[Congressional Bills 103th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3419 Engrossed in House (EH)]
103d CONGRESS
2d Session
H. R. 3419
_______________________________________________________________________
AN ACT
To simplify certain provisions of the Internal Revenue Code of 1986,
and for other purposes.
103d CONGRESS
2d Session
H. R. 3419
_______________________________________________________________________
AN ACT
To simplify certain provisions of the Internal Revenue Code of 1986,
and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE, ETC.
(a) Short Title.--This Act may be cited as the ``Tax Simplification
and Technical Corrections Act of 1993''.
(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.
TITLE I--PROVISIONS RELATING TO INDIVIDUALS
Subtitle A--Provisions Relating to Rollover of Gain on Sale of
Principal Residence
Sec. 101. Multiple sales within rollover period.
Sec. 102. Special rules in case of divorce.
Subtitle B--Other Provisions
Sec. 111. De minimis exception to passive loss rules.
Sec. 112. Payment of tax by credit card.
Sec. 113. Modifications to election to include child's income on
parent's return.
Sec. 114. Simplified foreign tax credit limitation for individuals.
Sec. 115. Treatment of personal transactions by individuals under
foreign currency rules.
Sec. 116. Expanded access to simplified income tax returns.
Sec. 117. Treatment of certain reimbursed expenses of rural mail
carriers.
Sec. 118. Exclusion of combat pay from withholding limited to amount
excludable from gross income.
TITLE II--PENSION SIMPLIFICATION
Subtitle A--Simplified Distribution Rules
Sec. 201. Repeal of 5-year income averaging for lump-sum distributions.
Sec. 202. Repeal of $5,000 exclusion of employees' death benefits.
Sec. 203. Simplified method for taxing annuity distributions under
certain employer plans.
Sec. 204. Required distributions.
Subtitle B--Increased Access to Pension Plans
Sec. 211. Modifications of simplified employee pensions.
Sec. 212. Tax exempt organizations eligible under section 401(k).
Sec. 213. Duties of sponsors of certain prototype plans.
Subtitle C--Nondiscrimination Provisions
Sec. 221. Definition of highly compensated employees.
Sec. 222. Modification of additional participation requirements.
Sec. 223. Nondiscrimination rules for qualified cash or deferred
arrangements and matching contributions.
Subtitle D--Miscellaneous Simplification
Sec. 231. Treatment of leased employees.
Sec. 232. Modifications of cost-of-living adjustments.
Sec. 233. Plans covering self-employed individuals.
Sec. 234. Elimination of special vesting rule for multiemployer plans.
Sec. 235. Full-funding limitation of multiemployer plans.
Sec. 236. Alternative full-funding limitation.
Sec. 237. Distributions under rural cooperative plans.
Sec. 238. Treatment of governmental plans under section 415.
Sec. 239. Uniform retirement age.
Sec. 240. Uniform penalty provisions to apply to certain pension
reporting requirements.
Sec. 241. Contributions on behalf of disabled employees.
Sec. 242. Special rules for plans covering pilots.
Sec. 243. Treatment of deferred compensation plans of State and local
governments and tax-exempt organizations.
Sec. 244. Treatment of employer reversions required by contract to be
paid to the United States.
Sec. 245. Continuation health coverage for employees of failed
financial institutions.
Sec. 246. Date for adoption of plan amendments.
TITLE III--TREATMENT OF LARGE PARTNERSHIPS
Subtitle A--General Provisions
Sec. 301. Simplified flow-through for large partnerships.
Sec. 302. Simplified audit procedures for large partnerships.
Sec. 303. Due date for furnishing information to partners of large
partnerships.
Sec. 304. Returns may be required on magnetic media.
Sec. 305. Treatment of partnership items of individual retirement
accounts.
Sec. 306. Effective date.
Subtitle B--Provisions Related to TEFRA Partnership Proceedings
Sec. 311. Treatment of partnership items in deficiency proceedings.
Sec. 312. Partnership return to be determinative of audit procedures to
be followed.
Sec. 313. Provisions relating to statute of limitations.
Sec. 314. Expansion of small partnership exception.
Sec. 315. Exclusion of partial settlements from 1 year limitation on
assessment.
Sec. 316. Extension of time for filing a request for administrative
adjustment.
Sec. 317. Availability of innocent spouse relief in context of
partnership proceedings.
Sec. 318. Determination of penalties at partnership level.
Sec. 319. Provisions relating to court jurisdiction, etc.
Sec. 320. Treatment of premature petitions filed by notice partners or
5-percent groups.
Sec. 321. Bonds in case of appeals from TEFRA proceeding.
Sec. 322. Suspension of interest where delay in computational
adjustment resulting from TEFRA
settlements.
Sec. 323. Special rules for administrative adjustment requests with
respect to bad debts or worthless
securities.
TITLE IV--FOREIGN PROVISIONS
Subtitle A--Simplification of Treatment of Passive Foreign Corporations
Sec. 401. Repeal of foreign personal holding company rules and foreign
investment company rules.
Sec. 402. Replacement for passive foreign investment company rules.
Sec. 403. Technical and conforming amendments.
Sec. 404. Effective date.
Subtitle B--Treatment of Controlled Foreign Corporations
Sec. 411. Gain on certain stock sales by controlled foreign
corporations treated as dividends.
Sec. 412. Miscellaneous modifications to subpart F.
Sec. 413. Indirect foreign tax credit allowed for certain lower tier
companies.
Subtitle C--Other Provisions
Sec. 421. Exchange rate used in translating foreign taxes.
Sec. 422. Election to use simplified section 904 limitation for
alternative minimum tax.
Sec. 423. Modification of section 1491.
Sec. 424. Modification of section 367(b).
TITLE V--OTHER INCOME TAX PROVISIONS
Subtitle A--Provisions Relating to Subchapter S Corporations
Sec. 501. Authority to validate certain invalid elections.
Sec. 502. Treatment of distributions during loss years.
Sec. 503. Electing small business trusts.
Sec. 504. Other modifications.
Subtitle B--Accounting Provision
Sec. 511. Modifications to look-back method for long-term contracts.
Subtitle C--Provisions Relating to Regulated Investment Companies
Sec. 521. Repeal of 30-percent gross income limitation.
Sec. 522. Basis rules for shares in open-end regulated investment
companies.
Sec. 523. Nonrecognition treatment for certain transfers by common
trust funds to regulated investment
companies.
Subtitle D--Tax-Exempt Bond Provisions
Sec. 531. Repeal of $100,000 limitation on unspent proceeds under 1-
year exception from rebate.
Sec. 532. Exception from rebate for earnings on bona fide debt service
fund under construction bond rules.
Sec. 533. Repeal of debt service-based limitation on investment in
certain nonpurpose investments.
Sec. 534. Repeal of expired provisions.
Sec. 535. Clarification of investment-type property.
Sec. 536. Effective dates.
Subtitle E--Insurance Provisions
Sec. 541. Treatment of certain insurance contracts on retired lives.
Sec. 542. Treatment of modified guaranteed contracts.
Subtitle F--Other Provisions
Sec. 551. Closing of partnership taxable year with respect to deceased
partner, etc.
Sec. 552. Modification of credit for producing fuel from a
nonconventional source.
TITLE VI--ESTATE AND GIFT TAX PROVISIONS
Sec. 601. Clarification of waiver of certain rights of recovery.
Sec. 602. Adjustments for gifts within 3 years of decedent's death.
Sec. 603. Clarification of qualified terminable interest rules.
Sec. 604. Transitional rule under section 2056A.
Sec. 605. Opportunity to correct certain failures under section 2032A.
TITLE VII--EXCISE TAX SIMPLIFICATION
Subtitle A--Provisions Related to Distilled Spirits, Wines, and Beer
Sec. 701. Credit or refund for imported bottled distilled spirits
returned to distilled spirits plant.
Sec. 702. Authority to cancel or credit export bonds without submission
of records.
Sec. 703. Repeal of required maintenance of records on premises of
distilled spirits plant.
Sec. 704. Fermented material from any brewery may be received at a
distilled spirits plant.
Sec. 705. Repeal of requirement for wholesale dealers in liquors to
post sign.
Sec. 706. Refund of tax to wine returned to bond not limited to
unmerchantable wine.
Sec. 707. Use of additional ameliorating material in certain wines.
Sec. 708. Domestically produced beer may be withdrawn free of tax for
use of foreign embassies, legations, etc.
Sec. 709. Beer may be withdrawn free of tax for destruction.
Sec. 710. Authority to allow drawback on exported beer without
submission of records.
Sec. 711. Transfer to brewery of beer imported in bulk without payment
of tax.
Subtitle B--Other Excise Tax Provisions
Sec. 721. Authority to grant exemptions from registration requirements.
Sec. 722. Repeal of expired provisions.
TITLE VIII--ADMINISTRATIVE PROVISIONS
Subtitle A--General Provisions
Sec. 801. Use of reproductions of returns stored in digital image
format.
Sec. 802. Repeal of authority to disclose whether prospective juror has
been audited.
Sec. 803. Repeal of special audit provisions for subchapter S items.
Sec. 804. Clarification of statute of limitations.
Sec. 805. Certain notices disregarded under provision increasing
interest rate on large corporate
underpayments.
Subtitle B--Tax Court Procedures
Sec. 811. Overpayment determinations of Tax Court.
Sec. 812. Awarding of administrative costs.
Sec. 813. Redetermination of interest pursuant to motion.
Sec. 814. Application of net worth requirement for awards of litigation
costs.
Subtitle C--Authority for Certain Cooperative Agreements
Sec. 821. Cooperative agreements with State tax authorities.
Subtitle D--Administrative Practice and Procedural Simplification
Sec. 831. Notification of reasons for termination or denial of
installment agreements.
Sec. 832. Joint return may be made after separate returns without full
payment of tax.
Sec. 833. Offers-in-compromise.
Sec. 834. Preliminary notice requirement.
Sec. 835. Penalties under section 6672.
Sec. 836. Required content of certain notices.
Sec. 837. Required notice of certain payments.
Sec. 838. Improved procedures for notifying Service of change of
address or name.
Sec. 839. Rights and responsibilities of divorced individuals.
TITLE IX--FINANCING PROVISIONS
Sec. 901. Certain amounts derived from foreign corporations treated as
unrelated business taxable income.
Sec. 902. Special rules for rental use of dwelling for less than 15
days per year.
Sec. 903. Loss carryovers and carrybacks not excluded in applying
taxable income limitation on certain
reserve deductions.
Sec. 904. Extension of withholding to certain gambling winnings.
TITLE X--TECHNICAL CORRECTIONS
Subtitle A--Revenue Provisions
Sec. 1001. Amendments related to Revenue Reconciliation Act of 1990.
Sec. 1002. Amendments related to Revenue Reconciliation Act of 1993.
Sec. 1003. Miscellaneous provisions.
Subtitle B--Income Security and Human Resource Amendments
Part I--Amendments Relating to Old-age, Survivors, and Disability
Insurance Program
Sec. 1011. Technical corrections related to OASDI in the Omnibus Budget
Reconciliation Act of 1990.
Sec. 1012. Elimination of rounding distortion in the calculation of the
old-age, survivors, and disability
insurance contribution and benefit base and
the earnings test exempt amounts.
Part II--Human Resources Provisions
Sec. 1016. Corrections related to the income security and human
resources provisions of the Omnibus Budget
Reconciliation Act of 1990.
Sec. 1017. Technical corrections related to the human resource and
income security provisions of Omnibus
Budget Reconciliation Act of 1989.
Sec. 1018. Elimination of obsolete provisions relating to treatment of
the earned income tax credit.
Sec. 1019. Redesignation of certain provisions.
Subtitle C--Tariff and Customs
Sec. 1021. Technical amendments to the Harmonized Tariff Schedule of
the United States.
Sec. 1022. Clarification regarding the application of customs user
fees.
Sec. 1023. Technical amendments to the Omnibus Trade and
Competitiveness Act of 1988.
Sec. 1024. Technical amendment to the Customs and Trade Act of 1990.
Sec. 1025. Technical amendments regarding certain beneficiary
countries.
Sec. 1026. Clarification of fees for certain customs services.
Sec. 1027. Conforming amendment to section 337 of the Tariff Act of
1930.
TITLE I--PROVISIONS RELATING TO INDIVIDUALS
Subtitle A--Provisions Relating to Rollover of Gain on Sale of
Principal Residence
SEC. 101. MULTIPLE SALES WITHIN ROLLOVER PERIOD.
(a) General Rule.--
(1) Section 1034 (relating to rollover of gain on sale of
principal residence) is amended by striking subsection (d).
(2) Paragraph (4) of section 1034(c) is amended to read as
follows:
``(4) If the taxpayer, during the period described in
subsection (a), purchases more than 1 residence which is used
by him as his principal residence at some time within 2 years
after the date of the sale of the old residence, only the first
of such residences so used by him after the date of such sale
shall constitute the new residence.''
(3) Subsections (h)(1) and (k) of section 1034 are each
amended by striking ``(other than the 2 years referred to in
subsection (c)(4))''.
(b) Effective Date.--The amendments made by this section shall
apply to sales of old residences (within the meaning of section 1034 of
the Internal Revenue Code of 1986) after the date of the enactment of
this Act.
SEC. 102. SPECIAL RULES IN CASE OF DIVORCE.
(a) In General.--Subsection (c) of section 1034 is amended by
adding at the end thereof the following new paragraph:
``(5) If--
``(A) a residence is sold by an individual pursuant
to a divorce or marital separation, and
``(B) the taxpayer used such residence as his
principal residence at any time during the 2-year
period ending on the date of such sale,
for purposes of this section, such residence shall be treated
as the taxpayer's principal residence at the time of such
sale.''
(b) Effective Dates.--The amendment made by subsection (a) shall
apply to sales of old residences (within the meaning of section 1034 of
the Internal Revenue Code of 1986) after the date of the enactment of
this Act.
Subtitle B--Other Provisions
SEC. 111. DE MINIMIS EXCEPTION TO PASSIVE LOSS RULES.
(a) General Rule.--Section 469 (relating to passive activity losses
and credits limited) is amended--
(1) by striking subsection (m),
(2) by redesignating subsection (l) as subsection (m), and
(3) by inserting after subsection (k) the following new
subsection:
``(l) De Minimis Exception.--
``(1) In general.--In the case of a natural person,
subsection (a) shall not apply to the passive activity loss for
any taxable year if the amount of such loss does not exceed
$200.
``(2) Exception for items attributable to publicly traded
partnerships.--This subsection shall not apply to items treated
separately under subsection (k) (and such items shall not be
taken into account in determining whether paragraph (1) applies
to the taxpayer for the taxable year with respect to other
items).
``(3) Estates eligible.--For purposes of this subsection,
an estate shall be treated as a natural person with respect to
any taxable year ending less than 2 years after the death of
the decedent.
``(4) Married individuals filing separately.--
``(A) In general.--This subsection shall not apply
to a taxpayer who--
``(i) is a married individual filing a
separate return for the taxable year, and
``(ii) does not live apart from his spouse
at all times during such taxable year.
``(B) Limitation.--Paragraph (1) shall be applied
by substituting `$100' for `$200' in the case of a
married individual who files a separate return for the
taxable year and to whom this subsection applies after
the application of subparagraph (A).''
(b) Conforming Amendments.--
(1) Subparagraph (C) of section 56(b)(1) is amended by
striking clause (ii) and redesignating the following clauses
accordingly.
(2) Subsection (b) of section 58 is amended by inserting
``and'' at the end of paragraph (1), by striking paragraph (2),
and by redesignating paragraph (3) as paragraph (2).
(3) Paragraph (4) of section 163(d) is amended by striking
subparagraph (E).
(4) Subsection (d) of section 163 is amended by striking
paragraph (6).
(5) Subsection (h) of section 163 is amended by striking
paragraph (5).
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 1993.
SEC. 112. PAYMENT OF TAX BY CREDIT CARD.
(a) General Rule.--Section 6311 is amended to read as follows:
``SEC. 6311. PAYMENT BY CHECK, MONEY ORDER, OR OTHER MEANS.
``(a) Authority To Receive.--It shall be lawful for the Secretary
to receive for internal revenue taxes (or in payment for internal
revenue stamps) checks, money orders, or any other commercially
acceptable means that the Secretary deems appropriate, including
payment by use of credit cards or debit cards, to the extent and under
the conditions provided in regulations prescribed by the Secretary.
``(b) Ultimate Liability.--If a check, money order, or other method
of payment, including payment by credit card or debit card, so received
is not duly paid, or is paid and subsequently charged back to the
Secretary, the person by whom such check, or money order, or other
method of payment has been tendered shall remain liable for the payment
of the tax or for the stamps, and for all legal penalties and
additions, to the same extent as if such check, money order, or other
method of payment had not been tendered.
``(c) Liability of Banks and Others.--If any certified,
treasurer's, or cashier's check (or other guaranteed draft), or any
money order, or any other means of payment that has been guaranteed by
a financial institution (such as a credit card or debit card
transaction which has been guaranteed expressly by a financial
institution) so received is not duly paid, the United States shall, in
addition to its right to exact payment from the party originally
indebted therefor, have a lien for--
``(1) the amount of such check (or draft) upon all assets
of the financial institution on which drawn,
``(2) the amount of such money order upon all the assets of
the issuer thereof, or
``(3) the guaranteed amount of any other transaction upon
all the assets of the institution making such guarantee,
and such amount shall be paid out of such assets in preference to any
other claims whatsoever against such financial institution, issuer, or
guaranteeing institution, except the necessary costs and expenses of
administration and the reimbursement of the United States for the
amount expended in the redemption of the circulating notes of such
financial institution.
``(d) Payment by Other Means.--
``(1) Authority to prescribe regulations.--The Secretary
shall prescribe such regulations as the Secretary deems
necessary to receive payment by commercially acceptable means,
including regulations that--
``(A) specify which methods of payment by
commercially acceptable means will be acceptable,
``(B) specify when payment by such means will be
considered received,
``(C) identify types of nontax matters related to
payment by such means that are to be resolved by
persons ultimately liable for payment and financial
intermediaries, without the involvement of the
Secretary, and
``(D) ensure that tax matters will be resolved by
the Secretary, without the involvement of financial
intermediaries.
``(2) Authority to enter into contracts.--Notwithstanding
section 3718(f) of title 31, United States Code, the Secretary
is authorized to enter into contracts to obtain services
related to receiving payment by other means where cost
beneficial to the Government and is further authorized to pay
any fees required by such contracts.
``(3) Special provisions for use of credit cards.--If use
of credit cards is accepted as a method of payment of taxes
pursuant to subsection (a)--
``(A) a payment of internal revenue taxes (or a
payment for internal revenue stamps) by a person by use
of a credit card shall not be subject to section 161 of
the Truth-in-Lending Act (15 U.S.C. 1666), or to any
similar provisions of State law, if the error alleged
by the person is an error relating to the underlying
tax liability, rather than an error relating to the
credit card account such as a computational error or
numerical transposition in the credit card transaction
or an issue as to whether the person authorized payment
by use of the credit card,
``(B) a payment of internal revenue taxes (or a
payment for internal revenue stamps) shall not be
subject to section 170 of the Truth-in-Lending Act (15
U.S.C. 1666i), or to any similar provisions of State
law,
``(C) a payment of internal revenue taxes (or a
payment for internal revenue stamps) by a person by use
of a debit card shall not be subject to section 908 of
the Electronic Fund Transfer Act (15 U.S.C. 1693f), or
to any similar provisions of State law, if the error
alleged by the person is an error relating to the
underlying tax liability, rather than an error relating
to the debit card account such as a computational error
or numerical transposition in the debit card
transaction or an issue as to whether the person
authorized payment by use of the debit card,
``(D) the term `creditor' under section 103(f) of
the Truth-in-Lending Act (15 U.S.C. 1602(f)) shall not
include the Secretary with respect to credit card
transactions in payment of internal revenue taxes (or
payment for internal revenue stamps), and
``(E) notwithstanding any other provision of law to
the contrary, in the case of payment made by credit
card or debit card transaction of an amount owed to a
person as the result of the correction of an error
under section 161 of the Truth-in-Lending Act (15
U.S.C. 1666) or section 908 of the Electronic Fund
Transfer Act (15 U.S.C. 1693f), the Secretary is
authorized to provide such amount to such person as a
credit to that person's credit card or debit card
account through the applicable credit card or debit
card system.
``(e) Confidentiality of Information.--
``(1) In general.--Except as otherwise authorized by this
subsection, no person may use or disclose any information
relating to credit or debit card transactions obtained pursuant
to section 6103(k)(8) other than for purposes directly related
to the processing of such transactions, or the billing or
collection of amounts charged or debited pursuant thereto.
``(2) Exceptions.--
``(A) Debit or credit card issuers or others acting
on behalf of such issuers may also use and disclose
such information for purposes directly related to
servicing an issuer's accounts.
``(B) Debit or credit card issuers or others
directly involved in the processing of credit or debit
card transactions or the billing or collection of
amounts charged or debited thereto may also use and
disclose such information for purposes directly related
to--
``(i) statistical risk and profitability
assessment;
``(ii) transferring receivables, accounts,
or interest therein;
``(iii) auditing the account information;
``(iv) complying with Federal, State, or
local law; and
``(v) properly authorized civil, criminal,
or regulatory investigation by Federal, State,
or local authorities.
``(3) Procedures.--Use and disclosure of information under
this paragraph shall be made only to the extent authorized by
written procedures promulgated by the Secretary.
``(4) Cross reference.--
``For provision providing for civil
damages for violation of paragraph (1), see section 7431.''
(b) Clerical Amendment.--The table of sections for subchapter B of
chapter 64 is amended by striking the item relating to section 6311 and
inserting the following:
``Sec. 6311. Payment by check, money
order, or other means.''
(c) Amendments to Sections 6103 and 7431 With Respect to Disclosure
Authorization.--
(1) Subsection (k) of section 6103 (relating to
confidentiality and disclosure of returns and return
information) is amended by adding at the end thereof the
following new paragraph:
``(8) Disclosure of information to administer section
6311.--The Secretary may disclose returns or return information
to financial institutions and others to the extent the
Secretary deems necessary for the administration of section
6311. Disclosures of information for purposes other than to
accept payments by checks or money orders shall be made only to
the extent authorized by written procedures promulgated by the
Secretary.''
(2) Section 7431 (relating to civil damages for
unauthorized disclosure of returns and return information) is
amended by adding at the end thereof the following new
subsection:
``(g) Special Rule for Information Obtained Under Section
6103(k)(8).--For purposes of this section, any reference to section
6103 shall be treated as including a reference to section 6311(e).''
(3) Section 6103(p)(3)(A) is amended by striking ``or (6)''
and inserting in lieu thereof ``(6), or (8)''.
(d) Effective Date.--The amendments made by this section shall take
effect on the day 9 months after the date of the enactment of this Act.
SEC. 113. MODIFICATIONS TO ELECTION TO INCLUDE CHILD'S INCOME ON
PARENT'S RETURN.
(a) Eligibility for Election.--Clause (ii) of section 1(g)(7)(A)
(relating to election to include certain unearned income of child on
parent's return) is amended to read as follows:
``(ii) such gross income is more than the
amount described in paragraph (4)(A)(ii)(I) and
less than 10 times the amount so described,''.
(b) Computation of Tax.--Subparagraph (B) of section 1(g)(7)
(relating to income included on parent's return) is amended--
(1) by striking ``$1,000'' in clause (i) and inserting
``twice the amount described in paragraph (4)(A)(ii)(I)'', and
(2) by amending subclause (II) of clause (ii) to read as
follows:
``(II) for each such child, 15
percent of the lesser of the amount
described in paragraph (4)(A)(ii)(I) or
the excess of the gross income of such
child over the amount so described,
and''.
(c) Minimum Tax.--Subparagraph (B) of section 59(j)(1) is amended
by striking ``$1,000'' and inserting ``twice the amount in effect for
the taxable year under section 63(c)(5)(A)''.
(d) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 1993.
SEC. 114. SIMPLIFIED FOREIGN TAX CREDIT LIMITATION FOR INDIVIDUALS.
(a) General Rule.--Section 904 (relating to limitations on foreign
tax credit) is amended by redesignating subsection (j) as subsection
(k) and by inserting after subsection (i) the following new subsection:
``(j) Simplified Limitation for Certain Individuals.--
``(1) In general.--In the case of an individual to whom
this subsection applies for any taxable year, the limitation of
subsection (a) shall be the lesser of--
``(A) 25 percent of such individual's gross income
for the taxable year from sources without the United
States, or
``(B) the amount of the creditable foreign taxes
paid or accrued by the individual during the taxable
year (determined without regard to subsection (c)).
No taxes paid or accrued by the individual during such taxable
year may be deemed paid or accrued in any other taxable year
under subsection (c).
``(2) Individuals to whom subsection applies.--This
subsection shall apply to an individual for any taxable year
if--
``(A) the entire amount of such individual's gross
income for the taxable year from sources without the
United States consists of qualified passive income,
``(B) the amount of the creditable foreign taxes
paid or accrued by the individual during the taxable
year does not exceed $200 ($400 in the case of a joint
return), and
``(C) such individual elects to have this
subsection apply for the taxable year.
``(3) Definitions.--For purposes of this subsection--
``(A) Qualified passive income.--The term
`qualified passive income' means any item of gross
income if--
``(i) such item of income is passive income
(as defined in subsection (d)(2)(A) without
regard to clause (iii) thereof), and
``(ii) such item of income is shown on a
payee statement furnished to the individual.
``(B) Creditable foreign taxes.--The term
`creditable foreign taxes' means any taxes for which a
credit is allowable under section 901; except that such
term shall not include any tax unless such tax is shown
on a payee statement furnished to such individual.
``(C) Payee statement.--The term `payee statement'
has the meaning given to such term by section
6724(d)(2).
``(D) Estates and trusts not eligible.--This
subsection shall not apply to any estate or trust.''
(b) Effective Date.--The amendment made by subsection (a) shall
apply to taxable years beginning after December 31, 1993.
SEC. 115. TREATMENT OF PERSONAL TRANSACTIONS BY INDIVIDUALS UNDER
FOREIGN CURRENCY RULES.
(a) General Rule.--Subsection (e) of section 988 (relating to
application to individuals) is amended to read as follows:
``(e) Application to Individuals.--
``(1) In general.--The preceding provisions of this section
shall not apply to any section 988 transaction entered into by
an individual which is a personal transaction.
``(2) Exclusion for certain personal transactions.--If--
``(A) nonfunctional currency is disposed of by an
individual in any transaction, and
``(B) such transaction is a personal transaction,
no gain shall be recognized for purposes of this subtitle by
reason of changes in exchange rates after such currency was
acquired by such individual and before such disposition. The
preceding sentence shall not apply if the gain which would
otherwise be recognized exceeds $200.
``(3) Personal transactions.--For purposes of this
subsection, the term `personal transaction' means any
transaction entered into by an individual, except that such
term shall not include any transaction to the extent that
expenses properly allocable to such transaction meet the
requirements of section 162 or 212 (other than that part of
section 212 dealing with expenses incurred in connection with
taxes).''
(b) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 1992.
SEC. 116. EXPANDED ACCESS TO SIMPLIFIED INCOME TAX RETURNS.
(a) General Rule.--The Secretary of the Treasury or his delegate
shall take such actions as may be appropriate to expand access to
simplified individual income tax returns and to otherwise simplify the
individual income tax returns, including--
(1) (if appropriate) allowing taxpayers who itemize
deductions to file their return on Form 1040A, and
(2) removing or raising the taxable income limitations on
taxpayers who may file Form 1040A.
(b) Report.--Not later than the date 1 year after the date of the
enactment of this Act, the Secretary of the Treasury or his delegate
shall submit a report to the Committee on Ways and Means of the House
of Representatives and the Committee on Finance of the Senate, a report
on his actions under subsection (a), together with such recommendations
as he may deem advisable.
SEC. 117. TREATMENT OF CERTAIN REIMBURSED EXPENSES OF RURAL MAIL
CARRIERS.
(a) In General.--Section 162 (relating to trade or business
expenses) is amended by redesignating subsection (o) as subsection (p)
and by inserting after subsection (n) the following new subsection:
``(o) Treatment of Certain Reimbursed Expenses of Rural Mail
Carriers.--
``(1) General rule.--In the case of any employee of the
United States Postal Service who performs services involving
the collection and delivery of mail on a rural route and who
receives qualified reimbursements for the expenses incurred by
such employee for the use of a vehicle in performing such
services--
``(A) the amount allowable as a deduction under
this chapter for the use of a vehicle in performing
such services shall be equal to the amount of such
qualified reimbursements; and
``(B) such qualified reimbursements shall be
treated as paid under a reimbursement or other expense
allowance arrangement for purposes of section
62(a)(2)(A) (and section 62(c) shall not apply to such
qualified reimbursements).
``(2) Definition of qualified reimbursements.--For purposes
of this subsection, the term `qualified reimbursements' means
the amounts paid by the United States Postal Service to
employees as an equipment maintenance allowance under the 1991
collective bargaining agreement between the United States
Postal Service and the National Rural Letter Carriers'
Association. Amounts paid as an equipment maintenance allowance
by such Postal Service under later collective bargaining
agreements that supersede the 1991 agreement shall be
considered qualified reimbursements if such amounts do not
exceed the amounts that would have been paid under the 1991
agreement, adjusted for changes in the Consumer Price Index (as
defined in section 1(f)(5)) since 1991.''
(b) Technical Amendment.--Section 6008 of the Technical and
Miscellaneous Revenue Act of 1988 is hereby repealed.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 1992.
SEC. 118. EXCLUSION OF COMBAT PAY FROM WITHHOLDING LIMITED TO AMOUNT
EXCLUDABLE FROM GROSS INCOME.
(a) In General.--Paragraph (1) of section 3401(a) (defining wages)
is amended by inserting before the semicolon the following: ``to the
extent remuneration for such service is excludable from gross income
under such section''.
(b) Effective Date.--The amendment made by subsection (a) shall
apply to remuneration paid after December 31, 1994.
TITLE II--PENSION SIMPLIFICATION
Subtitle A--Simplified Distribution Rules
SEC. 201. REPEAL OF 5-YEAR INCOME AVERAGING FOR LUMP-SUM DISTRIBUTIONS.
(a) In General.--Subsection (d) of section 402 (relating to
taxability of beneficiary of employees' trust) is amended to read as
follows:
``(d) Taxability of Beneficiary of Certain Foreign Situs Trusts.--
For purposes of subsections (a), (b), and (c), a stock bonus, pension,
or profit-sharing trust which would qualify for exemption from tax
under section 501(a) except for the fact that it is a trust created or
organized outside the United States shall be treated as if it were a
trust exempt from tax under section 501(a).''
(b) Conforming Amendments.--
(1) Subparagraph (D) of section 402(e)(4) (relating to
other rules applicable to exempt trusts) is amended to read as
follows:
``(D) Lump-sum distribution.--For purposes of this
paragraph--
``(i) In general.--The term `lump sum
distribution' means the distribution or payment
within one taxable year of the recipient of the
balance to the credit of an employee which
becomes payable to the recipient--
``(I) on account of the employee's
death,
``(II) after the employee attains
age 59\1/2\,
``(III) on account of the
employee's separation from service, or
``(IV) after the employee has
become disabled (within the meaning of
section 72(m)(7)),
from a trust which forms a part of a plan
described in section 401(a) and which is exempt
from tax under section 501 or from a plan
described in section 403(a). Subclause (III) of
this clause shall be applied only with respect
to an individual who is an employee without
regard to section 401(c)(1), and subclause (IV)
shall be applied only with respect to an
employee within the meaning of section
401(c)(1). For purposes of this clause, a
distribution to two or more trusts shall be
treated as a distribution to one recipient. For
purposes of this paragraph, the balance to the
credit of the employee does not include the
accumulated deductible employee contributions
under the plan (within the meaning of section
72(o)(5)).
``(ii) Aggregation of certain trusts and
plans.--For purposes of determining the balance
to the credit of an employee under clause (i)--
``(I) all trusts which are part of
a plan shall be treated as a single
trust, all pension plans maintained by
the employer shall be treated as a
single plan, all profit-sharing plans
maintained by the employer shall be
treated as a single plan, and all stock
bonus plans maintained by the employer
shall be treated as a single plan, and
``(II) trusts which are not
qualified trusts under section 401(a)
and annuity contracts which do not
satisfy the requirements of section
404(a)(2) shall not be taken into
account.
``(iii) Community property laws.--The
provisions of this paragraph shall be applied
without regard to community property laws.
``(iv) Amounts subject to penalty.--This
paragraph shall not apply to amounts described
in subparagraph (A) of section 72(m)(5) to the
extent that section 72(m)(5) applies to such
amounts.
``(v) Balance to credit of employee not to
include amounts payable under qualified
domestic relations order.--For purposes of this
paragraph, the balance to the credit of an
employee shall not include any amount payable
to an alternate payee under a qualified
domestic relations order (within the meaning of
section 414(p)).
``(vi) Transfers to cost-of-living
arrangement not treated as distribution.--For
purposes of this paragraph, the balance to the
credit of an employee under a defined
contribution plan shall not include any amount
transferred from such defined contribution plan
to a qualified cost-of-living arrangement
(within the meaning of section 415(k)(2)) under
a defined benefit plan.
``(vii) Lump-sum distributions of alternate
payees.--If any distribution or payment of the
balance to the credit of an employee would be
treated as a lump-sum distribution, then, for
purposes of this paragraph, the payment under a
qualified domestic relations order (within the
meaning of section 414(p)) of the balance to
the credit of an alternate payee who is the
spouse or former spouse of the employee shall
be treated as a lump-sum distribution. For
purposes of this clause, the balance to the
credit of the alternate payee shall not include
any amount payable to the employee.''
(2) Section 402(c) (relating to rules applicable to
rollovers from exempt trusts) is amended by striking paragraph
(10).
(3) Paragraph (1) of section 55(c) (defining regular tax)
is amended by striking ``shall not include any tax imposed by
section 402(d) and''.
(4) Paragraph (8) of section 62(a) (relating to certain
portion of lump-sum distributions from pension plans taxed
under section 402(d)) is hereby repealed.
(5) Section 401(a)(28)(B) (relating to coordination with
distribution rules) is amended by striking clause (v).
(6) Subparagraph (B)(ii) of section 401(k)(10) (relating to
distributions that must be lump-sum distributions) is amended
to read as follows:
``(ii) Lump-sum distribution.--For purposes
of this subparagraph, the term `lump-sum
distribution' means any distribution of the
balance to the credit of an employee
immediately before the distribution.''
(7) Section 406(c) (relating to termination of status as
deemed employee not to be treated as separation from service
for purposes of limitation of tax) is hereby repealed.
(8) Section 407(c) (relating to termination of status as
deemed employee not to be treated as separation from service
for purposes of limitation of tax) is hereby repealed.
(9) Section 691(c) (relating to deduction for estate tax)
is amended by striking paragraph (5).
(10) Paragraph (1) of section 871(b) (relating to
imposition of tax) is amended by striking ``section 1, 55, or
402(d)(1)'' and inserting ``section 1 or 55''.
(11) Subsection (b) of section 877 (relating to alternative
tax) is amended by striking ``section 1, 55, or 402(d)(1)'' and
inserting ``section 1 or 55''.
(12) Section 4980A(c)(4) is amended--
(A) by striking ``to which an election under
section 402(d)(4)(B) applies'' and inserting ``(as
defined in section 402(e)(4)(D)) with respect to which
the individual elects to have this paragraph apply'',
(B) by adding at the end the following new flush
sentence:
``An individual may elect to have this paragraph apply to only
one lump-sum distribution.'', and
(C) by striking the heading and inserting:
``(4) Special one-time election.--''.
(13) Section 402(e) is amended by striking paragraph (5).
(c) Effective Dates.--
(1) In general.--The amendments made by this section shall
apply to taxable years beginning after December 31, 1993.
(2) Retention of certain transition rules.--Notwithstanding
any other provision of this section, the amendments made by
this section shall not apply to any distribution for which the
taxpayer elects the benefits of section 1122 (h)(3) or (h)(5)
of the Tax Reform Act of 1986. For purposes of the preceding
sentence, the rules of sections 402(c)(10) and 402(d) of the
Internal Revenue Code of 1986 (as in effect before the
amendments made by this Act) shall apply.
SEC. 202. REPEAL OF $5,000 EXCLUSION OF EMPLOYEES' DEATH BENEFITS.
(a) In General.--Subsection (b) of section 101 is hereby repealed.
(b) Conforming Amendment.--Subsection (c) of section 101 is amended
by striking ``subsection (a) or (b)'' and inserting ``subsection (a)''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 1993.
SEC. 203. SIMPLIFIED METHOD FOR TAXING ANNUITY DISTRIBUTIONS UNDER
CERTAIN EMPLOYER PLANS.
(a) General Rule.--Subsection (d) of section 72 (relating to
annuities; certain proceeds of endowment and life insurance contracts)
is amended to read as follows:
``(d) Special Rules for Qualified Employer Retirement Plans.--
``(1) Simplified method of taxing annuity payments.--
``(A) In general.--In the case of any amount
received as an annuity under a qualified employer
retirement plan--
``(i) subsection (b) shall not apply, and
``(ii) the investment in the contract shall
be recovered as provided in this paragraph.
``(B) Method of recovering investment in
contract.--
``(i) In general.--Gross income shall not
include so much of any monthly annuity payment
under a qualified employer retirement plan as
does not exceed the amount obtained by
dividing--
``(I) the investment in the
contract (as of the annuity starting
date), by
``(II) the number of anticipated
payments determined under the table
contained in clause (iii) (or, in the
case of a contract to which subsection
(c)(3)(B) applies, the number of
monthly annuity payments under such
contract).
``(ii) Certain rules made applicable.--
Rules similar to the rules of paragraphs (2)
and (3) of subsection (b) shall apply for
purposes of this paragraph.
``(iii) Number of anticipated payments.--
``If the age of the
primary annuitant on
The number
the annuity starting
of anticipated
date is:
payments is:
Not more than 55...... 300
More than 55 but not 260
more than 60.
More than 60 but not 240
more than 65.
More than 65 but not 170
more than 70.
More than 70.......... 120
``(C) Adjustment for refund feature not
applicable.--For purposes of this paragraph, investment
in the contract shall be determined under subsection
(c)(1) without regard to subsection (c)(2).
``(D) Special rule where lump sum paid in
connection with commencement of annuity payments.--If,
in connection with the commencement of annuity payments
under any qualified employer retirement plan, the
taxpayer receives a lump sum payment--
``(i) such payment shall be taxable under
subsection (e) as if received before the
annuity starting date, and
``(ii) the investment in the contract for
purposes of this paragraph shall be determined
as if such payment had been so received.
``(E) Exception.--This paragraph shall not apply in
any case where the primary annuitant has attained age
75 on the annuity starting date unless there are fewer
than 5 years of guaranteed payments under the annuity.
``(F) Adjustment where annuity payments not on
monthly basis.--In any case where the annuity payments
are not made on a monthly basis, appropriate
adjustments in the application of this paragraph shall
be made to take into account the period on the basis of
which such payments are made.
``(G) Qualified employer retirement plan.--For
purposes of this paragraph, the term `qualified
employer retirement plan' means any plan or contract
described in paragraph (1), (2), or (3) of section
4974(c).
``(2) Treatment of employee contributions under defined
contribution plans.--For purposes of this section, employee
contributions (and any income allocable thereto) under a
defined contribution plan may be treated as a separate
contract.''
(b) Effective Date.--The amendment made by subsection (a) shall
apply in cases where the annuity starting date is after December 31,
1993.
SEC. 204. REQUIRED DISTRIBUTIONS.
(a) In General.--Section 401(a)(9)(C) (defining required beginning
date) is amended to read as follows:
``(C) Required beginning date.--For purposes of
this paragraph--
``(i) In general.--The term `required
beginning date' means April 1 of the calendar
year following the later of--
``(I) the calendar year in which
the employee attains age 70\1/2\, or
``(II) the calendar year in which
the employee retires.
``(ii) Exception.--Subclause (II) of clause
(i) shall not apply--
``(I) except as provided in section
409(d), in the case of an employee who
is a 5-percent owner (as defined in
section 416) with respect to the plan
year ending in the calendar year in
which the employee attains age 70\1/2\,
or
``(II) for purposes of section 408
(a)(6) or (b)(3).
``(iii) Actuarial adjustment.--In the case
of an employee to whom clause (i)(II) applies
who retires in a calendar year after the
calendar year in which the employee attains age
70\1/2\, the employee's accrued benefit shall
be actuarially increased to take into account
the period after age 70\1/2\ in which the
employee was not receiving any benefits under
the plan.
``(iv) Exception for governmental and
church plans.--Clauses (ii) and (iii) shall not
apply in the case of a governmental plan or
church plan. For purposes of this clause, the
term `church plan' means a plan maintained by a
church for church employees, and the term
`church' means any church (as defined in
section 3121(w)(3)(A)) or qualified church-
controlled organization (as defined in section
3121(w)(3)(B)).''
(b) Effective Date.--The amendment made by subsection (a) shall
apply to years beginning after December 31, 1993.
Subtitle B--Increased Access to Pension Plans
SEC. 211. MODIFICATIONS OF SIMPLIFIED EMPLOYEE PENSIONS.
(a) Increase in Number of Allowable Participants for Salary
Reduction Arrangements.--Section 408(k)(6)(B) is amended by striking
``25'' each place it appears in the text and heading thereof and
inserting ``100''.
(b) Repeal of Participation Requirement.--Section 408(k)(6)(A) is
amended by striking clause (ii) and by redesignating clauses (iii) and
(iv) as clauses (ii) and (iii), respectively.
(c) Conforming Amendments.--Clause (ii) of section 408(k)(6)(C) and
clause (ii) of section 408(k)(6)(F) are each amended by striking
``subparagraph (A)(iii)'' and inserting ``subparagraph (A)(ii)''.
(d) Effective Date.--The amendments made by this section shall
apply to years beginning after December 31, 1993.
SEC. 212. TAX EXEMPT ORGANIZATIONS ELIGIBLE UNDER SECTION 401(k).
(a) General Rule.--Subparagraph (B) of section 401(k)(4) is amended
to read as follows:
``(B) State and local governments not eligible.--A
cash or deferred arrangement shall not be treated as a
qualified cash or deferred arrangement if it is part of
a plan maintained by a State or local government or
political subdivision thereof, or any agency or
instrumentality thereof. This subparagraph shall not
apply to a rural cooperative plan.''
(b) Effective Date.--The amendment made by this section shall apply
to plan years beginning after December 31, 1993, but shall not apply to
any cash or deferred arrangement to which clause (i) of section
1116(f)(2)(B) of the Tax Reform Act of 1986 applies.
SEC. 213. DUTIES OF SPONSORS OF CERTAIN PROTOTYPE PLANS.
(a) In General.--The Secretary of the Treasury may, as a condition
of sponsorship, prescribe rules defining the duties and
responsibilities of sponsors of master and prototype plans, regional
prototype plans, and other Internal Revenue Service preapproved plans.
(b) Duties Relating to Plan Amendment, Notification of Adopters,
and Plan Administration.--The duties and responsibilities referred to
in subsection (a) may include--
(1) the maintenance of lists of persons adopting the
sponsor's plans, including the updating of such lists not less
frequently than annually,
(2) the furnishing of notices at least annually to such
persons and to the Secretary or his delegate, in such form and
at such time as the Secretary shall prescribe,
(3) duties relating to administrative services to such
persons in the operation of their plans, and
(4) other duties that the Secretary considers necessary to
ensure that--
(A) the master and prototype, regional prototype,
and other preapproved plans of adopting employers are
timely amended to meet the requirements of the Internal
Revenue Code of 1986 or of any rule or regulation of
the Secretary, and
(B) adopting employers receive timely notification
of amendments and other actions taken by sponsors with
respect to their plans.
Subtitle C--Nondiscrimination Provisions
SEC. 221. DEFINITION OF HIGHLY COMPENSATED EMPLOYEES.
(a) In General.--Paragraph (1) of section 414(q) (defining highly
compensated employee) is amended to read as follows:
``(1) In general.--The term `highly compensated employee'
means any employee who--
``(A) was a 5-percent owner at any time during the
year or the preceding year, or
``(B) had compensation for the preceding year from
the employer in excess of $50,000.
The Secretary shall adjust the $50,000 amount under
subparagraph (B) at the same time and in the same manner as
under section 415(d).''
(b) Special Rule Where No Employees Treated as Highly
Compensated.--Paragraph (2) of section 414(q) is amended to read as
follows:
``(2) Special rule if no employee described in paragraph
(1).--If no employee is treated as a highly compensated
employee under paragraph (1), the highest paid officer for the
year shall be treated as a highly compensated employee.''
(c) Treatment of Family Members.--Paragraph (6) of section 414(q)
is hereby repealed.
(d) Conforming Amendments.--
(1) Paragraphs (4), (5), (8), and (12) of section 414(q)
are hereby repealed.
(2)(A) Section 414(r) is amended by adding at the end
thereof the following new paragraph:
``(9) Excluded employees.--For purposes of this subsection,
the following employees shall be excluded:
``(A) Employees who have not completed 6 months of
service.
``(B) Employees who normally work less than 17\1/2\
hours per week.
``(C) Employees who normally work not more than 6
months during any year.
``(D) Employees who have not attained the age of
21.
``(E) Except to the extent provided in regulations,
employees who are included in a unit of employees
covered by an agreement which the Secretary of Labor
finds to be a collective bargaining agreement between
employee representatives and the employer.
Except as provided by the Secretary, the employer may elect to
apply subparagraph (A), (B), (C), or (D) by substituting a
shorter period of service, smaller number of hours or months,
or lower age for the period of service, number of hours or
months, or age (as the case may be) specified in such
subparagraph.''
(B) Subparagraph (A) of section 414(r)(2) is amended by
striking ``subsection (q)(8)'' and inserting ``paragraph (9)''.
(3) Subparagraph (A) of section 401(a)(17) is amended by
striking the last sentence.
(4) Subsection (l) of section 404 is amended by striking
the last sentence.
(5) Section 1114(c)(4) of the Tax Reform Act of 1986 is
amended by adding at the end the following new sentence: ``Any
reference in this paragraph to section 414(q) shall be treated
as a reference to such section as in effect before the Tax
Simplification and Technical Corrections Act of 1993.''
(e) Effective Date.--The amendments made by this section shall
apply to years beginning after December 31, 1993.
SEC. 222. MODIFICATION OF ADDITIONAL PARTICIPATION REQUIREMENTS.
(a) General Rule.--Section 401(a)(26)(A) (relating to additional
participation requirements) is amended to read as follows:
``(A) In general.--In the case of a trust which is
a part of a defined benefit plan, such trust shall not
constitute a qualified trust under this subsection
unless on each day of the plan year such trust benefits
at least the lesser of--
``(i) 50 employees of the employer, or
``(ii) the greater of--
``(I) 40 percent of all employees
of the employer, or
``(II) 2 employees (or if there is
only 1 employee, such employee).''
(b) Separate Line of Business Test.--Section 401(a)(26)(G)
(relating to separate line of business) is amended by striking
``paragraph (7)'' and inserting ``paragraph (2)(A) or (7)''.
(c) Effective Date.--The amendment made by this section shall apply
to years beginning after December 31, 1993.
SEC. 223. NONDISCRIMINATION RULES FOR QUALIFIED CASH OR DEFERRED
ARRANGEMENTS AND MATCHING CONTRIBUTIONS.
(a) Alternative Methods of Satisfying Section 401(k)
Nondiscrimination Tests.--Section 401(k) (relating to cash or deferred
arrangements) is amended by adding at the end thereof the following new
paragraph:
``(11) Alternative methods of meeting nondiscrimination
requirements.--
``(A) In general.--A cash or deferred arrangement
shall be treated as meeting the requirements of
paragraph (3)(A)(ii) if such arrangement--
``(i) meets the contribution requirements
of subparagraph (B) or (C), and
``(ii) meets the notice requirements of
subparagraph (D).
``(B) Matching contributions.--
``(i) In general.--The requirements of this
subparagraph are met if, under the arrangement,
the employer makes matching contributions on
behalf of each employee who is not a highly
compensated employee in an amount equal to--
``(I) 100 percent of the elective
contributions of the employee to the
extent such elective contributions do
not exceed 3 percent of the employee's
compensation, and
``(II) 50 percent of the elective
contributions of the employee to the
extent that such elective contributions
exceed 3 percent but do not exceed 5
percent of the employee's compensation.
``(ii) Rate for highly compensated
employees.--The requirements of this
subparagraph are not met if, under the
arrangement, the matching contribution with
respect to any elective contribution of a
highly compensated employee at any level of
compensation is greater than that with respect
to an employee who is not a highly compensated
employee.
``(iii) Alternative plan designs.--If the
matching contribution with respect to any
elective contribution at any specific level of
compensation is not equal to the percentage
required under clause (i), an arrangement shall
not be treated as failing to meet the
requirements of clause (i) if--
``(I) the level of an employer's
matching contribution does not increase
as an employee's elective contributions
increase, and
``(II) the aggregate amount of
matching contributions with respect to
elective contributions not in excess of
such level of compensation is at least
equal to the amount of matching
contributions which would be made if
matching contributions were made on the
basis of the percentages described in
clause (i).
``(C) Nonelective contributions.--The requirements
of this subparagraph are met if, under the arrangement,
the employer is required, without regard to whether the
employee makes an elective contribution or employee
contribution, to make a contribution to a defined
contribution plan on behalf of each employee who is not
a highly compensated employee and who is eligible to
participate in the arrangement in an amount equal to at
least 3 percent of the employee's compensation.
``(D) Notice requirement.--An arrangement meets the
requirements of this paragraph if, under the
arrangement, each employee eligible to participate is,
within a reasonable period before any year, given
written notice of the employee's rights and obligations
under the arrangement which--
``(i) is sufficiently accurate and
comprehensive to appraise the employee of such
rights and obligations, and
``(ii) is written in a manner calculated to
be understood by the average employee eligible
to participate.
``(E) Other requirements.--
``(i) Withdrawal and vesting
restrictions.--An arrangement shall not be
treated as meeting the requirements of
subparagraph (B) or (C) unless the requirements
of subparagraphs (B) and (C) of paragraph (2)
are met with respect to all employer
contributions (including matching
contributions).
``(ii) Social security and similar
contributions not taken into account.--An
arrangement shall not be treated as meeting the
requirements of subparagraph (B) or (C) unless
such requirements are met without regard to
subsection (l), and, for purposes of subsection
(l), employer contributions under subparagraph
(B) or (C) shall not be taken into account.
``(F) Other plans.--An arrangement shall be treated
as meeting the requirements under subparagraph (A)(i)
if any other plan maintained by the employer meets such
requirements with respect to employees eligible under
the arrangement.''
(b) Alternative Methods of Satisfying Section 401(m)
Nondiscrimination Tests.--Section 401(m) (relating to nondiscrimination
test for matching contributions and employee contributions) is amended
by redesignating paragraph (10) as paragraph (11) and by adding after
paragraph (9) the following new paragraph:
``(10) Alternative method of satisfying tests.--
``(A) In general.--A defined contribution plan
shall be treated as meeting the requirements of
paragraph (2) with respect to matching contributions if
the plan--
``(i) meets the contribution requirements
of subparagraph (B) or (C) of subsection
(k)(11),
``(ii) meets the notice requirements of
subsection (k)(11)(D), and
``(iii) meets the requirements of
subparagraph (B).
``(B) Limitation on matching contributions.--The
requirements of this subparagraph are met if--
``(i) matching contributions on behalf of
any employee may not be made with respect to an
employee's contributions or elective deferrals
in excess of 6 percent of the employee's
compensation,
``(ii) the level of an employer's matching
contribution does not increase as an employee's
contributions or elective deferrals increase,
and
``(iii) the matching contribution with
respect to any highly compensated employee at a
specific level of compensation is not greater
than that with respect to an employee who is
not a highly compensated employee.''
(c) Year for Computing Nonhighly Compensated Employee Percentage.--
(1) Cash or deferred arrangements.--Clause (ii) of section
401(k)(3)(A) is amended--
(A) by striking ``such year'' and inserting ``the
plan year'', and
(B) by striking ``for such plan year'' and
inserting ``the preceding plan year''.
(2) Matching and employee contributions.--Section
401(m)(2)(A) is amended--
(A) by inserting ``for such plan year'' after
``highly compensated employees'', and
(B) by inserting ``for the preceding plan year''
after ``eligible employees'' each place it appears in
clause (i) and clause (ii).
(d) Special Rule for Determining Average Deferral Percentage for
First Plan Year, Etc.--
(1) Paragraph (3) of section 401(k) is amended by adding at
the end thereof the following new subparagraph:
``(E) For purposes of this paragraph, in the case
of the first plan year of any plan, the amount taken
into account as the actual deferral percentage of
nonhighly compensated employees for the preceding plan
year shall be--
``(i) 3 percent, or
``(ii) if the employer makes an election
under this subclause, the actual deferral
percentage of nonhighly compensated employees
determined for such first plan year.''
(2) Paragraph (3) of section 401(m) is amended by adding at
the end thereof the following: ``Rules similar to the rules of
subsection (k)(3)(E) shall apply for purposes of this
subsection.''
(e) Distribution of Excess Contributions.--
(1) Subparagraph (C) of section 401(k)(8) (relating to
arrangement not disqualified if excess contributions
distributed) is amended by striking ``on the basis of the
respective portions of the excess contributions attributable to
each of such employees'' and inserting ``on the basis of the
amount of contributions by, or on behalf of, each of such
employees''.
(2) Subparagraph (C) of section 401(m)(6) (relating to
method of distributing excess aggregate contributions) is
amended by striking ``on the basis of the respective portions
of such amounts attributable to each of such employees'' and
inserting ``on the basis of the amount of contributions on
behalf of, or by, each such employee''.
(f) Effective Date.--The amendments made by this section shall
apply to years beginning after December 31, 1993.
Subtitle D--Miscellaneous Simplification
SEC. 231. TREATMENT OF LEASED EMPLOYEES.
(a) General Rule.--Subparagraph (C) of section 414(n)(2) (defining
leased employee) is amended to read as follows:
``(C) such services are performed under significant
direction or control by the recipient.''
(b) Effective Date.--The amendment made by subsection (a) shall
apply to years beginning after December 31, 1993, but shall not apply
to any relationship determined under an Internal Revenue Service ruling
issued before the date of the enactment of this Act pursuant to section
414(n)(2)(C) of the Internal Revenue Code of 1986 (as in effect on the
day before such date) not to involve a leased employee.
SEC. 232. MODIFICATIONS OF COST-OF-LIVING ADJUSTMENTS.
(a) In General.--Section 415(d) (relating to cost-of-living
adjustments) is amended to read as follows:
``(d) Cost-Of-Living Adjustments.--
``(1) In general.--The Secretary shall adjust annually--
``(A) the $90,000 amount in subsection (b)(1)(A),
and
``(B) in the case of a participant who separated
from service, the amount taken into account under
subsection (b)(1)(B),
for increases in the cost-of-living in accordance with
regulations prescribed by the Secretary.
``(2) Method.--
``(A) In general.--The regulations prescribed under
paragraph (1) shall provide for adjustment procedures
which are similar to the procedures used to adjust
benefit amounts under section 215(i)(2)(A) of the
Social Security Act.
``(B) Periods for adjustment of dollar amount.--For
purposes of paragraph (1)(A)--
``(i) In general.--The adjustment with
respect to any calendar year shall be based on
the increase in the applicable index as of the
close of the calendar quarter ending September
30 of the preceding calendar year over such
index as of the close of the base period.
``(ii) Base period.--For purposes of clause
(i), the base period is the calendar quarter
beginning October 1, 1986.
``(C) Base period for separations.--For purposes of
paragraph (1)(B), the base period is the last calendar
quarter of the calendar year preceding the calendar
year in which the participant separated from service.
``(3) Rounding.--Any amount determined under paragraph (1)
(or by reference to this subsection) shall be rounded to the
nearest $1,000, except that the amounts under sections
402(g)(1), 408(k)(2)(C), and 457(e)(14) shall be rounded to the
nearest $100 and the amount under section 401(a)(17) shall be
rounded, to the next lowest multiple of $10,000.''
(b) Effective Date.--The amendments made by this section apply to
adjustments with respect to calendar years beginning after December 31,
1993.
SEC. 233. PLANS COVERING SELF-EMPLOYED INDIVIDUALS.
(a) Aggregation Rules.--Section 401(d) (relating to additional
requirements for qualification of trusts and plans benefiting owner-
employees) is amended to read as follows:
``(d) Contribution Limit on Owner-Employees.--A trust forming part
of a pension or profit-sharing plan which provides contributions or
benefits for employees some or all of whom are owner-employees shall
constitute a qualified trust under this section only if, in addition to
meeting the requirements of subsection (a), the plan provides that
contributions on behalf of any owner-employee may be made only with
respect to the earned income of such owner-employee which is derived
from the trade or business with respect to which such plan is
established.''
(b) Effective Date.--The amendments made by this section shall
apply to years beginning after December 31, 1993.
SEC. 234. ELIMINATION OF SPECIAL VESTING RULE FOR MULTIEMPLOYER PLANS.
(a) In General.--Paragraph (2) of section 411(a) (relating to
minimum vesting standards) is amended--
(1) by striking ``subparagraph (A), (B), or (C)'' and
inserting ``subparagraph (A) or (B)''; and
(2) by striking subparagraph (C).
(b) Effective Date.--The amendments made by this section shall
apply to plan years beginning on or after the earlier of--
(1) the later of--
(A) January 1, 1994, or
(B) the date on which the last of the collective
bargaining agreements pursuant to which the plan is
maintained terminates (determined without regard to any
extension thereof after the date of the enactment of
this Act), or
(2) January 1, 1996.
Such amendments shall not apply to any individual who does not have
more than 1 hour of service under the plan on or after the 1st day of
the 1st plan year to which such amendments apply.
SEC. 235. FULL-FUNDING LIMITATION OF MULTIEMPLOYER PLANS.
(a) Full-Funding Limitation.--Section 412(c)(7)(C) (relating to
full-funding limitation) is amended--
(1) by inserting ``or in the case of a multiemployer
plan,'' after ``paragraph (6)(B),'', and
(2) by inserting ``and multiemployer plans'' after
``paragraph (6)(b)'' in the heading thereof.
(b) Valuation.--Section 412(c)(9) is amended--
(1) by inserting ``(3 years in the case of a multiemployer
plan)'' after ``year'', and
(2) by striking ``Annual valuation'' in the heading and
inserting ``Valuation''.
(c) Effective Date.--The amendments made by this section shall
apply to years beginning after December 31, 1993.
SEC. 236. ALTERNATIVE FULL-FUNDING LIMITATION.
(a) In General.--Subsection (c) of section 412 (relating to minimum
funding standards) is amended by redesignating paragraphs (8) through
(11) as paragraphs (9) through (12), respectively, and by adding after
paragraph (7) the following new paragraph:
``(8) Alternative full-funding limitation.--
``(A) General rule.--An employer may elect the
full-funding limitation under this paragraph with
respect to any defined benefit plan of the employer in
lieu of the full-funding limitation determined under
paragraph (7) if the requirements of subparagraphs (C)
and (D) are met.
``(B) Alternative full-funding limitation.--The
full-funding limitation under this paragraph is the
full-funding limitation determined under paragraph (7)
without regard to subparagraph (A)(i)(I) thereof.
``(C) Requirements relating to plan eligibility.--
``(i) In general.--The requirements of this
subparagraph are met with respect to a defined
benefit plan if--
``(I) as of the 1st day of the
election period, the average accrued
liability of participants accruing
benefits under the plan for the 5
immediately preceding plan years is at
least 80 percent of the plan's total
accrued liability,
``(II) the plan is not a top-heavy
plan (as defined in section 416(g)) for
the 1st plan year of the election
period or either of the 2 preceding
plan years, and
``(III) each defined benefit plan
of the employer (and each defined
benefit plan of each employer who is a
member of any controlled group which
includes such employer) meets the
requirements of subclauses (I) and
(II).
``(ii) Failure to continue to meet
requirements.--
``(I) If any plan fails to meet the
requirement of clause (i)(I) for any
plan year during an election period,
the benefits of the election under this
paragraph shall be phased out under
regulations prescribed by the
Secretary.
``(II) If any plan fails to meet
the requirement of clause (i)(II) for
any plan year during an election
period, such plan shall be treated as
not meeting the requirements of clause
(i) for the remainder of the election
period.
If there is a failure described in subclause
(I) or (II) with respect to any plan, such plan
(and each plan described in clause (i)(III)
with respect to such plan) shall be treated as
not meeting the requirements of clause (i) for
any of the 10 plan years beginning after the
election period.
``(D) Requirements relating to election.--
``(i) In general.--The requirements of this
subparagraph are met with respect to an
election if--
``(I) Filing date.--Notice of such
election is filed with the Secretary
(in such form and manner and containing
such information as the Secretary may
provide) by January 1 of any calendar
year, and is effective as of the 1st
day of the election period beginning on
or after January 1 of the following
calendar year.
``(II) Consistent election.--Such
an election is made for all defined
benefit plans maintained by the
employer or by any member of a
controlled group which includes the
employer.
``(ii) Transition period.--In the case of
any election period beginning on or after July
1, 1994, and before January 1, 1995, the
requirements of clause (i) shall not apply and
the requirements of this subparagraph are met
with respect to such election period if--
``(I) Filing date.--Notice of
election is filed with the Secretary by
October 1, 1994.
``(II) Information.--The notice
sets forth the name and tax
identification number of the plan
sponsor, the names and tax
identification numbers of the plans to
which the election applies, the
limitation under paragraph (7)
(determined with and without regard to
this paragraph), and a signed
certification by an officer of the
employer stating that the requirements
of this paragraph have been met.
``(iii) Revenue offset procedures.--The
Secretary shall, by January 1, 1995, notify
defined benefit plans that have not made an
election under this paragraph for the
transition period described in clause (ii) of
the adjustment required by subparagraph (H).
The revenue offset for the transition period
shall apply to plan years beginning on or after
July 1, 1994, and before January 1, 1995.
``(iv) Excess contributions made by non-
electing plans.--To the extent a defined
benefit plan sponsor makes a contribution to a
defined benefit plan with respect to the
transition period described in clause (ii)
which exceeds the limitation of paragraph (7),
as adjusted by the Secretary for the transition
period, the sponsor shall offset the excess
contribution against allowable contributions to
the plan in subsequent quarters in the taxable
year of the sponsor. If no subsequent
contributions may be made for the taxable year,
the trustee of the defined benefit plan shall
return the excess contribution to the sponsor
in that taxable year or the following taxable
year. Notwithstanding any other provision of
this title, no deduction shall be allowed for
any contribution made in excess of the
limitation of paragraph (7), as adjusted by the
Secretary for the transition period, and no
penalty shall apply with respect to
contributions made in excess of such limitation
to the extent such excess contributions are
either used to offset subsequent contributions,
or returned to the plan sponsor, as provided in
this clause.
``(E) Term of election.--Any election made under
this paragraph shall apply for the election period.
``(F) Other consequences of election.--
``(i) No funding waivers.--In the case of a
plan with respect to which an election is made
under this paragraph, no waiver may be granted
under subsection (d) for any plan year
beginning after the date the election was made
and ending at the close of the election period
with respect thereto.
``(ii) Failure to make successive
elections.--If an election is made under this
paragraph with respect to any plan and such an
election does not apply for each successive
plan year of such plan, such plan shall be
treated as not meeting the requirements of
subparagraph (C) for the period of 10 plan
years beginning after the close of the last
election period for such plan.
``(G) Definitions.--For purposes of this
paragraph--
``(i) Election period.--The term `election
period' means the period of 5 consecutive plan
years beginning with the 1st plan year for
which the election is made.
``(ii) Controlled group.--The term
`controlled group' means all persons who are
treated as a single employer under subsection
(b), (c), (m), or (o) of section 414.
``(H) Procedures if alternative funding limitation
reduces net federal revenues.--
``(i) In general.--At least once with
respect to each fiscal year, the Secretary
shall estimate whether the application of this
paragraph will result in a net reduction in
Federal revenues for such fiscal year.
``(ii) Adjustment of full-funding
limitation if revenue shortfall.--If the
Secretary estimates that the application of
this paragraph will result in a more than
insubstantial net reduction in Federal revenues
for any fiscal year, the Secretary--
``(I) shall make the adjustment
described in clause (iii), and
``(II) to the extent such
adjustment is not sufficient to reduce
such reduction to an insubstantial
amount, shall make the adjustment
described in clause (iv).
Such adjustments shall apply only to defined
benefit plans with respect to which an election
under this paragraph is not in effect.
``(iii) Reduction in limitation based on
150 percent of current liability.--The
adjustment described in this clause is an
adjustment which substitutes a percentage (not
lower than 140 percent) for the percentage
described in paragraph (7)(A)(i)(I) determined
by reducing the percentage of current liability
taken into account with respect to participants
who are not accruing benefits under the plan.
``(iv) Reduction in limitation based on
accrued liability.--The adjustment described in
this clause is an adjustment which reduces the
percentage of accrued liability taken into
account under paragraph (7)(A)(i)(II). In no
event may the amount of accrued liability taken
into account under such paragraph after the
adjustment be less than 140 percent of current
liability.''
(b) Alteration of Discretionary Regulatory Authority.--Subparagraph
(D) of section 412(c)(7) is amended by striking ``provide--'' and all
that follows through ``(iii) for'' and inserting ``provide for''.
(c) Effective Date.--The amendments made by this section shall take
effect on January 1, 1995, except that, in the case of an election
under subparagraph (D)(ii) of paragraph (8) of section 412(c) of the
Internal Revenue Code of 1986, as added by this section, such
amendments shall take effect on July 1, 1994.
SEC. 237. DISTRIBUTIONS UNDER RURAL COOPERATIVE PLANS.
(a) Distributions After Certain Age.--Section 401(k)(7) is amended
by adding at the end thereof the following new subparagraph:
``(C) Special rule for certain distributions.--A
rural cooperative plan which includes a qualified cash
or deferred arrangement shall not be treated as
violating the requirements of section 401(a) merely by
reason of a distribution to a participant after
attainment of age 59\1/2\.''
(b) Effective Date.--The amendments made by this section shall
apply to distributions after the date of the enactment of this Act.
SEC. 238. TREATMENT OF GOVERNMENTAL PLANS UNDER SECTION 415.
(a) Definition of Compensation.--Subsection (k) of section 415
(regarding limitations on benefits and contributions under qualified
plans) is amended by adding immediately after paragraph (2) thereof the
following new paragraph:
``(3) Definition of compensation for governmental plans.--
For purposes of this section, in the case of a governmental
plan (as defined in section 414(d)), the term `compensation'
includes, in addition to the amounts described in subsection
(c)(3)--
``(A) any elective deferral (as defined in section
402(g)(3)), and
``(B) any amount which is contributed by the
employer at the election of the employee and which is
not includible in the gross income of an employee under
section 125 or 457.''
(b) Compensation Limit.--Subsection (b) of section 415 is amended
by adding immediately after paragraph (10) the following new paragraph:
``(11) Special limitation rule for governmental plans.--In
the case of a governmental plan (as defined in section 414(d)),
subparagraph (B) of paragraph (1) shall not apply.''
(c) Treatment of Certain Excess Benefit Plans.--
(1) In general.--Section 415 is amended by adding at the
end thereof the following new subsection:
``(m) Treatment of Qualified Governmental Excess Benefit
Arrangements.--
``(1) Governmental plan not affected.--In determining
whether a governmental plan (as defined in section 414(d))
meets the requirements of this section, benefits provided under
a qualified governmental excess benefit arrangement shall not
be taken into account. Income accruing to a governmental plan
(or to a trust that is maintained solely for the purpose of
providing benefits under a qualified governmental excess
benefit arrangement) in respect of a qualified governmental
excess benefit arrangement shall constitute income derived from
the exercise of an essential governmental function upon which
such governmental plan (or trust) shall be exempt from tax
under section 115.
``(2) Taxation of participant.--For purposes of this
chapter--
``(A) the taxable year or years for which amounts
in respect of a qualified governmental excess benefit
arrangement are includible in gross income by a
participant, and
``(B) the treatment of such amounts when so
includible by the participant,
shall be determined as if such qualified governmental excess
benefit arrangement were treated as a plan for the deferral of
compensation which is maintained by a corporation not exempt
from tax under this chapter and which does not meet the
requirements for qualification under section 401.
``(3) Qualified governmental excess benefit arrangement.--
For purposes of this subsection, the term `qualified
governmental excess benefit arrangement' means a portion of a
governmental plan if--
``(A) such portion is maintained solely for the
purpose of providing to participants in the plan that
part of the participant's annual benefit otherwise
payable under the terms of the plan that exceeds the
limitations on benefits imposed by this section,
``(B) under such portion no election is provided at
any time to the participant (directly or indirectly) to
defer compensation, and
``(C) benefits described in subparagraph (A) are
not paid from a trust forming a part of such
governmental plan unless such trust is maintained
solely for the purpose of providing such benefits.''
(2) Coordination with section 457.--Subsection (e) of
section 457 is amended by adding at the end thereof the
following new paragraph:
``(15) Treatment of qualified governmental excess benefit
arrangements.--Subsections (b)(2) and (c)(1) shall not apply to
any qualified governmental excess benefit arrangement (as
defined in section 415(m)(3)), and benefits provided under such
an arrangement shall not be taken into account in determining
whether any other plan is an eligible deferred compensation
plan.''
(3) Conforming amendment.--Paragraph (2) of section 457(f)
is amended by striking the word ``and'' at the end of
subparagraph (C), by striking the period after subparagraph (D)
and inserting the words ``, and'', and by inserting immediately
thereafter the following new subparagraph:
``(E) a qualified governmental excess benefit
arrangement described in section 415(m).''
(d) Exemption for Survivor and Disability Benefits.--Paragraph (2)
of section 415(b) is amended by adding at the end thereof the following
new subparagraph:
``(I) Exemption for survivor and disability
benefits provided under governmental plans.--
Subparagraph (B) of paragraph (1), subparagraph (C) of
this paragraph, and paragraph (5) shall not apply to--
``(i) income received from a governmental
plan (as defined in section 414(d)) as a
pension, annuity, or similar allowance as the
result of the recipient becoming disabled by
reason of personal injuries or sickness, or
``(ii) amounts received from a governmental
plan by the beneficiaries, survivors, or the
estate of an employee as the result of the
death of the employee.''
(e) Revocation of Grandfather Election.--Subparagraph (C) of
section 415(b)(10) is amended by adding at the end thereof the
following new sentence: ``An election made pursuant to the preceding
sentence to have the provisions of this paragraph applied to the plan
may be revoked not later than the last day of the 3rd plan year
beginning after the date of enactment with respect to all plan years as
to which such election has been applicable and all subsequent plan
years; provided that any amount paid by the plan in a taxable year
ending after revocation of such election in respect of benefits
attributable to a taxable year during which such election was in effect
shall be includible in income by the recipient in accordance with the
rules of this chapter in the taxable year in which such amount is
received (except that such amount shall be treated as received for
purposes of the limitations imposed by this section in the earlier
taxable year or years to which such amount is attributable).''
(f) Effective Date.--
(1) In general.--The amendments made by subsections (a),
(b), (c), and (d) shall apply to taxable years beginning on or
after the date of the enactment of this Act. The amendments
made by subsection (e) shall apply with respect to election
revocations adopted after the date of the enactment of this
Act.
(2) Treatment for years beginning before date of
enactment.--In the case of a governmental plan (as defined in
section 414(d) of the Internal Revenue Code of 1986), such plan
shall be treated as satisfying the requirements of section 415
of such Code for all taxable years beginning before the date of
the enactment of this Act.
SEC. 239. UNIFORM RETIREMENT AGE.
(a) Discrimination Testing.--Paragraph (5) of section 401(a)
(relating to special rules relating to nondiscrimination requirements)
is amended by adding at the end thereof the following new subparagraph:
``(F) Social security retirement age.--For purposes
of testing for discrimination under paragraph (4)--
``(i) the social security retirement age
(as defined in section 415(b)(8)) shall be
treated as a uniform retirement age, and
``(ii) subsidized early retirement benefits
and joint and survivor annuities shall not be
treated as being unavailable to employees on
the same terms merely because such benefits or
annuities are based in whole or in part on an
employee's social security retirement age (as
so defined).''
(b) Effective Date.--The amendments made by this section shall
apply to years beginning after December 31, 1993.
SEC. 240. UNIFORM PENALTY PROVISIONS TO APPLY TO CERTAIN PENSION
REPORTING REQUIREMENTS.
(a) In General.--
(1) Paragraph (1) of section 6724(d) is amended by striking
``and'' at the end of subparagraph (A), by striking the period
at the end of subparagraph (B) and inserting ``, and'', and by
inserting after subparagraph (B) the following new
subparagraph:
``(C) any statement of the amount of payments to
another person required to be made to the Secretary
under--
``(i) section 408(i) (relating to reports
with respect to individual retirement accounts
or annuities), or
``(ii) section 6047(d) (relating to reports
by employers, plan administrators, etc.).''
(2) Paragraph (2) of section 6724(d) is amended by striking
``or'' at the end of subparagraph (S), by striking the period
at the end of subparagraph (T) and inserting a comma, and by
inserting after subparagraph (T) the following new
subparagraphs:
``(U) section 408(i) (relating to reports with
respect to individual retirement plans) to any person
other than the Secretary with respect to the amount of
payments made to such person, or
``(V) section 6047(d) (relating to reports by plan
administrators) to any person other than the Secretary
with respect to the amount of payments made to such
person.''
(b) Modification of Reportable Designated Distributions.--
(1) Section 408.--Subsection (i) of section 408 (relating
to individual retirement account reports) is amended by
inserting ``aggregating $10 or more in any calendar year''
after ``distributions''.
(2) Section 6047.--Paragraph (1) of section 6047(d)
(relating to reports by employers, plan administrators, etc.)
is amended by adding at the end thereof the following new
sentence: ``No return or report may be required under the
preceding sentence with respect to distributions to any person
during any year unless such distributions aggregate $10 or
more.''
(c) Qualifying Rollover Distributions.--Section 6652(i) is
amended--
(1) by striking ``the $10'' and inserting ``$100'', and
(2) by striking ``$5,000'' and inserting ``$50,000''.
(d) Conforming Amendments.--
(1) Paragraph (1) of section 6047(f) is amended to read as
follows:
``(1) For provisions relating to
penalties for failures to file returns and reports required under this
section, see sections 6652(e), 6721, and 6722.''
(2) Subsection (e) of section 6652 is amended by adding at
the end thereof the following new sentence: ``This subsection
shall not apply to any return or statement which is an
information return described in section 6724(d)(1)(C)(ii) or a
payee statement described in section 6724(d)(2)(U).''
(3) Subsection (a) of section 6693 is amended by adding at
the end thereof the following new sentence: ``This subsection
shall not apply to any report which is an information return
described in section 6724(d)(1)(C)(i) or a payee statement
described in section 6724(d)(2)(T).''
(e) Effective Date.--The amendments made by this section shall
apply to returns, reports, and other statements the due date for which
(determined without regard to extensions) is after December 31, 1993.
SEC. 241. CONTRIBUTIONS ON BEHALF OF DISABLED EMPLOYEES.
(a) All Disabled Participants Receiving Contributions.--Section
415(c)(3)(C) is amended by adding at the end thereof the following:
``If a defined contribution plan provides for the continuation of
contributions on behalf of all participants described in clause (i) for
a fixed or determinable period, this subparagraph shall be applied
without regard to clauses (ii) and (iii).''
(b) Effective Date.--The amendments made by this section shall
apply to years beginning after December 31, 1993.
SEC. 242. SPECIAL RULES FOR PLANS COVERING PILOTS.
(a) General Rule.--
(1) Subparagraph (B) of section 410(b)(3) is amended to
read as follows:
``(B) in the case of a plan established or
maintained by one or more employers to provide
contributions or benefits for air pilots employed by
one or more common carriers engaged in interstate or
foreign commerce or air pilots employed by carriers
transporting mail for or under contract with the United
States Government, all employees who are not air
pilots.''
(2) Paragraph (3) of section 410(b) is amended by striking
the last sentence and inserting the following new sentence:
``Subparagraph (B) shall not apply in the case of a plan which
provides contributions or benefits for employees who are not
air pilots or for air pilots whose principal duties are not
customarily performed aboard aircraft in flight.''
(b) Effective Date.--The amendments made by subsection (a) shall
apply to years beginning after December 31, 1993.
SEC. 243. TREATMENT OF DEFERRED COMPENSATION PLANS OF STATE AND LOCAL
GOVERNMENTS AND TAX-EXEMPT ORGANIZATIONS.
(a) Special Rules for Plan Distributions.--Paragraph (9) of section
457(e) (relating to other definitions and special rules) is amended to
read as follows:
``(9) Benefits not treated as made available by reason of
certain elections, etc.--
``(A) Total amount payable is $3,500 or less.--The
total amount payable to a participant under the plan
shall not be treated as made available merely because
the participant may elect to receive such amount (or
the plan may distribute such amount without the
participant's consent) if--
``(i) such amount does not exceed $3,500,
and
``(ii) such amount may be distributed only
if--
``(I) no amount has been deferred
under the plan with respect to such
participant during the 2-year period
ending on the date of the distribution,
and
``(II) there has been no prior
distribution under the plan to such
participant to which this subparagraph
applied.
A plan shall not be treated as failing to meet the
distribution requirements of subsection (d) by reason
of a distribution to which this subparagraph applies.
``(B) Election to defer commencement of
distributions.--The total amount payable to a
participant under the plan shall not be treated as made
available merely because the participant may elect to
defer commencement of distributions under the plan if--
``(i) such election is made after amounts
may be available under the plan in accordance
with subsection (d)(1)(A) and before
commencement of such distributions, and
``(ii) the participant may make only 1 such
election.''
(b) Cost-of-Living Adjustment of Maximum Deferral Amount.--
Subsection (e) of section 457 is amended by adding at the end thereof
the following new paragraph:
``(14) Cost-of-living adjustment of maximum deferral
amount.--The Secretary shall adjust the $7,500 amount specified
in subsections (b)(2) and (c)(1) at the same time and in the
same manner as under section 415(d), except that the base year
in applying such section for purposes of this paragraph shall
be 1993.''
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after the date of the enactment of
this Act.
SEC. 244. TREATMENT OF EMPLOYER REVERSIONS REQUIRED BY CONTRACT TO BE
PAID TO THE UNITED STATES.
(a) In General.--Subparagraph (B) of section 4980(c)(2) (defining
employer reversion) is amended by striking ``or'' at the end of clause
(i), by striking the period at the end of clause (ii) and inserting ``,
or'', and by adding at the end thereof the following new clause:
``(iii) any distribution to the employer to
the extent that the distribution is paid within
a reasonable period to the United States in
satisfaction of a Federal claim for an
equitable share of the plan's surplus assets,
as determined pursuant to Federal contracting
regulations.''
(b) Effective Date.--The amendment made by subsection (a) shall
apply to reversions on or after the date of the enactment of this Act.
SEC. 245. CONTINUATION HEALTH COVERAGE FOR EMPLOYEES OF FAILED
FINANCIAL INSTITUTIONS.
(a) Enforcement of Continuation of Health Plan Requirements of
Acquirers of Failed Depository Institutions.--Subsection (f) of section
4980B (relating to continuation of coverage requirements of group
health plans) is amended by adding at the end thereof the following new
paragraph:
``(9) Special rules for acquirers of failed depository
institutions.--
``(A) In general.--Except as provided in
subparagraph (B), any acquirer of a failed depository
institution--
``(i) shall have the same obligation to
provide a group health plan meeting the
requirements of this subsection with respect to
qualified individuals of such institution as
the failed depository institution would have
had but for its failure, and
``(ii) shall be treated as the employer of
such qualified individuals for purposes of this
section.
``(B) Tax not to apply if fdic or rtc provide
continuation coverage.--No person shall be subject to
any liability under this section by reason of being an
acquirer of a failed depository institution if the
Federal Deposit Insurance Corporation or the Resolution
Trust Corporation elects to relieve such acquirer from
its obligations under subparagraph (A). In any such
case, the requirements of subparagraph (A) shall apply
to the Federal Deposit Insurance Corporation or the
Resolution Trust Corporation, as the case may be.
``(C) Acquirer.--For purposes of this paragraph, an
entity is an acquirer of a failed depository
institution during any period if--
``(i) such entity holds substantially all
of the assets or liabilities of such
institution, and
``(ii)(I) such entity is a bridge bank, or
``(II) such entity acquired such assets or
liabilities from the Federal Deposit Insurance
Corporation, the Resolution Trust Corporation,
or a bridge bank.
``(D) Failed depository institution.--For purposes
of this section, the term `failed depository
institution' means any depository institution (as
defined in section 3(c) of the Federal Deposit
Insurance Act) for which a receiver or conservator has
been appointed.
``(E) Qualified individual.--For purposes of this
section, the term `qualified individual' means--
``(i) any individual who was, on the day
before the date of the appointment of the
receiver or conservator, provided coverage
under a group health plan of the failed
depository institution by reason of the
performance of services for such institution,
and
``(ii) any individual who was, on such day,
a beneficiary under such plan as the spouse or
dependent child of the individual described in
clause (i).''
(b) Treatment of Depository Institution Failures as Qualifying
Events for Retirees of Such Institutions.--
(1) In general.--Subparagraph (B) of section 4980B(f)(3) is
amended--
(A) by striking ``The termination'' and inserting
``(i) The termination'',
(B) by striking the period at the end and inserting
``, or'', and
(C) by inserting after clause (i) the following new
clause:
``(ii) the appointment of a receiver or conservator
for a failed depository institution from whose
employment the covered employee retired at any time.''
(2) Conforming amendment.--Subclause (I) of section
4980B(f)(2)(B)(i) is amended by striking ``and reduced hours''
and inserting ``, reduced hours, and failures of depository
institutions''.
(c) Effective Dates.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply as if included in
section 451 of the Federal Deposit Insurance Corporation
Improvement Act of 1991 as of the date of the enactment of such
Act.
(2) Liability of fdic.--In the case of the Federal Deposit
Insurance Corporation or any acquirer from such Corporation,
the amendments made by this section shall apply only to failed
depository institutions for which the receiver or conservator
is appointed after the date of the enactment of this Act.
(3) Special rule for coverage under fdic plan.--Effective
as of the date of the enactment of the Federal Deposit
Insurance Corporation Improvement Act of 1991, coverage under
the health care continuation plan maintained by the Federal
Deposit Insurance Corporation on June 25, 1992, and any other
substantially similar plan maintained by such Corporation,
shall be deemed to satisfy the obligations of the Federal
Deposit Insurance Corporation (and any acquirer from such
Corporation) under section 4980B(f) of the Internal Revenue
Code of 1986 and section 451 of the Federal Deposit Insurance
Corporation Improvement Act of 1991 with respect to qualified
individuals of failed depository institutions.
SEC. 246. DATE FOR ADOPTION OF PLAN AMENDMENTS.
If any amendment made by this title requires an amendment to any
plan, such plan amendment shall not be required to be made before the
first day of the first plan year beginning on or after January 1, 1995,
if--
(1) during the period after such amendment takes effect and
before such first plan year, the plan is operated in accordance
with the requirements of such amendment, and
(2) such plan amendment applies retroactively to such
period.
TITLE III--TREATMENT OF LARGE PARTNERSHIPS
Subtitle A--General Provisions
SEC. 301. SIMPLIFIED FLOW-THROUGH FOR LARGE PARTNERSHIPS.
(a) General Rule.--Subchapter K (relating to partners and
partnerships) is amended by adding at the end thereof the following new
part:
``PART IV--SPECIAL RULES FOR LARGE PARTNERSHIPS
``Sec. 771. Application of subchapter to
large partnerships.
``Sec. 772. Simplified flow-through.
``Sec. 773. Computations at partnership
level.
``Sec. 774. Other modifications.
``Sec. 775. Large partnership defined.
``Sec. 776. Special rules for
partnerships holding oil and
gas properties.
``Sec. 777. Regulations.
``SEC. 771. APPLICATION OF SUBCHAPTER TO LARGE PARTNERSHIPS.
``The preceding provisions of this subchapter to the extent
inconsistent with the provisions of this part shall not apply to a
large partnership and its partners.
``SEC. 772. SIMPLIFIED FLOW-THROUGH.
``(a) General Rule.--In determining the income tax of a partner of
a large partnership, such partner shall take into account separately
such partner's distributive share of the partnership's--
``(1) taxable income or loss from passive loss limitation
activities,
``(2) taxable income or loss from other activities,
``(3) net capital gain (or net capital loss)--
``(A) to the extent allocable to passive loss
limitation activities, and
``(B) to the extent allocable to other activities,
``(4) tax-exempt interest,
``(5) applicable net AMT adjustment separately computed
for--
``(A) passive loss limitation activities, and
``(B) other activities,
``(6) general credits,
``(7) low-income housing credit determined under section
42,
``(8) rehabilitation credit determined under section 47,
``(9) foreign income taxes,
``(10) the credit allowable under section 29, and
``(11) other items to the extent that the Secretary
determines that the separate treatment of such items is
appropriate.
``(b) Separate Computations.--In determining the amounts required
under subsection (a) to be separately taken into account by any
partner, this section and section 773 shall be applied separately with
respect to such partner by taking into account such partner's
distributive share of the items of income, gain, loss, deduction, or
credit of the partnership.
``(c) Treatment at Partner Level.--
``(1) In general.--Except as provided in this subsection,
rules similar to the rules of section 702(b) shall apply to any
partner's distributive share of the amounts referred to in
subsection (a).
``(2) Income or loss from passive loss limitation
activities.--For purposes of this chapter, any partner's
distributive share of any income or loss described in
subsection (a)(1) shall be treated as an item of income or loss
(as the case may be) from the conduct of a trade or business
which is a single passive activity (as defined in section 469).
A similar rule shall apply to a partner's distributive share of
amounts referred to in paragraphs (3)(A) and (5)(A) of
subsection (a).
``(3) Income or loss from other activities.--
``(A) In general.--For purposes of this chapter,
any partner's distributive share of any income or loss
described in subsection (a)(2) shall be treated as an
item of income or expense (as the case may be) with
respect to property held for investment.
``(B) Deductions for loss not subject to section
67.--The deduction under section 212 for any loss
described in subparagraph (A) shall not be treated as a
miscellaneous itemized deduction for purposes of
section 67.
``(4) Treatment of net capital gain or loss.--For purposes
of this chapter, any partner's distributive share of any gain
or loss described in subsection (a)(3) shall be treated as a
long-term capital gain or loss, as the case may be.
``(5) Minimum tax treatment.--In determining the
alternative minimum taxable income of any partner, such
partner's distributive share of any applicable net AMT
adjustment shall be taken into account in lieu of making the
separate adjustments provided in sections 56, 57, and 58 with
respect to the items of the partnership. Except as provided in
regulations, the applicable net AMT adjustment shall be
treated, for purposes of section 53, as an adjustment or item
of tax preference not specified in section 53(d)(1)(B)(ii).
``(6) General credits.--A partner's distributive share of
the amount referred to in paragraph (6) of subsection (a) shall
be taken into account as a current year business credit.
``(d) Operating Rules.--For purposes of this section--
``(1) Passive loss limitation activity.--The term `passive
loss limitation activity' means--
``(A) any activity which involves the conduct of a
trade or business, and
``(B) any rental activity.
For purposes of the preceding sentence, the term `trade or
business' includes any activity treated as a trade or business
under paragraph (5) or (6) of section 469(c).
``(2) Tax-exempt interest.--The term `tax-exempt interest'
means interest excludable from gross income under section 103.
``(3) Applicable net amt adjustment.--
``(A) In general.--The applicable net AMT
adjustment is--
``(i) with respect to taxpayers other than
corporations, the net adjustment determined by
using the adjustments applicable to
individuals, and
``(ii) with respect to corporations, the
net adjustment determined by using the
adjustments applicable to corporations.
``(B) Net adjustment.--The term `net adjustment'
means the net adjustment in the items attributable to
passive loss activities or other activities (as the
case may be) which would result if such items were
determined with the adjustments of sections 56, 57, and
58.
``(4) Treatment of certain separately stated items.--
``(A) Exclusion for certain purposes.--In
determining the amounts referred to in paragraphs (1)
and (2) of subsection (a), any net capital gain or net
capital loss (as the case may be), and any item
referred to in subsection (a)(11), shall be excluded.
``(B) Allocation rules.--The net capital gain shall
be treated--
``(i) as allocable to passive loss
limitation activities to the extent the net
capital gain does not exceed the net capital
gain determined by only taking into account
gains and losses from sales and exchanges of
property used in connection with such
activities, and
``(ii) as allocable to other activities to
the extent such gain exceeds the amount
allocated under clause (i).
A similar rule shall apply for purposes of allocating
any net capital loss.
``(C) Net capital loss.--The term `net capital
loss' means the excess of the losses from sales or
exchanges of capital assets over the gains from sales
or exchange of capital assets.
``(5) General credits.--The term `general credits' means
any credit other than the low-income housing credit, the
rehabilitation credit, the foreign tax credit, and the credit
allowable under section 29.
``(6) Foreign income taxes.--The term `foreign income
taxes' means taxes described in section 901 which are paid or
accrued to foreign countries and to possessions of the United
States.
``(e) Special Rule for Unrelated Business Tax.--In the case of a
partner which is an organization subject to tax under section 511, such
partner's distributive share of any items shall be taken into account
separately to the extent necessary to comply with the provisions of
section 512(c)(1).
``(f) Special Rules for Applying Passive Loss Limitations.--If any
person holds an interest in a large partnership other than as a limited
partner--
``(1) paragraph (2) of subsection (c) shall not apply to
such partner, and
``(2) such partner's distributive share of the partnership
items allocable to passive loss limitation activities shall be
taken into account separately to the extent necessary to comply
with the provisions of section 469.
The preceding sentence shall not apply to any items allocable to an
interest held as a limited partner.
``SEC. 773. COMPUTATIONS AT PARTNERSHIP LEVEL.
``(a) General Rule.--
``(1) Taxable income.--The taxable income of a large
partnership shall be computed in the same manner as in the case
of an individual except that--
``(A) the items described in section 772(a) shall
be separately stated, and
``(B) the modifications of subsection (b) shall
apply.
``(2) Elections.--All elections affecting the computation
of the taxable income of a large partnership or the computation
of any credit of a large partnership shall be made by the
partnership; except that the election under section 901, and
any election under section 108, shall be made by each partner
separately.
``(3) Limitations, etc.--
``(A) In general.--Except as provided in
subparagraph (B), all limitations and other provisions
affecting the computation of the taxable income of a
large partnership or the computation of any credit of a
large partnership shall be applied at the partnership
level (and not at the partner level).
``(B) Certain limitations applied at partner
level.--The following provisions shall be applied at
the partner level (and not at the partnership level):
``(i) Section 68 (relating to overall
limitation on itemized deductions).
``(ii) Sections 49 and 465 (relating to at
risk limitations).
``(iii) Section 469 (relating to limitation
on passive activity losses and credits).
``(iv) Any other provision specified in
regulations.
``(4) Coordination with other provisions.--Paragraphs (2)
and (3) shall apply notwithstanding any other provision of this
chapter other than this part.
``(b) Modifications to Determination of Taxable Income.--In
determining the taxable income of a large partnership--
``(1) Certain deductions not allowed.--The following
deductions shall not be allowed:
``(A) The deduction for personal exemptions
provided in section 151.
``(B) The net operating loss deduction provided in
section 172.
``(C) The additional itemized deductions for
individuals provided in part VII of subchapter B (other
than section 212 thereof).
``(2) Charitable deductions.--In determining the amount
allowable under section 170, the limitation of section
170(b)(2) shall apply.
``(3) Coordination with section 67.--In lieu of applying
section 67, 70 percent of the amount of the miscellaneous
itemized deductions shall be disallowed.
``(c) Special Rules for Income From Discharge of Indebtedness.--If
a large partnership has income from the discharge of any indebtedness--
``(1) such income shall be excluded in determining the
amounts referred to in section 772(a), and
``(2) in determining the income tax of any partner of such
partnership--
``(A) such income shall be treated as an item
required to be separately taken into account under
section 772(a), and
``(B) the provisions of section 108 shall be
applied without regard to this part.
``SEC. 774. OTHER MODIFICATIONS.
``(a) Treatment of Certain Optional Adjustments, Etc.--In the case
of a large partnership--
``(1) computations under section 773 shall be made without
regard to any adjustment under section 743(b) or 108(b), but
``(2) a partner's distributive share of any amount referred
to in section 772(a) shall be appropriately adjusted to take
into account any adjustment under section 743(b) or 108(b) with
respect to such partner.
``(b) Credit Recapture Determined at Partnership Level.--
``(1) In general.--In the case of a large partnership--
``(A) any credit recapture shall be taken into
account by the partnership, and
``(B) the amount of such recapture shall be
determined as if the credit with respect to which the
recapture is made had been fully utilized to reduce
tax.
``(2) Method of taking recapture into account.--A large
partnership shall take into account a credit recapture by
reducing the amount of the appropriate current year credit to
the extent thereof, and if such recapture exceeds the amount of
such current year credit, the partnership shall be liable to
pay such excess.
``(3) Dispositions not to trigger recapture.--No credit
recapture shall be required by reason of any transfer of an
interest in a large partnership.
``(4) Credit recapture.--For purposes of this subsection,
the term `credit recapture' means any increase in tax under
section 42(j) or 50(a).
``(c) Partnership Not Terminated by Reason of Change in
Ownership.--Subparagraph (B) of section 708(b)(1) shall not apply to a
large partnership.
``(d) Partnership Entitled to Certain Credits.--The following shall
be allowed to a large partnership and shall not be taken into account
by the partners of such partnership:
``(1) The credit provided by section 34.
``(2) Any credit or refund under section 852(b)(3)(D).
``(e) Treatment of REMIC Residuals.--For purposes of applying
section 860E(e)(6) to any large partnership--
``(1) all interests in such partnership shall be treated as
held by disqualified organizations,
``(2) in lieu of applying subparagraph (C) of section
860E(e)(6), the amount subject to tax under section 860E(e)(6)
shall be excluded from the gross income of such partnership,
and
``(3) subparagraph (D) of section 860E(e)(6) shall not
apply.
``(f) Special Rules for Applying Certain Installment Sale Rules.--
In the case of a large partnership--
``(1) the provisions of sections 453(l)(3) and 453A shall
be applied at the partnership level, and
``(2) in determining the amount of interest payable under
such sections, such partnership shall be treated as subject to
tax under this chapter at the highest rate of tax in effect
under section 1 or 11.
``SEC. 775. LARGE PARTNERSHIP.
``(a) General Rule.--For purposes of this part--
``(1) In general.--Except as otherwise provided in this
section or section 776, the term `large partnership' means,
with respect to any partnership taxable year, any partnership
if the number of persons who were partners in such partnership
in such taxable year or any preceding partnership taxable year
ending on or after December 31, 1994, equaled or exceeded 250.
To the extent provided in regulations, a partnership shall
cease to be treated as a large partnership for any partnership
taxable year if in such taxable year fewer than 100 persons
were partners in such partnership.
``(2) Election for partnerships with at least 100
partners.--If a partnership makes an election under this
paragraph, paragraph (1) shall be applied by substituting `100'
for `250'. Such an election shall apply to the taxable year for
which made and all subsequent taxable years unless revoked with
the consent of the Secretary.
``(b) Special Rules for Certain Service Partnerships.--
``(1) Certain partners not counted.--For purposes of this
section, the term `partner' does not include any individual
performing substantial services in connection with the
activities of the partnership and holding an interest in such
partnership, or an individual who formerly performed
substantial services in connection with such activities and who
held an interest in such partnership at the time the individual
performed such services.
``(2) Exclusion.--For purposes of this part, the term
`large partnership' does not include any partnership if
substantially all the partners of such partnership--
``(A) are individuals performing substantial
services in connection with the activities of such
partnership or are personal service corporations (as
defined in section 269A(b)) the owner-employees (as
defined in section 269A(b)) of which perform such
substantial services,
``(B) are retired partners who had performed such
substantial services, or
``(C) are spouses of partners who are performing
(or had previously performed) such substantial
services.
``(3) Special rule for lower tier partnerships.--For
purposes of this subsection, the activities of a partnership
shall include the activities of any other partnership in which
the partnership owns directly an interest in the capital and
profits of at least 80 percent.
``(c) Exclusion of Commodity Pools.--For purposes of this part, the
term `large partnership' does not include any partnership the principal
activity of which is the buying and selling of commodities (not
described in section 1221(1)), or options, futures, or forwards with
respect to such commodities.
``(d) Secretary May Rely on Treatment on Return.--If, on the
partnership return of any partnership, such partnership is treated as a
large partnership, such treatment shall be binding on such partnership
and all partners of such partnership but not on the Secretary.
``SEC. 776. SPECIAL RULES FOR PARTNERSHIPS HOLDING OIL AND GAS
PROPERTIES.
``(a) Exception for Partnerships Holding Significant Oil and Gas
Properties.--
``(1) In general.--For purposes of this part, the term
`large partnership' shall not include any partnership if the
average percentage of assets (by value) held by such
partnership during the taxable year which are oil or gas
properties is at least 25 percent. For purposes of the
preceding sentence, any interest held by a partnership in
another partnership shall be disregarded, except that the
partnership shall be treated as holding its proportionate share
of the assets of such other partnership.
``(2) Election to waive exception.--Any partnership may
elect to have paragraph (1) not apply. Such an election shall
apply to the partnership taxable year for which made and all
subsequent partnership taxable years unless revoked with the
consent of the Secretary.
``(b) Special Rules Where Part Applies.--
``(1) Computation of percentage depletion.--In the case of
a large partnership, except as provided in paragraph (2)--
``(A) the allowance for depletion under section 611
with respect to any partnership oil or gas property
shall be computed at the partnership level without
regard to any provision of section 613A requiring such
allowance to be computed separately by each partner,
``(B) such allowance shall be determined without
regard to the provisions of section 613A(c) limiting
the amount of production for which percentage depletion
is allowable and without regard to paragraph (1) of
section 613A(d), and
``(C) paragraph (3) of section 705(a) shall not
apply.
``(2) Treatment of certain partners.--
``(A) In general.--In the case of a disqualified
person, the treatment under this chapter of such
person's distributive share of any item of income,
gain, loss, deduction, or credit attributable to any
partnership oil or gas property shall be determined
without regard to this part. Such person's distributive
share of any such items shall be excluded for purposes
of making determinations under sections 772 and 773.
``(B) Disqualified person.--For purposes of
subparagraph (A), the term `disqualified person' means,
with respect to any partnership taxable year--
``(i) any person referred to in paragraph
(2) or (4) of section 613A(d) for such person's
taxable year in which such partnership taxable
year ends, and
``(ii) any other person if such person's
average daily production of domestic crude oil
and natural gas for such person's taxable year
in which such partnership taxable year ends
exceeds 500 barrels.
``(C) Average daily production.--For purposes of
subparagraph (B), a person's average daily production
of domestic crude oil and natural gas for any taxable
year shall be computed as provided in section
613A(c)(2)--
``(i) by taking into account all production
of domestic crude oil and natural gas
(including such person's proportionate share of
any production of a partnership),
``(ii) by treating 6,000 cubic feet of
natural gas as a barrel of crude oil, and
``(iii) by treating as 1 person all persons
treated as 1 taxpayer under section 613A(c)(8)
or among whom allocations are required under
such section.
``SEC. 777. REGULATIONS.
``The Secretary shall prescribe such regulations as may be
appropriate to carry out the purposes of this part.''
(b) Clerical Amendment.--The table of parts for subchapter K of
chapter 1 is amended by adding at the end thereof the following new
item:
``Part IV. Special rules for large
partnerships.''
SEC. 302. SIMPLIFIED AUDIT PROCEDURES FOR LARGE PARTNERSHIPS.
(a) General Rule.--Chapter 63 is amended by adding at the end
thereof the following new subchapter:
``Subchapter D--Treatment of Large Partnerships
``Part I. Treatment of partnership items
and adjustments.
``Part II. Partnership level adjustments.
``Part III. Definitions and special
rules.
``PART I--TREATMENT OF PARTNERSHIP ITEMS AND ADJUSTMENTS
``Sec. 6240. Application of subchapter.
``Sec. 6241. Partner's return must be
consistent with partnership
return.
``Sec. 6242. Procedures for taking
partnership adjustments into
account.
``SEC. 6240. APPLICATION OF SUBCHAPTER.
``(a) General Rule.--This subchapter shall only apply to large
partnerships and partners in such partnerships.
``(b) Coordination With Other Partnership Audit Procedures.--
``(1) In general.--Subchapter C of this chapter shall not
apply to any large partnership other than in its capacity as a
partner in another partnership which is not a large
partnership.
``(2) Treatment where partner in other partnership.--If a
large partnership is a partner in another partnership which is
not a large partnership--
``(A) subchapter C of this chapter shall apply to
items of such large partnership which are partnership
items with respect to such other partnership, but
``(B) any adjustment under such subchapter C shall
be taken into account in the manner provided by section
6242.
``SEC. 6241. PARTNER'S RETURN MUST BE CONSISTENT WITH PARTNERSHIP
RETURN.
``(a) General Rule.--A partner of any large partnership shall, on
the partner's return, treat each partnership item attributable to such
partnership in a manner which is consistent with the treatment of such
partnership item on the partnership return.
``(b) Underpayment Due to Inconsistent Treatment Assessed as Math
Error.--Any underpayment of tax by a partner by reason of failing to
comply with the requirements of subsection (a) shall be assessed and
collected in the same manner as if such underpayment were on account of
a mathematical or clerical error appearing on the partner's return.
Paragraph (2) of section 6213(b) shall not apply to any assessment of
an underpayment referred to in the preceding sentence.
``(c) Adjustments Not To Affect Prior Year of Partners.--
``(1) In general.--Except as provided in paragraph (2),
subsections (a) and (b) shall apply without regard to any
adjustment to the partnership item under part II.
``(2) Certain changes in distributive share taken into
account by partner.--
``(A) In general.--To the extent that any
adjustment under part II involves a change under
section 704 in a partner's distributive share of the
amount of any partnership item shown on the partnership
return, such adjustment shall be taken into account in
applying this title to such partner for the partner's
taxable year for which such item was required to be
taken into account.
``(B) Coordination with deficiency procedures.--
``(i) In general.--Subchapter B shall not
apply to the assessment or collection of any
underpayment of tax attributable to an
adjustment referred to in subparagraph (A).
``(ii) Adjustment not precluded.--
Notwithstanding any other law or rule of law,
nothing in subchapter B (or in any proceeding
under subchapter B) shall preclude the
assessment or collection of any underpayment of
tax (or the allowance of any credit or refund
of any overpayment of tax) attributable to an
adjustment referred to in subparagraph (A) and
such assessment or collection or allowance (or
any notice thereof) shall not preclude any
notice, proceeding, or determination under
subchapter B.
``(C) Period of limitations.--The period for--
``(i) assessing any underpayment of tax, or
``(ii) filing a claim for credit or refund
of any overpayment of tax,
attributable to an adjustment referred to in
subparagraph (A) shall not expire before the close of
the period prescribed by section 6248 for making
adjustments with respect to the partnership taxable
year involved.
``(D) Tiered structures.--If the partner referred
to in subparagraph (A) is another partnership or an S
corporation, the rules of this paragraph shall also
apply to persons holding interests in such partnership
or S corporation (as the case may be); except that, if
such partner is a large partnership, the adjustment
referred to in subparagraph (A) shall be taken into
account in the manner provided by section 6242.
``(d) Addition to Tax for Failure to Comply With Section.--
``For addition to tax in case of
partner's disregard of requirements of this section, see part II of
subchapter A of chapter 68.
``SEC. 6242. PROCEDURES FOR TAKING PARTNERSHIP ADJUSTMENTS INTO
ACCOUNT.
``(a) Adjustments Flow Through To Partners for Year in Which
Adjustment Takes Effect.--
``(1) In general.--If any partnership adjustment with
respect to any partnership item takes effect (within the
meaning of subsection (d)(2)) during any partnership taxable
year and if an election under paragraph (2) does not apply to
such adjustment, such adjustment shall be taken into account in
determining the amount of such item for the partnership taxable
year in which such adjustment takes effect. In applying this
title to any person who is (directly or indirectly) a partner
in such partnership during such partnership taxable year, such
adjustment shall be treated as an item actually arising during
such taxable year.
``(2) Partnership liable in certain cases.--If--
``(A) a partnership elects under this paragraph to
not take an adjustment into account under paragraph
(1),
``(B) a partnership does not make such an election
but in filing its return for any partnership taxable
year fails to take fully into account any partnership
adjustment as required under paragraph (1), or
``(C) any partnership adjustment involves a
reduction in a credit which exceeds the amount of such
credit determined for the partnership taxable year in
which the adjustment takes effect,
the partnership shall pay to the Secretary an amount determined
by applying the rules of subsection (b)(4) to the adjustments
not so taken into account and any excess referred to in
subparagraph (C).
``(3) Offsetting adjustments taken into account.--If a
partnership adjustment requires another adjustment in a taxable
year after the adjusted year and before the partnership taxable
year in which such partnership adjustment takes effect, such
other adjustment shall be taken into account under this
subsection for the partnership taxable year in which such
partnership adjustment takes effect.
``(4) Coordination with part ii.--Amounts taken into
account under this subsection for any partnership taxable year
shall continue to be treated as adjustments for the adjusted
year for purposes of determining whether such amounts may be
readjusted under part II.
``(b) Partnership Liable for Interest and Penalties.--
``(1) In general.--If a partnership adjustment takes effect
during any partnership taxable year and such adjustment results
in an imputed underpayment for the adjusted year, the
partnership--
``(A) shall pay to the Secretary interest computed
under paragraph (2), and
``(B) shall be liable for any penalty, addition to
tax, or additional amount as provided in paragraph (3).
``(2) Determination of amount of interest.--The interest
computed under this paragraph with respect to any partnership
adjustment is the interest which would be determined under
chapter 67--
``(A) on the imputed underpayment determined under
paragraph (4) with respect to such adjustment,
``(B) for the period beginning on the day after the
return due date for the adjusted year and ending on the
return due date for the partnership taxable year in
which such adjustment takes effect (or, if earlier, in
the case of any adjustment to which subsection (a)(2)
applies, the date on which the payment under subsection
(a)(2) is made).
Proper adjustments in the amount determined under the preceding
sentence shall be made for adjustments required for partnership
taxable years after the adjusted year and before the year in
which the partnership adjustment takes effect by reason of such
partnership adjustment.
``(3) Penalties.--A partnership shall be liable for any
penalty, addition to tax, or additional amount for which it
would have been liable if such partnership had been an
individual subject to tax under chapter 1 for the adjusted year
and the imputed underpayment determined under paragraph (4)
were an actual underpayment (or understatement) for such year.
``(4) Imputed underpayment.--For purposes of this
subsection, the imputed underpayment determined under this
paragraph with respect to any partnership adjustment is the
underpayment (if any) which would result--
``(A) by netting all adjustments to items of
income, gain, loss, or deduction and by treating any
net increase in income as an underpayment equal to the
amount of such net increase multiplied by the highest
rate of tax in effect under section 1 or 11 for the
adjusted year, and
``(B) by taking adjustments to credits into account
as increases or decreases (whichever is appropriate) in
the amount of tax.
For purposes of the preceding sentence, any net decrease in a
loss shall be treated as an increase in income and a similar
rule shall apply to a net increase in a loss.
``(c) Administrative Provisions.--
``(1) In general.--Any payment required by subsection
(a)(2) or (b)(1)(A)--
``(A) shall be assessed and collected in the same
manner as if it were a tax imposed by subtitle C, and
``(B) shall be paid on or before the return due
date for the partnership taxable year in which the
partnership adjustment takes effect.
``(2) Interest.--For purposes of determining interest, any
payment required by subsection (a)(2) or (b)(1)(A) shall be
treated as an underpayment of tax.
``(3) Penalties.--
``(A) In general.--In the case of any failure by
any partnership to pay on the date prescribed therefor
any amount required by subsection (a)(2) or (b)(1)(A),
there is hereby imposed on such partnership a penalty
of 10 percent of the underpayment. For purposes of the
preceding sentence, the term `underpayment' means the
excess of any payment required under this section over
the amount (if any) paid on or before the date
prescribed therefor.
``(B) Accuracy-related and fraud penalties made
applicable.--For purposes of part II of subchapter A of
chapter 68, any payment required by subsection (a)(2)
shall be treated as an underpayment of tax.
``(d) Definitions and Special Rules.--For purposes of this
section--
``(1) Partnership adjustment.--The term `partnership
adjustment' means any adjustment in the amount of any
partnership item of a large partnership.
``(2) When adjustment takes effect.--A partnership
adjustment takes effect--
``(A) in the case of an adjustment pursuant to the
decision of a court in a proceeding brought under part
II, when such decision becomes final,
``(B) in the case of an adjustment pursuant to any
administrative adjustment request under section 6251,
when such adjustment is allowed by the Secretary, or
``(C) in any other case, when such adjustment is
made.
``(3) Adjusted year.--The term `adjusted year' means the
partnership taxable year to which the item being adjusted
relates.
``(4) Return due date.--The term `return due date' means,
with respect to any taxable year, the date prescribed for
filing the partnership return for such taxable year (determined
without regard to extensions).
``(5) Adjustments involving changes in character.--Under
regulations, appropriate adjustments in the application of this
section shall be made for purposes of taking into account
partnership adjustments which involve a change in the character
of any item of income, gain, loss, or deduction.
``(e) Payments Nondeductible.--No deduction shall be allowed under
subtitle A for any payment required to be made by a large partnership
under this section.
``PART II--PARTNERSHIP LEVEL ADJUSTMENTS
``Subpart A. Adjustments by Secretary.
``Subpart B. Claims for adjustments by
partnership.
``Subpart A--Adjustments by Secretary
``Sec. 6245. Secretarial authority.
``Sec. 6246. Restrictions on partnership
adjustments.
``Sec. 6247. Judicial review of
partnership adjustment.
``Sec. 6248. Period of limitations for
making adjustments.
``SEC. 6245. SECRETARIAL AUTHORITY.
``(a) General Rule.--The Secretary is authorized and directed to
make adjustments at the partnership level in any partnership item to
the extent necessary to have such item be treated in the manner
required.
``(b) Notice of Partnership Adjustment.--
``(1) In general.--If the Secretary determines that a
partnership adjustment is required, the Secretary is authorized
to send notice of such adjustment to the partnership by
certified mail or registered mail. Such notice shall be
sufficient if mailed to the partnership at its last known
address even if the partnership has terminated its existence.
``(2) Further notices restricted.--If the Secretary mails a
notice of a partnership adjustment to any partnership for any
partnership taxable year and the partnership files a petition
under section 6247 with respect to such notice, in the absence
of a showing of fraud, malfeasance, or misrepresentation of a
material fact, the Secretary shall not mail another such notice
to such partnership with respect to such taxable year.
``(3) Authority to rescind notice with partnership
consent.--The Secretary may, with the consent of the
partnership, rescind any notice of a partnership adjustment
mailed to such partnership. Any notice so rescinded shall not
be treated as a notice of a partnership adjustment, for
purposes of this section, section 6246, and section 6247, and
the taxpayer shall have no right to bring a proceeding under
section 6247 with respect to such notice. Nothing in this
subsection shall affect any suspension of the running of any
period of limitations during any period during which the
rescinded notice was outstanding.
``SEC. 6246. RESTRICTIONS ON PARTNERSHIP ADJUSTMENTS.
``(a) General Rule.--Except as otherwise provided in this chapter,
no adjustment to any partnership item may be made (and no levy or
proceeding in any court for the collection of any amount resulting from
such adjustment may be made, begun or prosecuted) before--
``(1) the close of the 90th day after the day on which a
notice of a partnership adjustment was mailed to the
partnership, and
``(2) if a petition is filed under section 6247 with
respect to such notice, the decision of the court has become
final.
``(b) Premature Action May Be Enjoined.--Notwithstanding section
7421(a), any action which violates subsection (a) may be enjoined in
the proper court, including the Tax Court. The Tax Court shall have no
jurisdiction to enjoin any action under this subsection unless a timely
petition has been filed under section 6247 and then only in respect of
the adjustments that are the subject of such petition.
``(c) Exceptions to Restrictions on Adjustments.--
``(1) Adjustments arising out of math or clerical errors.--
``(A) In general.--If the partnership is notified
that, on account of a mathematical or clerical error
appearing on the partnership return, an adjustment to a
partnership item is required, rules similar to the
rules of paragraphs (1) and (2) of section 6213(b)
shall apply to such adjustment.
``(B) Special rule.--If a large partnership is a
partner in another large partnership, any adjustment on
account of such partnership's failure to comply with
the requirements of section 6241(a) with respect to its
interest in such other partnership shall be treated as
an adjustment referred to in subparagraph (A), except
that paragraph (2) of section 6213(b) shall not apply
to such adjustment.
``(2) Partnership may waive restrictions.--The partnership
shall at any time (whether or not a notice of partnership
adjustment has been issued) have the right, by a signed notice
in writing filed with the Secretary, to waive the restrictions
provided in subsection (a) on the making of any partnership
adjustment.
``(d) Limit Where No Proceeding Begun.--If no proceeding under
section 6247 is begun with respect to any notice of a partnership
adjustment during the 90-day period described in subsection (a), the
amount for which the partnership is liable under section 6242 (and any
increase in any partner's liability for tax under chapter 1 by reason
of any adjustment under section 6242(a)) shall not exceed the amount
determined in accordance with such notice.
``SEC. 6247. JUDICIAL REVIEW OF PARTNERSHIP ADJUSTMENT.
``(a) General Rule.--Within 90 days after the date on which a
notice of a partnership adjustment is mailed to the partnership with
respect to any partnership taxable year, the partnership may file a
petition for a readjustment of the partnership items for such taxable
year with--
``(1) the Tax Court,
``(2) the district court of the United States for the
district in which the partnership's principal place of business
is located, or
``(3) the Claims Court.
``(b) Jurisdictional Requirement for Bringing Action in District
Court or Claims Court.--
``(1) In general.--A readjustment petition under this
section may be filed in a district court of the United States
or the Claims Court only if the partnership filing the petition
deposits with the Secretary, on or before the date the petition
is filed, the amount for which the partnership would be liable
under section 6242(b) (as of the date of the filing of the
petition) if the partnership items were adjusted as provided by
the notice of partnership adjustment. The court may by order
provide that the jurisdictional requirements of this paragraph
are satisfied where there has been a good faith attempt to
satisfy such requirement and any shortfall of the amount
required to be deposited is timely corrected.
``(2) Interest payable.--Any amount deposited under
paragraph (1), while deposited, shall not be treated as a
payment of tax for purposes of this title (other than chapter
67).
``(c) Scope of Judicial Review.--A court with which a petition is
filed in accordance with this section shall have jurisdiction to
determine all partnership items of the partnership for the partnership
taxable year to which the notice of partnership adjustment relates and
the proper allocation of such items among the partners (and the
applicability of any penalty, addition to tax, or additional amount for
which the partnership may be liable under section 6242(b)).
``(d) Determination of Court Reviewable.--Any determination by a
court under this section shall have the force and effect of a decision
of the Tax Court or a final judgment or decree of the district court or
the Claims Court, as the case may be, and shall be reviewable as such.
The date of any such determination shall be treated as being the date
of the court's order entering the decision.
``(e) Effect of Decision Dismissing Action.--If an action brought
under this section is dismissed other than by reason of a rescission
under section 6245(b)(3), the decision of the court dismissing the
action shall be considered as its decision that the notice of
partnership adjustment is correct, and an appropriate order shall be
entered in the records of the court.
``SEC. 6248. PERIOD OF LIMITATIONS FOR MAKING ADJUSTMENTS.
``(a) General Rule.--Except as otherwise provided in this section,
no adjustment under this subpart to any partnership item for any
partnership taxable year may be made after the date which is 3 years
after the later of--
``(1) the date on which the partnership return for such
taxable year was filed, or
``(2) the last day for filing such return for such year
(determined without regard to extensions).
``(b) Extension by Agreement.--The period described in subsection
(a) (including an extension period under this subsection) may be
extended by an agreement entered into by the Secretary and the
partnership before the expiration of such period.
``(c) Special Rule in Case of Fraud, Etc.--
``(1) False return.--In the case of a false or fraudulent
partnership return with intent to evade tax, the adjustment may
be made at any time.
``(2) Substantial omission of income.--If any partnership
omits from gross income an amount properly includible therein
which is in excess of 25 percent of the amount of gross income
stated in its return, subsection (a) shall be applied by
substituting `6 years' for `3 years'.
``(3) No return.--In the case of a failure by a partnership
to file a return for any taxable year, the adjustment may be
made at any time.
``(4) Return filed by secretary.--For purposes of this
section, a return executed by the Secretary under subsection
(b) of section 6020 on behalf of the partnership shall not be
treated as a return of the partnership.
``(d) Suspension When Secretary Mails Notice of Adjustment.--If
notice of a partnership adjustment with respect to any taxable year is
mailed to the partnership, the running of the period specified in
subsection (a) (as modified by the other provisions of this section)
shall be suspended--
``(1) for the period during which an action may be brought
under section 6247 (and, if a petition is filed under section
6247 with respect to such notice, until the decision of the
court becomes final), and
``(2) for 1 year thereafter.
``Subpart B--Claims for Adjustments by Partnership
``Sec. 6251. Administrative adjustment
requests.
``Sec. 6252. Judicial review where
administrative adjustment
request is not allowed in full.
``SEC. 6251. ADMINISTRATIVE ADJUSTMENT REQUESTS.
``(a) General Rule.--A partnership may file a request for an
administrative adjustment of partnership items for any partnership
taxable year at any time which is--
``(1) within 3 years after the later of--
``(A) the date on which the partnership return for
such year is filed, or
``(B) the last day for filing the partnership
return for such year (determined without regard to
extensions), and
``(2) before the mailing to the partnership of a notice of
a partnership adjustment with respect to such taxable year.
``(b) Secretarial Action.--If a partnership files an administrative
adjustment request under subsection (a), the Secretary may allow any
part of the requested adjustments.
``(c) Special Rule in Case of Extension Under Section 6248.--If the
period described in section 6248(a) is extended pursuant to an
agreement under section 6248(b), the period prescribed by subsection
(a)(1) shall not expire before the date 6 months after the expiration
of the extension under section 6248(b).
``SEC. 6252. JUDICIAL REVIEW WHERE ADMINISTRATIVE ADJUSTMENT REQUEST IS
NOT ALLOWED IN FULL.
``(a) In General.--If any part of an administrative adjustment
request filed under section 6251 is not allowed by the Secretary, the
partnership may file a petition for an adjustment with respect to the
partnership items to which such part of the request relates with--
``(1) the Tax Court,
``(2) the district court of the United States for the
district in which the principal place of business of the
partnership is located, or
``(3) the Claims Court.
``(b) Period for Filing Petition.--A petition may be filed under
subsection (a) with respect to partnership items for a partnership
taxable year only--
``(1) after the expiration of 6 months from the date of
filing of the request under section 6251, and
``(2) before the date which is 2 years after the date of
such request.
The 2-year period set forth in paragraph (2) shall be extended for such
period as may be agreed upon in writing by the partnership and the
Secretary.
``(c) Coordination With Subpart A.--
``(1) Notice of partnership adjustment before filing of
petition.--No petition may be filed under this section after
the Secretary mails to the partnership a notice of a
partnership adjustment for the partnership taxable year to
which the request under section 6251 relates.
``(2) Notice of partnership adjustment after filing but
before hearing of petition.--If the Secretary mails to the
partnership a notice of a partnership adjustment for the
partnership taxable year to which the request under section
6251 relates after the filing of a petition under this
subsection but before the hearing of such petition, such
petition shall be treated as an action brought under section
6247 with respect to such notice, except that subsection (b) of
section 6247 shall not apply.
``(3) Notice must be before expiration of statute of
limitations.--A notice of a partnership adjustment for the
partnership taxable year shall be taken into account under
paragraphs (1) and (2) only if such notice is mailed before the
expiration of the period prescribed by section 6248 for making
adjustments to partnership items for such taxable year.
``(d) Scope of Judicial Review.--Except in the case described in
paragraph (2) of subsection (c), a court with which a petition is filed
in accordance with this section shall have jurisdiction to determine
only those partnership items to which the part of the request under
section 6251 not allowed by the Secretary relates and those items with
respect to which the Secretary asserts adjustments as offsets to the
adjustments requested by the partnership.
``(e) Determination of Court Reviewable.--Any determination by a
court under this subsection shall have the force and effect of a
decision of the Tax Court or a final judgment or decree of the district
court or the Claims Court, as the case may be, and shall be reviewable
as such. The date of any such determination shall be treated as being
the date of the court's order entering the decision.
``PART III--DEFINITIONS AND SPECIAL RULES
``Sec. 6255. Definitions and special
rules.
``SEC. 6255. DEFINITIONS AND SPECIAL RULES.
``(a) Definitions.--For purposes of this subchapter--
``(1) Large partnership.--The term `large partnership' has
the meaning given to such term by section 775 without regard to
section 776(a).
``(2) Partnership item.--The term `partnership item' has
the meaning given to such term by section 6231(a)(3).
``(b) Partners Bound by Actions of Partnership, Etc.--
``(1) Designation of partner.--Each large partnership shall
designate (in the manner prescribed by the Secretary) a partner
(or other person) who shall have the sole authority to act on
behalf of such partnership under this subchapter. In any case
in which such a designation is not in effect, the Secretary may
select any partner as the partner with such authority.
``(2) Binding effect.--A large partnership and all partners
of such partnership shall be bound--
``(A) by actions taken under this subchapter by the
partnership, and
``(B) by any decision in a proceeding brought under
this subchapter.
``(c) Partnerships Having Principal Place of Business Outside the
United States.--For purposes of sections 6247 and 6252, a principal
place of business located outside the United States shall be treated as
located in the District of Columbia.
``(d) Treatment Where Partnership Ceases To Exist.--If a
partnership ceases to exist before a partnership adjustment under this
subchapter takes effect, such adjustment shall be taken into account by
the former partners of such partnership under regulations prescribed by
the Secretary.
``(e) Date Decision Becomes Final.--For purposes of this
subchapter, the principles of section 7481(a) shall be applied in
determining the date on which a decision of a district court or the
Claims Court becomes final.
``(f) Partnerships in Cases Under Title 11 of the United States
Code.--The running of any period of limitations provided in this
subchapter on making a partnership adjustment (or provided by section
6501 or 6502 on the assessment or collection of any amount required to
be paid under section 6242) shall, in a case under title 11 of the
United States Code, be suspended during the period during which the
Secretary is prohibited by reason of such case from making the
adjustment (or assessment or collection) and--
``(1) for adjustment or assessment, 60 days thereafter, and
``(2) for collection, 6 months thereafter.
``(g) Regulations.--The Secretary shall prescribe such regulations
as may be necessary to carry out the provisions of this subchapter,
including regulations--
``(1) to prevent abuse through manipulation of the
provisions of this subchapter, and
``(2) providing that this subchapter shall not apply to any
case described in section 6231(c)(1) (or the regulations
prescribed thereunder) where the application of this subchapter
to such a case would interfere with the effective and efficient
enforcement of this title.
In any case to which this subchapter does not apply by reason of
paragraph (2), rules similar to the rules of sections 6229(f) and
6255(f) shall apply.''
(b) Clerical Amendment.--The table of subchapters for chapter 63 is
amended by adding at the end thereof the following new item:
``Subchapter D. Treatment of large partnerships.''
SEC. 303. DUE DATE FOR FURNISHING INFORMATION TO PARTNERS OF LARGE
PARTNERSHIPS.
(a) General Rule.--Subsection (b) of section 6031 (relating to
copies to partners) is amended by adding at the end thereof the
following new sentence: ``In the case of a large partnership (as
defined in sections 775 and 776(a)), such information shall be
furnished on or before the first March 15 following the close of such
taxable year.''
(b) Treatment as Information Return.--Section 6724 is amended by
adding at the end thereof the following new subsection:
``(e) Special Rule for Certain Partnership Returns.--If any
partnership return under section 6031(a) is required under section
6011(e) to be filed on magnetic media or in other machine-readable
form, for purposes of this part, each schedule required to be included
with such return with respect to each partner shall be treated as a
separate information return.''
SEC. 304. RETURNS MAY BE REQUIRED ON MAGNETIC MEDIA.
Paragraph (2) of section 6011(e) (relating to returns on magnetic
media) is amended by adding at the end thereof the following new
sentence:
``The preceding sentence shall not apply in the case of the
partnership return of a large partnership (as defined in
sections 775 and 776(a)) or any other partnership with 250 or
more partners.''
SEC. 305. TREATMENT OF PARTNERSHIP ITEMS OF INDIVIDUAL RETIREMENT
ACCOUNTS.
Subsection (b) of section 6012 is amended by adding at the end
thereof the following new paragraph:
``(6) IRA share of partnership income.--In the case of a
trust which is exempt from taxation under section 408(e), for
purposes of this section, the trust's distributive share of
items of gross income and gain of any partnership to which
subchapter C or D of chapter 63 applies shall be treated as
equal to the trust's distributive share of the taxable income
of such partnership.''
SEC. 306. EFFECTIVE DATE.
(a) General Rule.--Except as otherwise provided in this section,
the amendments made by this subtitle shall apply to partnership taxable
years ending on or after December 31, 1994.
(b) Special Rule for Section 304.--In the case of a partnership
which is not a large partnership (as defined in sections 775 and 776(a)
of the Internal Revenue Code of 1986, as added by this subtitle), the
amendment made by section 304 shall only apply to partnership taxable
years ending on or after December 31, 1998.
(c) Special Rule for Section 305.--The amendment made by section
305 shall apply to taxable years beginning after December 31, 1993.
Subtitle B--Provisions Related to TEFRA Partnership Proceedings
SEC. 311. TREATMENT OF PARTNERSHIP ITEMS IN DEFICIENCY PROCEEDINGS.
(a) In General.--Subchapter C of chapter 63 is amended by adding at
the end thereof the following new section:
``SEC. 6234. DECLARATORY JUDGMENT RELATING TO TREATMENT OF ITEMS OTHER
THAN PARTNERSHIP ITEMS WITH RESPECT TO AN OVERSHELTERED
RETURN.
``(a) General Rule.--If--
``(1) a taxpayer files an oversheltered return for a
taxable year,
``(2) the Secretary makes a determination with respect to
the treatment of items (other than partnership items) of such
taxpayer for such taxable year, and
``(3) the adjustments resulting from such determination do
not give rise to a deficiency (as defined in section 6211) but
would give rise to a deficiency if there were no net loss from
partnership items,
the Secretary is authorized to send a notice of adjustment reflecting
such determination to the taxpayer by certified or registered mail.
``(b) Oversheltered Return.--For purposes of this section, the term
`oversheltered return' means an income tax return which--
``(1) shows no taxable income for the taxable year, and
``(2) shows a net loss from partnership items.
``(c) Judicial Review in the Tax Court.--Within 90 days, or 150
days if the notice is addressed to a person outside the United States,
after the day on which the notice of adjustment authorized in
subsection (a) is mailed to the taxpayer, the taxpayer may file a
petition with the Tax Court for redetermination of the adjustments.
Upon the filing of such a petition, the Tax Court shall have
jurisdiction to make a declaration with respect to all items (other
than partnership items and affected items which require partner level
determinations as described in section 6230(a)(2)(A)(i)) for the
taxable year to which the notice of adjustment relates, in accordance
with the principles of section 6214(a). Any such declaration shall have
the force and effect of a decision of the Tax Court and shall be
reviewable as such.
``(d) Failure To File Petition.--
``(1) In general.--Except as provided in paragraph (2), if
the taxpayer does not file a petition with the Tax Court within
the time prescribed in subsection (c), the determination of the
Secretary set forth in the notice of adjustment that was mailed
to the taxpayer shall be deemed to be correct.
``(2) Exception.--Paragraph (1) shall not apply after the
date that the taxpayer--
``(A) files a petition with the Tax Court within
the time prescribed in subsection (c) with respect to a
subsequent notice of adjustment relating to the same
taxable year, or
``(B) files a claim for refund of an overpayment of
tax under section 6511 for the taxable year involved.
If a claim for refund is filed by the taxpayer, then solely for
purposes of determining (for the taxable year involved) the
amount of any computational adjustment in connection with a
partnership proceeding under this subchapter (other than under
this section) or the amount of any deficiency attributable to
affected items in a proceeding under section 6230(a)(2), the
items that are the subject of the notice of adjustment shall be
presumed to have been correctly reported on the taxpayer's
return during the pendency of the refund claim (and, if within
the time prescribed by section 6532 the taxpayer commences a
civil action for refund under section 7422, until the decision
in the refund action becomes final).
``(e) Limitations Period.--
``(1) In general.--Any notice to a taxpayer under
subsection (a) shall be mailed before the expiration of the
period prescribed by section 6501 (relating to the period of
limitations on assessment).
``(2) Suspension when secretary mails notice of
adjustment.--If the Secretary mails a notice of adjustment to
the taxpayer for a taxable year, the period of limitations on
the making of assessments shall be suspended for the period
during which the Secretary is prohibited from making the
assessment (and, in any event, if a proceeding in respect of
the notice of adjustment is placed on the docket of the Tax
Court, until the decision of the Tax Court becomes final), and
for 60 days thereafter.
``(3) Restrictions on assessment.--Except as otherwise
provided in section 6851, 6852, or 6861, no assessment of a
deficiency with respect to any tax imposed by subtitle A
attributable to any item (other than a partnership item or any
item affected by a partnership item) shall be made--
``(A) until the expiration of the applicable 90-day
or 150-day period set forth in subsection (c) for
filing a petition with the Tax Court, or
``(B) if a petition has been filed with the Tax
Court, until the decision of the Tax Court has become
final.
``(f) Further Notices of Adjustment Restricted.--If the Secretary
mails a notice of adjustment to the taxpayer for a taxable year and the
taxpayer files a petition with the Tax Court within the time prescribed
in subsection (c), the Secretary may not mail another such notice to
the taxpayer with respect to the same taxable year in the absence of a
showing of fraud, malfeasance, or misrepresentation of a material fact.
``(g) Coordination With Other Proceedings Under This Subchapter.--
``(1) In general.--The treatment of any item that has been
determined pursuant to subsection (c) or (d) shall be taken
into account in determining the amount of any computational
adjustment that is made in connection with a partnership
proceeding under this subchapter (other than under this
section), or the amount of any deficiency attributable to
affected items in a proceeding under section 6230(a)(2), for
the taxable year involved. Notwithstanding any other law or
rule of law pertaining to the period of limitations on the
making of assessments, for purposes of the preceding sentence,
any adjustment made in accordance with this section shall be
taken into account regardless of whether any assessment has
been made with respect to such adjustment.
``(2) Special rule in case of computational adjustment.--In
the case of a computational adjustment that is made in
connection with a partnership proceeding under this subchapter
(other than under this section), the provisions of paragraph
(1) shall apply only if the computational adjustment is made
within the period prescribed by section 6229 for assessing any
tax under subtitle A which is attributable to any partnership
item or affected item for the taxable year involved.
``(3) Conversion to deficiency proceeding.--If--
``(A) after the notice referred to in subsection
(a) is mailed to a taxpayer for a taxable year but
before the expiration of the period for filing a
petition with the Tax Court under subsection (c) (or,
if a petition is filed with the Tax Court, before the
Tax Court makes a declaration for that taxable year),
the treatment of any partnership item for the taxable
year is finally determined, or any such item ceases to
be a partnership item pursuant to section 6231(b), and
``(B) as a result of that final determination or
cessation, a deficiency can be determined with respect
to the items that are the subject of the notice of
adjustment,
the notice of adjustment shall be treated as a notice of
deficiency under section 6212 and any petition filed in respect
of the notice shall be treated as an action brought under
section 6213.
``(4) Finally determined.--For purposes of this subsection,
the treatment of partnership items shall be treated as finally
determined if--
``(A) the Secretary enters into a settlement
agreement (within the meaning of section 6224) with the
taxpayer regarding such items,
``(B) a notice of final partnership administrative
adjustment has been issued and--
``(i) no petition has been filed under
section 6226 and the time for doing so has
expired, or
``(ii) a petition has been filed under
section 6226 and the decision of the court has
become final, or
``(C) the period within which any tax attributable
to such items may be assessed against the taxpayer has
expired.
``(h) Special Rules if Secretary Incorrectly Determines Applicable
Procedure.--
``(1) Special rule if secretary erroneously mails notice of
adjustment.--If the Secretary erroneously determines that
subchapter B does not apply to a taxable year of a taxpayer and
consistent with that determination timely mails a notice of
adjustment to the taxpayer pursuant to subsection (a) of this
section, the notice of adjustment shall be treated as a notice
of deficiency under section 6212 and any petition that is filed
in respect of the notice shall be treated as an action brought
under section 6213.
``(2) Special rule if secretary erroneously mails notice of
deficiency.--If the Secretary erroneously determines that
subchapter B applies to a taxable year of a taxpayer and
consistent with that determination timely mails a notice of
deficiency to the taxpayer pursuant to section 6212, the notice
of deficiency shall be treated as a notice of adjustment under
subsection (a) and any petition that is filed in respect of the
notice shall be treated as an action brought under subsection
(c).''
(b) Treatment of Partnership Items in Deficiency Proceedings.--
Section 6211 (defining deficiency) is amended by adding at the end
thereof the following new subsection:
``(c) Coordination With Subchapter C.--In determining the amount of
any deficiency for purposes of this subchapter, adjustments to
partnership items shall be made only as provided in subchapter C.''
(c) Clerical Amendment.--The table of sections for subchapter C of
chapter 63 is amended by adding at the end thereof the following new
item:
``Sec. 6234. Declaratory judgment
relating to treatment of items
other than partnership items
with respect to an
oversheltered return.''
(d) Effective Date.--The amendments made by this section shall
apply to partnership taxable years ending after the date of the
enactment of this Act.
SEC. 312. PARTNERSHIP RETURN TO BE DETERMINATIVE OF AUDIT PROCEDURES TO
BE FOLLOWED.
(a) In General.--Section 6231 (relating to definitions and special
rules) is amended by adding at the end thereof the following new
subsection:
``(g) Partnership Return To Be Determinative of Whether Subchapter
Applies.--
``(1) Determination that subchapter applies.--If, on the
basis of a partnership return for a taxable year, the Secretary
reasonably determines that this subchapter applies to such
partnership for such year but such determination is erroneous,
then the provisions of this subchapter are hereby extended to
such partnership (and its items) for such taxable year and to
partners of such partnership.
``(2) Determination that subchapter does not apply.--If, on
the basis of a partnership return for a taxable year, the
Secretary reasonably determines that this subchapter does not
apply to such partnership for such year but such determination
is erroneous, then the provisions of this subchapter shall not
apply to such partnership (and its items) for such taxable year
or to partners of such partnership.''
(b) Effective Date.--The amendment made by this section shall apply
to partnership taxable years ending after the date of the enactment of
this Act.
SEC. 313. PROVISIONS RELATING TO STATUTE OF LIMITATIONS.
(a) Suspension of Statute Where Untimely Petition Filed.--Paragraph
(1) of section 6229(d) (relating to suspension where Secretary makes
administrative adjustment) is amended by striking all that follows
``section 6226'' and inserting the following: ``(and, if a petition is
filed under section 6226 with respect to such administrative
adjustment, until the decision of the court becomes final), and''.
(b) Suspension of Statute During Bankruptcy Proceeding.--Section
6229 is amended by adding at the end thereof the following new
subsection:
``(h) Suspension During Pendency of Bankruptcy Proceeding.--If a
petition is filed naming a partner as a debtor in a bankruptcy
proceeding under title 11 of the United States Code, the running of the
period of limitations provided in this section with respect to such
partner shall be suspended--
``(1) for the period during which the Secretary is
prohibited by reason of such bankruptcy proceeding from making
an assessment, and
``(2) for 60 days thereafter.''
(c) Tax Matters Partner in Bankruptcy.--Section 6229(b) is amended
by redesignating paragraph (2) as paragraph (3) and by inserting after
paragraph (1) the following new paragraph:
``(2) Special rule with respect to debtors in title 11
cases.--Notwithstanding any other law or rule of law, if an
agreement is entered into under paragraph (1)(B) and the
agreement is signed by a person who would be the tax matters
partner but for the fact that, at the time that the agreement
is executed, the person is a debtor in a bankruptcy proceeding
under title 11 of the United States Code, such agreement shall
be binding on all partners in the partnership unless the
Secretary has been notified of the bankruptcy proceeding in
accordance with regulations prescribed by the Secretary.''
(d) Effective Dates.--
(1) Subsections (a) and (b).--The amendments made by
subsections (a) and (b) shall apply to partnership taxable
years with respect to which the period under section 6229 of
the Internal Revenue Code of 1986 for assessing tax has not
expired on or before the date of the enactment of this Act.
(2) Subsection (c).--The amendment made by subsection (c)
shall apply to agreements entered into after the date of the
enactment of this Act.
SEC. 314. EXPANSION OF SMALL PARTNERSHIP EXCEPTION.
(a) In General.--Clause (i) of section 6231(a)(1)(B) (relating to
exception for small partnerships) is amended to read as follows:
``(i) In general.--The term `partnership'
shall not include any partnership having 10 or
fewer partners each of whom is an individual
(other than a nonresident alien), a C
corporation, or an estate of a deceased
partner. For purposes of the preceding
sentence, a husband and wife (and their
estates) shall be treated as 1 partner.''
(b) Effective Date.--The amendment made by this section shall apply
to partnership taxable years ending after the date of the enactment of
this Act.
SEC. 315. EXCLUSION OF PARTIAL SETTLEMENTS FROM 1 YEAR LIMITATION ON
ASSESSMENT.
(a) In General.--Subsection (f) of section 6229 (relating to items
becoming nonpartnership items) is amended--
(1) by striking ``(f) Items Becoming Nonpartnership
Items.--If'' and inserting the following:
``(f) Special Rules.--
``(1) Items becoming nonpartnership items.--If'',
(2) by moving the text of such subsection 2 ems to the
right, and
(3) by adding at the end thereof the following new
paragraph:
``(2) Special rule for partial settlement agreements.--If a
partner enters into a settlement agreement with the Secretary
with respect to the treatment of some of the partnership items
in dispute for a partnership taxable year but other partnership
items for such year remain in dispute, the period of
limitations for assessing any tax attributable to the settled
items shall be determined as if such agreement had not been
entered into.''
(b) Effective Date.--The amendment made by this section shall apply
to settlements entered into after the date of the enactment of this
Act.
SEC. 316. EXTENSION OF TIME FOR FILING A REQUEST FOR ADMINISTRATIVE
ADJUSTMENT.
(a) In General.--Section 6227 (relating to administrative
adjustment requests) is amended by redesignating subsections (b) and
(c) as subsections (c) and (d), respectively, and by inserting after
subsection (a) the following new subsection:
``(b) Special Rule in Case of Extension of Period of Limitations
Under Section 6229.--The period prescribed by subsection (a)(1) for
filing of a request for an administrative adjustment shall be
extended--
``(1) for the period within which an assessment may be made
pursuant to an agreement (or any extension thereof) under
section 6229(b), and
``(2) for 6 months thereafter.''
(b) Effective Date.--The amendment made by this section shall take
effect as if included in the amendments made by section 402 of the Tax
Equity and Fiscal Responsibility Act of 1982.
SEC. 317. AVAILABILITY OF INNOCENT SPOUSE RELIEF IN CONTEXT OF
PARTNERSHIP PROCEEDINGS.
(a) In General.--Subsection (a) of section 6230 is amended by
adding at the end thereof the following new paragraph:
``(3) Special rule in case of assertion by partner's spouse
of innocent spouse relief.--
``(A) Notwithstanding section 6404(b), if the
spouse of a partner asserts that section 6013(e)
applies with respect to a liability that is
attributable to any adjustment to a partnership item,
then such spouse may file with the Secretary within 60
days after the notice of computational adjustment is
mailed to the spouse a request for abatement of the
assessment specified in such notice. Upon receipt of
such request, the Secretary shall abate the assessment.
Any reassessment of the tax with respect to which an
abatement is made under this subparagraph shall be
subject to the deficiency procedures prescribed by
subchapter B. The period for making any such
reassessment shall not expire before the expiration of
60 days after the date of such abatement.
``(B) If the spouse files a petition with the Tax
Court pursuant to section 6213 with respect to the
request for abatement described in subparagraph (A),
the Tax Court shall only have jurisdiction pursuant to
this section to determine whether the requirements of
section 6013(e) have been satisfied. For purposes of
such determination, the treatment of partnership items
under the settlement, the final partnership
administrative adjustment, or the decision of the court
(whichever is appropriate) that gave rise to the
liability in question shall be conclusive.
``(C) Rules similar to the rules contained in
subparagraphs (B) and (C) of paragraph (2) shall apply
for purposes of this paragraph.''
(b) Claims for Refund.--Subsection (c) of section 6230 is amended
by adding at the end thereof the following new paragraph:
``(5) Rules for seeking innocent spouse relief.--
``(A) In general.--The spouse of a partner may file
a claim for refund on the ground that the Secretary
failed to relieve the spouse under section 6013(e) from
a liability that is attributable to an adjustment to a
partnership item.
``(B) Time for filing claim.--Any claim under
subparagraph (A) shall be filed within 6 months after
the day on which the Secretary mails to the spouse the
notice of computational adjustment referred to in
subsection (a)(3)(A).
``(C) Suit if claim not allowed.--If the claim
under subparagraph (B) is not allowed, the spouse may
bring suit with respect to the claim within the period
specified in paragraph (3).
``(D) Prior determinations are binding.--For
purposes of any claim or suit under this paragraph, the
treatment of partnership items under the settlement,
the final partnership administrative adjustment, or the
decision of the court (whichever is appropriate) that
gave rise to the liability in question shall be
conclusive.''
(c) Technical Amendments.--
(1) Paragraph (1) of section 6230(a) is amended by striking
``paragraph (2)'' and inserting ``paragraph (2) or (3)''.
(2) Subsection (a) of section 6503 is amended by striking
``section 6230(a)(2)(A)'' and inserting ``paragraph (2)(A) or
(3) of section 6230(a)''.
(d) Effective Date.--The amendments made by this section shall take
effect as if included in the amendments made by section 402 of the Tax
Equity and Fiscal Responsibility Act of 1982.
SEC. 318. DETERMINATION OF PENALTIES AT PARTNERSHIP LEVEL.
(a) In General.--Section 6221 (relating to tax treatment determined
at partnership level) is amended by striking ``item'' and inserting
``item (and the applicability of any penalty, addition to tax, or
additional amount which relates to an adjustment to a partnership
item)''.
(b) Conforming Amendments.--
(1) Subsection (f) of section 6226 is amended--
(A) by striking ``relates and'' and inserting
``relates,'', and
(B) by inserting before the period ``, and the
applicability of any penalty, addition to tax, or
additional amount which relates to an adjustment to a
partnership item''.
(2) Clause (i) of section 6230(a)(2)(A) is amended to read
as follows:
``(i) affected items which require partner
level determinations (other than penalties,
additions to tax, and additional amounts that
relate to adjustments to partnership items),
or''.
(3)(A) Subparagraph (A) of section 6230(a)(3), as added by
section 317, is amended by inserting ``(including any liability
for any penalty, addition to tax, or additional amount relating
to such adjustment)'' after ``partnership item''.
(B) Subparagraph (B) of such section is amended by
inserting ``(and the applicability of any penalties, additions
to tax, or additional amounts)'' after ``partnership items''.
(C) Subparagraph (A) of section 6230(c)(5), as added by
section 317, is amended by inserting before the period
``(including any liability for any penalties, additions to tax,
or additional amounts relating to such adjustment)''.
(D) Subparagraph (D) of section 6230(c)(5), as added by
section 317, is amended by inserting ``(and the applicability
of any penalties, additions to tax, or additional amounts)''
after ``partnership items''.
(4) Paragraph (1) of section 6230(c) is amended by striking
``or'' at the end of subparagraph (A), by striking the period
at the end of subparagraph (B) and inserting ``, or'', and by
adding at the end thereof the following new subparagraph:
``(C) the Secretary erroneously imposed any
penalty, addition to tax, or additional amount which
relates to an adjustment to a partnership item.''
(5) So much of subparagraph (A) of section 6230(c)(2) as
precedes ``shall be filed'' is amended to read as follows:
``(A) Under paragraph (1) (a) or (c).--Any claim
under subparagraph (A) or (C) of paragraph (1)''.
(6) Paragraph (4) of section 6230(c) is amended by adding
at the end thereof the following: ``In addition, the
determination under the final partnership administrative
adjustment or under the decision of the court (whichever is
appropriate) concerning the applicability of any penalty,
addition to tax, or additional amount which relates to an
adjustment to a partnership item shall also be conclusive.
Notwithstanding the preceding sentence, the partner shall be
allowed to assert any partner level defenses that may apply or
to challenge the amount of the computational adjustment.''
(c) Effective Date.--The amendments made by this section shall
apply to partnership taxable years ending after the date of the
enactment of this Act.
SEC. 319. PROVISIONS RELATING TO COURT JURISDICTION, ETC.
(a) Tax Court Jurisdiction To Enjoin Premature Assessments of
Deficiencies Attributable to Partnership Items.--Subsection (b) of
section 6225 is amended by striking ``the proper court.'' and inserting
``the proper court, including the Tax Court. The Tax Court shall have
no jurisdiction to enjoin any action or proceeding under this
subsection unless a timely petition for a readjustment of the
partnership items for the taxable year has been filed and then only in
respect of the adjustments that are the subject of such petition.''
(b) Jurisdiction To Consider Statute of Limitations With Respect to
Partners.--Paragraph (1) of section 6226(d) is amended by adding at the
end thereof the following new sentence:
``Notwithstanding subparagraph (B), any person treated under
subsection (c) as a party to an action shall be permitted to
participate in such action (or file a readjustment petition
under subsection (b) or paragraph (2) of this subsection)
solely for the purpose of asserting that the period of
limitations for assessing any tax attributable to partnership
items has expired with respect to such person, and the court
having jurisdiction of such action shall have jurisdiction to
consider such assertion.''
(c) Tax Court Jurisdiction To Determine Overpayments Attributable
to Affected Items.--
(1) Paragraph (6) of section 6230(d) is amended by striking
``(or an affected item)''.
(2) Paragraph (3) of section 6512(b) is amended by adding
at the end thereof the following new sentence:
``In the case of a credit or refund relating to an affected
item (within the meaning of section 6231(a)(5)), the preceding
sentence shall be applied by substituting the periods under
sections 6229 and 6230(d) for the periods under section
6511(b)(2), (c), and (d).''
(d) Venue on Appeal.--
(1) Paragraph (1) of section 7482(b) is amended by striking
``or'' at the end of subparagraph (D), by striking the period
at the end of subparagraph (E) and inserting ``, or'', and by
inserting after subparagraph (E) the following new
subparagraph:
``(F) in the case of a petition under section
6234(c)--
``(i) the legal residence of the petitioner
if the petitioner is not a corporation, and
``(ii) the place or office applicable under
subparagraph (B) if the petitioner is a
corporation.''
(2) The last sentence of section 7482(b)(1) is amended by
striking ``or 6228(a)'' and inserting ``, 6228(a), or
6234(c)''.
(e) Other Provisions.--
(1) Subsection (c) of section 7459 is amended by striking
``or section 6228(a)'' and inserting ``, 6228(a), or 6234(c)''.
(2) Subsection (o) of section 6501 is amended by adding at
the end thereof the following new paragraph:
``(3) For declaratory judgment relating to treatment of
items other than partnership items with respect to an
oversheltered return, see section 6234.''
(f) Effective Date.--The amendments made by this section shall
apply to partnership taxable years ending after the date of the
enactment of this Act.
SEC. 320. TREATMENT OF PREMATURE PETITIONS FILED BY NOTICE PARTNERS OR
5-PERCENT GROUPS.
(a) In General.--Subsection (b) of section 6226 (relating to
judicial review of final partnership administrative adjustments) is
amended by redesignating paragraph (5) as paragraph (6) and by
inserting after paragraph (4) the following new paragraph:
``(5) Treatment of premature petitions.--If--
``(A) a petition for a readjustment of partnership
items for the taxable year involved is filed by a
notice partner (or a 5-percent group) during the 90-day
period described in subsection (a), and
``(B) no action is brought under paragraph (1)
during the 60-day period described therein with respect
to such taxable year which is not dismissed,
such petition shall be treated for purposes of paragraph (1) as
filed on the last day of such 60-day period.''
(b) Effective Date.--The amendment made by this section shall apply
to petitions filed after the date of the enactment of this Act.
SEC. 321. BONDS IN CASE OF APPEALS FROM TEFRA PROCEEDING.
(a) In General.--Subsection (b) of section 7485 (relating to bonds
to stay assessment of collection) is amended--
(1) by inserting ``penalties,'' after ``any interest,'',
and
(2) by striking ``aggregate of such deficiencies'' and
inserting ``aggregate liability of the parties to the action''.
(b) Effective Date.--The amendment made by this section shall take
effect as if included in the amendments made by section 402 of the Tax
Equity and Fiscal Responsibility Act of 1982.
SEC. 322. SUSPENSION OF INTEREST WHERE DELAY IN COMPUTATIONAL
ADJUSTMENT RESULTING FROM TEFRA SETTLEMENTS.
(a) In General.--Subsection (c) of section 6601 (relating to
interest on underpayment, nonpayment, or extension of time for payment,
of tax) is amended by adding at the end thereof the following new
sentence: ``In the case of a settlement under section 6224(c) which
results in the conversion of partnership items to nonpartnership items
pursuant to section 6231(b)(1)(C), the preceding sentence shall apply
to a computational adjustment resulting from such settlement in the
same manner as if such adjustment were a deficiency and such settlement
were a waiver referred to in the preceding sentence.''
(b) Effective Date.--The amendment made by this section shall apply
to adjustments with respect to partnership taxable years beginning
after the date of the enactment of this Act.
SEC. 323. SPECIAL RULES FOR ADMINISTRATIVE ADJUSTMENT REQUESTS WITH
RESPECT TO BAD DEBTS OR WORTHLESS SECURITIES.
(a) General Rule.--Section 6227 (relating to administrative
adjustment requests) is amended by adding at the end thereof the
following new subsection:
``(d) Requests With Respect to Bad Debts or Worthless Securities.--
In the case of that portion of any request for an administrative
adjustment which relates to the deductibility by the partnership under
section 166 of a debt as a debt which became worthless, or under
section 165(g) of a loss from worthlessness of a security, the period
prescribed in subsection (a)(1) shall be 7 years from the last day for
filing the partnership return for the year with respect to which such
request is made (determined without regard to extensions).''
(b) Effective Date.--
(1) In general.--The amendment made by subsection (a) shall
take effect as if included in the amendments made by section
402 of the Tax Equity and Fiscal Responsibility Act of 1982.
(2) Treatment of requests filed before date of enactment.--
In the case of that portion of any request (filed before the
date of the enactment of this Act) for an administrative
adjustment which relates to the deductibility of a debt as a
debt which became worthless or the deductibility of a loss from
the worthlessness of a security--
(A) paragraph (2) of section 6227(a) of the
Internal Revenue Code of 1986 shall not apply,
(B) the period for filing a petition under section
6228 of the Internal Revenue Code of 1986 with respect
to such request shall not expire before the date 6
months after the date of the enactment of this Act, and
(C) such a petition may be filed without regard to
whether there was a notice of the beginning of an
administrative proceeding or a final partnership
administrative adjustment.
TITLE IV--FOREIGN PROVISIONS
Subtitle A--Simplification of Treatment of Passive Foreign Corporations
SEC. 401. REPEAL OF FOREIGN PERSONAL HOLDING COMPANY RULES AND FOREIGN
INVESTMENT COMPANY RULES.
(a) General Rule.--The following provisions are hereby repealed:
(1) Part III of subchapter G of chapter 1 (relating to
foreign personal holding companies).
(2) Section 1246 (relating to gain on foreign investment
company stock).
(3) Section 1247 (relating to election by foreign
investment companies to distribute income currently).
(b) Exemption of Foreign Corporations From Accumulated Earnings Tax
and Personal Holding Company Rules.--
(1) Accumulated earnings tax.--Subsection (b) of section
532 (relating to exceptions) is amended--
(A) by striking paragraph (2) and inserting the
following:
``(2) a foreign corporation, or'',
(B) by striking ``, or'' at the end of paragraph
(3) and inserting a period, and
(C) by striking paragraph (4).
(2) Personal holding company rules.--Subsection (c) of
section 542 (relating to exceptions) is amended--
(A) by striking paragraph (5) and inserting the
following:
``(5) a foreign corporation,'',
(B) by striking paragraphs (7) and (10) and by
redesignating paragraphs (8) and (9) as paragraphs (7)
and (8), respectively,
(C) by inserting ``and'' at the end of paragraph
(7) (as so redesignated), and
(D) by striking ``; and'' at the end of paragraph
(8) (as so redesignated) and inserting a period.
(c) Treatment of Certain Service Contracts Under Subpart F.--
(1) Paragraph (1) of section 954(c) (defining foreign
personal holding company income) is amended by adding at the
end thereof the following new subparagraph:
``(F) Personal service contracts.--
``(i) Amounts received under a contract
under which the corporation is to furnish
personal services, if some person other than
the corporation has the right to designate (by
name or by description) the individual who is
to perform the services, or if the individual
who is to perform the services is designated
(by name or by description) in the contract.
``(ii) Amounts received from the sale or
other disposition of such contract.
This subparagraph shall apply with respect to amounts
received for services under a particular contract only
if at some time during the taxable year 25 percent or
more in value of the outstanding stock of the
corporation is owned, directly or indirectly, by or for
the individual who has performed, is to perform, or may
be designated (by name or by description) as the one to
perform, such services. For purposes of the preceding
sentence, the attribution rules of section 544 shall
apply, determined as if any reference to section
543(a)(7) were a reference to this subparagraph.''
(2) Clause (iii) of section 904(d)(2)(A) is amended by
striking ``and'' at the end of subclause (II), by striking the
period at the end of subclause (III) and inserting ``, and'',
and by adding at the end thereof the following new subclause:
``(IV) any income described in
section 954(c)(1)(F) (relating to
personal service contracts).''
SEC. 402. REPLACEMENT FOR PASSIVE FOREIGN INVESTMENT COMPANY RULES.
(a) General Rule.--Part VI of subchapter P of chapter 1 (relating
to treatment of certain passive foreign investment companies) is
amended to read as follows:
``PART VI--TREATMENT OF PASSIVE FOREIGN CORPORATIONS
``Subpart A. Current taxation rules.
``Subpart B. Interest on holdings to
which subpart A does not apply.
``Subpart C. General provisions.
``Subpart A--Current Taxation Rules
``Sec. 1291. Stock in certain passive
foreign corporations marked to
market.
``Sec. 1292. Inclusion of income of
certain passive foreign
corporations.
``SEC. 1291. STOCK IN CERTAIN PASSIVE FOREIGN CORPORATIONS MARKED TO
MARKET.
``(a) General Rule.--In the case of marketable stock in a passive
foreign corporation which is owned (or treated under subsection (g) as
owned) by a United States person at the close of any taxable year of
such person--
``(1) If the fair market value of such stock as of the
close of such taxable year exceeds its adjusted basis, such
United States person shall include in gross income for such
taxable year an amount equal to the amount of such excess.
``(2) If the adjusted basis of such stock exceeds the fair
market value of such stock as of the close of such taxable
year, such United States person shall be allowed a deduction
for such taxable year equal to the lesser of--
``(A) the amount of such excess, or
``(B) the unreversed inclusions with respect to
such stock.
``(b) Basis Adjustments.--
``(1) In general.--The adjusted basis of stock in a passive
foreign corporation--
``(A) shall be increased by the amount included in
the gross income of the United States person under
subsection (a)(1) with respect to such stock, and
``(B) shall be decreased by the amount allowed as a
deduction to the United States person under subsection
(a)(2) with respect to such stock.
``(2) Special rule for stock constructively owned.--In the
case of stock in a passive foreign corporation which the United
States person is treated as owning under subsection (g)--
``(A) the adjustments under paragraph (1) shall
apply to such stock in the hands of the person actually
holding such stock but only for purposes of determining
the subsequent treatment under this chapter of the
United States person with respect to such stock, and
``(B) similar adjustments shall be made to the
adjusted basis of the property by reason of which the
United States person is treated as owning such stock.
``(c) Character and Source Rules.--
``(1) Ordinary treatment.--
``(A) Gain.--Any amount included in gross income
under subsection (a)(1), and any gain on the sale or
other disposition of marketable stock in a passive
foreign corporation, shall be treated as ordinary
income.
``(B) Loss.--Any--
``(i) amount allowed as a deduction under
subsection (a)(2), and
``(ii) loss on the sale or other
disposition of marketable stock in a passive
foreign corporation to the extent that the
amount of such loss does not exceed the
unreversed inclusions with respect to such
stock,
shall be treated as an ordinary loss. The amount so
treated shall be treated as a deduction allowable in
computing adjusted gross income.
``(2) Source.--The source of any amount included in gross
income under subsection (a)(1) (or allowed as a deduction under
subsection (a)(2)) shall be determined in the same manner as if
such amount were gain or loss (as the case may be) from the
sale of stock in the passive foreign corporation.
``(d) Unreversed Inclusions.--For purposes of this section, the
term `unreversed inclusions' means, with respect to any stock in a
passive foreign corporation, the excess (if any) of--
``(1) the amount included in gross income of the taxpayer
under subsection (a)(1) with respect to such stock for prior
taxable years, over
``(2) the amount allowed as a deduction under subsection
(a)(2) with respect to such stock for prior taxable years.
The amount referred to in paragraph (1) shall include any amount which
would have been included in gross income under subsection (a)(1) with
respect to such stock for any prior taxable year but for section 1293.
``(e) Coordination With Section 1292.--This section shall not apply
with respect to any stock in a passive foreign corporation--
``(1) which is United States controlled,
``(2) which is a qualified electing fund with respect to
the United States person for the taxable year, or
``(3) in which the United States person is a 25-percent
shareholder.
``(f) Treatment of Controlled Foreign Corporations Which are
Shareholders in Passive Foreign Corporations.--In the case of a foreign
corporation which is a controlled foreign corporation (or is treated as
a controlled foreign corporation under section 1292) and which owns (or
is treated under subsection (g) as owning) stock in a passive foreign
corporation--
``(1) this section (other than subsection (c)(2) thereof)
shall apply to such foreign corporation in the same manner as
if such corporation were a United States person, and
``(2) for purposes of subpart F of part III of subchapter
N--
``(A) any amount included in gross income under
subsection (a)(1) shall be treated as foreign personal
holding company income described in section
954(c)(1)(A), and
``(B) any amount allowed as a deduction under
subsection (a)(2) shall be treated as a deduction
allocable to foreign personal holding company income so
described.
``(g) Stock Owned Through Certain Foreign Entities.--Except as
provided in regulations--
``(1) In general.--For purposes of this section, stock
owned, directly or indirectly, by or for a foreign partnership
or foreign trust or foreign estate shall be considered as being
owned proportionately by its partners or beneficiaries. Stock
considered to be owned by a person by reason of the application
of the preceding sentence shall, for purposes of applying such
sentence, be treated as actually owned by such person.
``(2) Treatment of certain dispositions.--In any case in
which a United States person is treated as owning stock in a
passive foreign corporation by reason of paragraph (1)--
``(A) any disposition by the United States person
or by any other person which results in the United
States person being treated as no longer owning such
stock, and
``(B) any disposition by the person owning such
stock,
shall be treated as a disposition by the United States person
of the stock in the passive foreign corporation.
``(h) Coordination With Section 851(b).--For purposes of paragraphs
(2) and (3) of section 851(b), any amount included in gross income
under subsection (a) shall be treated as a dividend.
``(i) Transition Rules.--
``(1) Individuals becoming subject to united states tax.--
If any individual becomes a United States person in a taxable
year beginning after December 31, 1993, solely for purposes of
this section, the adjusted basis (before adjustments under
subsection (b)) of any marketable stock in a passive foreign
corporation owned (or treated as owned under subsection (g)) by
such individual on the first day of such taxable year shall be
treated as being the greater of its fair market value on such
first day or its adjusted basis on such first day.
``(2) Marketable stock held before effective date.--
``(A) In general.--If any marketable stock in a
passive foreign corporation is owned (or treated under
subsection (g) as owned) by a United States person on
the first day of such person's first taxable year,
beginning after December 31, 1993--
``(i) paragraph (2) of section 1294(a)
shall apply to such stock as if it became
marketable during such first taxable year;
except that--
``(I) section 1293 shall not apply
to the amount included in gross income
under subsection (a) to the extent such
amount is attributable to increases in
fair market value during such first
taxable year, and
``(II) the taxpayer's holding
period shall be treated as having ended
on the last day of the preceding
taxable year for purposes of allocating
amounts under section 1293(a)(1)(A),
and
``(ii) such person may elect to extend the
time for the payment of the applicable section
1293 deferred tax as provided in subparagraph
(B).
``(B) Election to extend time for payment.--
``(i) In general.--At the election of the
taxpayer, the time for the payment of the
applicable section 1293 deferred tax shall be
extended to the extent and subject to the
limitations provided in this subparagraph.
``(ii) Termination of extension.--
``(I) Distributions.--If any
distribution is received with respect
to any stock to which an extension
under clause (i) relates and such
distribution would be an excess
distribution within the meaning of
section 1293 if such section applied to
such stock, then the extension under
clause (i) for the appropriate portion
(as determined under regulations) of
the applicable section 1293 deferred
tax shall expire on the last day
prescribed by law (determined without
regard to extensions) for filing the
return of tax for the taxable year in
which the distribution is received.
``(II) Reversal of inclusion.--If
an amount is allowable as a deduction
under subsection (a)(2) with respect to
any stock to which an extension under
clause (i) relates and the amount so
allowable is allocable to the amount
which gave rise to the applicable
section 1293 deferred tax, then the
extension under clause (i) for the
appropriate portion (as determined
under regulations) of the applicable
section 1293 deferred tax shall expire
on the last day prescribed by law
(determined without regard to
extensions) for filing the return of
the tax for the taxable year for which
such deduction is allowed.
``(III) Dispositions, etc.--If
stock in a passive foreign corporation
is disposed of during the taxable year,
all extensions under clause (i) for
payment of the applicable section 1293
deferred tax attributable to such stock
which have not expired before the date
of such disposition shall expire on the
last date prescribed by law (determined
without regard to extensions) for
filing the return of tax for the
taxable year in which such disposition
occurs. To the extent provided in
regulations, the preceding sentence
shall not apply in the case of a
disposition in a transaction with
respect to which gain or loss is not
recognized (in whole or in part), and
the person acquiring such stock in such
transaction shall succeed to the
treatment under this section of the
person making such disposition.
``(iii) Other rules.--
``(I) Election.--The election under
clause (i) shall be made not later than
the time prescribed by law (including
extensions) for filing the return of
tax imposed by this chapter for the
first taxable year referred to in
subparagraph (A).
``(II) Treatment of loans to
shareholder.--For purposes of this
subparagraph, any loan by a passive
foreign corporation (directly or
indirectly) to a shareholder of such
corporation shall be treated as a
distribution to such shareholder.
``(C) Cross reference.--
``For provisions providing for interest
for the period of the extension under this paragraph, see section 6601.
``(D) Applicable section 1293 deferred tax.--For
purposes of this paragraph, the term `applicable
section 1293 deferred tax' means the deferred tax
amount determined under section 1293 with respect to
the amount which, but for section 1293, would have been
included in gross income for the first taxable year
referred to in subparagraph (A). Such term also
includes the tax imposed by this chapter for such first
taxable year to the extent attributable to the amounts
allocated under section 1293(a)(1)(A) to a period
described in section 1293(a)(1)(B)(ii).
``(3) Special rules for regulated investment companies.--
``(A) In general.--If any marketable stock in a
passive foreign corporation is owned (or treated under
subsection (g) as owned) by a regulated investment
company on the first day of such company's first
taxable year beginning after December 31, 1993--
``(i) section 1293 shall not apply to such
stock with respect to any distribution or
disposition during, or amount included in gross
income under this section for, such first
taxable year, but
``(ii) such company's tax under this
chapter for such first taxable year shall be
increased by the aggregate amount of interest
which would have been determined under section
1293(c)(3) if section 1293 were applied without
regard to this subparagraph.
``(B) Disallowance of deduction.--No deduction
shall be allowed to any regulated investment company
for the increase in tax under subparagraph (A)(ii).
``SEC. 1292. CURRENT INCLUSION OF INCOME OF CERTAIN PASSIVE FOREIGN
CORPORATIONS.
``(a) Passive Foreign Corporations Which Are United States
Controlled.--
``(1) Treatment under subpart f.--
``(A) In general.--If a passive foreign corporation
is United States controlled, then for purposes of
subpart F of part III of subchapter N--
``(i) such corporation, if not otherwise a
controlled foreign corporation, shall be
treated as a controlled foreign corporation,
``(ii) the term `United States shareholder'
means, with respect to such corporation, any
United States person who owns (within the
meaning of section 958(a)) any stock in such
corporation,
``(iii) the entire gross income of such
corporation shall, after being reduced under
the principles of paragraph (5) of section
954(b), be treated as foreign base company
income, and
``(iv) sections 970 and 971 shall not apply
to such corporation.
Except as provided in regulations, the preceding
sentence shall also apply for purposes of section
904(d).
``(B) Special rules.--If any taxpayer is treated as
being a United States shareholder in a controlled
foreign corporation solely by reason of this section--
``(i) section 954(b)(4) (relating to
exception for certain income subject to high
foreign taxes) shall not apply for purposes of
determining the amount included in the gross
income of such taxpayer under section 951 by
reason of being so treated with respect to such
corporation,
``(ii) the amount so included in the gross
income of such taxpayer under section 951 with
respect to such corporation shall be treated as
long-term capital gain to the extent
attributable to the net capital gain of such
corporation, and
``(iii) sections 956 and 956A shall not
apply to such taxpayer.
``(2) United states controlled.--For purposes of this
subpart, a passive foreign corporation is United States
controlled if--
``(A) such corporation is a controlled foreign
corporation determined without regard to this
subsection, or
``(B) at any time during the taxable year more than
50 percent of--
``(i) the total combined voting power of
all classes of stock of such corporation
entitled to vote, or
``(ii) the total value of the stock of such
corporation,
is owned directly or indirectly by 5 or fewer United
States persons.
``(3) Constructive ownership rules for purposes of
paragraph (2)(b).--For purposes of paragraph (2)(B), the
attribution rules provided in section 544 shall apply,
determined as if any reference to a personal holding company
were a reference to a corporation described in paragraph (2)(B)
(and any reference to the stock ownership requirement provided
in section 542(a)(2) were a reference to the requirement of
paragraph (2)(B)); except that--
``(A) subsection (a)(4) of such section shall be
applied by substituting `Paragraphs (1), (2), and (3)'
for `Paragraphs (2) and (3)',
``(B) stock owned by a nonresident alien individual
shall not be considered by reason of attribution
through family membership as owned by a citizen or
resident alien individual who is not the spouse of the
nonresident alien individual and who does not otherwise
own stock in the foreign corporation (determined after
the application of such attribution rules other than
attribution through family membership), and
``(C) stock of a corporation owned by any foreign
person shall not be considered by reason of attribution
through partners as owned by a citizen or resident of
the United States who does not otherwise own stock in
the foreign corporation (determined after the
application of such attribution rules and subparagraph
(A), other than attribution through partners).
``(b) Taxpayers Electing Current Inclusion and 25-Percent
Shareholders.--
``(1) In general.--If a passive foreign corporation which
is not United States controlled is a qualified electing fund
with respect to any taxpayer or the taxpayer is a 25-percent
shareholder in such corporation, then for purposes of subpart F
of part III of subchapter N--
``(A) such passive foreign corporation shall be
treated as a controlled foreign corporation with
respect to such taxpayer,
``(B) such taxpayer shall be treated as a United
States shareholder in such corporation, and
``(C) the modifications of clauses (iii) and (iv)
of subsection (a)(1)(A) and of subparagraph (B) of
subsection (a)(1) shall apply in determining the amount
included under such subpart F in the gross income of
such taxpayer (and the character of the amount so
included).
For purposes of section 904(d), any amount included in the
gross income of the taxpayer under the preceding sentence shall
be treated as a dividend from a foreign corporation which is
not a controlled foreign corporation.
``(2) Qualified electing fund.--For purposes of this
subpart, the term `qualified electing fund' means any passive
foreign corporation if--
``(A) an election by the taxpayer under paragraph
(3) applies to such corporation for the taxable year of
the taxpayer, and
``(B) such corporation complies with such
requirements as the Secretary may prescribe for
purposes of carrying out the purposes of this subpart.
``(3) Election.--
``(A) In general.--A taxpayer may make an election
under this paragraph with respect to any passive
foreign corporation for any taxable year of the
taxpayer. Such an election, once made with respect to
any corporation, shall apply to all subsequent taxable
years of the taxpayer with respect to such corporation
unless revoked by the taxpayer with the consent of the
Secretary.
``(B) When made.--An election under this subsection
may be made for any taxable year of the taxpayer at any
time on or before the due date (determined with regard
to extensions) for filing the return of the tax imposed
by this chapter for such taxable year. To the extent
provided in regulations, such an election may be made
later than as required in the preceding sentence where
the taxpayer fails to make a timely election because
the taxpayer reasonably believes that the corporation
was not a passive foreign corporation.
``(4) 25-percent shareholder.--For purposes of this
subpart, the term `25-percent shareholder' means, with respect
to any passive foreign corporation, any United States person
who owns (within the meaning of section 958(a)), or is
considered as owning by applying the rules of section 958(b),
25 percent or more (by vote or value) of the stock of such
corporation.
``Subpart B--Interest on Holdings To Which Subpart A Does Not Apply
``Sec. 1293. Interest on tax deferral.
``Sec. 1294. Definitions and special
rules.
``SEC. 1293. INTEREST ON TAX DEFERRAL.
``(a) Treatment of Distributions and Stock Dispositions.--
``(1) Distributions.--If a United States person receives an
excess distribution in respect of stock to which this section
applies, then--
``(A) the amount of the excess distribution shall
be allocated ratably to each day in the taxpayer's
holding period for the stock,
``(B) with respect to such excess distribution, the
taxpayer's gross income for the current year shall
include (as ordinary income) only the amounts allocated
under subparagraph (A) to--
``(i) the current year, or
``(ii) any period in the taxpayer's holding
period before the first day of the first
taxable year of the corporation which begins
after December 31, 1986, and for which it was a
passive foreign corporation, and
``(C) the tax imposed by this chapter for the
current year shall be increased by the deferred tax
amount (determined under subsection (c)).
``(2) Dispositions.--If the taxpayer disposes of stock to
which this section applies, then the rules of paragraph (1)
shall apply to any gain recognized on such disposition in the
same manner as if such gain were an excess distribution.
``(3) Definitions.--For purposes of this subpart--
``(A) Holding period.--The taxpayer's holding
period shall be determined under section 1223; except
that--
``(i) for purposes of applying this section
to an excess distribution, such holding period
shall be treated as ending on the date of such
distribution, and
``(ii) if section 1291 applied to such
stock with respect to the taxpayer for any
prior taxable year, such holding period shall
be treated as beginning on the first day of the
first taxable year beginning after the last
taxable year for which section 1291 so applied.
``(B) Current year.--The term `current year' means
the taxable year in which the excess distribution or
disposition occurs.
``(b) Excess Distribution.--
``(1) In general.--For purposes of this section, the term
`excess distribution' means any distribution in respect of
stock received during any taxable year to the extent such
distribution does not exceed its ratable portion of the total
excess distribution (if any) for such taxable year.
``(2) Total excess distribution.--For purposes of this
subsection--
``(A) In general.--The term `total excess
distribution' means the excess (if any) of--
``(i) the amount of the distributions in
respect of the stock received by the taxpayer
during the taxable year, over
``(ii) 125 percent of the average amount of
the distributions received in respect of such
stock by the taxpayer during the 3 preceding
taxable years (or, if shorter, the portion of
the taxpayer's holding period before the
taxable year).
For purposes of clause (ii), any excess distribution
received during such 3-year period shall be taken into
account only to the extent it was included in gross
income under subsection (a)(1)(B).
``(B) No excess for first year.--The total excess
distributions with respect to any stock shall be zero
for the taxable year in which the taxpayer's holding
period in such stock begins.
``(3) Adjustments.--Under regulations prescribed by the
Secretary--
``(A) determinations under this subsection shall be
made on a share-by-share basis, except that shares with
the same holding period may be aggregated,
``(B) proper adjustments shall be made for stock
splits and stock dividends,
``(C) if the taxpayer does not hold the stock
during the entire taxable year, distributions received
during such year shall be annualized,
``(D) if the taxpayer's holding period includes
periods during which the stock was held by another
person, distributions received by such other person
shall be taken into account as if received by the
taxpayer,
``(E) if the distributions are received in a
foreign currency, determinations under this subsection
shall be made in such currency and the amount of any
excess distribution determined in such currency shall
be translated into dollars,
``(F) proper adjustment shall be made for amounts
not includible in gross income by reason of section
959(a) or for which a deduction is allowable under
section 245(c), and
``(G) if a charitable deduction was allowable under
section 642(c) to a trust for any distribution of its
income, proper adjustments shall be made for the
deduction so allowable to the extent allocable to
distributions or gain in respect of stock in a passive
foreign corporation.
For purposes of subparagraph (F), any amount not includible in
gross income by reason of section 551(d) (as in effect on
January 1, 1993) or 1293(c) (as so in effect) shall be treated
as an amount not includible in gross income by reason of
section 959(a).
``(c) Deferred Tax Amount.--For purposes of this section--
``(1) In general.--The term `deferred tax amount' means,
with respect to any distribution or disposition to which
subsection (a) applies, an amount equal to the sum of--
``(A) the aggregate increases in taxes described in
paragraph (2), plus
``(B) the aggregate amount of interest (determined
in the manner provided under paragraph (3)) on such
increases in tax.
Any increase in the tax imposed by this chapter for the current
year under subsection (a) to the extent attributable to the
amount referred to in subparagraph (B) shall be treated as
interest paid under section 6601 on the due date for the
current year.
``(2) Aggregate increases in taxes.--For purposes of
paragraph (1)(A), the aggregate increases in taxes shall be
determined by multiplying each amount allocated under
subsection (a)(1)(A) to any taxable year (other than any
taxable year referred to in subsection (a)(1)(B)) by the
highest rate of tax in effect for such taxable year under
section 1 or 11, whichever applies.
``(3) Computation of interest.--
``(A) In general.--The amount of interest referred
to in paragraph (1)(B) on any increase determined under
paragraph (2) for any taxable year shall be determined
for the period--
``(i) beginning on the day after the due
date for such taxable year, and
``(ii) ending on the due date for the
taxable year with or within which the
distribution or disposition occurs,
by using the rates and method applicable under section
6621 for underpayments of tax for such period.
``(B) Due date.--For purposes of this subsection,
the term `due date' means the date prescribed by law
(determined without regard to extensions) for filing
the return of the tax imposed by this chapter for the
taxable year.
``(C) Special rule.--For purposes of determining
the amount of interest referred to in paragraph (1)(B),
the amount of any increase in tax determined under
paragraph (2) shall be determined without regard to any
reduction under section 1294(d) for a tax described in
paragraph (2)(A)(ii) thereof.
``SEC. 1294. DEFINITIONS AND SPECIAL RULES.
``(a) Stock to Which Section 1293 Applies.--
``(1) In general.--Except as otherwise provided in this
subsection, section 1293 shall apply to any stock in a passive
foreign corporation unless--
``(A) such stock is marketable stock as of the time
of the distribution or disposition involved, or
``(B)(i) with respect to each of such corporation's
taxable years for which such corporation was a passive
foreign corporation and which began after December 31,
1993, and included any portion of the taxpayer's
holding period in such stock--
``(I) such corporation was United States
controlled (within the meaning of section
1292(a)(2)), or
``(II) such corporation was treated as a
controlled foreign corporation under section
1292(b) with respect to the taxpayer, and
``(ii) with respect to each of such corporation's
taxable years for which such corporation was a passive
foreign corporation and which begin after December 31,
1986, and before January 1, 1994, and included any
portion of the taxpayer's holding period in such stock,
such corporation was treated as a qualified electing
fund under this part (as in effect on January 1, 1993)
with respect to the taxpayer.
``(2) Treatment where stock becomes marketable.--If any
stock in a passive foreign corporation becomes marketable stock
after the beginning of the taxpayer's holding period in such
stock, and if the requirements of paragraph (1)(B) are not
satisfied, section 1293 shall apply to--
``(A) any distributions with respect to, or
disposition of, such stock in the taxable year of the
taxpayer in which it becomes so marketable, and
``(B) any amount which, but for section 1293, would
have been included in gross income under section
1291(a) with respect to such stock for such taxable
year in the same manner as if such amount were gain on
the disposition of such stock.
``(3) Election to recognize gain where company becomes
subject to current inclusions.--
``(A) In general.--If--
``(i) a passive foreign corporation first
meets the requirements of clause (i) of
paragraph (1)(B) with respect to the taxpayer
for a taxable year of such taxpayer which
begins after December 31, 1993,
``(ii) the taxpayer holds stock in such
company on the first day of such taxable year,
and
``(iii) the taxpayer establishes to the
satisfaction of the Secretary the fair market
value of such stock on such first day,
the taxpayer may elect to recognize gain as if he sold
such stock on such first day for such fair market
value.
``(B) Additional election for shareholder of
controlled foreign corporations.--
``(i) In general.--If--
``(I) a passive foreign corporation
first meets the requirements of
subclause (I) of paragraph (1)(B)(i)
with respect to the taxpayer for a
taxable year of such taxpayer which
begins after December 31, 1993,
``(II) the taxpayer holds stock in
such corporation on the first day of
such taxable year, and
``(III) such corporation is a
controlled foreign corporation without
regard to this part,
the taxpayer may elect to be treated as receiving a
dividend on such first day in an amount equal to the
portion of the post-1986 earnings and profits of such
corporation attributable (under regulations prescribed
by the Secretary) to the stock in such corporation held
by the taxpayer on such first day. The amount treated
as a dividend under the preceding sentence shall be
treated as an excess distribution and shall be
allocated under section 1293(a)(1)(A) only to days
during periods taken into account in determining the
post-1986 earnings and profits so attributable.
``(ii) Post-1986 earnings and profits.--For
purposes of clause (i), the term `post-1986
earnings and profits' means earnings and
profits which were accumulated in taxable years
of the corporation beginning after December 31,
1986, and during the period or periods the
stock was held by the taxpayer while the
corporation was a passive foreign corporation.
``(iii) Coordination with section 959(e).--
For purposes of section 959(e), any amount
treated as a dividend under this subparagraph
shall be treated as included in gross income
under section 1248(a).
``(C) Adjustments.--In the case of any stock to
which subparagraph (A) or (B) applies--
``(i) the adjusted basis of such stock
shall be increased by the gain recognized under
subparagraph (A) or the amount treated as a
dividend under subparagraph (B), as the case
may be, and
``(ii) the taxpayer's holding period in
such stock shall be treated as beginning on the
first day referred to in such subparagraph.
``(b) Rules Relating to Stock Acquired From a Decedent.--
``(1) Basis.--In the case of stock of a passive foreign
corporation acquired by bequest, devise, or inheritance (or by
the decedent's estate), notwithstanding section 1014, the basis
of such stock in the hands of the person so acquiring it shall
be the adjusted basis of such stock in the hands of the
decedent immediately before his death (or, if lesser, the basis
which would have been determined under section 1014 without
regard to this paragraph).
``(2) Deduction for estate tax.--If stock in a passive
foreign corporation is acquired from a decedent, the taxpayer
shall, under regulations prescribed by the Secretary, be
allowed (for the taxable year of the sale or exchange) a
deduction from gross income equal to that portion of the
decedent's estate tax deemed paid which is attributable to the
excess of (A) the value at which such stock was taken into
account for purposes of determining the value of the decedent's
gross estate, over (B) the basis determined under paragraph
(1).
``(3) Exceptions.--This subsection shall not apply to any
stock in a passive foreign corporation if--
``(A) section 1293 would not have applied to a
disposition of such stock by the decedent immediately
before his death, or
``(B) the decedent was a nonresident alien at all
times during his holding period in such stock.
``(c) Recognition of Gain.--Except as otherwise provided in
regulations, in the case of any transfer of stock in a passive foreign
company to which section 1293 applies, where (but for this subsection)
there is not full recognition of gain, the excess (if any) of--
``(1) the fair market value of such stock, over
``(2) its adjusted basis,
shall be treated as gain from the sale or exchange of such stock and
shall be recognized notwithstanding any provision of law. Proper
adjustment shall be made to the basis of property for gain recognized
under the preceding sentence.
``(d) Coordination With Foreign Tax Credit Rules.--
``(1) In general.--If there are creditable foreign taxes
with respect to any distribution in respect of stock in a
passive foreign corporation--
``(A) the amount of such distribution shall be
determined for purposes of section 1293 with regard to
section 78,
``(B) the excess distribution taxes shall be
allocated ratably to each day in the taxpayer's holding
period for the stock, and
``(C) to the extent--
``(i) that such excess distribution taxes
are allocated to a taxable year referred to in
section 1293(a)(1)(B), such taxes shall be
taken into account under section 901 for the
current year, and
``(ii) that such excess distribution taxes
are allocated to any other taxable year, such
taxes shall reduce (subject to the principles
of section 904 and not below zero) the increase
in tax determined under section 1293(c)(2) for
such taxable year by reason of such
distribution (but such taxes shall not be taken
into account under section 901).
``(2) Definitions.--For purposes of this subsection--
``(A) Creditable foreign taxes.--The term
`creditable foreign taxes' means, with respect to any
distribution--
``(i) any foreign taxes deemed paid under
section 902 with respect to such distribution,
and
``(ii) any withholding tax imposed with
respect to such distribution,
but only if the taxpayer chooses the benefits of
section 901 and such taxes are creditable under section
901 (determined without regard to paragraph
(1)(C)(ii)).
``(B) Excess distribution taxes.--The term `excess
distribution taxes' means, with respect to any
distribution, the portion of the creditable foreign
taxes with respect to such distribution which is
attributable (on a pro rata basis) to the portion of
such distribution which is an excess distribution.
``(C) Section 1248 gain.--The rules of this
subsection also shall apply in the case of any gain
which but for this section would be includible in gross
income as a dividend under section 1248.
``(e) Attribution of Ownership.--For purposes of this subpart--
``(1) Attribution to united states persons.--This
subsection--
``(A) shall apply to the extent that the effect is
to treat stock of a passive foreign corporation as
owned by a United States person, and
``(B) except as provided in paragraph (3) or in
regulations, shall not apply to treat stock owned (or
treated as owned under this subsection) by a United
States person as owned by any other person.
``(2) Corporations.--
``(A) In general.--If 50 percent or more in value
of the stock of a corporation (other than an S
corporation) is owned, directly or indirectly, by or
for any person, such person shall be considered as
owning the stock owned directly or indirectly by or for
such corporation in that proportion which the value of
the stock which such person so owns bears to the value
of all stock in the corporation.
``(B) 50-percent limitation not to apply in certain
cases.--For purposes of determining whether a
shareholder of a passive foreign corporation (or
whether a United States shareholder of a controlled
foreign corporation which is not a passive foreign
corporation) is treated as owning stock owned directly
or indirectly by or for such corporation, subparagraph
(A) shall be applied without regard to the 50-percent
limitation contained therein.
``(C) Family and partner attribution for 50-percent
limitation.--For purposes of determining whether the
50-percent limitation of subparagraph (A) is met, the
constructive ownership rules of section 544(a)(2) shall
apply in addition to the other rules of this
subsection.
``(3) Partnerships, etc.--Except as provided in
regulations, stock owned, directly or indirectly, by or for a
partnership, S corporation, estate, or trust shall be
considered as being owned proportionately by its partners,
shareholders, or beneficiaries (as the case may be).
``(4) Options.--To the extent provided in regulations, if
any person has an option to acquire stock, such stock shall be
considered as owned by such person. For purposes of this
paragraph, an option to acquire such an option, and each one of
a series of such options, shall be considered as an option to
acquire such stock.
``(5) Successive application.--Stock considered to be owned
by a person by reason of the application of paragraph (2), (3),
or (4) shall, for purposes of applying such paragraphs, be
considered as actually owned by such person.
``(f) Other Special Rules.--For purposes of this subpart--
``(1) Time for determination.--Stock held by a taxpayer
shall be treated as stock in a passive foreign corporation if,
at any time during the holding period of the taxpayer with
respect to such stock, such corporation (or any predecessor)
was a passive foreign corporation. The preceding sentence shall
not apply if the taxpayer elects to recognize gain (as of the
last day of the last taxable year for which the company was a
passive foreign corporation) under rules similar to the rules
of subsection (a)(3)(A).
``(2) Application of subpart where stock held by other
entity.--Under regulations--
``(A) In general.--In any case in which a United
States person is treated as owning stock in a passive
foreign corporation by reason of subsection (e)--
``(i) any transaction which results in the
United States person being treated as no longer
owning such stock,
``(ii) any disposition of such stock by the
person owning such stock, and
``(iii) any distribution of property in
respect of such stock to the person holding
such stock,
shall be treated as a disposition by, or distribution
to, the United States person with respect to the stock
in the passive foreign corporation.
``(B) Amount treated in same manner as previously
taxed income.--Rules similar to the rules of section
959(b) shall apply to any amount described in
subparagraph (A) in respect of stock which the taxpayer
is treated as owning under subsection (e).
``(C) Coordination with section 951.--If, but for
this subparagraph, an amount would be taken into
account under section 1293 by reason of subparagraph
(A) and such amount would also be included in the gross
income of the taxpayer under section 951, such amount
shall only be taken into account under section 1293.
``(3) Dispositions.--Except as provided in regulations, if
a taxpayer uses any stock in a passive foreign corporation as
security for a loan, the taxpayer shall be treated as having
disposed of such stock.
``Subpart C--General Provisions
``Sec. 1296. Passive foreign corporation.
``Sec. 1297. Special rules.
``SEC. 1296. PASSIVE FOREIGN CORPORATION.
``(a) In General.--For purposes of this part, except as otherwise
provided in this subpart, the term `passive foreign corporation' means
any foreign corporation if--
``(1) 60 percent or more of the gross income of such
corporation for the taxable year is passive income,
``(2) the average percentage of assets (by value) held by
such corporation during the taxable year which produce passive
income or which are held for the production of passive income
is at least 50 percent, or
``(3) such corporation is registered under the Investment
Company Act of 1940, as amended (15 U.S.C. 80a-1 to 80b-2),
either as a management company or as a unit investment trust.
In the case of a controlled foreign corporation (or any other foreign
corporation if such corporation so elects), the determination under
paragraph (2) shall be based on the adjusted bases (as determined for
purposes of computing earnings and profits) of its assets in lieu of
their value. Such an election, once made, may be revoked only with the
consent of the Secretary.
``(b) Passive Income.--For purposes of this section--
``(1) In general.--Except as otherwise provided in this
subsection, the term `passive income' means any income which is
of a kind which would be foreign personal holding company
income as defined in section 954(c) without regard to paragraph
(3) thereof.
``(2) Exceptions.--Except as provided in regulations, the
term `passive income' does not include any income--
``(A) derived in the active conduct of a banking
business by an institution licensed to do business as a
bank in the United States (or, to the extent provided
in regulations, by any other corporation),
``(B) derived in the active conduct of an insurance
business by a corporation which is predominantly
engaged in an insurance business and which would be
subject to tax under subchapter L if it were a domestic
corporation,
``(C) which is interest, a dividend, or a rent or
royalty, which is received or accrued from a related
person (within the meaning of section 954(d)(3)) to the
extent such amount is properly allocable (under
regulations prescribed by the Secretary) to income of
such related person which is not passive income, or
``(D) any foreign trade income of a FSC.
For purposes of subparagraph (C), the term `related person' has
the meaning given such term by section 954(d)(3) determined by
substituting `foreign corporation' for `controlled foreign
corporation' each place it appears in section 954(d)(3).
``(3) Treatment of income from certain assets.--To the
extent that any asset is properly treated as not held for the
production of passive income for purposes of subsection (a)(2),
all income from such asset shall be treated as income which is
not passive income.
``(4) Treatment of certain dealers in securities.--
``(A) In general.--In the case of any foreign
corporation which is a controlled foreign corporation
(as defined in section 957(a)), the term `passive
income' does not include any income derived in the
active conduct of a securities business by such
corporation if such corporation is registered as a
securities broker or dealer under section 15(a) of the
Securities Exchange Act of 1934 or is registered as a
Government securities broker or dealer under section
15C(a) of such Act. To the extent provided in
regulations, such term shall not include any income
derived in the active conduct of a securities business
by a controlled foreign corporation which is not so
registered.
``(B) Application of look-through rules.--For
purposes of paragraph (2)(C), rules similar to the
rules of subparagraph (A) of this paragraph shall apply
in determining whether any income of a related person
(whether or not a corporation) is passive income.
``(C) Limitation.--The preceding provisions of this
paragraph shall only apply in the case of persons who
are United States shareholders (as defined in section
951(b)) in the controlled foreign corporation.
``(c) Look-Through in Case of 25-Percent Owned Corporation.--If a
foreign corporation owns (directly or indirectly) at least 25 percent
(by value) of the stock of another corporation, for purposes of
determining whether such foreign corporation is a passive foreign
corporation, such foreign corporation shall be treated as if it--
``(1) held its proportionate share of the assets of such
other corporation, and
``(2) received directly its proportionate share of the
income of such other corporation.
``SEC. 1297. SPECIAL RULES.
``(a) United States Person.--For purposes of this part, the term
`United States person' has the meaning given to such term by section
7701(a)(30).
``(b) Controlled Foreign Corporation.--For purposes of this part,
the term `controlled foreign corporation' has the meaning given such
term by section 957(a).
``(c) Marketable Stock.--For purposes of this part--
``(1) In general.--The term `marketable stock' means--
``(A) any stock which is regularly traded on--
``(i) a national securities exchange which
is registered with the Securities and Exchange
Commission or the national market system
established pursuant to section 11A of the
Securities and Exchange Act of 1934, or
``(ii) any exchange or other market which
the Secretary determines has rules adequate to
carry out the purposes of this part, and
``(B) to the extent provided in regulations, stock
in any foreign corporation which is comparable to a
regulated investment company and which offers for sale
or has outstanding any stock of which it is the issuer
and which is redeemable at its net asset value.
``(2) Special rule for regulated investment companies.--In
the case of any regulated investment company which is offering
for sale or has outstanding any stock of which it is the issuer
and which is redeemable at its net asset value, all stock in a
passive foreign corporation which it owns (or is treated under
section 1291(g) as owning) shall be treated as marketable stock
for purposes of this part. Except as provided in regulations, a
similar rule shall apply in the case of any other regulated
investment company.
``(d) Other Special Rules.--For purposes of this part--
``(1) Certain corporations not treated as passive.--A
corporation shall not be treated as a passive foreign
corporation for the 1st taxable year such corporation has gross
income (hereinafter in this paragraph referred to as the
`start-up year') if--
``(A) no predecessor of such corporation was a
passive foreign corporation,
``(B) it is established to the satisfaction of the
Secretary that such corporation will not be a passive
foreign corporation for either of the 1st 2 taxable
years following the start-up year, and
``(C) such corporation is not a passive foreign
corporation for either of the 1st 2 taxable years
following the start-up year.
``(2) Certain corporations changing businesses.--A
corporation shall not be treated as a passive foreign
corporation for any taxable year if--
``(A) neither such corporation (nor any
predecessor) was a passive foreign corporation for any
prior taxable year,
``(B) it is established to the satisfaction of the
Secretary that--
``(i) substantially all of the passive
income of the corporation for the taxable year
is attributable to proceeds from the
disposition of 1 or more active trades or
businesses, and
``(ii) such corporation will not be a
passive foreign corporation for either of the
first 2 taxable years following the taxable
year, and
``(C) such corporation is not a passive foreign
corporation for either of such 2 taxable years.
For purposes of section 1296(c), any passive income referred to
in subparagraph (B)(i) shall be treated as income which is not
passive income and any assets which produce income so described
shall be treated as assets producing income other than passive
income.
``(3) Treatment of certain foreign corporations owning
stock in 25-percent owned domestic corporation.--
``(A) In general.--If a foreign corporation owns at
least 25 percent (by value) of the stock of a domestic
corporation, for purposes of determining whether such
foreign corporation is a passive foreign corporation,
any qualified stock held by such domestic corporation
shall be treated as an asset which does not produce
passive income (and is not held for the production of
passive income) and any amount included in gross income
with respect to such stock shall not be treated as
passive income.
``(B) Qualified stock.--For purposes of
subparagraph (A), the term `qualified stock' means any
stock in a C corporation which is a domestic
corporation and which is not a regulated investment
company or real estate investment trust.
``(4) Treatment of corporation which was a pfic.--A
corporation shall be treated as a passive foreign corporation
for any taxable year beginning before January 1, 1994, if and
only if such corporation was a passive foreign investment
company under this part as in effect for such taxable year.
``(5) Separate interests treated as separate
corporations.--Under regulations prescribed by the Secretary,
where necessary to carry out the purposes of this part,
separate classes of stock (or other interests) in a corporation
shall be treated as interests in separate corporations.
``(6) Treatment of certain subpart f inclusions.--Any
amount included in gross income under subparagraph (B) or (C)
of section 951(a)(1) shall be treated as a distribution
received with respect to the stock.
``(e) Treatment of Certain Leased Property.--For purposes of this
part--
``(1) In general.--Any tangible personal property with
respect to which a foreign corporation is the lessee under a
lease with a term of at least 12 months shall be treated as an
asset actually held by such corporation.
``(2) Amount taken into account.--
``(A) In general.--The amount taken into account
under section 1296(a)(2) with respect to any asset to
which paragraph (1) applies shall be the unamortized
portion (as determined under regulations prescribed by
the Secretary) of the present value of the payments
under the lease for the use of such property.
``(B) Present value.--For purposes of subparagraph
(A), the present value of payments described in
subparagraph (A) shall be determined in the manner
provided in regulations prescribed by the Secretary--
``(i) as of the beginning of the lease
term, and
``(ii) except as provided in such
regulations, by using a discount rate equal to
the applicable Federal rate determined under
section 1274(d)--
``(I) by substituting the lease
term for the term of the debt
instrument, and
``(II) without regard to paragraph
(2) or (3) thereof.
``(3) Exceptions.--This subsection shall not apply in any
case where--
``(A) the lessor is a related person (as defined in
section 954(d)(3)) with respect to the foreign
corporation, or
``(B) a principal purpose of leasing the property
was to avoid the provisions of this part or section
956A.
``(f) Special Rules for Certain Intangibles.--For purposes of this
part--
``(1) Research expenditures.--The adjusted basis of the
total assets of a controlled foreign corporation shall be
increased by the research or experimental expenditures (within
the meaning of section 174) paid or incurred by such foreign
corporation during the taxable year and the preceding 2 taxable
years. Any expenditure otherwise taken into account under the
preceding sentence shall be reduced by the amount of any
reimbursement received by the controlled foreign corporation
with respect to such expenditure.
``(2) Certain licensed intangibles.--
``(A) In general.--In the case of any intangible
property (as defined in section 936(h)(3)(B)) with
respect to which a controlled foreign corporation is a
licensee and which is used by such foreign corporation
in the active conduct of a trade or business, the
adjusted basis of the total assets of such foreign
corporation shall be increased by an amount equal to
300 percent of the payments made during the taxable
year by such foreign corporation for the use of such
intangible property.
``(B) Exceptions.--Subparagraph (A) shall not apply
to--
``(i) any payments to a foreign person if
such foreign person is a related person (as
defined in section 954(d)(3)) with respect to
the controlled foreign corporation, and
``(ii) any payments under a license if a
principal purpose of entering into such license
was to avoid the provisions of this part or
section 956A.
``(3) Controlled foreign corporation.--For purposes of this
subsection, the term `controlled foreign corporation' has the
meaning given such term by section 957(a).
``(g) Election by Certain Passive Foreign Corporations To Be
Treated as a Domestic Corporation.--
``(1) In general.--For purposes of this title, if--
``(A) a passive foreign corporation would qualify
as a regulated investment company under part I of
subchapter M if such passive foreign corporation were a
domestic corporation,
``(B) such passive foreign corporation meets such
requirements as the Secretary shall prescribe to ensure
that the taxes imposed by this title on such passive
foreign corporation are paid, and
``(C) such passive foreign corporation makes an
election to have this paragraph apply and waives all
benefits which are granted by the United States under
any treaty and to which such corporation would
otherwise be entitled by reason of being a resident of
another country,
such corporation shall be treated as a domestic corporation.
``(2) Certain rules made applicable.--Rules similar to the
rules of paragraphs (2), (3), (4)(A), and (5) of section 953(d)
shall apply with respect to any corporation making an election
under paragraph (1).
``(h) Special Rules for Certain Taxpayers.--
``(1) Tax-exempt organizations.--In the case of any
organization exempt from tax under section 501--
``(A) this part shall apply to any stock in a
passive foreign corporation owned (or treated as owned
under section 1294(e)) by such organization only to the
extent that a dividend on such stock would be taken
into account in determining the unrelated business
taxable income of such organization, and
``(B) to the extent that this part applies to any
such stock, this part shall be applied in the same
manner as if such organization were not exempt from tax
under section 501(a).
``(2) Treatment of stock held by pooled income fund.--If
stock in a passive foreign corporation is owned (or treated as
owned under section 1294(e)) by a pooled income fund (as
defined in section 642(c)(5)) and no portion of any gain from a
disposition of such stock may be allocated to income under the
terms of the governing instrument of such fund--
``(A) section 1293 shall not apply to any gain on a
disposition of such stock by such fund if (without
regard to section 1293) a deduction would be allowable
with respect to such gain under section 642(c)(3),
``(B) subpart A shall not apply with respect to
such stock, and
``(C) in determining whether section 1293 applies
to any distribution in respect of such stock, such
stock shall be treated as failing to qualify for the
exceptions under section 1294(a)(1).
``(i) Information From Shareholders.--Every United States person
who owns stock in any passive foreign corporation shall furnish with
respect to such corporation such information as the Secretary may
prescribe.
``(j) Regulations.--The Secretary shall prescribe such regulations
as may be necessary or appropriate to carry out the purposes of this
part, including regulations--
``(1) providing that gross income shall be determined
without regard to section 1293 for such purposes as may be
specified in such regulations, and
``(2) to prevent avoidance of the provisions of this part
through changes in citizenship or residence status.''
(b) Installment Sales Treatment Not Available.--Paragraph (2) of
section 453(k) is amended by striking ``or'' at the end of subparagraph
(A), by inserting ``or'' at the end of subparagraph (B), and by adding
at the end thereof the following new subparagraph:
``(C) stock in a passive foreign corporation (as
defined in section 1296) if section 1293 applies to
such sale,''.
(c) Treatment of Mark-to-Market Gain Under Section 4982.--
(1) Subsection (e) of section 4982 is amended by adding at
the end thereof the following new paragraph:
``(6) Treatment of gain recognized under section 1291.--For
purposes of determining a regulated investment company's
ordinary income--
``(A) notwithstanding paragraph (1)(C), section
1291 shall be applied as if such company's taxable year
ended on October 31, and
``(B) any ordinary gain or loss from an actual
disposition of stock in a passive foreign corporation
during the portion of the calendar year after October
31 shall be taken into account in determining such
company's ordinary income for the following calendar
year.
In the case of a company making an election under paragraph
(4), the preceding sentence shall be applied by substituting
the last day of the company's taxable year for October 31.''
(2) Subsection (b) of section 852 is amended by adding at
the end thereof the following new paragraph:
``(10) Special rule for certain losses on stock in passive
foreign corporations.--To the extent provided in regulations,
the taxable income of a regulated investment company (other
than a company to which an election under section 4982(e)(4)
applies) shall be computed without regard to any net reduction
in the value of any stock of a passive foreign corporation to
which section 1291 applies occurring after October 31 of the
taxable year, and any such reduction shall be treated as
occurring on the first day of the following taxable year.''
(3) Subsection (c) of section 852 is amended by inserting
after ``October 31 of such year'' the following: ``, without
regard to any net reduction in the value of any stock of a
passive foreign corporation to which section 1291 applies
occurring after October 31 of such year,''.
(d) Treatment of Certain Previously Taxed Amounts.--Subsection (e)
of section 959 is amended--
(1) by adding at the end thereof the following new
sentence: ``A similar rule shall apply in the case of amounts
included in gross income under section 1293 (as in effect on
January 1, 1993).'', and
(2) by striking ``Amounts Previously Taxed Under Section
1248'' in the subsection heading and inserting ``Certain
Previously Taxed Amounts''.
SEC. 403. TECHNICAL AND CONFORMING AMENDMENTS.
(a) General Rule.--
(1) Paragraph (2) of section 171(c) is amended--
(A) by striking ``, or by a foreign personal
holding company, as defined in section 552'', and
(B) by striking ``-, -o-r -a or foreign personal
holding company''.
(2) Section 312 is amended by striking subsection (j).
(3) Subsection (m) of section 312 is amended by striking
``, a foreign investment company (within the meaning of section
1246(b)), or a foreign personal holding company (within the
meaning of section 552)'' and inserting ``or a passive foreign
corporation (as defined in section 1296)''.
(4) Subsection (e) of section 443 is amended by striking
paragraph (3) and by redesignating paragraphs (4) and (5) as
paragraphs (3) and (4), respectively.
(5) Clause (ii) of section 465(c)(7)(B) is amended to read
as follows:
``(ii) a passive foreign corporation with
respect to which the stock ownership
requirements of section 1292(a)(2)(B) are met,
or''.
(6) Subsection (b) of section 535 is amended by striking
paragraph (9).
(7) Subsection (d) of section 535 is hereby repealed.
(8) Paragraph (1) of section 543(b) is amended by inserting
``and'' at the end of subparagraph (A), by striking ``, and''
at the end of subparagraph (B) and inserting a period, and by
striking subparagraph (C).
(9) Section 545 is amended by striking subsections (b)(7)
and (c).
(10) Paragraph (1) of section 562(b) is amended by striking
``or a foreign personal holding company described in section
552''.
(11) Section 563 is amended--
(A) by striking subsection (c),
(B) by redesignating subsection (d) as subsection
(c), and
(C) by striking ``subsection (a), (b), or (c)'' in
subsection (c) (as so redesignated) and inserting
``subsection (a) or (b)''.
(12) Paragraph (2) of section 751(d) is amended by striking
``subsection (a) of section 1246 (relating to gain on foreign
investment company stock)'' and inserting ``section 1291
(relating to stock in certain passive foreign corporations
marked to market)''.
(13) Subsection (b) of section 851 is amended by striking
the sentence following paragraph (4)(B) which contains a
reference to section 1293(a).
(14) Clause (ii) of section 864(b)(2)(A) is amended by
striking ``(other than'' and all that follows down through
``holding company)'' and inserting ``(other than a corporation
which would be a personal holding company but for section
542(c)(5) and which is not United States controlled (as defined
in section 1292(a)(2))''.
(15) Subsection (d) of section 904 is amended by striking
paragraphs (2)(A)(ii), (2)(E)(iii), and (3)(I).
(16)(A) Subparagraph (A) of section 904(g)(1) is amended to
read as follows:
``(A) Any amount included in gross income under
section 951(a) (relating to amounts included in gross
income of United States shareholders).''
(B) The paragraph heading of paragraph (2) of section
904(g) is amended by striking ``and foreign personal holding or
passive foreign investment company''.
(17) Section 951 is amended by striking subsections (c),
(d), and (f), and by redesignating subsection (e) as subsection
(c).
(18) Paragraph (3) of section 956A(c) is amended--
(A) by striking ``1297(d)'' in subparagraph (B) and
inserting ``1297(e)'', and
(B) by striking ``1297(e)'' in subparagraph (C) and
inserting ``1297(f)''.
(19) Paragraph (1) of section 986(c) is amended by striking
``or 1293(c)''.
(20) Paragraph (3) of section 989(b) is amended by striking
``, 551(a), or 1293(a)''.
(21) Paragraph (5) of section 1014(b) is hereby repealed.
(22) Subsection (a) of section 1016 is amended by striking
paragraph (13) and by redesignating the following paragraphs
accordingly.
(23) Paragraph (3) of section 1212(a) is amended--
(A) by striking subparagraph (A),
(B) by redesignating subparagraphs (B) and (C) as
subparagraphs (A) and (B), respectively, and
(C) by amending subparagraph (D) to read as
follows:
``(C) for which it is a passive foreign
corporation.''
(24) Section 1223 is amended by striking paragraph (10) and
by redesignating the following paragraphs accordingly.
(25) Subsection (d) of section 1248 is amended by striking
paragraphs (5) and (7).
(26)(A) Subsection (a) of section 6035 is amended by
striking ``foreign personal holding company (as defined in
section 552)'' and inserting ``passive foreign corporation with
respect to which the stock ownership requirements of section
1292(a)(2)(B) are met''.
(B) The section heading for section 6035 is amended by
striking ``foreign personal holding companies'' and inserting
``closely held passive foreign corporations''.
(C) The table of sections for subpart A of part III of
subchapter A of chapter 61 is amended by striking ``foreign
personal holding companies'' in the item relating to section
6035 and inserting ``closely-held passive foreign
corporations''.
(27) Subparagraph (D) of section 6103(e)(1) is amended by
striking clause (iv) and redesignating clauses (v) and (vi) as
clauses (iv) and (v), respectively.
(28) Subparagraph (B) of section 6501(e)(1) is amended to
read as follows:
``(B) Constructive dividends.--If the taxpayer
omits from gross income an amount properly includible
therein under section 951(a), the tax may be assessed,
or a proceeding in court for the collection of such tax
may be done without assessing, at any time within 6
years after the return was filed.''
(29) Section 4947 and section 4948(c)(4) are each amended
by striking ``556(b)(2),'' each place it appears.
(b) Clerical Amendments.--
(1) The table of parts for subchapter G of chapter 1 is
amended by striking the item relating to part III.
(2) The table of sections for part IV of subchapter P of
chapter 1 is amended by striking the items relating to sections
1246 and 1247.
(3) The table of parts for subchapter P of chapter 1 is
amended by striking the item relating to part VI and inserting
the following:
``Part VI. Treatment of passive foreign
corporations.''
SEC. 404. EFFECTIVE DATE.
(a) General Rule.--Except as otherwise provided in this section,
the amendments made by this subtitle shall apply to--
(1) taxable years of United States persons beginning after
December 31, 1993, and
(2) taxable years of foreign corporations ending with or
within such taxable years of United States persons.
(b) Denial of Installment Sales Treatment.--The amendment made by
section 402(b) shall apply to dispositions after December 31, 1993.
(c) Basis Rule.--The amendments made by this subtitle shall not
affect the determination of the basis of any stock acquired from a
decedent in a taxable year beginning before January 1, 1994.
Subtitle B--Treatment of Controlled Foreign Corporations
SEC. 411. GAIN ON CERTAIN STOCK SALES BY CONTROLLED FOREIGN
CORPORATIONS TREATED AS DIVIDENDS.
(a) General Rule.--Section 964 (relating to miscellaneous
provisions) is amended by adding at the end thereof the following new
subsection:
``(e) Gain on Certain Stock Sales by Controlled Foreign
Corporations Treated as Dividends.--
``(1) In general.--If a controlled foreign corporation
sells or exchanges stock in any other foreign corporation, gain
recognized on such sale or exchange shall be included in the
gross income of such controlled foreign corporation as a
dividend to the same extent that it would have been so included
under section 1248(a) if such controlled foreign corporation
were a United States person. For purposes of determining the
amount which would have been so includible, the determination
of whether such other foreign corporation was a controlled
foreign corporation shall be made without regard to the
preceding sentence.
``(2) Same country exception not applicable.--Clause (i) of
section 954(c)(3)(A) shall not apply to any amount treated as a
dividend by reason of paragraph (1).
``(3) Clarification of deemed sales.--For purposes of this
subsection, a controlled foreign corporation shall be treated
as having sold or exchanged any stock if, under any provision
of this subtitle, such controlled foreign corporation is
treated as having gain from the sale or exchange of such
stock.''
(b) Amendment of Section 904(d).--Clause (i) of section
904(d)(2)(E) is amended by striking ``and except as provided in
regulations, the taxpayer was a United States shareholder in such
corporation''.
(c) Effective Dates.--
(1) The amendment made by subsection (a) shall apply to
gain recognized on transactions occurring after the date of the
enactment of this Act.
(2) The amendment made by subsection (b) shall apply to
distributions after the date of the enactment of this Act.
SEC. 412. MISCELLANEOUS MODIFICATIONS TO SUBPART F.
(a) Section 1248 Gain Taken Into Account in Determining Pro Rata
Share.--
(1) In general.--Paragraph (2) of section 951(a) (defining
pro rata share of subpart F income) is amended by adding at the
end thereof the following new sentence: ``For purposes of
subparagraph (B), any gain included in the gross income of any
person as a dividend under section 1248 shall be treated as a
distribution received by such person with respect to the stock
involved.''
(2) Effective date.--The amendment made by paragraph (1)
shall apply to dispositions after the date of the enactment of
this Act.
(b) Basis Adjustments in Stock Held by Foreign Corporation.--
(1) In general.--Section 961 (relating to adjustments to
basis of stock in controlled foreign corporations and of other
property) is amended by adding at the end thereof the following
new subsection:
``(c) Basis Adjustments in Stock Held by Foreign Corporation.--
Under regulations prescribed by the Secretary, if a United States
shareholder is treated under section 958(a)(2) as owning any stock in a
controlled foreign corporation which is actually owned by another
controlled foreign corporation, adjustments similar to the adjustments
provided by subsections (a) and (b) shall be made to the basis of such
stock in the hands of such other controlled foreign corporation, but
only for the purposes of determining the amount included under section
951 in the gross income of such United States shareholder (or any other
United States shareholder who acquires from any person any portion of
the interest of such United States shareholder by reason of which such
shareholder was treated as owning such stock, but only to the extent of
such portion, and subject to such proof of identity of such interest as
the Secretary may prescribe by regulations).''
(2) Effective date.--The amendment made by paragraph (1)
shall apply for purposes of determining inclusions for taxable
years of United States shareholders beginning after December
31, 1993.
(c) Determination of Previously Taxed Income in Section 304
Distributions, Etc.--
(1) In general.--Section 959 (relating to exclusion from
gross income of previously taxed earnings and profits) is
amended by adding at the end thereof the following new
subsection:
``(g) Adjustments for Certain Transactions.--If by reason of--
``(1) a transaction to which section 304 applies,
``(2) the structure of a United States shareholder's
holdings in controlled foreign corporations, or
``(3) other circumstances,
there would be a multiple inclusion of any item in income (or an
inclusion or exclusion without an appropriate basis adjustment) by
reason of this subpart, the Secretary may prescribe regulations
providing such modifications in the application of this subpart as may
be necessary to eliminate such multiple inclusion or provide such basis
adjustment, as the case may be.''
(2) Effective date.--The amendment made by paragraph (1)
shall take effect on the date of the enactment of this Act.
(d) Clarification of Treatment of Branch Tax Exemptions or
Reductions.--
(1) In general.--Subsection (b) of section 952 is amended
by adding at the end thereof the following new sentence: ``For
purposes of this subsection, any exemption (or reduction) with
respect to the tax imposed by section 884 shall not be taken
into account.''.
(2) Effective date.--The amendment made by paragraph (1)
shall apply to taxable years beginning after December 31, 1986.
SEC. 413. INDIRECT FOREIGN TAX CREDIT ALLOWED FOR CERTAIN LOWER TIER
COMPANIES.
(a) Section 902 Credit.--
(1) In general.--Subsection (b) of section 902 (relating to
deemed taxes increased in case of certain 2nd and 3rd tier
foreign corporations) is amended to read as follows:
``(b) Deemed Taxes Increased in Case of Certain Lower Tier
Corporations.--
``(1) In general.--If--
``(A) any foreign corporation is a member of a
qualified group, and
``(B) such foreign corporation owns 10 percent or
more of the voting stock of another member of such
group from which it receives dividends in any taxable
year,
such foreign corporation shall be deemed to have paid the same
proportion of such other member's post-1986 foreign income
taxes as would be determined under subsection (a) if such
foreign corporation were a domestic corporation.
``(2) Qualified group.--For purposes of paragraph (1), the
term `qualified group' means--
``(A) the foreign corporation described in
subsection (a), and
``(B) any other foreign corporation if--
``(i) the domestic corporation owns at
least 5 percent of the voting stock of such
other foreign corporation indirectly through a
chain of foreign corporations connected through
stock ownership of at least 10 percent of their
voting stock,
``(ii) the foreign corporation described in
subsection (a) is the first tier corporation in
such chain, and
``(iii) such other corporation is not below
the sixth tier in such chain,
The term `qualified group' shall not include any foreign
corporation below the third tier in the chain referred to in
clause (i) unless such foreign corporation is a controlled
foreign corporation (as defined in section 957) and the
domestic corporation is a United States shareholder (as defined
in section 951(b)) in such foreign corporation. Paragraph (1)
shall apply to those taxes paid by a member of the qualified
group below the third tier only with respect to periods during
which it was a controlled foreign corporation.''
(2) Conforming amendments.--
(A) Subparagraph (B) of section 902(c)(3) is
amended by adding ``or'' at the end of clause (i) and
by striking clauses (ii) and (iii) and inserting the
following new clause:
``(ii) the requirements of subsection
(b)(2) are met with respect to such foreign
corporation.''
(B) Subparagraph (B) of section 902(c)(4) is
amended by striking ``3rd foreign corporation'' and
inserting ``sixth tier foreign corporation''.
(C) The heading for paragraph (3) of section 902(c)
is amended by striking ``where domestic corporation
acquires 10 percent of foreign corporation'' and
inserting ``where foreign corporation first
qualifies''.
(D) Paragraph (3) of section 902(c) is amended by
striking ``ownership'' each place it appears.
(b) Section 960 Credit.--Paragraph (1) of section 960(a) (relating
to special rules for foreign tax credits) is amended to read as
follows:
``(1) Deemed paid credit.--For purposes of subpart A of
this part, if there is included under section 951(a) in the
gross income of a domestic corporation any amount attributable
to earnings and profits of a foreign corporation which is a
member of a qualified group (as defined in section 902(b)) with
respect to the domestic corporation, then, except to the extent
provided in regulations, section 902 shall be applied as if the
amount so included were a dividend paid by such foreign
corporation (determined by applying section 902(c) in
accordance with section 904(d)(3)(B)).''
(c) Effective Date.--
(1) In general.--The amendments made by this section shall
apply to taxes of foreign corporations for taxable years of
such corporations beginning after the date of enactment of this
Act.
(2) Special rule.--In the case of any chain of foreign
corporations described in clauses (i) and (ii) of section
902(b)(2)(B) of the Internal Revenue Code of 1986 (as amended
by this section), no liquidation, reorganization, or similar
transaction in a taxable year beginning after the date of the
enactment of this Act shall have the effect of permitting taxes
to be taken into account under section 902 of the Internal
Revenue Code of 1986 which could not have been taken into
account under such section but for such transaction.
Subtitle C--Other Provisions
SEC. 421. EXCHANGE RATE USED IN TRANSLATING FOREIGN TAXES.
(a) Accrued Taxes Translated by Using Average Rate for Year to
Which Taxes Relate.--
(1) In general.--Subsection (a) of section 986 (relating to
translation of foreign taxes) is amended to read as follows:
``(a) Foreign Income Taxes.--
``(1) Translation of accrued taxes.--
``(A) In general.--For purposes of determining the
amount of the foreign tax credit, in the case of a
taxpayer who takes foreign income taxes into account
when accrued, the amount of any foreign income taxes
(and any adjustment thereto) shall be translated into
dollars by using the average exchange rate for the
taxable year to which such taxes relate.
``(B) Exception for taxes not paid within following
2 years.--
``(i) Subparagraph (A) shall not apply to
any foreign income taxes paid after the date 2
years after the close of the taxable year to
which such taxes relate.
``(ii) Subparagraph (A) shall not apply to
taxes paid before the beginning of the taxable
year to which such taxes relate.
``(C) Exception for inflationary currencies.--To
the extent provided in regulations, subparagraph (A)
shall not apply to any foreign income taxes the
liability for which is denominated in any currency
determined to be an inflationary currency under such
regulations.
``(D) Cross reference.--
``For adjustments where tax is not paid
within 2 years, see section 905(c).
``(2) Translation of taxes to which paragraph (1) does not
apply.--For purposes of determining the amount of the foreign
tax credit, in the case of any foreign income taxes to which
subparagraph (A) of paragraph (1) does not apply--
``(A) such taxes shall be translated into dollars
using the exchange rates as of the time such taxes were
paid to the foreign country or possession of the United
States, and
``(B) any adjustment to the amount of such taxes
shall be translated into dollars using--
``(i) except as provided in clause (ii),
the exchange rate as of the time when such
adjustment is paid to the foreign country or
possession, or
``(ii) in the case of any refund or credit
of foreign income taxes, using the exchange
rate as of the time of the original payment of
such foreign income taxes.
``(3) Foreign income taxes.--For purposes of this
subsection, the term `foreign income taxes' means any income,
war profits, or excess profits taxes paid or accrued to any
foreign country or to any possession of the United States.''
(2) Adjustment when not paid within 2 years after year to
which taxes relate.--Subsection (c) of section 905 is amended
to read as follows:
``(c) Adjustments to Accrued Taxes.--
``(1) In general.--If--
``(A) accrued taxes when paid differ from the
amounts claimed as credits by the taxpayer,
``(B) accrued taxes are not paid before the date 2
years after the close of the taxable year to which such
taxes relate, or
``(C) any tax paid is refunded in whole or in part,
the taxpayer shall notify the Secretary, who shall redetermine
the amount of the tax for the year or years affected.
``(2) Special rule for taxes not paid within 2 years.--In
making the redetermination under paragraph (1), no credit shall
be allowed for accrued taxes not paid before the date referred
to in subparagraph (B) of paragraph (1). Any such taxes if
subsequently paid shall be taken into account for the taxable
year in which paid and no redetermination under this section
shall be made on account of such payment.
``(3) Adjustments.--The amount of tax due on any
redetermination under paragraph (1) (if any) shall be paid by
the taxpayer on notice and demand by the Secretary, and the
amount of tax overpaid (if any) shall be credited or refunded
to the taxpayer in accordance with subchapter B of chapter 66
(section 6511 et seq.).
``(4) Bond requirements.--In the case of any tax accrued
but not paid, the Secretary, as a condition precedent to the
allowance of the credit provided in this subpart, may require
the taxpayer to give a bond, with sureties satisfactory to and
approved by the Secretary, in such sum as the Secretary may
require, conditioned on the payment by the taxpayer of any
amount of tax found due on any such redetermination. Any such
bond shall contain such further conditions as the Secretary may
require.
``(5) Other special rules.--In any redetermination under
paragraph (1) by the Secretary of the amount of tax due from
the taxpayer for the year or years affected by a refund, the
amount of the taxes refunded for which credit has been allowed
under this section shall be reduced by the amount of any tax
described in section 901 imposed by the foreign country or
possession of the United States with respect to such refund;
but no credit under this subpart, or deduction under section
164, shall be allowed for any taxable year with respect to any
such tax imposed on the refund. No interest shall be assessed
or collected on any amount of tax due on any redetermination by
the Secretary, resulting from a refund to the taxpayer, for any
period before the receipt of such refund, except to the extent
interest was paid by the foreign country or possession of the
United States on such refund for such period.''
(b) Authority to Use Average Rates.--
(1) In general.--Subsection (a) of section 986 (as amended
by subsection (a)) is amended by redesignating paragraph (3) as
paragraph (4) and inserting after paragraph (2) the following
new paragraph:
``(3) Authority to permit use of average rates.--To the
extent prescribed in regulations, the average exchange rate for
the period (specified in such regulations) during which the
taxes or adjustment is paid may be used instead of the exchange
rate as of the time of such payment.''
(2) Determination of average rates.--Subsection (c) of
section 989 is amended by striking ``and'' at the end of
paragraph (4), by striking the period at the end of paragraph
(5) and inserting ``, and'', and by adding at the end thereof
the following new paragraph:
``(6) setting forth procedures for determining the average
exchange rate for any period.''
(3) Conforming amendments.--Subsection (b) of section 989
is amended by striking ``weighted'' each place it appears.
(c) Effective Dates.--
(1) In general.--The amendments made by subsections (a)(1)
and (b) shall apply to taxes paid or accrued in taxable years
beginning after December 31, 1992.
(2) Subsection (a)(2).--The amendment made by subsection
(a)(2) shall apply to taxes which relate to taxable years
beginning after December 31, 1992.
SEC. 422. ELECTION TO USE SIMPLIFIED SECTION 904 LIMITATION FOR
ALTERNATIVE MINIMUM TAX.
(a) General Rule.--Subsection (a) of section 59 (relating to
alternative minimum tax foreign tax credit) is amended by adding at the
end thereof the following new paragraph:
``(3) Election to use simplified section 904 limitation.--
``(A) In general.--In determining the alternative
minimum tax foreign tax credit for any taxable year to
which an election under this paragraph applies--
``(i) subparagraph (B) of paragraph (1)
shall not apply, and
``(ii) the limitation of section 904 shall
be based on the proportion which--
``(I) the taxpayer's taxable income
(as determined for purposes of the
regular tax) from sources without the
United States (but not in excess of the
taxpayer's entire alternative minimum
taxable income), bears to
``(II) the taxpayer's entire
alternative minimum taxable income for
the taxable year.
``(B) Election.--
``(i) In general.--An election under this
paragraph may be made only for the taxpayer's
first taxable year which begins after December
31, 1993, and for which the taxpayer claims an
alternative minimum tax foreign tax credit.
``(ii) Election revocable only with
consent.--An election under this paragraph,
once made, shall apply to the taxable year for
which made and all subsequent taxable years
unless revoked with the consent of the
Secretary.''
(b) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 1993.
SEC. 423. MODIFICATION OF SECTION 1491.
(a) General Rule.--So much of chapter 5 (relating to tax on
transfers to avoid income tax) as precedes section 1492 is amended to
read as follows:
``CHAPTER 5--TREATMENT OF TRANSFERS TO AVOID INCOME TAX
``Sec. 1491. Recognition of gain.
``Sec. 1492. Exceptions.
``SEC. 1491. RECOGNITION OF GAIN.
``In the case of any transfer of property by a United States person
to a foreign corporation as paid-in surplus or as a contribution to
capital, to a foreign estate or trust, or to a foreign partnership, for
purposes of this subtitle, such transfer shall be treated as a sale or
exchange for an amount equal to the fair market value of the property
transferred, and the transferor shall recognize as gain the excess of--
``(1) the fair market value of the property so transferred,
over
``(2) the adjusted basis (for purposes of determining gain)
of such property in the hands of the transferor.''
(b) Conforming Amendments.--
(1) Section 1057 is hereby repealed.
(2) Section 1492 is amended to read as follows:
``SEC. 1492. EXCEPTIONS.
``The provisions of section 1491 shall not apply--
``(1) If the transferee is an organization exempt from
income tax under part I of subchapter F of chapter 1 (other
than an organization described in section 401(a)),
``(2) To a transfer described in section 367, or
``(3) To any other transfer, to the extent provided in
regulations in accordance with principles similar to the
principles of section 367 or otherwise consistent with the
purpose of section 1491.''
(3) Section 1494 is hereby repealed.
(4) The table of sections for part IV of subchapter O of
chapter 1 is amended by striking the item relating to section
1057.
(5) The table of chapters for subtitle A is amended by
striking ``Tax on'' in the item relating to chapter 5 and
inserting ``Treatment of''.
(c) Effective Date.--The amendments made by this section shall
apply to transfers after December 31, 1994.
SEC. 424. MODIFICATION OF SECTION 367(b).
(a) General Rule.--Paragraph (1) of section 367(b) is amended to
read as follows:
``(1) In general.--In the case of any transaction described
in section 332, 351, 354, 355, 356, or 361 in which the status
of a foreign corporation as a corporation is a general
condition for nonrecognition by 1 or more of the parties to the
transaction, income shall be required to be recognized to the
extent provided in regulations prescribed by the Secretary
which are necessary or appropriate to prevent the avoidance of
Federal income taxes. This subsection shall not apply to a
transaction in which the foreign corporation is not treated as
a corporation under subsection (a)(1).''
(b) Effective Date.--The amendment made by subsection (a) shall
apply to transfers after December 31, 1994.
TITLE V--OTHER INCOME TAX PROVISIONS
Subtitle A--Provisions Relating to Subchapter S Corporations
SEC. 501. AUTHORITY TO VALIDATE CERTAIN INVALID ELECTIONS.
(a) General Rule.--Subsection (f) of section 1362 (relating to
inadvertent terminations) is amended to read as follows:
``(f) Inadvertent Invalid Elections or Terminations.--If--
``(1) an election under subsection (a) by any corporation--
``(A) was not effective for the taxable year for
which made (determined without regard to subsection
(b)(2)) by reason of a failure to meet the requirements
of section 1361(b) or to obtain shareholder consents,
or
``(B) was terminated under paragraph (2) or (3) of
subsection (d),
``(2) the Secretary determines that the circumstances
resulting in such ineffectiveness or termination were
inadvertent,
``(3) no later than a reasonable period of time after
discovery of the circumstances resulting in such
ineffectiveness or termination, steps were taken--
``(A) so that the corporation is a small business
corporation, or
``(B) to acquire the required shareholder consents,
and
``(4) the corporation, and each person who was a
shareholder in the corporation at any time during the period
specified pursuant to this subsection, agrees to make such
adjustments (consistent with the treatment of the corporation
as an S corporation) as may be required by the Secretary with
respect to such period,
then, notwithstanding the circumstances resulting in such
ineffectiveness or termination, such corporation shall be treated as an
S corporation during the period specified by the Secretary.''
(b) Late Elections.--Subsection (b) of section 1362 is amended by
adding at the end thereof the following new paragraph:
``(5) Authority to treat late elections as timely.--If--
``(A) an election under subsection (a) is made for
any taxable year (determined without regard to
paragraph (3)) after the date prescribed by this
subsection for making such election for such taxable
year, and
``(B) the Secretary determines that there was
reasonable cause for the failure to timely make such
election,
the Secretary may treat such election as timely made for such
taxable year (and paragraph (3) shall not apply).''
(c) Effective Date.--The amendments made by this section shall
apply with respect to elections for taxable years beginning after
December 31, 1982.
SEC. 502. TREATMENT OF DISTRIBUTIONS DURING LOSS YEARS.
(a) Adjustments for Distributions Taken Into Account Before
Losses.--
(1) Subparagraph (A) of section 1366(d)(1) is amended by
striking ``paragraph (1)'' and inserting ``paragraphs (1) and
(2)(A)''.
(2) Subsection (d) of section 1368 is amended by adding at
the end thereof the following new sentence:
``In the case of any distribution made during any taxable year, the
adjusted basis of the stock shall be determined with regard to the
adjustments provided in paragraph (1) of section 1367(a) for the
taxable year.''
(b) Accumulated Adjustments Account.--Paragraph (1) of section
1368(e) (relating to accumulated adjustments account) is amended by
adding at the end thereof the following new subparagraph:
``(C) Net loss for year disregarded.--
``(i) In general.--In applying this section to
distributions made during any taxable year, the amount
in the accumulated adjustments account as of the close
of such taxable year shall be determined without regard
to any net negative adjustment for such taxable year.
``(ii) Net negative adjustment.--For purposes of
clause (i), the term `net negative adjustment' means,
with respect to any taxable year, the excess (if any)
of--
``(I) the reductions in the account for the
taxable year (other than for distributions),
over
``(II) the increases in such account for
such taxable year.''
(c) Conforming Amendments.--Subparagraph (A) of section 1368(e)(1)
is amended--
(1) by striking ``as provided in subparagraph (B)'' and
inserting ``as otherwise provided in this paragraph'', and
(2) by striking ``section 1367(b)(2)(A)'' and inserting
``section 1367(a)(2)''.
(d) Effective Date.--The amendments made by this section shall
apply to distributions in taxable years beginning after December 31,
1992.
SEC. 503. ELECTING SMALL BUSINESS TRUSTS.
(a) General Rule.--Subparagraph (A) of section 1361(c)(2) (relating
to certain trusts permitted as shareholders) is amended by inserting
after clause (iv) the following new clause:
``(v) An electing small business trust.''
(b) Current Beneficiaries Treated as Shareholders.--Subparagraph
(B) of section 1361(c)(2) is amended by adding at the end the following
new clause:
``(v) In the case of a trust described in
clause (v) of subparagraph (A), each potential
current beneficiary of such trust shall be
treated as a shareholder; except that, if for
any period there is no potential current
beneficiary of such trust, such trust shall be
treated as the shareholder during such
period.''
(c) Electing Small Business Trust Defined.--Section 1361 (defining
S corporation) is amended by adding at the end the following new
subsection:
``(e) Electing Small Business Trust Defined.--
``(1) Electing small business trust.--For purposes of this
section--
``(A) In general.--Except as provided in
subparagraph (B), the term `electing small business
trust' means any trust if--
``(i) such trust does not have as a
beneficiary any person other than (I) an
individual, (II) an estate, or (III) an
organization described in paragraph (2), (3),
(4), or (5) of section 170(c) which holds a
contingent interest and is not a potential
current beneficiary,
``(ii) no interest in such trust was
acquired by purchase, and
``(iii) an election under this subsection
applies to such trust.
``(B) Certain trusts not eligible.--The term
`electing small business trust' shall not include--
``(i) any qualified subchapter S trust (as
defined in subsection (d)(3)) if an election
under subsection (d)(2) applies to any
corporation the stock of which is held by such
trust, and
``(ii) any trust exempt from tax under this
subtitle.
``(C) Purchase.--For purposes of subparagraph (A),
the term `purchase' means any acquisition if the basis
of the property acquired is determined under section
1012.
``(2) Potential current beneficiary.--For purposes of this
section, the term `potential current beneficiary' means, with
respect to any period, any person who at any time during such
period is entitled to, or at the discretion of any person may
receive, a distribution from the principal or income of the
trust. If a trust disposes of all of the stock which it holds
in an S corporation, then, with respect to such corporation,
the term `potential current beneficiary' does not include any
person who first met the requirements of the preceding sentence
during the 60-day period ending on the date of such
disposition.
``(3) Election.--An election under this subsection shall be
made by the trustee. Any such election shall apply to the
taxable year of the trust for which made and all subsequent
taxable years of such trust unless revoked with the consent of
the Secretary.
``(4) Cross reference.--
``For special treatment of electing
small business trusts, see section 641(d).''
(d) Taxation of Electing Small Business Trusts.--Section 641
(relating to imposition of tax on trusts) is amended by adding at the
end the following new subsection:
``(d) Special Rules for Taxation of Electing Small Business
Trusts.--
``(1) In general.--For purposes of this chapter--
``(A) the portion of any electing small business
trust which consists of stock in 1 or more S
corporations shall be treated as a separate trust, and
``(B) the amount of the tax imposed by this chapter
on such separate trust shall be determined with the
modifications of paragraph (2).
``(2) Modifications.--For purposes of paragraph (1), the
modifications of this paragraph are the following:
``(A) Except as provided in section 1(h), the
amount of the tax imposed by section 1(e) shall be
determined by using the highest rate of tax set forth
in section 1(e).
``(B) The exemption amount under section 55(d)
shall be zero.
``(C) The only items of income, loss, deduction, or
credit to be taken into account are the following:
``(i) The items required to be taken into
account under section 1366.
``(ii) Any gain or loss from the
disposition of stock in an S corporation.
``(iii) To the extent provided in
regulations, State or local income taxes or
administrative expenses to the extent allocable
to items described in clauses (i) and (ii).
No deduction or credit shall be allowed for any amount
not described in this paragraph, and no item described
in this paragraph shall be apportioned to any
beneficiary.
``(D) No amount shall be allowed under paragraph
(1) or (2) of section 1211(b).
``(3) Treatment of remainder of trust and distributions.--
For purposes of determining--
``(A) the amount of the tax imposed by this chapter
on the portion of any electing small business trust not
treated as a separate trust under paragraph (1), and
``(B) the distributable net income of the entire
trust,
the items referred to in paragraph (2)(C) shall be excluded.
Except as provided in the preceding sentence, this subsection
shall not affect the taxation of any distribution from the
trust.
``(4) Treatment of unused deductions where termination of
separate trust.--If a portion of an electing small business
trust ceases to be treated as a separate trust under paragraph
(1), any carryover or excess deduction of the separate trust
which is referred to in section 642(h) shall be taken into
account by the entire trust.
``(5) Electing small business trust.--For purposes of this
subsection, the term `electing small business trust' has the
meaning given such term by section 1361(e)(1).''
(e) Technical Amendment.--Paragraph (1) of section 1366(a) is
amended by inserting ``, or of a trust or estate which terminates,''
after ``who dies''.
(f) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after the date of the enactment of
this Act.
SEC. 504. OTHER MODIFICATIONS.
(a) Treatment of S Corporations Under Subchapter C.--Subsection (a)
of section 1371 (relating to application of subchapter C rules) is
amended to read as follows:
``(a) Application of Subchapter C Rules.--Except as otherwise
provided in this title, and except to the extent inconsistent with this
subchapter, subchapter C shall apply to an S corporation and its
shareholders.''
(b) S Corporations Permitted To Hold Subsidiaries.--
(1) In general.--Paragraph (2) of section 1361(b) (defining
ineligible corporation) is amended by striking subparagraph (A)
and by redesignating subparagraphs (B), (C), (D), and (E) as
subparagraphs (A), (B), (C), and (D), respectively.
(2) Conforming amendments.--
(A) Subsection (c) of section 1361 is amended by
striking paragraph (6).
(B) Subsection (b) of section 1504 (defining
includible corporation) is amended by adding at the end
thereof the following new paragraph:
``(8) An S corporation.''
(c) Elimination of Pre-1983 Earnings and Profits.--
(1) In general.--If--
(A) a corporation was an electing small business
corporation under subchapter S of chapter 1 of the
Internal Revenue Code of 1986 for any taxable year
beginning before January 1, 1983, and
(B) such corporation is an S corporation under
subchapter S of chapter 1 of such Code for its first
taxable year beginning after December 31, 1992,
the amount of such corporation's accumulated earnings and
profits (as of the beginning of such first taxable year) shall
be reduced by an amount equal to the portion (if any) of such
accumulated earnings and profits which were accumulated in any
taxable year beginning before January 1, 1983, for which such
corporation was an electing small business corporation under
such subchapter S.
(2) Conforming amendments.--
(A) Paragraph (3) of section 1362(d) is amended--
(i) by striking ``Subchapter C'' in the
paragraph heading and inserting
``Accumulated'',
(ii) by striking ``subchapter C'' in
subparagraph (A)(i)(I) and inserting
``accumulated'', and
(iii) by striking subparagraph (B) and
redesignating the following subparagraphs
accordingly.
(B)(i) Subsection (a) of section 1375 is amended by
striking ``subchapter C'' in paragraph (1) and
inserting ``accumulated''.
(ii) Paragraph (3) of section 1375(b) is amended to
read as follows:
``(3) Passive investment income, etc.--The terms `passive
investment income' and `gross receipts' have the same
respective meanings as when used in paragraph (3) of section
1362(d).''
(iii) The section heading for section 1375 is
amended by striking ``subchapter c'' and inserting
``accumulated''.
(iv) The table of sections for part III of
subchapter S of chapter 1 is amended by striking
``subchapter C'' in the item relating to section 1375
and inserting ``accumulated''.
(C) Clause (i) of section 1042(c)(4)(A) is amended
by striking ``section 1362(d)(3)(D)'' and inserting
``section 1362(d)(3)(C)''.
(d) Adjustments to Basis of Inherited S Stock To Reflect Certain
Items of Income.--Subsection (b) of section 1367 (relating to
adjustments to basis of stock of shareholders, etc.) is amended by
adding at the end thereof the following new paragraph:
``(4) Adjustments in case of inherited stock.--
``(A) In general.--If any person acquires stock in
an S corporation by reason of the death of a decedent
or by bequest, devise, or inheritance, section 691
shall be applied with respect to any item of income of
the S corporation in the same manner as if the decedent
had held directly his pro rata share of such item.
``(B) Adjustments to basis.--The basis determined
under section 1014 of any stock in an S corporation
shall be reduced by the portion of the value of the
stock which is attributable to items constituting
income in respect of the decedent.''
(e) Effective Dates.--
(1) Subsections (a) and (b).--The amendments made by
subsections (a) and (b) shall take effect on the date of the
enactment of this Act.
(2) Subsection (c).--The amendments made by subsection (c)
shall apply to taxable years beginning after December 31, 1992.
(3) Subsection (d).--The amendment made by subsection (d)
shall apply in the case of decedents dying after the date of
the enactment of this Act.
Subtitle B--Accounting Provision
SEC. 511. MODIFICATIONS TO LOOK-BACK METHOD FOR LONG-TERM CONTRACTS.
(a) Look-Back Method Not To Apply in Certain Cases.--Subsection (b)
of section 460 (relating to percentage of completion method) is amended
by adding at the end thereof the following new paragraph:
``(6) Election to have look-back method not apply in de
minimis cases.--
``(A) Amounts taken into account after completion
of contract.--Paragraph (1)(B) shall not apply with
respect to any taxable year (beginning after the
taxable year in which the contract is completed) if--
``(i) the cumulative taxable income (or
loss) under the contract as of the close of
such taxable year, is within
``(ii) 10 percent of the cumulative look-
back taxable income (or loss) under the
contract as of the close of the most recent
taxable year to which paragraph (1)(B) applied
(or would have applied but for subparagraph
(B)).
``(B) De minimis discrepancies.--Paragraph (1)(B)
shall not apply in any case to which it would otherwise
apply if--
``(i) the cumulative taxable income (or
loss) under the contract as of the close of
each prior contract year, is within
``(ii) 10 percent of the cumulative look-
back income (or loss) under the contract as of
the close of such prior contract year.
``(C) Definitions.--For purposes of this
paragraph--
``(i) Contract year.--The term `contract
year' means any taxable year for which income
is taken into account under the contract.
``(ii) Look-back income or loss.--The look-
back income (or loss) is the amount which would
be the taxable income (or loss) under the
contract if the allocation method set forth in
paragraph (2)(A) were used in determining
taxable income.
``(iii) Discounting not applicable.--The
amounts taken into account after the completion
of the contract shall be determined without
regard to any discounting under the 2nd
sentence of paragraph (2).
``(D) Contracts to which paragraph applies.--This
paragraph shall only apply if the taxpayer makes an
election under this subparagraph. Unless revoked with
the consent of the Secretary, such an election shall
apply to all long-term contracts completed during the
taxable year for which election is made or during any
subsequent taxable year.''
(b) Modification of Interest Rate.--
(1) In general.--Subparagraph (C) of section 460(b)(2) is
amended by striking ``the overpayment rate established by
section 6621'' and inserting ``the adjusted overpayment rate
(as defined in paragraph (7))''.
(2) Adjusted overpayment rate.--Subsection (b) of section
460 is amended by adding at the end thereof the following new
paragraph:
``(7) Adjusted overpayment rate.--
``(A) In general.--The adjusted overpayment rate
for any interest accrual period is the overpayment rate
in effect under section 6621 for the calendar quarter
in which such interest accrual period begins.
``(B) Interest accrual period.--For purposes of
subparagraph (A), the term `interest accrual period'
means the period--
``(i) beginning on the day after the return
due date for any taxable year of the taxpayer,
and
``(ii) ending on the return due date for
the following taxable year.
For purposes of the preceding sentence, the term
`return due date' means the date prescribed for filing
the return of the tax imposed by this chapter
(determined without regard to extensions).''
(c) Effective Date.--The amendments made by this section shall
apply to contracts completed in taxable years ending after the date of
the enactment of this Act.
Subtitle C--Provisions Relating To Regulated Investment Companies
SEC. 521. REPEAL OF 30-PERCENT GROSS INCOME LIMITATION.
(a) General Rule.--Subsection (b) of section 851 (relating to
limitations) is amended by striking paragraph (3), by adding ``and'' at
the end of paragraph (2), and by redesignating paragraph (4) as
paragraph (3).
(b) Technical Amendments.--
(1) The material following paragraph (3) of section 851 (as
redesignated by subsection (a)) is amended--
(A) by striking out ``paragraphs (2) and (3)'' and
inserting ``paragraph (2)'', and
(B) by striking out the last sentence thereof.
(2) Subsection (c) of section 851 is amended by striking
``subsection (b)(4)'' each place it appears (including the
heading) and inserting ``subsection (b)(3)''.
(3) Subsection (d) of section 851 is amended by striking
``subsections (b)(4)'' and inserting ``subsections (b)(3)''.
(4) Paragraph (1) of section 851(e) is amended by striking
``subsection (b)(4)'' and inserting ``subsection (b)(3)''.
(5) Paragraph (4) of section 851(e) is amended by striking
``subsections (b)(4)'' and inserting ``subsections (b)(3)''.
(6) Section 851 is amended by striking subsection (g) and
redesignating subsection (h) as subsection (g).
(7) Subsection (g) of section 851 (as redesignated by
paragraph (6)) is amended by striking paragraph (3).
(8) Section 817(h)(2) is amended--
(A) by striking ``851(b)(4)'' in subparagraph (A)
and inserting ``851(b)(3)'', and
(B) by striking ``851(b)(4)(A)(i)'' in subparagraph
(B) and inserting ``851(b)(3)(A)(i)''.
(9) Section 1092(f)(2) is amended by striking ``Except for
purposes of section 851(b)(3), the'' and inserting ``The''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years ending after the date of the enactment of this
Act.
SEC. 522. BASIS RULES FOR SHARES IN OPEN-END REGULATED INVESTMENT
COMPANIES.
(a) Additional Reporting Requirement.--Section 6045 (relating to
returns of brokers) is amended by adding at the end thereof the
following new subsection:
``(f) Additional Information Required With Respect to Open-End
Regulated Investment Companies.--
``(1) In general.--If any person is required under
subsection (a) to make a return regarding the gross proceeds
from any disposition of stock in an open-end regulated
investment company, such return shall include--
``(A) the basis of the stock disposed of
(determined by reference to the average basis of all of
the stock in the account from which the disposition was
made immediately before the disposition), and
``(B) the portion of such basis and such gross
proceeds attributable to stock held for more than 1
year and the portion not so attributable.
Determinations under subparagraph (B) shall be made on a first-
in, first-out, basis and determinations of basis and holding
period shall be made in such manner as the Secretary may
prescribe.
``(2) Open-end regulated investment company.--For purposes
of this subsection, the term `open-end regulated investment
company' means any regulated investment company which is
offering for sale or has outstanding any redeemable security
(as defined in section 2(a)(32) of the Investment Company Act
of 1940) of which it is the issuer.
``(3) Information transfers.--To the extent provided in
regulations, there shall be such exchanges of information
between brokers as such regulations may require for purposes of
enabling brokers to meet the requirements of this subsection.
``(4) Application of subsection.--This subsection shall not
apply with respect to stock in any account--
``(A) which was established before January 1, 1995,
or
``(B) which includes any stock not acquired by
purchase.''
(b) Basis for Income Tax Purposes.--Section 1012 of such Code is
amended--
(1) by striking ``The basis'' and inserting ``(a) General
Rule.--The basis'', and
(2) by adding at the end thereof the following new
subsection:
``(b) Special Rules for Stock in Open-End Regulated Investment
Companies.--
``(1) In general.--In the case of any disposition of stock
from a covered account--
``(A) the basis of such stock shall be determined
by reference to the average basis of all of the stock
in such account immediately before such disposition,
and
``(B) the determination of which stock in such
account is so disposed of shall be made on a first-in,
first-out, basis.
``(2) Covered account.--For purposes of this subsection--
``(A) In general.--The term `covered account' means
any account of stock in an open-end regulated
investment company if section 6045(f) applies to such
account.
``(B) Election out.--The term `covered account'
shall not include any account if, on the taxpayer's
return for his first taxable year in which a
disposition from such account occurs, the taxpayer
elects to have this subsection not apply to such
account.''
(c) Coordination With Wash Sale Rules.--Section 1091 is amended by
adding at the end thereof the following new subsection:
``(f) Special Rules for Certain Accounts in Open-End Regulated
Investment Companies.--
``(1) In general.--In applying this section to a
disposition during December of any calendar year of stock from
a covered account, any acquisition of stock after January 15 of
the following calendar year shall be disregarded if such
acquisition is a result of a dividend reinvestment pursuant to
a dividend reinvestment program established at the time such
account was opened or, if later, at least 6 months before the
date of such disposition.
``(2) De minimis exception.--If--
``(A) but for this paragraph, losses from
dispositions during December of any calendar year of
stock from a covered account would have been disallowed
under this section by reason of acquisitions during
January of the following calendar year, and
``(B) the amount of such losses which would have
been so disallowed does not exceed $25,
nothing in this section shall disallow such losses.
``(3) Covered account.--For purposes of this subsection,
the term `covered account' means any account of stock in an
open-end regulated investment company if section 6045(f)
applies to such account.''
(d) Modification of Load Basis Deferral Rule for Certain
Acquisitions Occurring After December 31.--
(1) Paragraph (1) of section 852(f) is amended by striking
``subparagraph (C)) shall not'' and all that follows and
inserting ``subparagraph (C)) shall be recaptured as provided
in paragraph (2). To the extent such charge is recaptured under
paragraph (2), such charge shall be treated as incurred in
connection with the acquisition referred to in subparagraph (C)
(including for purposes of reapplying this paragraph).''
(2) Subsection (f) of section 852 is amended by
redesignating paragraph (2) as paragraph (3) and by inserting
after paragraph (1) the following new paragraph:
``(2) Recapture.--
``(A) In general.--Except as provided in
subparagraph (B), any load charge required by paragraph
(1) to be recaptured shall not be taken into account in
determining the amount of gain or loss on the
disposition referred to in paragraph (1)(B).
``(B) Subsequent acquisitions occurring after
december 31.--If--
``(i) the acquisition referred to in
paragraph (1)(A) occurs in a calendar year, and
``(ii) the subsequent acquisition referred
to in paragraph (1)(C) occurs after December 31
of such calendar year,
subparagraph (A) shall not apply and the amount of the
load charge required by paragraph (1) to be recaptured
shall be included in gross income as short-term capital
gain for the taxable year in which the subsequent
acquisition referred to in paragraph (1)(C) occurs.''
(e) Technical Amendment.--Section 6724 of such Code is amended by
adding at the end thereof the following new subsection:
``(f) Special Rule for Certain Reports With Respect to Stock in
Open End Regulated Investment Companies.--For purposes of sections
6721(e)(2)(B) and 6722(c)(1)(B), the amount required to be reported
under section 6045 shall be determined without regard to subsection (f)
thereof.''
(f) Effective Date.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to returns and
statements required for calendar year 1995 and subsequent
calendar years.
(2) Subsections (b).--The amendments made by subsections
(b), (c), and (d) shall apply to dispositions after December
31, 1994.
SEC. 523. NONRECOGNITION TREATMENT FOR CERTAIN TRANSFERS BY COMMON
TRUST FUNDS TO REGULATED INVESTMENT COMPANIES.
(a) General Rule.--Section 584 (relating to common trust funds) is
amended by redesignating subsection (h) as subsection (i) and by
inserting after subsection (g) the following new subsection:
``(h) Nonrecognition Treatment for Certain Transfers to Regulated
Investment Companies.--
``(1) In general.--If--
``(A) a common trust fund transfers substantially
all of its assets to a regulated investment company in
exchange solely for stock in such company, and
``(B) such stock is distributed by such common
trust fund to participants in such common trust fund in
exchange solely for their interests in such common
trust fund,
no gain or loss shall be recognized by such common trust fund
by reason of such transfer or distribution, and no gain or loss
shall be recognized by any participant in such common trust
fund by reason of such exchange.
``(2) Basis rules.--
``(A) Regulated investment company.--The basis of
any asset received by a regulated investment company in
a transfer referred to in paragraph (1)(A) shall be the
same as it would be in the hands of the common trust
fund.
``(B) Participants.--The basis of any stock in a
regulated investment company which is received in an
exchange referred to in paragraph (1)(B) shall be the
same as that of the property exchanged.
``(3) Treatment of assumptions of liability.--
``(A) In general.--In determining whether the
transfer referred to in paragraph (1)(A) is in exchange
solely for stock in the regulated investment company,
the assumption by such company of a liability of the
common trust fund, and the fact that any property
transferred by the common trust fund is subject to a
liability, shall be disregarded.
``(B) Special rule where assumed liabilities exceed
basis.--
``(i) In general.--If in any transfer
referred to in paragraph (1)(A) the assumed
liabilities exceed the aggregate adjusted bases
(in the hands of the common trust fund) of the
assets transferred to the regulated investment
company--
``(I) notwithstanding paragraph
(1), gain shall be recognized to the
common trust fund on such transfer in
an amount equal to such excess,
``(II) the basis of the assets
received by the regulated investment
company in such transfer shall be
increased by the amount so recognized,
and
``(III) any adjustment to the basis
of a participant's interest in the
common trust fund as a result of the
gain so recognized shall be treated as
occurring immediately before the
exchange referred to in paragraph
(1)(B).
``(ii) Assumed liabilities.--For purposes
of clause (i), the term `assumed liabilities'
means the aggregate of--
``(I) any liability of the common
trust fund assumed by the regulated
investment company in connection with
the transfer referred to in paragraph
(1)(A), and
``(II) any liability to which
property so transferred is subject.
``(4) Common trust fund must meet diversification rules.--
This subsection shall not apply to any common trust fund which
would not meet the requirements of section 368(a)(2)(F)(ii) if
it were a corporation. For purposes of the preceding sentence,
Government securities shall not be treated as securities of an
issuer in applying the 25-percent and 50-percent test and such
securities shall not be excluded for purposes of determining
total assets under clause (iv) of section 368(a)(2)(F).''
(b) Effective Date.--The amendment made by subsection (a) shall
apply to transfers after the date of the enactment of this Act.
Subtitle D--Tax-Exempt Bond Provisions
SEC. 531. REPEAL OF $100,000 LIMITATION ON UNSPENT PROCEEDS UNDER 1-
YEAR EXCEPTION FROM REBATE.
Subclause (I) of section 148(f)(4)(B)(ii) (relating to additional
period for certain bonds) is amended by striking ``the lesser of 5
percent of the proceeds of the issue or $100,000'' and inserting ``5
percent of the proceeds of the issue''.
SEC. 532. EXCEPTION FROM REBATE FOR EARNINGS ON BONA FIDE DEBT SERVICE
FUND UNDER CONSTRUCTION BOND RULES.
Subparagraph (C) of section 148(f)(4) is amended by adding at the
end thereof the following new clause:
``(xvii) Treatment of bona fide debt
service funds.--If the spending requirements of
clause (ii) are met with respect to the
available construction proceeds of a
construction issue, then paragraph (2) shall
not apply to earnings on a bona fide debt
service fund for such issue.''
SEC. 533. REPEAL OF DEBT SERVICE-BASED LIMITATION ON INVESTMENT IN
CERTAIN NONPURPOSE INVESTMENTS.
Subsection (d) of section 148 (relating to special rules for
reasonably required reserve or replacement fund) is amended by striking
paragraph (3).
SEC. 534. REPEAL OF EXPIRED PROVISIONS.
(a) Paragraph (2) of section 148(c) is amended by striking
subparagraph (B) and by redesignating subparagraphs (C), (D), and (E)
as subparagraph (B), (C), and (D), respectively.
(b) Paragraph (4) of section 148(f) is amended by striking
subparagraph (E).
SEC. 535. CLARIFICATION OF INVESTMENT-TYPE PROPERTY.
Subparagraph (D) of section 148(b)(2) is amended to read as
follows:
``(D) any investment-type property, or''.
SEC. 536. EFFECTIVE DATES.
(a) In General.--Except as provided in subsection (b), the
amendments made by this subtitle shall apply to bonds issued after the
date of the enactment of this Act.
(b) Investment-Type Property.--The amendment made by section 535
shall take effect as if included in the amendments made by section 1301
of the Tax Reform Act of 1986.
Subtitle E--Insurance Provisions
SEC. 541. TREATMENT OF CERTAIN INSURANCE CONTRACTS ON RETIRED LIVES.
(a) General Rule.--
(1) Paragraph (2) of section 817(d) (defining variable
contract) is amended by striking ``or'' at the end of
subparagraph (A), by striking ``and'' at the end of
subparagraph (B) and inserting ``or'', and by inserting after
subparagraph (B) the following new subparagraph:
``(C) provides for funding of insurance on retired
lives as described in section 807(c)(6), and''.
(2) Paragraph (3) of section 817(d) is amended by striking
``or'' at the end of subparagraph (A), by striking the period
at the end of subparagraph (B) and inserting ``, or'', and by
inserting after subparagraph (B) the following new
subparagraph:
``(C) in the case of funds held under a contract
described in paragraph (2)(C), the amounts paid in, or
the amounts paid out, reflect the investment return and
the market value of the segregated asset account.''
(b) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 1992.
SEC. 542. TREATMENT OF MODIFIED GUARANTEED CONTRACTS.
(a) General Rule.--Subpart E of part I of subchapter L of chapter 1
(relating to definitions and special rules) is amended by inserting
after section 817 the following new section:
``SEC. 817A. SPECIAL RULES FOR MODIFIED GUARANTEED CONTRACTS.
``(a) Computation of Reserves.--In the case of a modified
guaranteed contract, clause (ii) of section 807(e)(1)(A) shall not
apply.
``(b) Segregated Assets Under Modified Guaranteed Contracts Marked
to Market.--
``(1) In general.--In the case of any life insurance
company, for purposes of this subtitle--
``(A) Any gain or loss with respect to a segregated
asset shall be treated as ordinary income or loss, as
the case may be.
``(B) If any segregated asset is held by such
company as of the close of any taxable year--
``(i) such company shall recognize gain or
loss as if such asset were sold for its fair
market value on the last business day of such
taxable year, and
``(ii) any such gain or loss shall be taken
into account for such taxable year.
Proper adjustment shall be made in the amount of any
gain or loss subsequently realized for gain or loss
taken into account under the preceding sentence. The
Secretary may provide by regulations for the
application of this subparagraph at times other than
the times provided in this subparagraph.
``(2) Segregated asset.--For purposes of paragraph (1), the
term `segregated asset' means any asset held as part of a
segregated account referred to in subsection (d)(1) under a
modified guaranteed contract.
``(c) Special Rule in Computing Life Insurance Reserves.--For
purposes of applying section 816(b)(1)(A) to any modified guaranteed
contract, an assumed rate of interest shall include a rate of interest
determined, from time to time, with reference to a market rate of
interest.
``(d) Modified Guaranteed Contract Defined.--For purposes of this
section, the term `modified guaranteed contract' means a contract not
described in section 817--
``(1) all or part of the amounts received under which are
allocated to an account which, pursuant to State law or
regulation, is segregated from the general asset accounts of
the company and is valued from time to time with reference to
market values,
``(2) which--
``(A) provides for the payment of annuities,
``(B) is a life insurance contract, or
``(C) is a pension plan contract which is not a
life, accident, or health, property, casualty, or
liability contract,
``(3) for which reserves are valued at market for annual
statement purposes, and
``(4) which provides for a net surrender value or a
policyholder's fund (as defined in section 807(e)(1)).
``(e) Regulations.--The Secretary may prescribe regulations--
``(1) to provide for the treatment of market value
adjustments under sections 72, 7702, 7702A, and 807(e)(1)(B),
``(2) to determine the interest rates applicable under
sections 807(c)(3), 807(d)(2)(B), and 812 with respect to a
modified guaranteed contract annually, in a manner appropriate
for modified guaranteed contracts and, to the extent
appropriate for such a contract, to modify or waive the
applicability of section 811(d),
``(3) to provide rules to limit ordinary gain or loss
treatment to assets constituting reserves for modified
guaranteed contracts (and not other assets) of the company,
``(4) to provide appropriate treatment of transfers of
assets to and from the segregated account, and
``(5) as may be necessary or appropriate to carry out the
purposes of this section.''
(b) Clerical Amendment.--The table of sections for subpart E of
part I of subchapter L of chapter 1 is amended by inserting after the
item relating to section 817 the following new item:
``Sec. 817A. Special rules for modified
guaranteed contracts.''
(c) Effective Date.--
(1) In general.--The amendments made by this section shall
apply to taxable years beginning after December 31, 1992.
(2) Treatment of net adjustments.--In the case of any
taxpayer required by the amendments made by this section to
change its calculation of reserves to take into account market
value adjustments and to mark segregated assets to market for
any taxable year--
(A) such changes shall be treated as a change in
method of accounting initiated by the taxpayer,
(B) such changes shall be treated as made with the
consent of the Secretary, and
(C) the adjustments required by reason of section
481 of the Internal Revenue Code of 1986 shall be taken
into account as ordinary income or loss by the taxpayer
for the taxpayer's first taxable year beginning after
December 31, 1992.
Subtitle F--Other Provisions
SEC. 551. CLOSING OF PARTNERSHIP TAXABLE YEAR WITH RESPECT TO DECEASED
PARTNER, ETC.
(a) General Rule.--Subparagraph (A) of section 706(c)(2) (relating
to disposition of entire interest) is amended to read as follows:
``(A) Disposition of entire interest.--The taxable
year of a partnership shall close with respect to a
partner whose entire interest in the partnership
terminates (whether by reason of death, liquidation, or
otherwise).''
(b) Clerical Amendment.--The paragraph heading for paragraph (2) of
section 706(c) is amended to read as follows:
``(2) Treatment of dispositions.--''.
(c) Effective Date.--The amendments made by this section shall
apply to partnership taxable years beginning after December 31, 1993.
SEC. 552. MODIFICATION OF CREDIT FOR PRODUCING FUEL FROM A
NONCONVENTIONAL SOURCE.
(a) In General.--Subparagraph (A) of section 29(c)(2) (relating to
gas from geopressured brine, etc.) is amended by adding at the end the
following new sentence: ``If the Federal Energy Regulatory Commission
ceases to make the determinations described in the preceding sentence,
the Secretary shall make such determinations in accordance with section
503 of such Act.''
(b) Conforming Amendment.--Section 29(c)(2)(A) is amended by
inserting ``(as in effect before its repeal by the Natural Gas Wellhead
Decontrol Act of 1989)'' after ``Natural Gas Policy Act of 1978''.
(c) Effective Date.--The amendments made by this section shall take
effect on January 1, 1993.
TITLE VI--ESTATE AND GIFT TAX PROVISIONS
SEC. 601. CLARIFICATION OF WAIVER OF CERTAIN RIGHTS OF RECOVERY.
(a) Amendment to Section 2207A.--Paragraph (2) of section 2207A(a)
(relating to right of recovery in the case of certain marital deduction
property) is amended to read as follows:
``(2) Decedent may otherwise direct.--Paragraph (1) shall
not apply with respect to any property to the extent that the
decedent in his will (or a revocable trust) specifically
indicates an intent to waive any right of recovery under this
subchapter with respect to such property.''
(b) Amendment to Section 2207B.--Paragraph (2) of section 2207B(a)
(relating to right of recovery where decedent retained interest) is
amended to read as follows:
``(2) Decedent may otherwise direct.--Paragraph (1) shall
not apply with respect to any property to the extent that the
decedent in his will (or a revocable trust) specifically
indicates an intent to waive any right of recovery under this
subchapter with respect to such property.''
(c) Effective Date.--The amendments made by this section shall
apply with respect to the estates of decedents dying after the date of
the enactment of this Act.
SEC. 602. ADJUSTMENTS FOR GIFTS WITHIN 3 YEARS OF DECEDENT'S DEATH.
(a) General Rule.--Section 2035 is amended to read as follows:
``SEC. 2035. ADJUSTMENTS FOR CERTAIN GIFTS MADE WITHIN 3 YEARS OF
DECEDENT'S DEATH.
``(a) Inclusion of Certain Property in Gross Estate.--If--
``(1) the decedent made a transfer (by trust or otherwise)
of an interest in any property, or relinquished a power with
respect to any property, during the 3-year period ending on the
date of the decedent's death, and
``(2) the value of such property (or an interest therein)
would have been included in the decedent's gross estate under
section 2036, 2037, 2038, or 2042 if such transferred interest
or relinquished power had been retained by the decedent on the
date of his death,
the value of the gross estate shall include the value of any property
(or interest therein) which would have been so included.
``(b) Inclusion of Gift Tax on Gifts Made During 3 Years Before
Decedent's Death.--The amount of the gross estate (determined without
regard to this subsection) shall be increased by the amount of any tax
paid under chapter 12 by the decedent or his estate on any gift made by
the decedent or his spouse during the 3-year period ending on the date
of the decedent's death.
``(c) Other Rules Relating to Transfers Within 3 Years of Death.--
``(1) In general.--For purposes of--
``(A) section 303(b) (relating to distributions in
redemption of stock to pay death taxes),
``(B) section 2032A (relating to special valuation
of certain farms, etc., real property), and
``(C) subchapter C of chapter 64 (relating to lien
for taxes),
the value of the gross estate shall include the value of all
property to the extent of any interest therein of which the
decedent has at any time made a transfer, by trust or
otherwise, during the 3-year period ending on the date of the
decedent's death.
``(2) Coordination with section 6166.--An estate shall be
treated as meeting the 35 percent of adjusted gross estate
requirement of section 6166(a)(1) only if the estate meets such
requirement both with and without the application of paragraph
(1).
``(3) Small transfers.--Paragraph (1) shall not apply to
any transfer (other than a transfer with respect to a life
insurance policy) made during a calendar year to any donee if
the decedent was not required by section 6019 (other than by
reason of section 6019(a)(2)) to file any gift tax return for
such year with respect to transfers to such donee.
``(d) Exception.--Subsection (a) shall not apply to any bona fide
sale for an adequate and full consideration in money or money's worth.
``(e) Treatment of Certain Transfers From Revocable Trusts.--For
purposes of this section and section 2038, any transfer from any
portion of a trust with respect to which the decedent was the grantor
during any period when the decedent held the power to revest in the
decedent title to such portion shall be treated as a transfer made
directly by the decedent.''
(b) Clerical Amendment.--The table of sections for part III of
subchapter A of chapter 11 is amended by striking ``gifts'' in the item
relating to section 2035 and inserting ``certain gifts''.
(c) Effective Date.--The amendments made by this section shall
apply to the estates of decedents dying after the date of the enactment
of this Act.
SEC. 603. CLARIFICATION OF QUALIFIED TERMINABLE INTEREST RULES.
(a) General Rule.--
(1) Estate tax.--Subparagraph (B) of section 2056(b)(7)
(defining qualified terminable interest property) is amended by
adding at the end thereof the following new clause:
``(vi) Treatment of certain income
distributions.--An income interest shall not
fail to qualify as a qualified income interest
for life solely because income for the period
after the last distribution date and on or
before the date of the surviving spouse's death
is not required to be distributed to the
surviving spouse or to the estate of the
surviving spouse.''
(2) Gift tax.--Paragraph (3) of section 2523(f) is amended
by striking ``and (iv)'' and inserting ``(iv), and (vi)''.
(b) Clarification of Subsequent Inclusions.--Section 2044 is
amended by adding at the end thereof the following new subsection:
``(d) Clarification of Inclusion of Certain Income.--The amount
included in the gross estate under subsection (a) shall include the
amount of any income from the property to which this section applies
for the period after the last distribution date and on or before the
date of the decedent's death if such income is not otherwise included
in the decedent's gross estate.''
(c) Effective Date.--
(1) In general.--The amendments made by this section shall
apply with respect to the estates of decedents dying, and gifts
made, after the date of the enactment of this Act.
(2) Application of section 2044 to transfers before date of
enactment.--In the case of the estate of any decedent dying
after the date of the enactment of this Act, if there was a
transfer of property on or before such date--
(A) such property shall not be included in the
gross estate of the decedent under section 2044 of the
Internal Revenue Code of 1986 if no prior marital
deduction was allowed with respect to such a transfer
of such property to the decedent, but
(B) such property shall be so included if such a
deduction was allowed.
SEC. 604. TRANSITIONAL RULE UNDER SECTION 2056A.
(a) General Rule.--In the case of any trust created under an
instrument executed before the date of the enactment of the Revenue
Reconciliation Act of 1990, such trust shall be treated as meeting the
requirements of paragraph (1) of section 2056A(a) of the Internal
Revenue Code of 1986 if the trust instrument requires that all trustees
of the trust be individual citizens of the United States or domestic
corporations.
(b) Effective Date.--The provisions of subsection (a) shall take
effect as if included in the provisions of section 11702(g) of the
Revenue Reconciliation Act of 1990.
SEC. 605. OPPORTUNITY TO CORRECT CERTAIN FAILURES UNDER SECTION 2032A.
(a) General Rule.--Paragraph (3) of section 2032A(d) (relating to
modification of election and agreement to be permitted) is amended to
read as follows:
``(3) Modification of election and agreement to be
permitted.--The Secretary shall prescribe procedures which
provide that in any case in which the executor makes an
election under paragraph (1) (and submits the agreement
referred to in paragraph (2)) within the time prescribed
therefor, but--
``(A) the notice of election, as filed, does not
contain all required information, or
``(B) signatures of 1 or more persons required to
enter into the agreement described in paragraph (2) are
not included on the agreement as filed, or the
agreement does not contain all required information,
the executor will have a reasonable period of time (not
exceeding 90 days) after notification of such failures to
provide such information or signatures.''
(b) Effective Date.--The amendment made by subsection (a) shall
apply to the estates of decedents dying after the date of the enactment
of this Act.
TITLE VII--EXCISE TAX SIMPLIFICATION
Subtitle A--Provisions Related to Distilled Spirits, Wines, and Beer
SEC. 701. CREDIT OR REFUND FOR IMPORTED BOTTLED DISTILLED SPIRITS
RETURNED TO DISTILLED SPIRITS PLANT.
(a) In General.--Paragraph (1) of section 5008(c) (relating to
distilled spirits returned to bonded premises) is amended by striking
``withdrawn from bonded premises on payment or determination of tax''
and inserting ``on which tax has been determined or paid''.
(b) Effective Date.--The amendment made by subsection (a) shall
take effect at the beginning of the first calendar quarter beginning
more than 180 days after the date of the enactment of this Act.
SEC. 702. AUTHORITY TO CANCEL OR CREDIT EXPORT BONDS WITHOUT SUBMISSION
OF RECORDS.
(a) In General.--Subsection (c) of section 5175 (relating to export
bonds) is amended by striking ``on the submission of'' and all that
follows and inserting ``if there is such proof of exportation as the
Secretary may by regulations require.''
(b) Effective Date.--The amendment made by subsection (a) shall
take effect at the beginning of the first calendar quarter beginning
more than 180 days after the date of the enactment of this Act.
SEC. 703. REPEAL OF REQUIRED MAINTENANCE OF RECORDS ON PREMISES OF
DISTILLED SPIRITS PLANT.
(a) In General.--Subsection (c) of section 5207 (relating to
records and reports) is amended by striking ``shall be kept on the
premises where the operations covered by the record are carried on
and''.
(b) Effective Date.--The amendment made by subsection (a) shall
take effect at the beginning of the first calendar quarter beginning
more than 180 days after the date of the enactment of this Act.
SEC. 704. FERMENTED MATERIAL FROM ANY BREWERY MAY BE RECEIVED AT A
DISTILLED SPIRITS PLANT.
(a) In General.--Paragraph (2) of section 5222(b) (relating to
production, receipt, removal, and use of distilling materials) is
amended to read as follows:
``(2) beer conveyed without payment of tax from brewery
premises, beer which has been lawfully removed from brewery
premises upon determination of tax, or''.
(b) Clarification of Authority To Permit Removal of Beer Without
Payment of Tax for Use as Distilling Material.--Section 5053 (relating
to exemptions) is amended by redesignating subsection (f) as subsection
(i) and by inserting after subsection (e) the following new subsection:
``(f) Removal for Use as Distilling Material.--Subject to such
regulations as the Secretary may prescribe, beer may be removed from a
brewery without payment of tax to any distilled spirits plant for use
as distilling material.''
(c) Clarification of Refund and Credit of Tax.--Section 5056
(relating to refund and credit of tax, or relief from liability) is
amended--
(1) by redesignating subsection (c) as subsection (d) and
by inserting after subsection (b) the following new subsection:
``(c) Beer Received at a Distilled Spirits Plant.--Any tax paid by
any brewer on beer produced in the United States may be refunded or
credited to the brewer, without interest, or if the tax has not been
paid, the brewer may be relieved of liability therefor, under
regulations as the Secretary may prescribe, if such beer is received on
the bonded premises of a distilled spirits plant pursuant to the
provisions of section 5222(b)(2), for use in the production of
distilled spirits.'', and
(2) by striking ``or rendering unmerchantable'' in
subsection (d) (as so redesignated) and inserting ``rendering
unmerchantable, or receipt on the bonded premises of a
distilled spirits plant''.
(d) Effective Date.--The amendments made by this section shall take
effect at the beginning of the first calendar quarter beginning more
than 180 days after the date of the enactment of this Act.
SEC. 705. REPEAL OF REQUIREMENT FOR WHOLESALE DEALERS IN LIQUORS TO
POST SIGN.
(a) In General.--Section 5115 (relating to sign required on
premises) is hereby repealed.
(b) Conforming Amendments.--
(1) Subsection (a) of section 5681 is amended by striking
``, and every wholesale dealer in liquors,'' and by striking
``section 5115(a) or''.
(2) Subsection (c) of section 5681 is amended--
(A) by striking ``or wholesale liquor
establishment, on which no sign required by section
5115(a) or'' and inserting ``on which no sign required
by'', and
(B) by striking ``or wholesale liquor
establishment, or who'' and inserting ``or who''.
(3) The table of sections for subpart D of part II of
subchapter A of chapter 51 is amended by striking the item
relating to section 5115.
(c) Effective Date.--The amendments made by this section shall take
effect on the date of the enactment of this Act.
SEC. 706. REFUND OF TAX TO WINE RETURNED TO BOND NOT LIMITED TO
UNMERCHANTABLE WINE.
(a) In General.--Subsection (a) of section 5044 (relating to refund
of tax on unmerchantable wine) is amended by striking ``as
unmerchantable''.
(b) Conforming Amendments.--
(1) Section 5361 is amended by striking ``unmerchantable''.
(2) The section heading for section 5044 is amended by
striking ``unmerchantable''.
(3) The item relating to section 5044 in the table of
sections for subpart C of part I of subchapter A of chapter 51
is amended by striking ``unmerchantable''.
(c) Effective Date.--The amendments made by this section shall take
effect at the beginning of the first calendar quarter beginning more
than 180 days after the date of the enactment of this Act.
SEC. 707. USE OF ADDITIONAL AMELIORATING MATERIAL IN CERTAIN WINES.
(a) In General.--Subparagraph (D) of section 5384(b)(2) (relating
to ameliorated fruit and berry wines) is amended by striking
``loganberries, currants, or gooseberries,'' and inserting ``any fruit
or berry with a natural fixed acid of 20 parts per thousand or more
(before any correction of such fruit or berry)''.
(b) Effective Date.--The amendment made by this section shall take
effect at the beginning of the first calendar quarter beginning more
than 180 days after the date of the enactment of this Act.
SEC. 708. DOMESTICALLY PRODUCED BEER MAY BE WITHDRAWN FREE OF TAX FOR
USE OF FOREIGN EMBASSIES, LEGATIONS, ETC.
(a) In General.--Section 5053 (relating to exemptions) is amended
by inserting after subsection (f) the following new subsection:
``(g) Removals for Use of Foreign Embassies, Legations, Etc.--
``(1) In general.--Subject to such regulations as the
Secretary may prescribe--
``(A) beer may be withdrawn from the brewery
without payment of tax for transfer to any customs
bonded warehouse for entry pending withdrawal therefrom
as provided in subparagraph (B), and
``(B) beer entered into any customs bonded
warehouse under subparagraph (A) may be withdrawn for
consumption in the United States by, and for the
official and family use of, such foreign governments,
organizations, and individuals as are entitled to
withdraw imported beer from such warehouses free of
tax.
Beer transferred to any customs bonded warehouse under
subparagraph (A) shall be entered, stored, and accounted for in
such warehouse under such regulations and bonds as the
Secretary may prescribe, and may be withdrawn therefrom by such
governments, organizations, and individuals free of tax under
the same conditions and procedures as imported beer.
``(2) Other rules to apply.--Rules similar to the rules of
paragraphs (2) and (3) of section 5362(e) of such section shall
apply for purposes of this subsection.''
(b) Effective Date.--The amendment made by subsection (a) shall
take effect at the beginning of the first calendar quarter beginning
more than 180 days after the date of the enactment of this Act.
SEC. 709. BEER MAY BE WITHDRAWN FREE OF TAX FOR DESTRUCTION.
(a) In General.--Section 5053 is amended by inserting after
subsection (g) the following new subsection:
``(h) Removals for Destruction.--Subject to such regulations as the
Secretary may prescribe, beer may be removed from the brewery without
payment of tax for destruction.''
(b) Effective Date.--The amendment made by subsection (a) shall
take effect at the beginning of the first calendar quarter beginning
more than 180 days after the date of the enactment of this Act.
SEC. 710. AUTHORITY TO ALLOW DRAWBACK ON EXPORTED BEER WITHOUT
SUBMISSION OF RECORDS.
(a) In General.--The first sentence of section 5055 (relating to
drawback of tax on beer) is amended by striking ``found to have been
paid'' and all that follows and inserting ``paid on such beer if there
is such proof of exportation as the Secretary may by regulations
require.''
(b) Effective Date.--The amendment made by subsection (a) shall
take effect at the beginning of the first calendar quarter beginning
more than 180 days after the date of the enactment of this Act.
SEC. 711. TRANSFER TO BREWERY OF BEER IMPORTED IN BULK WITHOUT PAYMENT
OF TAX.
(a) In General.--Part II of subchapter G of chapter 51 is amended
by adding at the end thereof the following new section:
``SEC. 5418. BEER IMPORTED IN BULK.
``Beer imported or brought into the United States in bulk
containers may, under such regulations as the Secretary may prescribe,
be withdrawn from customs custody and transferred in such bulk
containers to the premises of a brewery without payment of the internal
revenue tax imposed on such beer. The proprietor of a brewery to which
such beer is transferred shall become liable for the tax on the beer
withdrawn from customs custody under this section upon release of the
beer from customs custody, and the importer, or the person bringing
such beer into the United States, shall thereupon be relieved of the
liability for such tax.''
(b) Clerical Amendment.--The table of sections for such part II is
amended by adding at the end thereof the following new item:
``Sec. 5418. Beer imported in bulk.''
(c) Effective Date.--The amendments made by this section shall take
effect at the beginning of the first calendar quarter beginning more
than 180 days after the date of the enactment of this Act.
Subtitle B--Other Excise Tax Provisions
SEC. 721. AUTHORITY TO GRANT EXEMPTIONS FROM REGISTRATION REQUIREMENTS.
(a) In General.--The first sentence of section 4222 (relating to
registration) is amended to read as follows: ``Except as provided in
subsection (b), section 4221 shall not apply with respect to the sale
of any article by or to any person who is required by the Secretary to
be registered under this section and who is not so registered.''
(b) Effective Date.--The amendment made by subsection (a) shall
apply to sales after the 180th day after the date of the enactment of
this Act.
SEC. 722. REPEAL OF EXPIRED PROVISIONS.
(a) Piggy-Back Trailers.--Section 4051 is amended by striking
subsection (d) and by redesignating subsection (e) as subsection (d).
(b) Deep Seabed Mining.--
(1) Subchapter F of chapter 36 (relating to tax on removal
of hard mineral resources from deep seabed) is hereby repealed.
(2) The table of subchapters for chapter 36 is amended by
striking the item relating to subchapter F.
TITLE VIII--ADMINISTRATIVE PROVISIONS
Subtitle A--General Provisions
SEC. 801. USE OF REPRODUCTIONS OF RETURNS STORED IN DIGITAL IMAGE
FORMAT.
(a) In General.--Paragraph (2) of section 6103(p) (relating to
procedure and recordkeeping) is amended by adding at the end thereof
the following new subparagraph:
``(D) Reproduction from digital images.--For
purposes of this paragraph, the term `reproduction'
includes a reproduction from digital images.''
(b) Study.--The Comptroller General of the United States shall
conduct a study of available digital image technology for the purpose
of determining the extent to which reproductions of documents stored
using that technology accurately reflect the data on the original
document and the appropriate period for retaining the original
document. Not later than 1 year after the date of the enactment of this
Act, a report on the results of such study shall be submitted to the
Committee on Ways and Means of the House of Representatives and the
Committee on Finance of the Senate.
SEC. 802. REPEAL OF AUTHORITY TO DISCLOSE WHETHER PROSPECTIVE JUROR HAS
BEEN AUDITED.
(a) In General.--Subsection (h) of section 6103 (relating to
disclosure to certain Federal officers and employees for purposes of
tax administration, etc.) is amended by striking paragraph (5) and by
redesignating paragraph (6) as paragraph (5).
(b) Conforming Amendment.--Paragraph (4) of section 6103(p) is
amended by striking ``(h)(6)'' each place it appears and inserting
``(h)(5)''.
(c) Effective Date.--The amendments made by this section shall
apply to judicial proceedings pending on, or commenced after, the date
of the enactment of this Act.
SEC. 803. REPEAL OF SPECIAL AUDIT PROVISIONS FOR SUBCHAPTER S ITEMS.
(a) General Rule.--Subchapter D of chapter 63 (relating to tax
treatment of subchapter S items) is hereby repealed.
(b) Consistent Treatment Required.--Section 6037 (relating to
return of S corporation) is amended by adding at the end thereof the
following new subsection:
``(c) Shareholder's Return Must Be Consistent With Corporate Return
or Secretary Notified of Inconsistency.--
``(1) In general.--A shareholder of an S corporation shall,
on such shareholder's return, treat a subchapter S item in a
manner which is consistent with the treatment of such item on
the corporate return.
``(2) Notification of inconsistent treatment.--
``(A) In general.--In the case of any subchapter S
item, if--
``(i)(I) the corporation has filed a return
but the shareholder's treatment on his return
is (or may be) inconsistent with the treatment
of the item on the corporate return, or
``(II) the corporation has not filed a
return, and
``(ii) the shareholder files with the
Secretary a statement identifying the
inconsistency,
paragraph (1) shall not apply to such item.
``(B) Shareholder receiving incorrect
information.--A shareholder shall be treated as having
complied with clause (ii) of subparagraph (A) with
respect to a subchapter S item if the shareholder--
``(i) demonstrates to the satisfaction of
the Secretary that the treatment of the
subchapter S item on the shareholder's return
is consistent with the treatment of the item on
the schedule furnished to the shareholder by
the corporation, and
``(ii) elects to have this paragraph apply
with respect to that item.
``(3) Effect of failure to notify.--In any case--
``(A) described in subparagraph (A)(i)(I) of
paragraph (2), and
``(B) in which the shareholder does not comply with
subparagraph (A)(ii) of paragraph (2),
any adjustment required to make the treatment of the items by
such shareholder consistent with the treatment of the items on
the corporate return shall be treated as arising out of
mathematical or clerical errors and assessed according to
section 6213(b)(1). Paragraph (2) of section 6213(b) shall not
apply to any assessment referred to in the preceding sentence.
``(4) Subchapter s item.--For purposes of this subsection,
the term `subchapter S item' means any item of an S corporation
to the extent that regulations prescribed by the Secretary
provide that, for purposes of this subtitle, such item is more
appropriately determined at the corporation level than at the
shareholder level.
``(5) Addition to tax for failure to comply with section.--
``For addition to tax in the case of a
shareholder's negligence in connection with, or disregard of, the
requirements of this section, see part II of subchapter A of chapter
68.''
(c) Conforming Amendments.--
(1) Section 1366 is amended by striking subsection (g).
(2) Subsection (b) of section 6233 is amended to read as
follows:
``(b) Similar Rules in Certain Cases.--If a partnership return is
filed for any taxable year but it is determined that there is no entity
for such taxable year, to the extent provided in regulations, rules
similar to the rules of subsection (a) shall apply.''
(3) The table of subchapters for chapter 63 is amended by
striking the item relating to subchapter D.
(d) Effective Date.--The amendments made by this section shall
apply to taxable years ending after the date of the enactment of this
Act.
SEC. 804. CLARIFICATION OF STATUTE OF LIMITATIONS.
(a) In General.--Subsection (a) of section 6501 (relating to
limitations on assessment and collection) is amended by adding at the
end thereof the following new sentence: ``For purposes of this chapter,
the term `return' means the return required to be filed by the taxpayer
(and does not include a return of any person from whom the taxpayer has
received an item of income, gain, loss, deduction, or credit).''
(b) Effective Date.--The amendment made by this section shall apply
to taxable years beginning after the date of the enactment of this Act.
SEC. 805. CERTAIN NOTICES DISREGARDED UNDER PROVISION INCREASING
INTEREST RATE ON LARGE CORPORATE UNDERPAYMENTS.
(a) General Rule.--Subparagraph (B) of section 6621(c)(2) (defining
applicable date) is amended by adding at the end thereof the following
new clause:
``(iii) Exception for letters or notices
involving small amounts.--For purposes of this
paragraph, any letter or notice shall be
disregarded if the amount of the deficiency or
proposed deficiency (or the assessment or
proposed assessment) set forth in such letter
or notice is not greater than $100,000
(determined by not taking into account any
interest, penalties, or additions to tax).''
(b) Effective Date.--The amendment made by subsection (a) shall
apply for purposes of determining interest for periods after December
31, 1993.
Subtitle B--Tax Court Procedures
SEC. 811. OVERPAYMENT DETERMINATIONS OF TAX COURT.
(a) Appeal of Order.--Paragraph (2) of section 6512(b) (relating to
jurisdiction to enforce) is amended by adding at the end the following
new sentence: ``An order of the Tax Court disposing of a motion under
this paragraph shall be reviewable in the same manner as a decision of
the Tax Court, but only with respect to the matters determined in such
order.''
(b) Denial of Jurisdiction Regarding Certain Credits and
Reductions.--Subsection (b) of section 6512 (relating to overpayment
determined by Tax Court) is amended by adding at the end the following
new paragraph:
``(4) Denial of jurisdiction regarding certain credits and
reductions.--The Tax Court shall have no jurisdiction under
this subsection to restrain or review any credit or reduction
made by the Secretary under section 6402.''
(c) Effective Date.--The amendments made by this section shall take
effect on the date of the enactment of this Act.
SEC. 812. AWARDING OF ADMINISTRATIVE COSTS.
(a) Right to Appeal Tax Court Decision.--Subsection (f) of section
7430 (relating to right of appeal) is amended by adding at the end the
following new paragraph:
``(3) Appeal of tax court decision.--An order of the Tax
Court disposing of a petition under paragraph (2) shall be
reviewable in the same manner as a decision of the Tax Court,
but only with respect to the matters determined in such
order.''
(b) Period for Applying to IRS for Costs.--Subsection (b) of
section 7430 (relating to limitations) is amended by adding at the end
the following new paragraph:
``(5) Period for applying to irs for administrative
costs.--An award may be made under subsection (a) by the
Internal Revenue Service for reasonable administrative costs
only if the prevailing party files an application with the
Internal Revenue Service for such costs before the 91st day
after the date on which the final decision of the Internal
Revenue Service as to the determination of the tax, interest,
or penalty is mailed to such party.''
(c) Period for Petitioning of Tax Court for Review of Denial of
Costs.--Paragraph (2) of section 7430(f) (relating to right of appeal)
is amended--
(1) by striking ``appeal to'' and inserting ``the filing of
a petition for review with'', and
(2) by adding at the end the following new sentence: ``If
the Secretary sends by certified or registered mail a notice of
such decision to the petitioner, no proceeding in the Tax Court
may be initiated under this paragraph unless such petition is
filed before the 91st day after the date of such mailing.''
(d) Effective Date.--The amendments made by this section shall
apply to civil actions or proceedings commenced after the date of the
enactment of this Act.
SEC. 813. REDETERMINATION OF INTEREST PURSUANT TO MOTION.
(a) In General.--Paragraph (3) of section 7481(c) (relating to
jurisdiction over interest determinations) is amended by striking
``petition'' and inserting ``motion''.
(b) Effective Date.--The amendment made by this section shall take
effect on the date of the enactment of this Act.
SEC. 814. APPLICATION OF NET WORTH REQUIREMENT FOR AWARDS OF LITIGATION
COSTS.
(a) In General.--Paragraph (4) of section 7430(c) (defining
prevailing party) is amended by adding at the end thereof the following
new subparagraph:
``(C) Special rules for applying net worth
requirement.--In applying the requirements of section
2412(d)(2)(B) of title 28, United States Code, for
purposes of subparagraph (A)(iii) of this paragraph--
``(i) the net worth limitation in clause
(i) of such section shall apply to--
``(I) an estate but shall be
determined as of the date of the
decedent's death, and
``(II) a trust but shall be
determined as of the last day of the
taxable year involved in the
proceeding, and
``(ii) individuals filing a joint return
shall be treated as 1 individual for purposes
of clause (i) of such section, except in the
case of a spouse relieved of liability under
section 6013(e).''
(b) Effective Date.--The amendment made by this section shall apply
to proceedings commenced after the date of the enactment of this Act.
Subtitle C--Authority for Certain Cooperative Agreements
SEC. 821. COOPERATIVE AGREEMENTS WITH STATE TAX AUTHORITIES.
(a) General Rule.--Chapter 77 (relating to miscellaneous
provisions) is amended by adding at the end thereof the following new
section:
``SEC. 7524. COOPERATIVE AGREEMENTS WITH STATE TAX AUTHORITIES.
``(a) Authorization of Agreements.--The Secretary is hereby
authorized to enter into cooperative agreements with State tax
authorities for purposes of enhancing joint tax administration. Such
agreements may provide for--
``(1) joint filing of Federal and State income tax returns,
``(2) single processing of such returns,
``(3) joint collection of taxes (other than Federal income
taxes), and
``(4) such other provisions as may enhance joint tax
administration.
``(b) Services on Reimbursable Basis.--Any agreement under
subsection (a) may require reimbursement for services provided by
either party to the agreement.
``(c) Availability of Funds.--Any funds appropriated for purposes
of the administration of this title shall be available for purposes of
carrying out the Secretary's responsibility under an agreement entered
into under subsection (a). Any reimbursement received pursuant to such
an agreement shall be credited to the amount so appropriated.
``(d) State Tax Authority.--For purposes of this section, the term
`State tax authority' means agency, body, or commission referred to in
section 6103(d)(1).''
(b) Clerical Amendment.--The table of sections for chapter 77 is
amended by adding at the end thereof the following new item:
``Sec. 7524. Cooperative agreements with
State tax authorities.''
Subtitle D--Administrative Practice and Procedural Simplification
SEC. 831. NOTIFICATION OF REASONS FOR TERMINATION OR DENIAL OF
INSTALLMENT AGREEMENTS.
(a) Terminations.--Subsection (b) of section 6159 (relating to
extent to which agreements remain in effect) is amended by adding at
the end thereof the following new paragraph:
``(5) Notice requirements.--The Secretary may not take any
action under paragraph (2), (3), or (4) unless--
``(A) a notice of such action is provided to the
taxpayer not later than the day 30 days before the date
of such action, and
``(B) such notice includes an explanation why the
Secretary intends to take such action.
The preceding sentence shall not apply in any case in which the
Secretary believes that collection of any tax to which an
agreement under this section relates is in jeopardy.''
(b) Denials.--Section 6159 (relating to agreements for payment of
tax liability in installments) is amended by adding at the end thereof
the following new subsection:
``(c) Notice Requirements for Denials.--The Secretary may not deny
any request for an installment agreement under this section unless--
``(1) a notice of the proposed denial is provided to the
taxpayer not later than the day 30 days before the date of such
denial, and
``(2) such notice includes an explanation why the Secretary
intends to deny such request.
The preceding sentence shall not apply in any case in which the
Secretary believes that collection of any tax to which a request for an
agreement under this section relates is in jeopardy.''
(c) Conforming Amendment.--Paragraph (3) of section 6159(b) is
amended to read as follows:
``(3) Subsequent change in financial conditions.--If the
Secretary makes a determination that the financial condition of
a taxpayer with whom the Secretary has entered into an
agreement under subsection (a) has significantly changed, the
Secretary may alter, modify, or terminate such agreement.''
(d) Effective Date.--The amendments made by this section shall take
effect on the date 6 months after the date of the enactment of this
Act.
SEC. 832. JOINT RETURN MAY BE MADE AFTER SEPARATE RETURNS WITHOUT FULL
PAYMENT OF TAX.
(a) General Rule.--Paragraph (2) of section 6013(b) (relating to
limitations on filing of joint return after filing separate returns) is
amended by striking subparagraph (A) and redesignating the following
subparagraphs accordingly.
(b) Effective Date.--The amendment made by subsection (a) shall
apply to taxable years beginning after the date of the enactment of
this Act.
SEC. 833. OFFERS-IN-COMPROMISE.
(a) General Rule.--Subsection (a) of section 7122 (relating to
compromises) is amended by adding at the end thereof the following new
sentence: ``The Secretary may make such a compromise in any case where
the Secretary determines that such compromise would be in the best
interests of the United States.''.
(b) Review Requirements.--Subsection (b) of section 7122 (relating
to records) is amended by striking ``$500.'' and inserting ``$50,000.
However, such compromise shall be subject to continuing quality review
by the Secretary.''.
(c) Effective Date.--The amendments made by this section shall take
effect on the date of the enactment of this Act.
SEC. 834. PRELIMINARY NOTICE REQUIREMENT.
(a) In General.--Section 6672 (relating to failure to collect and
pay over tax, or attempt to evade or defeat tax) is amended by
redesignating subsection (b) as subsection (c) and by inserting after
subsection (a) the following new subsection:
``(b) Preliminary Notice Requirement.--
``(1) In general.--No penalty shall be imposed under
subsection (a) unless the Secretary notifies the taxpayer in
writing by mail to an address as determined under section
6212(b) that the taxpayer shall be subject to an assessment of
such penalty.
``(2) Timing of notice.--The mailing of the notice
described in paragraph (1) shall precede any notice and demand
of any penalty under subsection (a) by at least 60 days.
``(3) Statute of limitations.--If a notice described in
paragraph (1) with respect to any penalty is mailed before the
expiration of the period provided by section 6501 for the
assessment of such penalty (determined without regard to this
paragraph), the period provided by such section for the
assessment of such penalty shall not expire before the date 90
days after the date on which such notice was mailed.
``(4) Exception for jeopardy.--This subsection shall not
apply if the Secretary finds that the collection of the penalty
is in jeopardy.''
(b) Effective Date.--The amendment made by subsection (a) shall
apply to assessments made after June 30, 1995.
SEC. 835. PENALTIES UNDER SECTION 6672.
(a) Public Information Requirements.--The Secretary of the Treasury
or the Secretary's delegate (hereafter in this section referred to as
the ``Secretary'') shall take such actions as may be appropriate to
ensure that employees are aware of their responsibilities under the
Federal tax depository system, the circumstances under which employees
may be liable for the penalty imposed by section 6672 of the Internal
Revenue Code of 1986, and the responsibility to promptly report to the
Internal Revenue Service any failure referred to in subsection (a) of
such section 6672. Such actions shall include--
(1) printing of a warning on deposit coupon booklets and
the appropriate tax returns that certain employees may be
liable for the penalty imposed by such section 6672, and
(2) the development of a special information packet.
(b) Board Members of Tax-Exempt Organizations.--
(1) Voluntary board members.--
(A) In general.--The penalty under section 6672 of
the Internal Revenue Code of 1986 shall not be imposed
on unpaid, volunteer members of any board of trustees
or directors of an organization referred to in section
501 of such Code to the extent such members are solely
serving in an honorary capacity, do not participate in
the day-to-day or financial operations of the
organization, and do not have actual knowledge of the
failure on which such penalty is imposed.
(B) Application of paragraph.--This paragraph shall
not apply if it results in no person being held liable
for the penalty described in section 6672(a) of the
Internal Revenue Code of 1986.
(2) Development of explanatory materials.--The Secretary
shall develop materials explaining the circumstances under
which board members of tax-exempt organizations (including
voluntary and honorary members) may be subject to penalty under
section 6672 of such Code. Such materials shall be made
available to tax-exempt organizations.
(3) IRS instructions.--The Secretary shall clarify the
instructions to Internal Revenue Service employees on the
application of the penalty under section 6672 of such Code with
regard to voluntary members of boards of trustees or directors
of tax-exempt organizations.
(c) Prompt Notification.--To the maximum extent practicable, the
Secretary shall notify all persons who have failed to make timely and
complete deposit of any taxes described in section 6672 of the Internal
Revenue Code of 1986 of such failure within 30 days after the return
was filed reflecting such failure or after the date on which the
Secretary is first aware of such failure. If the person failing to make
the deposit is not an individual, the Secretary shall notify the entity
subject to such deposit requirement and that entity shall notify,
within 15 days of the notification by the Secretary, all officers,
general partners, trustees, or other managers of the failure.
SEC. 836. REQUIRED CONTENT OF CERTAIN NOTICES.
(a) General Rule.--Subsection (a) of section 7522 (relating to
content of tax due, deficiency, and other notices) is amended by
striking ``shall describe the basis for, and identify'' and inserting
``shall set forth the adjustments which are the basis for, and shall
identify''.
(b) Effective Date.--The amendment made by subsection (a) shall
apply to notices sent after the date 6 months after the date of the
enactment of this Act.
SEC. 837. REQUIRED NOTICE OF CERTAIN PAYMENTS.
If any payment is received by the Secretary of the Treasury or the
Secretary's delegate (hereafter in the section referred to as the
``Secretary'') from any taxpayer and the Secretary cannot associate
such payment with any outstanding tax liability of such taxpayer, the
Secretary shall make reasonable efforts to notify the taxpayer of such
inability within 60 days after the receipt of such payment.
SEC. 838. IMPROVED PROCEDURES FOR NOTIFYING SERVICE OF CHANGE OF
ADDRESS OR NAME.
The Secretary of the Treasury shall provide improved procedures for
taxpayers to notify the Secretary of changes in names and addresses.
Not later than December 31, 1994, the Secretary shall institute
procedures for timely updating all Internal Revenue Service records
with change-of-address information provided to the Secretary by
taxpayers.
SEC. 839. RIGHTS AND RESPONSIBILITIES OF DIVORCED INDIVIDUALS.
The Secretary of the Treasury shall include in the Internal Revenue
Service publication entitled ``Your Rights As A Taxpayer'' a section on
the rights and responsibilities of divorced individuals.
TITLE IX--FINANCING PROVISIONS
SEC. 901. CERTAIN AMOUNTS DERIVED FROM FOREIGN CORPORATIONS TREATED AS
UNRELATED BUSINESS TAXABLE INCOME.
(a) General Rule.--Subsection (b) of section 512 (relating to
modifications) is amended by adding at the end thereof the following
new paragraph:
``(17) Treatment of certain amounts derived from foreign
corporations.--
``(A) In general.--Notwithstanding paragraph (1),
any disqualified amount derived by an organization from
a foreign corporation in which such organization is a
10-percent shareholder shall be included as an item of
gross income derived from an unrelated trade or
business. There shall be allowed all deductions
directly connected with amounts included in gross
income under the preceding sentence.
``(B) Disqualified amount.--For purposes of
subparagraph (A), the term `disqualified amount' means
any of the following:
``(i) Subpart f inclusion.--Any amount
included in gross income under section
951(a)(1)(A) to the extent the amount so
included is attributable to income which, if
derived directly by the organization, would be
treated as gross income from an unrelated trade
or business.
``(ii) Dividends.--Any dividend paid out of
the earnings and profits of any foreign
corporation in proportion to the ratio of--
``(I) the portion of the earnings
and profits attributable to income
which, if derived directly by the
organization, would be treated as gross
income from an unrelated trade or
business, to
``(II) the total amount of earnings
and profits.
For purposes of the preceding sentence,
earnings and profits accumulated in taxable
years beginning before January 1, 1994, shall
not be taken into account.
``(C) 10-percent shareholder.--The term `10-percent
shareholder' means any organization who owns (within
the meaning of section 958(a)), or is considered as
owning by applying the rules of section 958(b), 10
percent or more of the combined voting power of all
class of stock entitled to vote of the foreign
corporation.
``(D) Treatment of certain amounts as dividends.--
The rules of section 904(d)(3)(G) shall apply for
purposes of this paragraph.
``(E) Regulations.--The Secretary shall prescribe
such regulations as may be necessary or appropriate to
carry out the purposes of this paragraph, including
regulations for the application of this paragraph in
the case of income paid through 1 or more entities or
between 2 or more chains of entities.''
(b) Effective Date.--The amendments made by this section shall
apply to--
(1) dividends paid out of earnings and profits of foreign
corporations for taxable years beginning after December 31,
1993, and
(2) amounts included in gross income under section
951(a)(1)(A) of the Internal Revenue Code of 1986 in respect of
any such taxable year.
SEC. 902. SPECIAL RULES FOR RENTAL USE OF DWELLING FOR LESS THAN 15
DAYS PER YEAR.
(a) In General.--Section 280A is amended by striking subsection (g)
and inserting:
``(g) Special Rule for Certain Rental Use.--Notwithstanding any
other provision of this section or section 183, if the principal
residence of the taxpayer is actually rented for less than 15 days
during the taxable year for the purpose of providing accommodations to
visitors to an event for which commercial rental accommodations in the
community holding the event are not sufficient to reasonably provide
more than one-half of the accommodations necessary (and the rental
income received by the taxpayer for any visitor is not greater than a
reasonable rental rate charged per individual guest by commercial
rental accommodations), then--
``(1) no deduction otherwise allowable under this chapter
because of the rental use of such dwelling unit shall be
allowed, and
``(2) the income derived from such use for the taxable year
shall not be included in the gross income of such taxpayer
under section 61.
``(h) Regulations.--The Secretary shall prescribe such regulations
as may be appropriate to carry out the purposes of this section,
including regulations providing such de minimis rules as the Secretary
may deem appropriate.''
(b) Effective Date.--The amendment made by subsection (a) shall
apply to taxable years beginning after December 31, 1993.
SEC. 903. LOSS CARRYOVERS AND CARRYBACKS NOT EXCLUDED IN APPLYING
TAXABLE INCOME LIMITATION ON CERTAIN RESERVE DEDUCTIONS.
(a) General Rule.--Subparagraph (D) of section 593(b)(2) (relating
to computation of taxable income) is amended by adding at the end
thereof the following new sentence:
``Except as providing in the preceding sentence, for
purposes of this paragraph, taxable income shall be
computed as provided in this chapter, including the
application of any carryover or carryback.''
(b) Effective Date.--The amendment made by subsection (a) shall
apply to losses incurred in taxable years ending after December 31,
1993.
SEC. 904. EXTENSION OF WITHHOLDING TO CERTAIN GAMBLING WINNINGS.
(a) Repeal of Exemption for Bingo and Keno.--Paragraph (5) of
section 3402(q) is amended to read as follows:
``(5) Exemption for slot machines.--The tax imposed by
paragraph (1) shall not apply to winnings from a slot
machine.''
(b) Threshold Amount.--Paragraph (3) of section 3402(q) is
amended--
(1) by striking ``(B) and (C)'' in subparagraph (A) and
inserting ``(B), (C), and (D)'', and
(2) by adding at the end thereof the following new
subparagraph:
``(D) Bingo and keno.--Proceeds of more than
$10,000 from a wager placed in a bingo or keno game.''
(c) Effective Date.--The amendments made by this section shall take
effect on January 1, 1994.
TITLE X--TECHNICAL CORRECTIONS
Subtitle A--Revenue Provisions
SEC. 1001. AMENDMENTS RELATED TO REVENUE RECONCILIATION ACT OF 1990.
(a) Amendments Related to Subtitle A.--
(1) Subparagraph (B) of section 59(j)(3) is amended by
striking ``section 1(i)(3)(B)'' and inserting ``section
1(g)(3)(B)''.
(2) Clause (i) of section 151(d)(3)(C) is amended by
striking ``joint of a return'' and inserting ``joint return''.
(3) Subsection (b) of section 1 (as in effect on the day
before the date of the enactment of the Revenue Reconciliation
Act of 1993) is amended by striking ``$26,500'' in the table
contained therein and inserting ``$26,050''.
(b) Amendments Related to Subtitle B.--
(1) Paragraph (1) of section 11212(e) of the Revenue
Reconciliation Act of 1990 is amended by striking ``Paragraph
(1) of section 6724(d)'' and inserting ``Subparagraph (B) of
section 6724(d)(1)''.
(2)(A) Subparagraph (B) of section 4093(c)(2), as in effect
before the amendments made by the Revenue Reconciliation Act of
1993, is amended by inserting before the period ``unless such
fuel is sold for exclusive use by a State or any political
subdivision thereof''.
(B) Paragraph (4) of section 6427(l), as in effect before
the amendments made by the Revenue Reconciliation Act of 1993,
is amended by inserting before the period ``unless such fuel
was used by a State or any political subdivision thereof''.
(3) Paragraph (1) of section 6416(b) is amended by striking
``chapter 32 or by section 4051'' and inserting ``chapter 31 or
32''.
(4) Section 7012 is amended--
(A) by striking ``production or importation of
gasoline'' in paragraph (3) and inserting ``taxes on
gasoline and diesel fuel'', and
(B) by striking paragraph (4) and redesignating
paragraphs (5) and (6) as paragraphs (4) and (5),
respectively.
(5) Subsection (c) of section 5041 is amended by striking
paragraph (6) and by inserting the following new paragraphs:
``(6) Credit for transferee in bond.--If--
``(A) wine produced by any person would be eligible
for any credit under paragraph (1) if removed by such
person during the calendar year,
``(B) wine produced by such person is removed
during such calendar year by any other person
(hereafter in this paragraph referred to as the
`transferee') to whom such wine was transferred in bond
and who is liable for the tax imposed by this section
with respect to such wine, and
``(C) such producer holds title to such wine at the
time of its removal and provides to the transferee such
information as is necessary to properly determine the
transferee's credit under this paragraph,
then, the transferee (and not the producer) shall be allowed
the credit under paragraph (1) which would be allowed to the
producer if the wine removed by the transferee had been removed
by the producer on that date.
``(7) Regulations.--The Secretary may prescribe such
regulations as may be necessary to carry out the purposes of
this subsection, including regulations--
``(A) to prevent the credit provided in this
subsection from benefiting any person who produces more
than 250,000 wine gallons during a calendar year, and
``(B) to assure proper reduction of such credit for
persons producing more than 150,000 wine gallons of
wine during a calendar year.''
(6) Paragraph (3) of section 5061(b) is amended to read as
follows:
``(3) section 5041(f),''.
(7) Section 5354 is amended by inserting ``(taking into
account the appropriate amount of credit with respect to such
wine under section 5041(c))'' after ``any one time''.
(8) Effective on the date of the enactment of this Act,
paragraph (7) of section 11202(i) of the Revenue Reconciliation
Act of 1990 is amended by adding at the end thereof the
following: ``The Secretary may treat any person who bore the
ultimate burden of the tax imposed by this subsection as the
person to whom a credit or refund under such provisions may be
allowed or made.''.
(c) Amendments Related to Subtitle C.--
(1) Paragraph (4) of section 56(g) is amended by
redesignating subparagraphs (I) and (J) as subparagraphs (H)
and (I), respectively.
(2) Subparagraph (B) of section 6724(d)(1) is amended--
(A) by striking ``or'' at the end of clause (xii),
and
(B) by striking the period at the end of clause
(xiii) and inserting ``, or''.
(3) Subsection (g) of section 6302 is amended by inserting
``, 22,'' after ``chapters 21''.
(4) The earnings and profits of any insurance company to
which section 11305(c)(3) of the Revenue Reconciliation Act of
1990 applies shall be determined without regard to any
deduction allowed under such section; except that, for purposes
of applying sections 56 and 902, and subpart F of part III of
subchapter N of chapter 1 of the Internal Revenue Code of 1986,
such deduction shall be taken into account.
(5) Subparagraph (D) of section 6038A(e)(4) is amended--
(A) by striking ``any transaction to which the
summons relates'' and inserting ``any affected taxable
year'', and
(B) by adding at the end thereof the following new
sentence: ``For purposes of this subparagraph, the term
`affected taxable year' means any taxable year if the
determination of the amount of tax imposed for such
taxable year is affected by the treatment of the
transaction to which the summons relates.''.
(6) Subparagraph (A) of section 6621(c)(2) is amended by
adding at the end thereof the following new sentence: ``The
preceding sentence shall be applied without regard to any such
letter or notice which is withdrawn by the Secretary.''.
(7) Clause (i) of section 6621(c)(2)(B) is amended by
striking ``this subtitle'' and inserting ``this title''.
(d) Amendments Related to Subtitle D.--
(1) Notwithstanding section 11402(c) of the Revenue
Reconciliation Act of 1990, the amendment made by section
11402(b)(1) of such Act shall apply to taxable years ending
after December 31, 1989.
(2) Clause (ii) of section 143(m)(4)(C) is amended--
(A) by striking ``any month of the 10-year period''
and inserting ``any year of the 4-year period'',
(B) by striking ``succeeding months'' and inserting
``succeeding years'', and
(C) by striking ``over the remainder of such period
(or, if lesser, 5 years)'' and inserting ``to zero over
the succeeding 5 years''.
(e) Amendments Related to Subtitle E.--
(1)(A) Clause (ii) of section 56(d)(1)(B) is amended to
read as follows:
``(ii) appropriate adjustments in the
application of section 172(b)(2) shall be made
to take into account the limitation of
subparagraph (A).''
(B) For purposes of applying sections 56(g)(1) and 56(g)(3)
of the Internal Revenue Code of 1986 with respect to taxable
years beginning in 1991 and 1992, the reference in such
sections to the alternative tax net operating loss deduction
shall be treated as including a reference to the deduction
under section 56(h) of such Code as in effect before the
amendments made by section 1915 of the Energy Policy Act of
1992.
(2) Clause (i) of section 613A(c)(3)(A) is amended by
striking ``the table contained in''.
(3) Section 6501 is amended--
(A) by striking subsection (m) (relating to
deficiency attributable to election under section 44B)
and by redesignating subsections (n) and (o) as
subsections (m) and (n), respectively, and
(B) by striking ``section 40(f) or 51(j)'' in
subsection (m) (as redesignated by subparagraph (A))
and inserting ``section 40(f), 43, or 51(j)''.
(4) Subparagraph (C) of section 38(c)(2) (as in effect on
the day before the date of the enactment of the Revenue
Reconciliation Act of 1990) is amended by inserting before the
period at the end of the first sentence the following: ``and
without regard to the deduction under section 56(h)''.
(5) The amendment made by section 1913(b)(2)(C)(i) of the
Energy Policy Act of 1992 shall apply to taxable years
beginning after December 31, 1990.
(f) Amendments Related to Subtitle F.--
(1)(A) Section 2701(a)(3) is amended by adding at the end
thereof the following new subparagraph:
``(C) Valuation of qualified payments where no
liquidation, etc. rights.--In the case of an applicable
retained interest which is described in subparagraph
(B)(i) but not subparagraph (B)(ii), the value of the
distribution right shall be determined without regard
to this section.''
(B) Section 2701(a)(3)(B) is amended by inserting
``certain'' before ``qualified'' in the heading thereof.
(C) Sections 2701 (d)(1) and (d)(4) are each amended by
striking ``subsection (a)(3)(B)'' and inserting ``subsection
(a)(3) (B) or (C)''.
(2) Clause (i) of section 2701(a)(4)(B) is amended by
inserting ``(or, to the extent provided in regulations, the
rights as to either income or capital)'' after ``income and
capital''.
(3)(A) Section 2701(b)(2) is amended by adding at the end
thereof the following new subparagraph:
``(C) Applicable family member.--For purposes of
this subsection, the term `applicable family member'
includes any lineal descendant of any parent of the
transferor or the transferor's spouse.''
(B) Section 2701(e)(3) is amended--
(i) by striking subparagraph (B), and
(ii) by striking so much of paragraph (3) as
precedes ``shall be treated as holding'' and inserting:
``(3) Attribution of indirect holdings and transfers.--An
individual''.
(C) Section 2704(c)(3) is amended by striking ``section
2701(e)(3)(A)'' and inserting ``section 2701(e)(3)''.
(4) Clause (i) of section 2701(c)(1)(B) is amended to read
as follows:
``(i) a right to distributions with respect
to any interest which is junior to the rights
of the transferred interest,''.
(5)(A) Clause (i) of section 2701(c)(3)(C) is amended to
read as follows:
``(i) In general.--Payments under any
interest held by a transferor which (without
regard to this subparagraph) are qualified
payments shall be treated as qualified payments
unless the transferor elects not to treat such
payments as qualified payments. Payments
described in the preceding sentence which are
held by an applicable family member shall be
treated as qualified payments only if such
member elects to treat such payments as
qualified payments.''
(B) The first sentence of section 2701(c)(3)(C)(ii) is
amended to read as follows: ``A transferor or applicable family
member holding any distribution right which (without regard to
this subparagraph) is not a qualified payment may elect to
treat such right as a qualified payment, to be paid in the
amounts and at the times specified in such election.''.
(C) The time for making an election under the second
sentence of section 2701(c)(3)(C)(i) of the Internal Revenue
Code of 1986 (as amended by subparagraph (A)) shall not expire
before the due date (including extensions) for filing the
transferor's return of the tax imposed by section 2501 of such
Code for the first calendar year ending after the date of
enactment.
(6) Section 2701(d)(3)(A)(iii) is amended by striking ``the
period ending on the date of''.
(7) Subclause (I) of section 2701(d)(3)(B)(ii) is amended
by inserting ``or the exclusion under section 2503(b),'' after
``section 2523,''.
(8) Section 2701(e)(5) is amended--
(A) by striking ``such contribution to capital or
such redemption, recapitalization, or other change'' in
subparagraph (A) and inserting ``such transaction'',
and
(B) by striking ``the transfer'' in subparagraph
(B) and inserting ``such transaction''.
(9) Section 2701(d)(4) is amended by adding at the end
thereof the following new subparagraph:
``(C) Transfer to transferors.--In the case of a
taxable event described in paragraph (3)(A)(ii)
involving a transfer of an applicable retained interest
from an applicable family member to a transferor, this
subsection shall continue to apply to the transferor
during any period the transferor holds such interest.''
(10) Section 2701(e)(6) is amended by inserting ``or to
reflect the application of subsection (d)'' before the period
at the end thereof.
(11)(A) Section 2702(a)(3)(A) is amended--
(i) by striking ``to the extent'' and inserting
``if'' in clause (i),
(ii) by striking ``or'' at the end of clause (i),
(iii) by striking the period at the end of clause
(ii) and inserting ``, or'', and
(iv) by adding at the end thereof the following new
clause:
``(iii) to the extent that regulations
provide that such transfer is not inconsistent
with the purposes of this section.''
(B)(i) Section 2702(a)(3) is amended by striking
``incomplete transfer'' each place it appears and inserting
``incomplete gift''.
(ii) The heading for section 2702(a)(3)(B) is amended by
striking ``Incomplete transfer'' and inserting ``Incomplete
gift''.
(g) Amendments Related to Subtitle G.--
(1)(A) Subsection (a) of section 1248 is amended--
(i) by striking ``, or if a United States person
receives a distribution from a foreign corporation
which, under section 302 or 331, is treated as an
exchange of stock'' in paragraph (1), and
(ii) by adding at the end thereof the following new
sentence: ``For purposes of this section, a United
States person shall be treated as having sold or
exchanged any stock if, under any provision of this
subtitle, such person is treated as realizing gain from
the sale or exchange of such stock.''.
(B) Paragraph (1) of section 1248(e) is amended by striking
``, or receives a distribution from a domestic corporation
which, under section 302 or 331, is treated as an exchange of
stock''.
(C) Subparagraph (B) of section 1248(f)(1) is amended by
striking ``or 361(c)(1)'' and inserting ``355(c)(1), or
361(c)(1)''.
(D) Paragraph (1) of section 1248(i) is amended to read as
follows:
``(1) In general.--If any shareholder of a 10-percent
corporate shareholder of a foreign corporation exchanges stock
of the 10-percent corporate shareholder for stock of the
foreign corporation, such 10-percent corporate shareholder
shall recognize gain in the same manner as if the stock of the
foreign corporation received in such exchange had been--
``(A) issued to the 10-percent corporate
shareholder, and
``(B) then distributed by the 10-percent corporate
shareholder to such shareholder in redemption or
liquidation (whichever is appropriate).
The amount of gain recognized by such 10-percent corporate
shareholder under the preceding sentence shall not exceed the
amount treated as a dividend under this section.''
(2) Section 897 is amended by striking subsection (f).
(3) Paragraph (13) of section 4975(d) is amended by
striking ``section 408(b)'' and inserting ``section
408(b)(12)''.
(4) Clause (iii) of section 56(g)(4)(D) is amended by
inserting ``, but only with respect to taxable years beginning
after December 31, 1989'' before the period at the end thereof.
(5)(A) Paragraph (11) of section 11701(a) of the Revenue
Reconciliation Act of 1990 (and the amendment made by such
paragraph) are hereby repealed, and section 7108(r)(2) of the
Revenue Reconciliation Act of 1989 shall be applied as if such
paragraph (and amendment) had never been enacted.
(B) Subparagraph (A) shall not apply to any building if the
owner of such building establishes to the satisfaction of the
Secretary of the Treasury or his delegate that such owner
reasonably relied on the amendment made by such paragraph (11).
(h) Amendments Related to Subtitle H.--
(1)(A) Clause (vi) of section 168(e)(3)(B) is amended by
striking ``or'' at the end of subclause (I), by striking the
period at the end of subclause (II) and inserting ``, or'', and
by adding at the end thereof the following new subclause:
``(III) is described in section
48(l)(3)(A)(ix) (as in effect on the day before
the date of the enactment of the Revenue
Reconciliation Act of 1990).''
(B) Subparagraph (K) of section 168(g)(4) is amended by
striking ``section 48(a)(3)(A)(iii)'' and inserting ``section
48(l)(3)(A)(ix) (as in effect on the day before the date of the
enactment of the Revenue Reconciliation Act of 1990)''.
(2) Clause (ii) of section 172(b)(1)(E) is amended by
striking ``subsection (m)'' and inserting ``subsection (h)''.
(3) Sections 805(a)(4)(E), 832(b)(5)(C)(ii)(II), and
832(b)(5)(D)(ii)(II) are each amended by striking ``243(b)(5)''
and inserting ``243(b)(2)''.
(4) Subparagraph (A) of section 243(b)(3) is amended by
inserting ``of'' after ``In the case''.
(5) The subsection heading for subsection (a) of section
280F is amended by striking ``Investment Tax Credit and''.
(6) Clause (i) of section 1504(c)(2)(B) is amended by
inserting ``section'' before ``243(b)(2)''.
(7) Paragraph (3) of section 341(f) is amended by striking
``351, 361, 371(a), or 374(a)'' and inserting ``351, or 361''.
(8) Paragraph (2) of section 243(b) is amended to read as
follows:
``(2) Affiliated group.--For purposes of this subsection:
``(A) In general.--The term `affiliated group' has
the meaning given such term by section 1504(b), except
that for such purposes sections 1504(b)(2), 1504(b)(4),
and 1504(c) shall not apply.
``(B) Group must be consistent in foreign tax
treatment.--The requirements of paragraph (1)(A) shall
not be treated as being met with respect to any
dividend received by a corporation if, for any taxable
year which includes the day on which such dividend is
received--
``(i) 1 or more members of the affiliated
group referred to in paragraph (1)(A) choose to
any extent to take the benefits of section 901,
and
``(ii) 1 or more other members of such
group claim to any extent a deduction for taxes
otherwise creditable under section 901.''
(9) The amendment made by section 11813(b)(17) of the
Revenue Reconciliation Act of 1990 shall be applied as if the
material stricken by such amendment included the closing
parenthesis after ``section 48(a)(5)''.
(10) Paragraph (1) of section 179(d) is amended--
(A) by striking ``in a trade or business'' and
inserting ``a trade or business'', and
(B) by adding at the end thereof the following new
sentence: ``Such term shall not include any property
described in section 50(b) and shall not include air
conditioning or heating units and horses''.
(11) Subparagraph (E) of section 50(a)(2) is amended by
striking ``section 48(a)(5)(A)'' and inserting ``section
48(a)(5)''.
(12) The amendment made by section 11801(c)(9)(G)(ii) of
the Revenue Reconciliation Act of 1990 shall be applied as if
it struck ``Section 422A(c)(2)'' and inserted ``Section
422(c)(2)''.
(13) Subparagraph (B) of section 424(c)(3) is amended by
striking ``a qualified stock option, an incentive stock option,
an option granted under an employee stock purchase plan, or a
restricted stock option'' and inserting ``an incentive stock
option or an option granted under an employee stock purchase
plan''.
(14) Subparagraph (E) of section 1367(a)(2) is amended by
striking ``section 613A(c)(13)(B)'' and inserting ``section
613A(c)(11)(B)''.
(15) Subparagraph (B) of section 460(e)(6) is amended by
striking ``section 167(k)'' and inserting ``section
168(e)(2)(A)(ii)''.
(16) Subparagraph (C) of section 172(h)(4) is amended by
striking ``subsection (b)(1)(M)'' and inserting ``subsection
(b)(1)(E)''.
(17) Section 6503 is amended--
(A) by redesignating the subsection relating to
extension in case of certain summonses as subsection
(j), and
(B) by redesignating the subsection relating to
cross references as subsection (k).
(18) Paragraph (4) of section 1250(e) is hereby repealed.
(19) Subsection (c) of section 2104 is amended by striking
``subparagraph (A), (C), or (D)'' and inserting ``subparagraph
(A)''.
(i) Effective Date.--Except as otherwise expressly provided--
(1) the amendments made by this section shall be treated as
amendments to the Internal Revenue Code of 1986 as amended by
the Revenue Reconciliation Act of 1993; and
(2) any amendment made by this section shall apply to
periods before the date of the enactment of this section in the
same manner as if it had been included in the provision of the
Revenue Reconciliation Act of 1990 to which such amendment
relates.
SEC. 1002. AMENDMENTS RELATED TO REVENUE RECONCILIATION ACT OF 1993.
(a) Amendment Related to Section 13114.--Paragraph (2) of section
1044(c) is amended to read as follows:
``(2) Purchase.--The taxpayer shall be considered to have
purchased any property if, but for subsection (d), the
unadjusted basis of such property would be its cost within the
meaning of section 1012.''
(b) Amendments Related to Section 13142.--
(1) Subparagraph (B) of section 13142(b)(6) of the Revenue
Reconciliation Act of 1993 is amended to read as follows:
``(B) Full-time students, waiver authority, and
prohibited discrimination.--The amendments made by
paragraphs (2), (3), and (4) shall take effect on the
date of the enactment of this Act.''
(2) Subparagraph (C) of section 13142(b)(6) of such Act is
amended by striking ``paragraph (2)'' and inserting ``paragraph
(5)''.
(c) Amendment Related to Section 13161.--
(1) In general.--Subsection (e) of section 4001 (relating
to inflation adjustment) is amended to read as follows:
``(e) Inflation Adjustment.--
``(1) In general.--In the case of any calendar year after
1993, the $30,000 amount in subsection (a) and section 4003(a)
shall be increased by an amount equal to--
``(A) $30,000, multiplied by
``(B) the cost-of-living adjustment under section
1(f)(3) for such calendar year, determined by
substituting `calendar year 1990' for `calendar year
1992' in subparagraph (B) thereof.
``(2) Rounding.--If any amount as adjusted under paragraph
(1) is not a multiple of $2,000, such amount shall be rounded
to the next lowest multiple of $2,000.''
(2) Effective date.--The amendment made by paragraph (1)
shall take effect on January 1, 1994.
(d) Amendment Related to Section 13201.--Clause (ii) of section
135(b)(2)(B) is amended by inserting before the period at the end
thereof the following: ``, determined by substituting `calendar year
1989' for `calendar year 1992' in subparagraph (B) thereof''.
(e) Amendments Related to Section 13203.--Subsection (a) of section
59 is amended--
(1) by striking ``the amount determined under section
55(b)(1)(A)'' in paragraph (1)(A) and (2)(A)(i) and inserting
``the pre-credit tentative minimum tax'',
(2) by striking ``specified in section 55(b)(1)(A)'' in
paragraph (1)(C) and inserting ``specified in subparagraph
(A)(i) or (B)(i) of section 55(b)(1) (whichever applies)'',
(3) by striking ``which would be determined under section
55(b)(1)(A)'' in paragraph (2)(A)(ii) and inserting ``which
would be the pre-credit tentative minimum tax'', and
(4) by adding at the end thereof the following new
paragraph:
``(4) Pre-credit tentative minimum tax.--For purposes of
this subsection, the term `pre-credit tentative minimum tax'
means--
``(A) in the case of a taxpayer other than a
corporation, the amount determined under the first
sentence of section 55(b)(1)(A)(i), or
``(B) in the case of a corporation, the amount
determined under section 55(b)(1)(B)(i).''
(f) Amendment Related to Section 13212.--Subparagraph (B) of
section 401(a)(17) is amended to read as follows:
``(B) Cost-of-living adjustment.--The Secretary
shall adjust annually the $150,000 amount in
subparagraph (A) for increases in the cost-of-living at
the same time and in the same manner as under section
415(d), except that the base period for purposes of
section 415(d)(1)(A) shall be the calendar quarter
beginning October 1, 1993.''
(g) Amendment Related to Section 13221.--Subparagraph (A) of
section 7518(g)(6) is amended by striking ``34 percent'' and inserting
``35 percent''.
(h) Amendments Related to Section 13222.--
(1) Subparagraph (B) of section 6033(e)(1) is amended by
adding at the end thereof the following new clause:
``(iii) Coordination with section 527(f).--
This subsection shall not apply to any amount
on which tax is imposed by reason of section
527(f).''.
(2) Clause (i) of section 6033(e)(1)(B) is amended by
striking ``this subtitle'' and inserting ``section 501''.
(i) Amendment Related to Section 13225.--Paragraph (3) of section
6655(g) is amended by striking all that follows ```3rd month''' in the
sentence following subparagraph (C) and inserting ``, subsection
(e)(2)(A) shall be applied by substituting `2 months' for `3 months' in
clause (i)(I), the election under clause (i) of subsection (e)(2)(C)
may be made separately for each installment, and clause (ii) of
subsection (e)(2)(C) shall not apply.''.
(j) Amendments Related to Section 13231.--
(1) Paragraph (1) of section 956A(b) is amended to read as
follows:
``(1) the amount (not including a deficit) referred to in
section 316(a)(1) to the extent such amount was accumulated in
prior taxable years beginning after September 30, 1993, and''.
(2) Subsection (f) of section 956A is amended by inserting
before the period at the end thereof: ``and regulations
coordinating the provisions of subsections (c)(3)(A) and (d)''.
(3)(A) Subparagraph (A) of section 1297(d)(2) is amended by
striking ``The adjusted basis of any asset'' and inserting
``The amount taken into account under section 1296(a)(2) with
respect to any asset''.
(B) The paragraph heading of paragraph (2) of section
1297(d) is amended to read as follows:
``(2) Amount taken into account.--''.
(4) Subsection (e) of section 1297 is amended by inserting
``For purposes of this part--'' after the subsection heading.
(k) Amendment Related to Section 13241.--Subparagraph (B) of
section 40(e)(1) is amended to read as follows:
``(B) for any period before January 1, 2001, during
which the rates of tax under section 4081(a)(2)(A) are
4.3 cents per gallon.''
(l) Amendment Related to Section 13261.--Clause (iii) of section
13261(g)(2)(A) of the Revenue Reconciliation Act of 1993 is amended by
striking ``by the taxpayer'' and inserting ``by the taxpayer or a
related person''.
(m) Amendment Related to Section 13301.--Subparagraph (B) of
section 1397B(d)(5) is amended by striking ``preceding''.
(n) Clerical Amendments.--
(1) Subsection (d) of section 39 is amended--
(A) by striking ``45'' in the heading of paragraph
(5) and inserting ``45A'', and
(B) by striking ``45'' in the heading of paragraph
(6) and inserting ``45B''.
(2) Subparagraph (A) of section 108(d)(9) is amended by
striking ``paragraph (3)(B)'' and inserting ``paragraph
(3)(C)''.
(3) Subparagraph (C) of section 143(d)(2) is amended by
striking the period at the end thereof and inserting a comma.
(4) Clause (ii) of section 163(j)(6)(E) is amended by
striking ``which is a'' and inserting ``which is''.
(5) Subparagraph (A) of section 1017(b)(4) is amended by
striking ``subsection (b)(2)(D)'' and inserting ``subsection
(b)(2)(E)''.
(6) So much of section 1245(a)(3) as precedes subparagraph
(A) thereof is amended to read as follows:
``(3) Section 1245 property.--For purposes of this section,
the term `section 1245 property' means any property which is or
has been property of a character subject to the allowance for
depreciation provided in section 167 and is either--''.
(7) Paragraph (2) of section 1394(e) is amended--
(A) by striking ``(i)'' and inserting ``(A)'', and
(B) by striking ``(ii)'' and inserting ``(B)''.
(8) Subsection (m) of section 6501 (as redesignated by
section 1001) is amended by striking ``or 51(j)'' and inserting
``45B, or 51(j)''.
(9)(A) The section 6714 added by section 13242(b)(1) of the
Revenue Reconciliation Act of 1993 is hereby redesignated as
section 6715.
(B) The table of sections for part I of subchapter B of
chapter 68 is amended by striking ``6714'' in the item added by
such section 13242(b)(2) of such Act and inserting ``6715''.
(10) Paragraph (2) of section 9502(b) is amended by
inserting ``and before'' after ``1982,''.
(11) Subsections (a)(2) and (a)(3) of section 13206 of the
Revenue Reconciliation Act of 1993 are each amended by striking
``this section'' and inserting ``this subsection''.
(12) Paragraph (1) of section 13215(c) of the Revenue
Reconciliation Act of 1993 is amended by striking ``Public Law
92-21'' and inserting ``Public Law 98-21''.
(13) Paragraph (2) of section 13311(e) of the Revenue
Reconciliation Act of 1993 is amended by striking ``section
1393(a)(3)'' and inserting ``section 1393(a)(2)''.
(14) Subparagraph (B) of section 117(d)(2) is amended by
striking ``section 132(f)'' and inserting ``section 132(h)''.
(o) Effective Date.--Any amendment made by this section shall take
effect as if included in the provision of the Revenue Reconciliation
Act of 1993 to which such amendment relates.
SEC. 1003. MISCELLANEOUS PROVISIONS.
(a) Application of Amendments Made By Title XII of Omnibus Budget
Reconciliation Act of 1990.--Except as otherwise expressly provided,
whenever in title XII of the Omnibus Budget Reconciliation Act of 1990
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.
(b) Treatment of Certain Amounts Under Hedge Bond Rules.--
(1) Clause (iii) of section 149(g)(3)(B) is amended to read
as follows:
``(iii) Amounts held pending reinvestment
or redemption.--Amounts held for not more than
30 days pending reinvestment or bond redemption
shall be treated as invested in bonds described
in clause (i).''
(2) The amendment made by paragraph (1) shall take effect
as if included in the amendments made by section 7651 of the
Omnibus Budget Reconciliation Act of 1989.
(c) Treatment of Certain Distributions Under Section 1445.--
(1) In general.--Paragraph (3) of section 1445(e) is
amended by adding at the end thereof the following new
sentence: ``Rules similar to the rules of the preceding
provisions of this paragraph shall apply in the case of any
distribution to which section 301 applies and which is not made
out of the earnings and profits of such a domestic
corporation.''
(2) Effective date.--The amendment made by paragraph (1)
shall apply to distributions after the date of the enactment of
this Act.
(d) Treatment of Certain Credits Under Section 469.--
(1) In general.--Subparagraph (B) of section 469(c)(3) is
amended by adding at the end thereof the following new
sentence: ``If the preceding sentence applies to the net income
from any property for any taxable year, any credits allowable
under subpart B (other than section 27(a)) or D of part IV of
subchapter A for such taxable year which are attributable to
such property shall be treated as credits not from a passive
activity to the extent the amount of such credits does not
exceed the regular tax liability of the taxpayer for the
taxable year which is allocable to such net income.''
(2) Effective date.--The amendment made by paragraph (1)
shall apply to taxable years beginning after December 31, 1986.
(e) Treatment of Dispositions Under Passive Loss Rules.--
(1) In general.--Subparagraph (A) of section 469(g)(1) is
amended to read as follows:
``(A) In general.--If all gain or loss realized on
such disposition is recognized, the excess of--
``(i) any loss from such activity for such
taxable year (determined after the application
of subsection (b)), over
``(ii) any net income or gain for such
taxable year from all other passive activities
(determined after the application of subsection
(b)),
shall be treated as a loss which is not from a passive
activity.''
(2) Effective date.--The amendment made by paragraph (1)
shall apply to taxable years beginning after December 31, 1986.
(f) Miscellaneous Amendments to Foreign Provisions.--
(1) Coordination of unified estate tax credit with
treaties.--Subparagraph (A) of section 2102(c)(3) is amended by
adding at the end thereof the following new sentence: ``For
purposes of the preceding sentence, property shall not be
treated as situated in the United States if such property is
exempt from the tax imposed by this subchapter under any treaty
obligation of the United States.''
(2) Treatment of certain interest paid to related person.--
(A) In general.--Subparagraph (B) of section
163(j)(1) is amended by inserting before the period at
the end thereof the following: ``(and clause (ii) of
paragraph (2)(A) shall not apply for purposes of
applying this subsection to the amount so treated)''.
(B) Effective date.--The amendment made by
subparagraph (A) shall apply as if included in the
amendments made by section 7210(a) of the Revenue
Reconciliation Act of 1989.
(3) Treatment of interest allocable to effectively
connected income.--
(A) In general.--
(i) Subparagraph (B) of section 884(f)(1)
is amended by striking ``to the extent'' and
all that follows down through ``subparagraph
(A)'' and inserting ``to the extent that the
allocable interest exceeds the interest
described in subparagraph (A)''.
(ii) The second sentence of section
884(f)(1) is amended by striking ``reasonably
expected'' and all that follows down through
the period at the end thereof and inserting
``reasonably expected to be allocable
interest.''
(iii) Paragraph (2) of section 884(f) is
amended to read as follows:
``(2) Allocable interest.--For purposes of this subsection,
the term `allocable interest' means any interest which is
allocable to income which is effectively connected (or treated
as effectively connected) with the conduct of a trade or
business in the United States.''
(B) Effective date.--The amendments made by
subparagraph (A) shall take effect as if included in
the amendments made by section 1241(a) of the Tax
Reform Act of 1986.
(4) Clarification of source rule.--
(A) In general.--Paragraph (2) of section 865(b) is
amended by striking ``863(b)'' and inserting ``863''.
(B) Effective date.--The amendment made by
subparagraph (A) shall take effect as if included in
the amendments made by section 1211 of the Tax Reform
Act of 1986.
(5) Repeal of obsolete provisions.--
(A) Paragraph (1) of section 6038(a) is amended by
striking ``, and'' at the end of subparagraph (E) and
inserting a period, and by striking subparagraph (F).
(B) Subsection (b) of section 6038A is amended by
adding ``and'' at the end of paragraph (2), by striking
``, and'' at the end of paragraph (3) and inserting a
period, and by striking paragraph (4).
(g) Treatment of Assignment of Interest in Certain Bond-Financed
Facilities.--
(1) In general.--Subparagraph (A) of section 1317(3) of the
Tax Reform Act of 1986 is amended by adding at the end thereof
the following new sentence: ``A facility shall not fail to be
treated as described in this subparagraph by reason of an
assignment (or an agreement to an assignment) by the
governmental unit on whose behalf the bonds are issued of any
part of its interest in the property financed by such bonds to
another governmental unit.''
(2) Effective date.--The amendment made by paragraph (1)
shall take effect as if included in such section 1317 on the
date of the enactment of the Tax Reform Act of 1986.
(h) Clarification of Treatment of Medicare Entitlement Under COBRA
Provisions.--
(1) In general.--
(A) Subclause (V) of section 4980B(f)(2)(B)(i) is
amended to read as follows:
``(V) Medicare entitlement followed
by qualifying event.--In the case of a
qualifying event described in paragraph
(3)(B) that occurs less than 18 months
after the date the covered employee
became entitled to benefits under title
XVIII of the Social Security Act, the
period of coverage for qualified
beneficiaries other than the covered
employee shall not terminate under this
clause before the close of the 36-month
period beginning on the date the
covered employee became so entitled.''
(B) Clause (v) of section 602(2)(A) of the Employee
Retirement Income Security Act of 1974 is amended to
read as follows:
``(v) Medicare entitlement followed by
qualifying event.--In the case of a qualifying
event described in section 603(2) that occurs
less than 18 months after the date the covered
employee became entitled to benefits under
title XVIII of the Social Security Act, the
period of coverage for qualified beneficiaries
other than the covered employee shall not
terminate under this subparagraph before the
close of the 36-month period beginning on the
date the covered employee became so entitled.''
(C) Clause (iv) of section 2202(2)(A) of the Public
Health Service Act is amended to read as follows:
``(iv) Medicare entitlement followed by
qualifying event.--In the case of a qualifying
event described in section 2203(2) that occurs
less than 18 months after the date the covered
employee became entitled to benefits under
title XVIII of the Social Security Act, the
period of coverage for qualified beneficiaries
other than the covered employee shall not
terminate under this subparagraph before the
close of the 36-month period beginning on the
date the covered employee became so entitled.''
(2) Effective date.--The amendments made by this subsection
shall apply to plan years beginning after December 31, 1989.
(i) Treatment of Certain REMIC Inclusions.--
(1) In general.--Subsection (a) of section 860E is amended
by adding at the end thereof the following new paragraph:
``(6) Coordination with minimum tax.--For purposes of part
VI of subchapter A of this chapter--
``(A) the reference in section 55(b)(2) to taxable
income shall be treated as a reference to taxable
income determined without regard to this subsection,
``(B) the alternative minimum taxable income of any
holder of a residual interest in a REMIC for any
taxable year shall in no event be less than the excess
inclusion for such taxable year, and
``(C) any excess inclusion shall be disregarded for
purposes of computing the alternative tax net operating
loss deduction.
The preceding sentence shall not apply to any organization to
which section 593 applies, except to the extent provided in
regulations prescribed by the Secretary under paragraph (2).''
(2) Effective date.--The amendment made by paragraph (1)
shall take effect as if included in the amendments made by
section 671 of the Tax Reform Act of 1986 unless the taxpayer
elects to apply such amendment only to taxable years beginning
after the date of the enactment of this Act.
(j) Exemption From Harbor Maintenance Tax for Certain Passengers.--
(1) In general.--Subparagraph (D) of section 4462(b)(1)
(relating to special rule for Alaska, Hawaii, and possessions)
is amended by inserting before the period the following: ``, or
passengers transported on United States flag vessels operating
solely within the State waters of Alaska or Hawaii and adjacent
international waters''.
(2) Effective date.--The amendment made by paragraph (1)
shall take effect as if included in the amendments made by
section 1402(a) of the Harbor Maintenance Revenue Act of 1986.
(k) Amendments Related to Revenue Provisions of Energy Policy Act
of 1992.--
(1) Effective with respect to taxable years beginning after
December 31, 1990, subclause (II) of section 53(d)(1)(B)(iv) is
amended to read as follows:
``(II) the adjusted net minimum tax
for any taxable year is the amount of
the net minimum tax for such year
increased in the manner provided in
clause (iii).''
(2) Subsection (g) of section 179A is redesignated as
subsection (f).
(l) Treatment of Qualified Football Coaches Plan.--
(1) In general.--Section 1022 of title II of the Employee
Retirement Income Security Act of 1974 is amended by adding at
the end thereof the following new subsection:
``(i) Qualified Football Coaches Plan.--For purposes of determining
the qualified plan status of a qualified football coaches plan, section
3(37)(F) shall be treated as part of this title and a qualified
football coaches plan shall be treated as a multiemployer collectively
bargained plan for purposes of the Internal Revenue Code of 1986.''
(2) Effective date.--The amendment made by paragraph (1)
shall apply to years beginning after the date of the enactment
of Public Law 100-202.
(m) Miscellaneous Clerical Amendments.--
(1) Subclause (II) of section 56(g)(4)(C)(ii) is amended by
striking ``of the subclause'' and inserting ``of subclause''.
(2) Paragraph (2) of section 72(m) is amended by inserting
``and'' at the end of subparagraph (A), by striking
subparagraph (B), and by redesignating subparagraph (C) as
subparagraph (B).
(3) Paragraph (2) of section 86(b) is amended by striking
``adusted'' and inserting ``adjusted''.
(4)(A) The heading for section 112 is amended by striking
``combat pay'' and inserting ``combat zone compensation''.
(B) The item relating to section 112 in the table of
sections for part III of subchapter B of chapter 1 is amended
by striking ``combat pay'' and inserting ``combat zone
compensation''.
(C) Paragraph (1) of section 3401(a) is amended by striking
``combat pay'' and inserting ``combat zone compensation''.
(5) Clause (i) of section 172(h)(3)(B) is amended by
striking the comma at the end thereof and inserting a period.
(6) Clause (ii) of section 543(a)(2)(B) is amended by
striking ``section 563(c)'' and inserting ``section 563(d)''.
(7) Paragraph (1) of section 958(a) is amended by striking
``sections 955(b)(1)(A) and (B), 955(c)(2)(A)(ii), and
960(a)(1)'' and inserting ``section 960(a)(1)''.
(8) Subsection (g) of section 642 is amended by striking
``under 2621(a)(2)'' and inserting ``under section
2621(a)(2)''.
(9) Section 1463 is amended by striking ``this subsection''
and inserting ``this section''.
(10) Subsection (k) of section 3306 is amended by inserting
a period at the end thereof.
(11) The item relating to section 4472 in the table of
sections for subchapter B of chapter 36 is amended by striking
``and special rules''.
(12) Paragraph (2) of section 4978(b) is amended by
striking the period at the end of subparagraph (A) and
inserting a comma, and by striking the period and quotation
marks at the end of subparagraph (B) and inserting a comma.
(13) Paragraph (3) of section 5134(c) is amended by
striking ``section 6662(a)'' and inserting ``section 6665(a)''.
(14) Paragraph (2) of section 5206(f) is amended by
striking ``section 5(e)'' and inserting ``section 105(e)''.
(15) Paragraph (1) of section 6050B(c) is amended by
striking ``section 85(c)'' and inserting ``section 85(b)''.
(16) Subsection (k) of section 6166 is amended by striking
paragraph (6).
(17) Subsection (e) of section 6214 is amended to read as
follows:
``(e) Cross Reference.--
``For provision giving Tax Court
jurisdiction to order a refund of an overpayment and to award
sanctions, see section 6512(b)(2).''
(18) The section heading for section 6043 is amended by
striking the semicolon and inserting a comma.
(19) The item relating to section 6043 in the table of
sections for subpart B of part III of subchapter A of chapter
61 is amended by striking the semicolon and inserting a comma.
(20) The table of sections for part I of subchapter A of
chapter 68 is amended by striking the item relating to section
6662.
(21)(A) Section 7232 is amended--
(i) by striking ``lubricating oil,'' in the
heading, and
(ii) by striking ``lubricating oil,'' in the text.
(B) The table of sections for part II of subchapter A of
chapter 75 is amended by striking ``lubricating oil,'' in the
item relating to section 7232.
(22) Paragraph (1) of section 6701(a) of the Omnibus Budget
Reconciliation Act of 1989 is amended by striking ``subclause
(IV)'' and inserting ``subclause (V)''.
(23) Clause (ii) of section 7304(a)(2)(D) of such Act is
amended by striking ``subsection (c)(2)'' and inserting
``subsection (c)''.
(24) Paragraph (1) of section 7646(b) of such Act is
amended by striking ``section 6050H(b)(1)'' and inserting
``section 6050H(b)(2)''.
(25) Paragraph (10) of section 7721(c) of such Act is
amended by striking ``section 6662(b)(2)(C)(ii)'' and inserting
``section 6661(b)(2)(C)(ii)''.
(26) Subparagraph (A) of section 7811(i)(3) of such Act is
amended by inserting ``the first place it appears'' before ``in
clause (i)''.
(27) Paragraph (10) of section 7841(d) of such Act is
amended by striking ``section 381(a)'' and inserting ``section
381(c)''.
(28) Paragraph (2) of section 7861(c) of such Act is
amended by inserting ``the second place it appears'' before
``and inserting''.
(29) Paragraph (1) of section 460(b) is amended by striking
``the look-back method of paragraph (3)'' and inserting ``the
look-back method of paragraph (2)''.
(30) Subparagraph (C) of section 50(a)(2) is amended by
striking ``subsection (c)(4)'' and inserting ``subsection
(d)(5)''.
(31) Subparagraph (B) of section 172(h)(4) is amended by
striking the material following the heading and preceding
clause (i) and inserting ``For purposes of subsection (b)(2)--
''.
(32) Subparagraph (A) of section 355(d)(7) is amended by
inserting ``section'' before ``267(b)''.
(33) Subparagraph (C) of section 420(e)(1) is amended by
striking ``mean'' and inserting ``means''.
(34) Paragraph (4) of section 537(b) is amended by striking
``section 172(i)'' and inserting ``section 172(f)''.
(35) Subparagraph (B) of section 613(e)(1) is amended by
striking the comma at the end thereof and inserting a period.
(36) Paragraph (4) of section 856(a) is amended by striking
``section 582(c)(5)'' and inserting ``section 582(c)(2)''.
(37) Sections 904(f)(2)(B)(i) and 907(c)(4)(B)(iii) are
each amended by inserting ``(as in effect on the day before the
date of the enactment of the Revenue Reconciliation Act of
1990)'' after ``section 172(h)''.
(38) Subsection (b) of section 936 is amended by striking
``subparagraphs (D)(ii)(I)'' and inserting ``subparagraphs
(D)(ii)''.
(39) Subsection (c) of section 2104 is amended by striking
``subparagraph (A), (C), or (D) of section 861(a)(1)'' and
inserting ``section 861(a)(1)(A)''.
(40) Paragraph (1) of section 5002(b) is amended by
striking ``section 5041(c)'' and inserting ``section 5041(d)''.
(41) Section 6038 is amended by redesignating the
subsection relating to cross references as subsection (f).
(42) Clause (iv) of section 6103(e)(1)(A) is amended by
striking all that follows ``provisions of'' and inserting
``section 1(g) or 59(j);''.
(43) The subsection (f) of section 6109 of the Internal
Revenue Code of 1986 which was added by section 2201(d) of
Public Law 101-624 is redesignated as subsection (g).
(44) Subsection (b) of section 7454 is amended by striking
``section 4955(e)(2)'' and inserting ``section 4955(f)(2)''.
(45) Subsection (d) of section 11231 of the Revenue
Reconciliation Act of 1990 shall be applied as if ``comma''
appeared instead of ``period'' and as if the paragraph (9)
proposed to be added ended with a comma.
(46) Paragraph (1) of section 11303(b) of the Revenue
Reconciliation Act of 1990 shall be applied as if ``paragraph''
appeared instead of ``subparagraph'' in the material proposed
to be stricken.
(47) Subsection (f) of section 11701 of the Revenue
Reconciliation Act of 1990 is amended by inserting ``(relating
to definitions)'' after ``section 6038(e)''.
(48) Subsection (i) of section 11701 of the Revenue
Reconciliation Act of 1990 shall be applied as if
``subsection'' appeared instead of ``section'' in the material
proposed to be stricken.
(49) Subparagraph (B) of section 11801(c)(2) of the Revenue
Reconciliation Act of 1990 shall be applied as if ``section
56(g)'' appeared instead of ``section 59(g)''.
(50) Subparagraph (C) of section 11801(c)(8) of the Revenue
Reconciliation Act of 1990 shall be applied as if
``reorganizations'' appeared instead of ``reorganization'' in
the material proposed to be stricken.
(51) Subparagraph (H) of section 11801(c)(9) of the Revenue
Reconciliation Act of 1990 shall be applied as if ``section
1042(c)(1)(B)'' appeared instead of ``section 1042(c)(2)(B)''.
(52) Subparagraph (F) of section 11801(c)(12) of the
Revenue Reconciliation Act of 1990 shall be applied as if ``and
(3)'' appeared instead of ``and (E)''.
(53) Subparagraph (A) of section 11801(c)(22) of the
Revenue Reconciliation Act of 1990 shall be applied as if
``chapters 21'' appeared instead of ``chapter 21'' in the
material proposed to be stricken.
(54) Paragraph (3) of section 11812(b) of the Revenue
Reconciliation Act of 1990 shall be applied by not executing
the amendment therein to the heading of section 42(d)(5)(B).
(55) Clause (i) of section 11813(b)(9)(A) of the Revenue
Reconciliation Act of 1990 shall be applied as if a comma
appeared after ``(3)(A)(ix)'' in the material proposed to be
stricken.
(56) Subparagraph (F) of section 11813(b)(13) of the
Revenue Reconciliation Act of 1990 shall be applied as if
``tax'' appeared after ``investment'' in the material proposed
to be stricken.
(57) Paragraph (19) of section 11813(b) of the Revenue
Reconciliation Act of 1990 shall be applied as if ``Paragraph
(20) of section 1016(a), as redesignated by section 11801,''
appeared instead of ``Paragraph (21) of section 1016(a)''.
(58) Paragraph (5) section 8002(a) of the Surface
Transportation Revenue Act of 1991 shall be applied as if
``4481(e)'' appeared instead of ``4481(c)''.
(59) Section 7872 is amended--
(A) by striking ``foregone'' each place it appears
in subsections (a) and (e)(2) and inserting
``forgone'', and
(B) by striking ``Foregone'' in the heading for
subsection (e) and the heading for paragraph (2) of
subsection (e) and inserting ``Forgone''.
(60) Paragraph (7) of section 7611(h) is amended by
striking ``appropriate'' and inserting ``appropriate''.
(61) The heading of paragraph (3) of section 419A(c) is
amended by striking ``severence'' and inserting ``severance''.
(62) Clause (ii) of section 807(d)(3)(B) is amended by
striking ``Commissioners' '' and inserting ``Commissioners' ''.
(63) Subparagraph (B) of section 1274A(c)(1) is amended by
striking ``instrument'' and inserting ``instrument''.
(64) Subparagraph (B) of section 724(d)(3) by striking
``Subparagraph'' and inserting ``Subparagraph''.
(65) The last sentence of paragraph (2) of section 42(c) is
amended by striking ``of 1988''.
(66) Paragraph (1) of section 9707(d) is amended by
striking ``diligence,'' and inserting ``diligence''.
(67) Subsection (c) of section 4977 is amended by striking
``section 132(g)(2)'' and inserting ``section 132(h)''.
(68) The last sentence of section 401(a)(20) is amended by
striking ``section 211'' and inserting ``section 521''.
(69) Subparagraph (A) of section 402(g)(3) is amended by
striking ``subsection (a)(8)'' and inserting ``subsection
(e)(3)''.
(70) The last sentence of section 403(b)(10) is amended by
striking ``an direct'' and inserting ``a direct''.
(71) Subparagraph (A) of section 4973(b)(1) is amended by
striking ``sections 402(c)'' and inserting ``section 402(c)''.
(72) Paragraph (12) of section 3405(e) is amended by
striking ``(b)(3)'' and inserting ``(b)(2)''.
(73) Paragraph (41) of section 521(b) of the Unemployment
Compensation Amendments of 1992 shall be applied as if
``section'' appeared instead of ``sections'' in the material
proposed to be stricken.
(74) Paragraph (27) of section 521(b) of the Unemployment
Compensation Amendments of 1992 shall be applied as if
``Section 691(c)(5)'' appeared instead of ``Section 691(c)''.
(75) Paragraph (5) of section 860F(a) is amended by
striking ``paragraph (1)'' and inserting ``paragraph (2)''.
Subtitle B--Income Security and Human Resource Amendments
PART I--AMENDMENTS RELATING TO OLD-AGE, SURVIVORS, AND DISABILITY
INSURANCE PROGRAM
SEC. 1011. TECHNICAL CORRECTIONS RELATED TO OASDI IN THE OMNIBUS BUDGET
RECONCILIATION ACT OF 1990.
(a) Amendments Related to Provisions in Section 5103(b) Relating to
Disabled Widows.--Section 223(f)(2) of the Social Security Act (42
U.S.C. 423(f)(2)) is amended--
(1) in subparagraph (A), by striking ``(in a case to which
clause (ii)(II) does not apply)''; and
(2) by striking subparagraph (B)(ii) and inserting the
following:
``(ii) the individual is now able to engage
in substantial gainful activity; or''.
(b) Amendments Related to Provisions in Section 5105(d) Relating to
Representative Payees.--Section 5105(d)(1)(A) of the Omnibus Budget
Reconciliation Act of 1990 (Public Law 101-508) is amended--
(1) by striking ``Section 205(j)(5)'' and inserting
``Section 205(j)(6)''; and
(2) by redesignating the paragraph (5) as amended thereby
as paragraph (6).
(c) Amendments Related to Provisions in Section 5106 Relating to
Coordination of Rules Under Titles II and XVI Governing Fees for
Representatives of Claimants With Entitlements Under Both Titles.--
(1) Calculation of fee of claimant's representative based
on amount of past-due supplemental security income benefits
after application of windfall offset provision.--Section
1631(d)(2)(A)(i) of the Social Security Act (as amended by
section 5106(a)(2) of the Omnibus Budget Reconciliation Act of
1990) (42 U.S.C. 1383(d)(2)(A)(i)) is amended to read as
follows:
``(i) by substituting, in subparagraphs (A)(ii)(I) and
(C)(i), the phrase `(as determined before any applicable
reduction under section 1631(g), and reduced by the amount of
any reduction in benefits under this title or title II made
pursuant to section 1127(a))' for the parenthetical phrase
contained therein; and''.
(2) Calculation of past-due benefits for purposes of
determining attorney fees in judicial proceedings.--
(A) In general.--Section 206(b)(1) of such Act (42
U.S.C. 406(b)(1)) is amended--
(i) by inserting ``(A)'' after ``(b)(1)'';
and
(ii) by adding at the end the following new
subparagraph:
``(B) For purposes of this paragraph--
``(i) the term `past-due benefits' excludes any benefits
with respect to which payment has been continued pursuant to
subsection (g) or (h) of section 223, and
``(ii) amounts of past-due benefits shall be taken into
account to the extent provided under the rules applicable in
cases before the Secretary.''.
(B) Protection from offsetting ssi benefits.--The
last sentence of section 1127(a) of such Act (as added
by section 5106(b) of the Omnibus Budget Reconciliation
Act of 1990) (42 U.S.C. 1320a-6(a)) is amended by
striking ``section 206(a)(4)'' and inserting
``subsection (a)(4) or (b) of section 206''.
(3) Application of single dollar amount ceiling to
concurrent claims under titles ii and xvi.--
(A) In general.--Section 206(a)(2) of such Act (as
amended by section 5106(a)(1) of the Omnibus Budget
Reconciliation Act of 1990) (42 U.S.C. 406(a)(2)) is
amended--
(i) by redesignating subparagraph (C) as
subparagraph (D); and
(ii) by inserting after subparagraph (B)
the following new subparagraph:
``(C) In any case involving--
``(i) an agreement described in subparagraph (A) with any
person relating to both a claim of entitlement to past-due
benefits under this title and a claim of entitlement to past-
due benefits under title XVI, and
``(ii) a favorable determination made by the Secretary with
respect to both such claims,
the Secretary may approve such agreement only if the total fee or fees
specified in such agreement does not exceed, in the aggregate, the
dollar amount in effect under subparagraph (A)(ii)(II).''.
(B) Conforming amendment.--Section 206(a)(3)(A) of
such Act (as amended by section 5106(a)(1) of the
Omnibus Budget Reconciliation Act of 1990) (42 U.S.C.
406(a)(3)(A)) is amended by striking ``paragraph
(2)(C)'' and inserting ``paragraph (2)(D)''.
(d) Amendment Related to Provisions in Section 5115 Relating to
Advance Tax Transfers.--Section 201(a) of the Social Security Act (42
U.S.C. 401(a)) is amended in the last sentence by striking ``and'' the
second place it appears.
(e) Effective Date.--Each amendment made by this section shall take
effect as if included in the provisions of the Omnibus Budget
Reconciliation Act of 1990 to which such amendment relates.
SEC. 1012. ELIMINATION OF ROUNDING DISTORTION IN THE CALCULATION OF THE
OLD-AGE, SURVIVORS, AND DISABILITY INSURANCE CONTRIBUTION
AND BENEFIT BASE AND THE EARNINGS TEST EXEMPT AMOUNTS.
(a) Adjustment of OASDI Contribution and Benefit Base.--
(1) In general.--Section 230(b) of the Social Security Act
(42 U.S.C. 430(b)) is amended by striking paragraphs (1) and
(2) and inserting the following:
``(1) $60,600, and
``(2) the ratio of (A) the deemed average total wages (as
defined in section 209(k)(1)) for the calendar year before the
calendar year in which the determination under subsection (a)
is made to (B) the deemed average total wages (as so defined)
for 1992,''.
(2) Conforming amendment relating to applicable prior
law.--Section 230(d) of such Act (42 U.S.C. 430(d)) is amended
by striking ``(except that'' and all that follows through the
end and inserting ``(except that, for purposes of subsection
(b) of such section 230 as so in effect, the reference to the
contribution and benefit base in paragraph (1) of such
subsection (b) shall be deemed a reference to an amount equal
to $45,000, each reference in paragraph (2) of such subsection
(b) to the average of the wages of all employees as reported to
the Secretary of the Treasury shall be deemed a reference to
the deemed average total wages (as defined in section
209(k)(1)), the reference to a preceding calendar year in
paragraph (2)(A) of such subsection (b) shall be deemed a
reference to the calendar year before the calendar year in
which the determination under subsection (a) of such section
230 is made, and the reference to a calendar year in paragraph
(2)(B) of such subsection (b) shall be deemed a reference to
1992).''.
(3) Adjustment of contribution and benefit base applicable
in determining years of coverage for purposes of special
minimum primary insurance amount.--Section 215(a)(1)(C)(ii) of
such Act is amended by striking ``(except that'' and all that
follows through the end and inserting ``(except that, for
purposes of subsection (b) of such section 230 as so in effect,
the reference to the contribution and benefit base in paragraph
(1) of such subsection (b) shall be deemed a reference to an
amount equal to $45,000, each reference in paragraph (2) of
such subsection (b) to the average of the wages of all
employees as reported to the Secretary of the Treasury shall be
deemed a reference to the deemed average total wages (as
defined in section 209(k)(1)), the reference to a preceding
calendar year in paragraph (2)(A) of such subsection (b) shall
be deemed a reference to the calendar year before the calendar
year in which the determination under subsection (a) of such
section 230 is made, and the reference to a calendar year in
paragraph (2)(B) of such subsection (b) shall be deemed a
reference to 1992).''.
(b) Adjustment of Earnings Test Exempt Amount.--Section
203(f)(8)(B)(ii) of the Social Security Act (42 U.S.C.
403(f)(8)(B)(ii)) is amended to read as follows:
``(ii) the product of the corresponding exempt
amount which is in effect with respect to months in the
taxable year ending after 1993 and before 1995, and the
ratio of--
``(I) the deemed average total wages (as
defined in section 209(k)(1)) for the calendar
year before the calendar year in which the
determination under subparagraph (A) is made,
to
``(II) the deemed average total wages (as
so defined) for 1992,
with such product, if not a multiple of $10, being
rounded to the next higher multiple of $10 where such
product is a multiple of $5 but not of $10 and to the
nearest multiple of $10 in any other case.''.
(c) Effective Dates.--
(1) The amendments made by subsection (a) shall be
effective with respect to the determination of the contribution
and benefit base for years after 1994.
(2) The amendment made by subsection (b) shall be effective
with respect to the determination of the exempt amounts
applicable to any taxable year ending after 1994.
PART II--HUMAN RESOURCES PROVISIONS
SEC. 1016. CORRECTIONS RELATED TO THE INCOME SECURITY AND HUMAN
RESOURCES PROVISIONS OF THE OMNIBUS BUDGET RECONCILIATION
ACT OF 1990.
(a) Amendment Related to Section 5035(a)(2).--Section 5035(a)(2) of
the Omnibus Budget Reconciliation Act of 1990 (Public Law 101-508) is
amended by striking ``a semicolon'' and inserting `` `; and' ''.
(b) Repeal of Provision Inadvertently Included.--Section 5057 of
the Omnibus Budget Reconciliation Act of 1990 (Public Law 101-508), and
the amendment made by such section, are hereby repealed, and section
1139(d) of the Social Security Act shall be applied and administered as
if such section 5057 had never been enacted.
(c) Amendment Related to Section 5105(d)(1)(B).--Section
5105(d)(1)(B) of the Omnibus Budget Reconciliation Act of 1990 (Public
Law 101-508; 104 Stat. 1388-266) is amended to read as follows:
``(B) Title xvi.--Section 1631(a)(2)(F) (42 U.S.C.
1383(a)(2)(F)), as so redesignated by subsection (c)(2)
of this section, is amended to read as follows:
```(F) The Secretary shall include as a part of the annual report
required under section 704 information with respect to the
implementation of the preceding provisions of this paragraph,
including--
```(i) the number of cases in which the representative
payee was changed;
```(ii) the number of cases discovered where there has been
a misuse of funds;
```(iii) how any such cases were dealt with by the
Secretary;
```(iv) the final disposition of such cases (including any
criminal penalties imposed); and
```(v) such other information as the Secretary determines
to be appropriate.'.''
(d) Amendment Related to Section 5105(a)(1)(B).--The second
paragraph of section 1631(a) of the Social Security Act (42 U.S.C.
1383(a)) is amended by striking ``(A)(i) Payments'' and inserting
``(2)(A)(i) Payments''.
(e) Amendments Related to Section 5105(b).--Section 1631(a)(2)(C)
of the Social Security Act (42 U.S.C. 1383(a)(2)(C)) is amended--
(1) by striking clause (ii);
(2) by redesignating clauses (iii), (iv), and (v) as
clauses (ii), (iii), and (iv), respectively; and
(3) in clause (iv) (as so redesignated), by striking
``(iii), and (iv)'' and inserting ``and (iii)''.
(f) Amendments Related to Section 5107(a)(2)(B).--Section
1631(c)(1)(B) of the Social Security Act (42 U.S.C. 1383(c)(1)(B)) is
amended by striking ``paragraph (1)'' each place such term appears and
inserting ``subparagraph (A)''.
(g) Amendment Related to Section 5109(a)(2).--Section 1631 of the
Social Security Act (42 U.S.C. 1383) is amended by redesignating the
subsection (n) added by section 5109(a)(2) of the Omnibus Budget
Reconciliation Act of 1990, as subsection (o).
(h) Amendments Related to Section 11115(b)(2).--Section 11115(b)(2)
of the Omnibus Budget Reconciliation Act of 1990 (Public Law 101-508)
is amended--
(1) in subparagraph (A), by striking ``paragraph (8)'' and
inserting ``paragraph (9)'';
(2) in subparagraph (B), by striking ``paragraph (9)'' and
inserting ``paragraph (10)''; and
(3) in subparagraph (C), by redesignating the new paragraph
added thereby as paragraph (11).
(i) Effective Date.--Each amendment made by this section shall take
effect as if included in the provision of the Omnibus Budget
Reconciliation Act of 1990 to which the amendment relates at the time
such provision became law.
SEC. 1017. TECHNICAL CORRECTIONS RELATED TO THE HUMAN RESOURCE AND
INCOME SECURITY PROVISIONS OF OMNIBUS BUDGET
RECONCILIATION ACT OF 1989.
(a) Amendment Relating to Section 8004(a).--Section 408(m)(2)(A) of
the Social Security Act (42 U.S.C. 608(m)(2)(A)) is amended by striking
``a fiscal'' and inserting ``the fiscal''.
(b) Amendment Relating to Section 8006(a).--Section 473(a)(6)(B) of
such Act (42 U.S.C. 673(a)(6)(B)) is amended by striking
``474(a)(3)(B)'' and inserting ``474(a)(3)(C)''.
(c) Amendment Relating to Section 8007(b)(3).--Subparagraph (D) of
section 475(5) of such Act (42 U.S.C. 675(5)(D)) is amended by moving
such subparagraph 2 ems to the right so that the left margin of such
subparagraph is aligned with the left margin of subparagraph (C) of
such section.
(d) Effective Date.--Each amendment made by this section shall take
effect as if the amendment had been included in the provision of the
Omnibus Budget Reconciliation Act of 1989 to which the amendment
relates, at the time the provision became law.
SEC. 1018. ELIMINATION OF OBSOLETE PROVISIONS RELATING TO TREATMENT OF
THE EARNED INCOME TAX CREDIT.
(a) Treatment of EITC as Earned Income.--Section 1612(a)(1) of the
Social Security Act (42 U.S.C. 1382a(a)(1)) is amended by striking
subparagraph (C) and by redesignating subparagraphs (D) and (E) as
subparagraphs (C) and (D), respectively.
(b) Adjustment of Benefits Due to Treatment of EITC as Earned
Income.--Section 1631(b) of such Act (42 U.S.C. 1383(b)) is amended by
striking paragraph (3) and by redesignating paragraphs (4) and (5) as
paragraphs (3) and (4), respectively.
SEC. 1019. REDESIGNATION OF CERTAIN PROVISIONS.
Section 1631(e)(6) of the Social Security Act (42 U.S.C.
1383(e)(6)) is amended by redesignating subparagraphs (1) and (2) as
subparagraphs (A) and (B), respectively.
Subtitle C--Tariff and Customs
SEC. 1021. TECHNICAL AMENDMENTS TO THE HARMONIZED TARIFF SCHEDULE OF
THE UNITED STATES.
(a) In General.--The Harmonized Tariff Schedule of the United
States is amended as follows:
(1) Tapestry and upholstery fabrics.--The article
description for subheading 5112.19.20 is amended by striking
``of a weight exceeding 300 g/m<SUP>2''.
(2) Gloves.--
(A) Chapter 61 is amended by redesignating
subheading 6116.10.45 as subheading 6116.10.48.
(B) Chapter 62 is amended by striking the superior
text ``Other:'' that appears between subheadings
6216.00.46 and 6216.00.52.
(3) Agglomerate stone floor and wall tiles.--The article
description for subheading 6810.19.12 is amended to read as
follows: ``Of stone agglomerated with binders other than
cement''.
(4) 2,4-Diaminobenzenesulfonic acid.--The article
description for heading 9902.30.43 is amended by striking
``2921.51.50'' and inserting ``2921.59.50''.
(5) Machines used in the manufacture of bicycle parts.--The
article description for heading 9902.84.79 is amended by
striking ``8479.89.90'' and inserting ``8462.49.00, 8479.89.90
or 9031.80.00''.
(6) Copying machines and parts.--The article description
for heading 9902.90.90 is amended by inserting ``or
8473.40.40'' after ``8472.90.80''.
(b) Staged Rate Reductions for Gloves.--Any staged reduction of a
special rate of duty set forth in subheading 6116.10.45 of such
Schedule that takes effect on or after October 1, 1990, by reason of
section 10011(a)(2) of the Omnibus Budget Reconciliation Act of 1990
shall apply to the corresponding rate of duty in subheading 6116.10.48
(as redesignated by subsection (a)(2)(A)).
(c) Effective Dates.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by subsection (a) shall apply with respect to
goods entered, or withdrawn from warehouse for consumption, on
or after the 15th day after the date of the enactment of this
Act.
(2) Retroactive application for certain liquidations and
reliquidations.--
(A) Notwithstanding section 514 of the Tariff Act
of 1930 or any other provision of law, upon proper
request filed with the appropriate customs officer on
or before the 90th day after the date of the enactment
of this Act, any entry--
(i) that was made after the applicable date
and before the 15th day after such date of
enactment; and
(ii) with respect to which there would have
been a lesser or no duty if any amendment made
by subsection (a) applied to such entry;
shall be liquidated or reliquidated as though such
amendment applied to such entry.
(B) For purposes of this subsection, the term
``applicable date'' means--
(i) if such amendment is made by subsection
(a)(3) or (a)(6), December 31, 1988; and
(ii) if such amendment is made by
subsection (a)(1), (a)(2), (a)(4), (a)(5),
September 30, 1990.
SEC. 1022. CLARIFICATION REGARDING THE APPLICATION OF CUSTOMS USER
FEES.
(a) In General.--Subparagraph (D) of section 13031(b)(8) of the
Consolidated Omnibus Budget Reconciliation Act of 1985 (19 U.S.C.
58c(b)(8)(D)) is amended--
(1) by striking ``and'' at the end of clause (iv);
(2) by striking the period at the end of clause (v) and
inserting ``; and''; and
(3) by inserting after clause (v) the following new clause:
``(vi) in the case of merchandise entered from a foreign
trade zone (other than merchandise to which clause (v)
applies), be applied only to the value of the privileged or
nonprivileged foreign status merchandise under section 3 of the
Act of June 18, 1934 (commonly known as the Foreign Trade Zones
Act, 19 U.S.C. 81c).''
(b) Effective Date.--The amendments made by subsection (a) apply
to--
(1) any entry made from a foreign trade zone on or after
the 15th day after the date of the enactment of this Act; and
(2) any entry made from a foreign trade zone after November
30, 1986, and before such 15th day if the entry was not
liquidated before such 15th day.
(c) Application of Fees to Certain Agricultural Products.--The
amendment made by section 111(b)(2)(D)(iv) of the Customs and Trade Act
of 1990 shall apply to--
(1) any entry made from a foreign trade zone on or after
the 15th day after the date of the enactment of this Act; and
(2) any entry made from a foreign trade zone after November
30, 1986, and before such 15th day if the entry was not
liquidated, or if the liquidation has not become final, before
such 15th day.
SEC. 1023. TECHNICAL AMENDMENTS TO THE OMNIBUS TRADE AND
COMPETITIVENESS ACT OF 1988.
(a) In General.--Paragraph (2) of section 1102(a) of the Omnibus
Trade and Competitiveness Act of 1988 (19 U.S.C. 2902(a)(2)) is
amended--
(1) in subparagraph (A)--
(A) by striking ``the date of enactment of this
Act'' and inserting ``January 1, 1989''; and
(B) by striking ``such date of enactment'' and
inserting ``January 1, 1989''; and
(2) in subparagraph (B), by striking ``such date of
enactment'' and inserting ``January 1, 1989''.
(b) Effective Date.--The amendments made by subsection (a) shall
take effect January 1, 1989.
(c) Construction.--For purposes of applying the amendments made by
subsection (a), the column 1-general rate of duty established by any
amendment to the Harmonized Tariff Schedule of the United States that
was enacted after January 1, 1989, shall, if--
(1) such amendment has, or is statutorily treated as
having, an effective date of January 1, 1989; or
(2) application for liquidation or reliquidation at such
rate with respect to entries made after December 31, 1988, and
before the effective date of the amendment, is provided for;
be treated as the rate in effect on January 1, 1989.
SEC. 1024. TECHNICAL AMENDMENT TO THE CUSTOMS AND TRADE ACT OF 1990.
Subsection (b) of section 484H of the Customs and Trade Act of 1990
(19 U.S.C. 1553 note) is amended by striking ``, or withdrawn from
warehouse for consumption,'' and inserting ``for transportation in
bond''.
SEC. 1025. TECHNICAL AMENDMENTS REGARDING CERTAIN BENEFICIARY
COUNTRIES.
(a) Caribbean Basin Economic Recovery Act.--Section 213(h)(1) of
the Caribbean Basin Economic Recovery Act (19 U.S.C. 2703(h)(1)) is
amended by adding at the end thereof the following flush sentence:
``The duty reductions provided for under this paragraph shall
not apply to textile and apparel articles which are subject to
textile agreements.''
(b) Andean Trade Preference Act.--Section 204(c)(1) of the Andean
Trade Preference Act (19 U.S.C. 3203(c)(1)) is amended by adding at the
end thereof the following flush sentence:
``The duty reductions provided for under this paragraph shall
not apply to textile and apparel articles which are subject to
textile agreements.''
(c) Effective Date.--The amendments made by this section apply with
respect to--
(1) articles entered, or withdrawn from warehouse for
consumption, on or after the 15th day after the date of the
enactment of this Act, and
(2) articles entered after December 31, 1991, and before
such 15th day, which are not liquidated before such 15th day.
SEC. 1026. CLARIFICATION OF FEES FOR CERTAIN CUSTOMS SERVICES.
(a) In General.--Section 13031(b)(9)(A) of the Consolidated Omnibus
Budget Reconciliation Act of 1985 (19 U.S.C. 58c(b)(9)(A)) is amended--
(1) by striking ``centralized hub facility or'' in clause
(i); and
(2) in clause (ii)--
(A) by striking ``facility--'' and inserting
``facility or centralized hub facility--'',
(B) by striking ``customs inspectional'' in
subclause (I), and
(C) by striking ``at the facility'' in subclause
(I) and inserting ``for the facility''.
(b) Definitions.--Section 13031(b)(9)(B)(i) of the Consolidated
Omnibus Budget Reconciliation Act of 1985 (19 U.S.C. 58c(b)(9)(B)(i))
is amended--
(1) by striking ``, as in effect on July 30, 1990'', and
(2) by adding at the end thereof the following new
sentence: ``Nothing in this paragraph shall be construed as
prohibiting the Secretary of the Treasury from processing
merchandise that is informally entered or released at any
centralized hub facility or express consignment carrier
facility during the normal operating hours of the Customs
Service, subject to reimbursement and payment under
subparagraph (A).''.
(c) Citation.--Section 13031(b)(9)(B)(ii) of the Consolidated
Omnibus Budget Reconciliation Act of 1985 (19 U.S.C. 58c(b)(9)(B)(ii))
is amended by striking ``section 236 of the Tariff and Trade Act of
1984'' and inserting ``section 236 of the Trade and Tariff Act of
1984''.
SEC. 1027. CONFORMING AMENDMENT TO SECTION 337 OF THE TARIFF ACT OF
1930.
(a) In General.--The second sentence of section 337(b)(3) of the
Tariff Act of 1930 is amended by striking ``section 303, 671, or 673''
and inserting ``section 303, 701, or 731''.
(b) Effective Date.--The amendment made by subsection (a) shall
take effect October 28, 1992.
Passed the House of Representatives May 17, 1994.
Attest:
Clerk.
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