[104th Congress Public Law 7]
[From the U.S. Government Printing Office]


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[DOCID: f:publ7.104]


[[Page 109 STAT. 93]]

Public Law 104-7
104th Congress

                                 An Act


 
  To amend the Internal Revenue Code of 1986 to permanently extend the 
 deduction for the health insurance costs of self-employed individuals, 
 to repeal the provision permitting nonrecognition of gain on sales and 
     exchanges effectuating policies of the Federal Communications 
   Commission, and for other purposes. <<NOTE: Apr. 11, 1995 -  [H.R. 
                                 831]>> 

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,
SECTION 1. PERMANENT EXTENSION AND INCREASE OF DEDUCTION FOR 
                              HEALTH INSURANCE COSTS OF SELF-
                              EMPLOYED INDIVIDUALS.

    (a) Permanent Extension.--Subsection (l) of section 162 of the 
Internal Revenue Code of 1986 (relating to special rules for health 
insurance costs of self-employed individuals) is amended by striking 
paragraph (6).
    (b) Increase in Deduction.--Paragraph (1) of section 162(l) of the 
Internal Revenue Code of 1986 is amended by striking ``25 percent'' and 
inserting ``30 percent''.
    (c) <<NOTE: 26 USC 162 note.>>  Effective Dates.--
            (1) Extension.--The amendment made by subsection (a) shall 
        apply to taxable years beginning after December 31, 1993.
            (2) Increase.--The amendment made by subsection (b) shall 
        apply to taxable years beginning after December 31, 1994.
SEC. 2. REPEAL OF NONRECOGNITION ON FCC CERTIFIED SALES AND 
                    EXCHANGES.

    (a) In General.--Subchapter O of chapter 1 of the Internal 
Revenue <<NOTE: 26 USC 1071.>> Code of 1986 is amended by striking part 
V (relating to changes to effectuate FCC policy).

    (b) Conforming Amendments.--Sections 1245(b)(5) and 1250(d)(5) of 
the Internal Revenue Code of 1986 are each amended--
            (1) by striking ``section 1071 (relating to gain from sale 
        or exchange to effectuate polices of FCC) or'', and
            (2) by striking ``1071 and'' in the heading thereof.

    (c) <<NOTE: 26 USC prec. 1001.>>  Clerical Amendment.--The table of 
parts for such subchapter O is amended by striking the item relating to 
part V.

    (d) <<NOTE: 26 USC 1071 note.>>  Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to--
                    (A) sales and exchanges on or after January 17, 
                1995, and
                    (B) sales and exchanges before such date if the FCC 
                tax certificate with respect to such sale or exchange is 
                issued on or after such date.
            (2) Binding contracts.--

[[Page 109 STAT. 94]]

                    (A) In general.--The amendments made by this section 
                shall not apply to any sale or exchange pursuant to a 
                written contract which was binding on January 16, 1995, 
                and at all times thereafter before the sale or exchange, 
                if the FCC tax certificate with respect to such sale or 
                exchange was applied for, or issued, on or before such 
                date.
                    (B) Sales contingent on issuance of certificate.--
                          (i) In general.--A contract shall be treated 
                      as not binding for purposes of subparagraph (A) if 
                      the sale or exchange pursuant to such contract, or 
                      the material terms of such contract, were 
                      contingent, at any time on January 16, 1995, on 
                      the issuance of an FCC tax certificate. The 
                      preceding sentence shall not apply if the FCC tax 
                      certificate for such sale or exchange is issued on 
                      or before January 16, 1995.
                          (ii) Material terms.--For purposes of clause 
                      (i), the material terms of a contract shall not be 
                      treated as contingent on the issuance of an FCC 
                      tax certificate solely because such terms provide 
                      that the sales price would, if such certificate 
                      were not issued, be increased by an amount not 
                      greater than 10 percent of the sales price 
                      otherwise provided in the contract.
            (3) FCC tax certificate.--For purposes of this subsection, 
        the term ``FCC tax certificate'' means any certificate of the 
        Federal Communications Commission for the effectuation of 
        section 1071 of the Internal Revenue Code of 1986 (as in effect 
        on the day before the date of the enactment of this Act).
SEC. 3. SPECIAL RULES RELATING TO INVOLUNTARY CONVERSIONS.

    (a) Replacement Property Acquired by Corporations From Related 
Persons.--
            (1) In general.--Section 1033 of the Internal Revenue Code 
        of 1986 (relating to involuntary conversions) is amended by 
        redesignating subsection (i) as subsection (j) and by inserting 
        after subsection (h) the following new subsection:

    ``(i) Nonrecognition Not To Apply if Corporation Acquires 
Replacement Property From Related Person.--
            ``(1) In general.--In the case of--
                    ``(A) a C corporation, or
                    ``(B) a partnership in which 1 or more C 
                corporations own, directly or indirectly (determined in 
                accordance with section 707(b)(3)), more than 50 percent 
                of the capital interest, or profits interest, in such 
                partnership at the time of the involuntary conversion,
        subsection (a) shall not apply if the replacement property or 
        stock is acquired from a related person. The preceding sentence 
        shall not apply to the extent that the related person acquired 
        the replacement property or stock from an unrelated person 
        during the period described in subsection (a)(2)(B).
            ``(2) Related person.--For purposes of this subsection, a 
        person is related to another person if the person bears a 
        relationship to the other person described in section 267(b) or 
        707(b)(1).''

[[Page 109 STAT. 95]]

            (2) <<NOTE: 26 USC 1033 note.>>  Effective date.--The 
        amendment made by paragraph (1) shall apply to involuntary 
        conversions occurring on or after February 6, 1995.

    (b) Application of Section 1033 to Certain Sales Required for 
Microwave Relocation.--
            (1) In general.--Section 1033 of the Internal Revenue Code 
        of 1986 (relating to involuntary conversions), as amended by 
        subsection (a), is amended by redesignating subsection (j) as 
        subsection (k) and by inserting after subsection (i) the 
        following new subsection:

    ``(j) Sales or Exchanges To Implement Microwave Relocation Policy.--
            ``(1) In general.--For purposes of this subtitle, if a 
        taxpayer elects the application of this subsection to a 
        qualified sale or exchange, such sale or exchange shall be 
        treated as an involuntary conversion to which this section 
        applies.
            ``(2) Qualified sale or exchange.--For purposes of paragraph 
        (1), the term `qualified sale or exchange' means a sale or 
        exchange before January 1, 2000, which is certified by the 
        Federal Communications Commission as having been made by a 
        taxpayer in connection with the relocation of the taxpayer from 
        the 1850-1990MHz spectrum by reason of the Federal 
        Communications Commission's reallocation of that spectrum for 
        use for personal communications services. The Commission shall 
        transmit copies of certifications under this paragraph to the 
        Secretary.''
            (2) <<NOTE: 26 USC 1033 note.>>  Effective date.--The 
        amendment made by paragraph (1) shall apply to sales or 
        exchanges after March 14, 1995.
SEC. 4. DENIAL OF EARNED INCOME CREDIT FOR INDIVIDUALS HAVING 
                    EXCESSIVE INVESTMENT INCOME.

    (a) In General.--Section 32 of the Internal Revenue Code of 1986 is 
amended by redesignating subsections (i) and (j) as subsections (j) and 
(k), respectively, and by inserting after subsection (h) the following 
new subsection:
    ``(i) Denial of Credit for Individuals Having Excessive Investment 
Income.--
            ``(1) In general.--No credit shall be allowed under 
        subsection (a) for the taxable year if the aggregate amount of 
        disqualified income of the taxpayer for the taxable year exceeds 
        $2,350.
            ``(2) Disqualified income.--For purposes of paragraph (1), 
        the term `disqualified income' means--
                    ``(A) interest or dividends to the extent includible 
                in gross income for the taxable year,
                    ``(B) interest received or accrued during the 
                taxable year which is exempt from tax imposed by this 
                chapter, and
                    ``(C) the excess (if any) of--
                          ``(i) gross income from rents or royalties not 
                      derived in the ordinary course of a trade or 
                      business, over
                          ``(ii) the sum of--
                                    ``(I) the deductions (other than 
                                interest) which are clearly and directly 
                                allocable to such gross income, plus
                                    ``(II) interest deductions properly 
                                allocable to such gross income.''

[[Page 109 STAT. 96]]

    (b) <<NOTE: 26 USC 32 note.>> Effective Date.--The amendments made 
by this section shall apply to taxable years beginning after December 
31, 1995.
SEC. 5. EXTENSION OF SPECIAL RULE FOR CERTAIN GROUP HEALTH PLANS.

    Section 13442(b) of the Omnibus Budget Reconciliation Act of 
1993 <<NOTE: 26 USC 162 note.>> (Public Law 103-66) is amended by 
striking ``May 12, 1995'' and inserting ``December 31, 1995''.

SEC. 6. STUDY OF EXPATRIATION TAX.

    (a) In General.--The staff of the Joint Committee on Taxation shall 
conduct a study of the issues presented by any proposals to affect the 
taxation of expatriation, including an evaluation of--
            (1) the effectiveness and enforceability of current law with 
        respect to the tax treatment of expatriation,
            (2) the current level of expatriation for tax avoidance 
        purposes,
            (3) any restrictions imposed by any constitutional 
        requirement that the Federal income tax apply only to realized 
        gains,
            (4) the application of international human rights principles 
        to taxation of expatriation,
            (5) the possible effects of any such proposals on the free 
        flow of capital into the United States,
            (6) the impact of any such proposals on existing tax 
        treaties and future treaty negotiations,
            (7) the operation of any such proposals in the case of 
        interests in trusts,
            (8) the problems of potential double taxation in any such 
        proposals,
            (9) the impact of any such proposals on the trade policy 
        objectives of the United States,
            (10) the administrability of such proposals, and
            (11) possible problems associated with existing law, 
        including estate and gift tax provisions.

    (b) Report.--The Chief of Staff of the Joint Committee on Taxation 
shall, not later than June 1, 1995, report the results of the study 
conducted under subsection (a) to the Chairmen of the Committee on Ways 
and Means of the House of Representatives and the Committee on Finance 
of the Senate.

    Approved April 11, 1995.

LEGISLATIVE HISTORY--H.R. 831:
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HOUSE REPORTS: Nos. 104-32 (Comm. on Ways and Means) and 104-92 (Comm. 
of Conference).
SENATE REPORTS: No. 104-16 (Comm. on Finance).
CONGRESSIONAL RECORD, Vol. 141 (1995):
            Feb. 21, considered and passed House.
            Mar. 24, considered and passed Senate, amended.
            Mar. 30, House agreed to conference report.
            Mar. 31, Apr. 3, Senate considered and agreed to conference 
                report.
WEEKLY COMPILATION OF PRESIDENTIAL DOCUMENTS, Vol. 31 (1995):
            Apr. 6, Presidential statement.

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