHOLDING RATE FOR NONPERIODIC 
                    DISTRIBUTIONS FROM DEFERRED COMPENSATION PLANS.

  (a) In General.--Section 3405(b)(1) (relating to withholding) 
is amended by striking `10 percent' and inserting `15 percent'.
  (b) Effective Date.--The amendment made by subsection (a) 
shall apply to distributions after December 31, 1999.

SEC. 805. CONTROLLED ENTITIES INELIGIBLE FOR REIT STATUS.

  (a) In General.--Subsection (a) of section 856 (relating to 
definition of real estate investment trust) is amended by 
striking ``and'' at the end of paragraph (6), by redesignating 
paragraph (7) as paragraph (8), and by inserting after 
paragraph (6) the following new paragraph:
          ``(7) which is not a controlled entity (as defined in 
        subsection (l)); and''.
  (b) Controlled Entity.--Section 856 is amended by adding at 
the end the following new subsection:
  ``(l) Controlled Entity.--
          ``(1) In general.--For purposes of subsection (a)(7), 
        an entity is a controlled entity if, at any time during 
        the taxable year, one person (other than a qualified 
        entity)--
                  ``(A) in the case of a corporation, owns 
                stock--
                          ``(i) possessing at least 50 percent 
                        of the total voting power of the stock 
                        of such corporation, or
                          ``(ii) having a value equal to at 
                        least 50 percent of the total value of 
                        the stock of such corporation, or
                  ``(B) in the case of a trust, owns beneficial 
                interests in the trust which would meet the 
                requirements of subparagraph (A) if such 
                interests were stock.
          ``(2) Qualified entity.--For purposes of paragraph 
        (1), the term `qualified entity' means--
                  ``(A) any real estate investment trust, and
                  ``(B) any partnership in which one real 
                estate investment trust owns at least 50 
                percent of the capital and profits interests in 
                the partnership.
          ``(3) Attribution rules.--For purposes of this 
        paragraphs (1) and (2)--
                  ``(A) In general.--Rules similar to the rules 
                of subsections (d)(5) and (h)(3) shall apply.
                  ``(B) Stapled entities.--A group of entities 
                which are stapled entities (as defined in 
                section 269B(c)(2)) shall be treated as 1 
                person.
          ``(4) Exception for certain new reits.--
                  ``(A) In general.--The term `controlled 
                entity' shall not include an incubator REIT.
                  ``(B) Incubator reit.--A corporation shall be 
                treated as an incubator REIT for any taxable 
                year during the eligibility period if it meets 
                all the following requirements for such year:
                          ``(i) The corporation elects to be 
                        treated as an incubator REIT.
                          ``(ii) The corporation has only 
                        voting common stock outstanding.
                          ``(iii) Not more than 50 percent of 
                        the corporation's real estate assets 
                        consist of mortgages.
                          ``(iv) From not later than the 
                        beginning of the last half of the 
                        second taxable year, at least 10 
                        percent of the corporation's capital is 
                        provided by lenders or equity investors 
                        who are unrelated to the corporation's 
                        largest shareholder.
                          ``(v) The directors of the 
                        corporation adopt a resolution setting 
                        forth an intent to engage in a going 
                        public transaction.
                No election may be made with respect to any 
                REIT if an election under this subsection was 
                in effect for any predecessor of such REIT.
                  ``(C) Eligibility period.--The eligibility 
                period (for which an incubator REIT election 
                can be made) begins with the REIT's second 
                taxable year and ends at the close of the 
                REIT's third taxable year, but, subject to the 
                following rules, it may be extended for an 
                additional 2 taxable years if the REIT so 
                elects:
                          ``(i) A REIT cannot elect to extend 
                        the eligibility period unless it agrees 
                        that, if it does not engage in a going 
                        public transaction by the end of the 
                        extended eligibility period, it shall 
                        pay Federal income taxes for the 2 
                        years of the extended eligibility 
                        period as if it had not made an 
                        incubator REIT election and had ceased 
                        to qualify as a REIT for those 2 
                        taxable years.
                          ``(ii) In the event the corporation 
                        ceases to be treated as a REIT by 
                        operation of clause (i), the 
                        corporation shall file any appropriate 
                        amended returns reflecting the change 
                        in status within 3 months of the close 
                        of the extended eligibility period. 
                        Interest would be payable but, unless 
                        there was a finding under subparagraph 
                        (D), no substantial underpayment 
                        penalties shall be imposed. The 
                        corporation shall, at the same time, 
                        also notify its shareholders and any 
                        other persons whose tax position is, or 
                        may reasonably be expected to be, 
                        affected by the change in status so 
                        they also may file any appropriate 
                        amended returns to conform their tax 
                        treatment consistent with the 
                        corporation's loss of REIT status. The 
                        Secretary shall provide appropriate 
                        regulations setting forth transferee 
                        liability and other provisions to 
                        ensure collection of tax and the proper 
                        administration of this provision.
                          ``(iii) Clause (i) and (ii) shall not 
                        apply if the corporation allows its 
                        incubator REIT status to lapse at the 
                        end of the initial 2-year eligibility 
                        period without engaging in a going 
                        public transaction, provided the 
                        corporation satisfies the requirements 
                        of the closely-held test commencing 
                        with its fourth taxable year. In such a 
                        case, the corporation's directors may 
                        still be liable for the penalties 
                        described in subparagraph (D) during 
                        the eligibility period.
                  ``(D) Special penalties.--If the Secretary 
                determines that an incubator REIT election was 
                filed for a principal purpose other than as 
                part of a reasonable plan to undertake a going 
                public transaction, an excise tax of $20,000 
                would be imposed on each of the corporation's 
                directors for each taxable year for which an 
                election was in effect.
                  ``(E) Going public transaction.--For purposes 
                of this paragraph, a going public transaction 
                means--
                          ``(i) a public offering of shares of 
                        the stock of the incubator REIT;
                          ``(ii) a transaction, or series of 
                        transactions, that results in the stock 
                        of the incubator REIT being regularly 
                        traded on an established securities 
                        market and that results in at least 50 
                        percent of such stock being held by 
                        shareholders who are unrelated to 
                        persons who held such stock before it 
                        began to be so regularly traded; or
                          ``(iii) any transaction resulting in 
                        ownership of the REIT by 200 or more 
                        persons (excluding the largest single 
                        shareholder) who in the aggregate own 
                        at least 50 percent of the stock of the 
                        REIT.
                For the purposes of this subparagraph, the 
                rules of paragraph (3) shall apply in 
                determining the ownership of stock.
                  ``(F) Definitions.--The term `established 
                securities market' shall have the meaning set 
                forth in the regulations under section 897.''
  (c) Conforming Amendment.--Paragraph (2) of section 856(h) is 
amended by striking ``and (6)'' each place it appears and 
inserting ``, (6), and (7)''.
  (d) Effective Date.--
          (1) In general.--The amendments made by this section 
        shall apply to taxable years ending after July 12, 
        1999.
          (2) Exception for existing controlled entities.--The 
        amendments made by this section shall not apply to any 
        entity which is a controlled entity (as defined in 
        section 856(l) of the Internal Revenue Code of 1986, as 
        added by this section) as of July 12, 1999, which is a 
        real estate investment trust for the taxable year which 
        includes such date, and which has significant business 
        assets or activities as of such date.

SEC. 806. TREATMENT OF GAIN FROM CONSTRUCTIVE OWNERSHIP TRANSACTIONS.

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

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

  ``(a) In General.--If the taxpayer has gain from a 
constructive ownership transaction with respect to any 
financial asset and such gain would (without regard to this 
section) be treated as a long-term capital gain--
          ``(1) such gain shall be treated as ordinary income 
        to the extent that such gain exceeds the net underlying 
        long-term capital gain, and
          ``(2) to the extent such gain is treated as a long-
        term capital gain after the application of paragraph 
        (1), the determination of the capital gain rate (or 
        rates) applicable to such gain under section 1(h) shall 
        be determined on the basis of the respective rate (or 
        rates) that would have been applicable to the net 
        underlying long-term capital gain.
  ``(b) Interest Charge on Deferral of Gain Recognition.--
          ``(1) In general.--If any gain is treated as ordinary 
        income for any taxable year by reason of subsection 
        (a)(1), the tax imposed by this chapter for such 
        taxable year shall be increased by the amount of 
        interest determined under paragraph (2) with respect to 
        each prior taxable year during any portion of which the 
        constructive ownership transaction was open. Any amount 
        payable under this paragraph shall be taken into 
        account in computing the amount of any deduction 
        allowable to the taxpayer for interest paid or accrued 
        during such taxable year.
          ``(2) Amount of interest.--The amount of interest 
        determined under this paragraph with respect to a prior 
        taxable year is the amount of interest which would have 
        been imposed under section 6601 on the underpayment of 
        tax for such year which would have resulted if the gain 
        (which is treated as ordinary income by reason of 
        subsection (a)(1)) had been included in gross income in 
        the taxable years in which it accrued (determined by 
        treating the income as accruing at a constant rate 
        equal to the applicable Federal rate as in effect on 
        the day the transaction closed). The period during 
        which such interest shall accrue shall end on the due 
        date (without extensions) for the return of tax imposed 
        by this chapter for the taxable year in which such 
        transaction closed.
          ``(3) Applicable federal rate.--For purposes of 
        paragraph (2), the applicable Federal rate is the 
        applicable Federal rate determined under 1274(d) 
        (compounded semiannually) which would apply to a debt 
        instrument with a term equal to the period the 
        transaction was open.
          ``(4) No credits against increase in tax.--Any 
        increase in tax under paragraph (1) shall not be 
        treated as tax imposed by this chapter for purposes of 
        determining--
                  ``(A) the amount of any credit allowable 
                under this chapter, or
                  ``(B) the amount of the tax imposed by 
                section 55.
  ``(c) Financial Asset.--For purposes of this section--
          ``(1) In general.--The term `financial asset' means--
                  ``(A) any equity interest in any pass-thru 
                entity, and
                  ``(B) to the extent provided in regulations--
                          ``(i) any debt instrument, and
                          ``(ii) any stock in a corporation 
                        which is not a pass-thru entity.
          ``(2) Pass-thru entity.--For purposes of paragraph 
        (1), the term `pass-thru entity' means--
                  ``(A) a regulated investment company,
                  ``(B) a real estate investment trust,
                  ``(C) an S corporation,
                  ``(D) a partnership,
                  ``(E) a trust,
                  ``(F) a common trust fund,
                  ``(G) a passive foreign investment company 
                (as defined in section 1297),
                  ``(H) a foreign personal holding company, and
                  ``(I) a foreign investment company (as 
                defined in section 1246(b)).
  ``(d) Constructive Ownership Transaction.--For purposes of 
this section--
          ``(1) In general.--The taxpayer shall be treated as 
        having entered into a constructive ownership 
        transaction with respect to any financial asset if the 
        taxpayer--
                  ``(A) holds a long position under a notional 
                principal contract with respect to the 
                financial asset,
                  ``(B) enters into a forward or futures 
                contract to acquire the financial asset,
                  ``(C) is the holder of a call option, and is 
                the grantor of a put option, with respect to 
                the financial asset and such options have 
                substantially equal strike prices and 
                substantially contemporaneous maturity dates, 
                or
                  ``(D) to the extent provided in regulations 
                prescribed by the Secretary, enters into 1 or 
                more other transactions (or acquires 1 or more 
                positions) that have substantially the same 
                effect as a transaction described in any of the 
                preceding subparagraphs.
          ``(2) Exception for positions which are marked to 
        market.--This section shall not apply to any 
        constructive ownership transaction if all of the 
        positions which are part of such transaction are marked 
        to market under any provision of this title or the 
        regulations thereunder.
          ``(3) Long position under notional principal 
        contract.--A person shall be treated as holding a long 
        position under a notional principal contract with 
        respect to any financial asset if such person--
                  ``(A) has the right to be paid (or receive 
                credit for) all or substantially all of the 
                investment yield (including appreciation) on 
                such financial asset for a specified period, 
                and
                  ``(B) is obligated to reimburse (or provide 
                credit for) all or substantially all of any 
                decline in the value of such financial asset.
          ``(4) Forward contract.--The term `forward contract' 
        means any contract to acquire in the future (or provide 
        or receive credit for the future value of) any 
        financial asset.
  ``(e) Net Underlying Long-Term Capital Gain.--For purposes of 
this section, in the case of any constructive ownership 
transaction with respect to any financial asset, the term `net 
underlying long-term capital gain' means the aggregate net 
capital gain that the taxpayer would have had if--
          ``(1) the financial asset had been acquired for fair 
        market value on the date such transaction was opened 
        and sold for fair market value on the date such 
        transaction was closed, and
          ``(2) only gains and losses that would have resulted 
        from the deemed ownership under paragraph (1) were 
        taken into account.
The amount of the net underlying long-term capital gain with 
respect to any financial asset shall be treated as zero unless 
the amount thereof is established by clear and convincing 
evidence.
  ``(f) Special Rule Where Taxpayer Takes Delivery.--Except as 
provided in regulations prescribed by the Secretary, if a 
constructive ownership transaction is closed by reason of 
taking delivery, this section shall be applied as if the 
taxpayer had sold all the contracts, options, or other 
positions which are part of such transaction for fair market 
value on the closing date. The amount of gain recognized under 
the preceding sentence shall not exceed the amount of gain 
treated as ordinary income under subsection (a). Proper 
adjustments shall be made in the amount of any gain or loss 
subsequently realized for gain recognized and treated as 
ordinary income under this subsection.
  ``(g) Regulations.--The Secretary shall prescribe such 
regulations as may be necessary or appropriate to carry out the 
purposes of this section, including regulations--
          ``(1) to permit taxpayers to mark to market 
        constructive ownership transactions in lieu of applying 
        this section, and
          ``(2) to exclude certain forward contracts which do 
        not convey substantially all of the economic return 
        with respect to a financial asset.''
  (b) Clerical Amendment.--The table of sections for part IV of 
subchapter P of chapter 1 is amended by adding at the end the 
following new item:

        ``Sec. 1260. Gains from constructive ownership transactions.''.

  (c) Effective Date.--The amendments made by this section 
shall apply to transactions entered into after July 11, 1999.

SEC. 807. TRANSFER OF EXCESS DEFINED BENEFIT PLAN ASSETS FOR RETIREE 
                    HEALTH BENEFITS.

  (a) Extension.--Paragraph (5) of section 420(b) (relating to 
expiration) is amended by striking ``in any taxable year 
beginning after December 31, 2000'' and inserting ``made after 
September 30, 2009''.
  (b) Application of Minimum Cost Requirements.--
          (1) In general.--Paragraph (3) of section 420(c) is 
        amended to read as follows:
          ``(3) Minimum cost requirements.--
                  ``(A) In general.--The requirements of this 
                paragraph are met if each group health plan or 
                arrangement under which applicable health 
                benefits are provided provides that the 
                applicable employer cost for each taxable year 
                during the cost maintenance period shall not be 
                less than the higher of the applicable employer 
                costs for each of the 2 taxable years 
                immediately preceding the taxable year of the 
                qualified transfer.
                  ``(B) Applicable employer cost.--For purposes 
                of this paragraph, the term `applicable 
                employer cost' means, with respect to any 
                taxable year, the amount determined by 
                dividing--
                          ``(i) the qualified current retiree 
                        health liabilities of the employer for 
                        such taxable year determined--
                                  ``(I) without regard to any 
                                reduction under subsection 
                                (e)(1)(B), and
                                  ``(II) in the case of a 
                                taxable year in which there was 
                                no qualified transfer, in the 
                                same manner as if there had 
                                been such a transfer at the end 
                                of the taxable year, by
                          ``(ii) the number of individuals to 
                        whom coverage for applicable health 
                        benefits was provided during such 
                        taxable year.
                  ``(C) Election to compute cost separately.--
                An employer may elect to have this paragraph 
                applied separately with respect to individuals 
                eligible for benefits under title XVIII of the 
                Social Security Act at any time during the 
                taxable year and with respect to individuals 
                not so eligible.
                  ``(D) Cost maintenance period.--For purposes 
                of this paragraph, the term `cost maintenance 
                period' means the period of 5 taxable years 
                beginning with the taxable year in which the 
                qualified transfer occurs. If a taxable year is 
                in 2 or more overlapping cost maintenance 
                periods, this paragraph shall be applied by 
                taking into account the highest applicable 
                employer cost required to be provided under 
                subparagraph (A) for such taxable year.''
          (2) Conforming amendments.--
                  (A) Clause (iii) of section 420(b)(1)(C) is 
                amended by striking ``benefits'' and inserting 
                ``cost''.
                  (B) Subparagraph (D) of section 420(e)(1) is 
                amended by striking ``and shall not be subject 
                to the minimum benefit requirements of 
                subsection (c)(3)'' and inserting ``or in 
                calculating applicable employer cost under 
                subsection (c)(3)(B)''.
  (c) Effective Date.--The amendments made by this section 
shall apply to qualified transfers occurring after the date of 
the enactment of this Act.

SEC. 808. MODIFICATION OF INSTALLMENT METHOD AND REPEAL OF INSTALLMENT 
                    METHOD FOR ACCRUAL METHOD TAXPAYERS.

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

SEC. 809. LIMITATION ON USE OF NONACCRUAL EXPERIENCE METHOD OF 
                    ACCOUNTING.

  (a) In General.--Section 448(d)(5) (relating to special rule 
for services) is amended--
          (1) by inserting ``in fields described in paragraph 
        (2)(A)'' after ``services by such person'', and
          (2) by inserting ``certain personal'' before 
        ``services'' in the heading.
  (b) Effective Date.--
          (1) In general.--The amendments made by this section 
        shall apply to taxable years ending after the date of 
        the enactment of this Act.
          (2) Change in method of accounting.--In the case of 
        any taxpayer required by the amendments made by this 
        section to change its method of accounting for its 
        first taxable year ending after the date of the 
        enactment of this Act--
                  (A) such change shall be treated as initiated 
                by the taxpayer,
                  (B) such change shall be treated as made with 
                the consent of the Secretary of the Treasury, 
                and
                  (C) the net amount of the adjustments 
                required to be taken into account by the 
                taxpayer under section 481 of the Internal 
                Revenue Code of 1986 shall be taken into 
                account over a period (not greater than 4 
                taxable years) beginning with such first 
                taxable year.

SEC. 810. EXCLUSION OF LIKE-KIND EXCHANGE PROPERTY FROM NONRECOGNITION 
                    TREATMENT ON THE SALE OF A PRINCIPAL RESIDENCE.

  (a) In General.--Subsection (d) of section 121 (relating to 
the exclusion of gain from the sale of a principal residence) 
is amended by adding at the end the following new paragraph:
          ``(9) Like-kind exchanges.--Subsection (a) shall not 
        apply to any sale or exchange of a residence if such 
        residence was acquired by the taxpayer during the 5-
        year period ending on the date of such sale or exchange 
        in an exchange in which any amount of gain was not 
        recognized under section 1031.''
  (b) Effective Date.--The amendment made by subsection (a) 
shall apply to any sale or exchange of a principal residence 
after the date of the enactment of this Act.

SEC. 811. DISALLOWANCE OF NONECONOMIC TAX ATTRIBUTES.

  (a) In General.--Section 7701 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.
                  ``(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.''
  (b) Increase in Substantial Underpayment Penalty With Respect 
to Disallowed Noneconomic Tax Attributes.--Section 6662 
(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) to the extent that such underpayment 
        is attributable to--
                  ``(A) the disallowance of any noneconomic tax 
                attribute (determined under section 7701(m)), 
                or
                  ``(B) 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.
          ``(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.''
  (c) Effective Date.--The amendments made by this section 
shall apply to transactions after the date of the enactment of 
this Act.

     TITLE IX--NATIONAL COMMISSION ON TAX REFORM AND SIMPLIFICATION

SEC. 901. ESTABLISHMENT.

  (a) In General.--There is established the National Commission 
on Tax Reform and Simplification. The Commission shall be 
composed of 15 members appointed or designated by the President 
and selected as follows:
          (1) 5 members selected by the President from among 
        officers or employees of the Executive Branch, private 
        citizens of the United States, or both. Not more than 3 
        of the members selected by the President shall be 
        members of the same political party;
          (2) 5 members selected by the Majority Leader of the 
        Senate from among members of the Senate, private 
        citizens of the United States, or both. Not more than 3 
        of the members selected by the Majority Leader shall be 
        members of the same political party;
          (3) 5 members selected by the Speaker of the House of 
        Representatives from among members of the House, 
        private citizens of the United States, or both. Not 
        more than 3 of the members selected by the Speaker 
        shall be members of the same political party.
  (b) Chairman.--The President shall designate a Chairman from 
among the members of the Commission.

SEC. 902. FUNCTIONS.

  (a) In General.--The Commission shall review the Internal 
Revenue Code of 1986, identify provisions of such Code which 
are unnecessarily complex and may be simplified, and make 
appropriate recommendations to the Secretary of the Treasury, 
the President, and to Congress.
  (b) Report.--The Commission shall make its report to the 
President not later than 1 year after the date of the enactment 
of this Act.

SEC. 903. ADMINISTRATION.

  (a) Information From Executive Agencies.--The heads of 
Executive agencies shall, to the extent permitted by law, 
provide the Commission such information as it may require for 
the purpose of carrying out its functions.
  (b) Pay.--Members of the Commission shall serve without any 
additional compensation for their work on the Commission. 
However, members appointed from among private citizens of the 
United States may be allowed travel expenses, including per 
diem in lieu of subsistence, as authorized by law for persons 
serving intermittently in the government service (5 U.S.C. 
5701-5707), to the extent funds are available therefor.
  (c) Staff.--The Commission shall have a staff headed by an 
Executive Director. Any expenses of the Commission shall be 
paid from such funds as may be available to the Secretary of 
the Treasury.

SEC. 904. GENERAL.

   (a) Authority of Secretary of Treasury.--Notwithstanding any 
Executive Order, the responsibilities of the President under 
the Federal Advisory Committee Act, as amended, except that of 
reporting annually to the Congress, which are applicable to the 
Commission, shall be performed by the Secretary of the Treasury 
in accordance with the guidelines and procedures established by 
the Administrator of General Services.
  (b) Termination.--The Commission shall terminate 30 days 
after submitting its report.

                                

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