H.R. 2014 "Taxpayer Relief Act of 1997"
"Taxpayer Fairness Act of 1997"
FILE h2014.eh
105th CONGRESS
1st Session
AN ACT
To provide for reconciliation pursuant to subsections (b)(2) and
(d) of section 105 of the concurrent resolution on the budget for
fiscal year 1998.
HR 2014 EH
105th CONGRESS
1st Session
AN ACT
To provide for reconciliation pursuant to subsections (b)(2) and
(d) of section 105 of the concurrent resolution on the budget for
fiscal year 1998.
Be it enacted by the Senate and House of
Representatives of the United States of America in Congress
assembled,
SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE.
(a) SHORT TITLE- This Act may be cited as the `Taxpayer Relief
Act of 1997'.
(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- The table of contents for this Act is as
follows:
Sec. 1. Short title; amendment of 1986 Code.
TITLE I--CHILD TAX CREDIT; TAX INCENTIVES FOR DEPENDENT CARE AND
HEALTH CARE FOR CHILDREN
Sec. 101. Child tax credit.
Sec. 102. Inflation adjustment of limits and other modifications of
dependent care credit.
TITLE II--EDUCATION INCENTIVES
SUBTITLE A--TAX BENEFITS RELATING TO EDUCATION EXPENSES
Sec. 201. Hope credit for higher education tuition and related
expenses.
Sec. 202. Deduction for qualified higher education expenses.
Sec. 203. Penalty-free withdrawals from individual retirement plans
for higher education expenses.
Sec. 204. Expenses for education which supplements elementary and
secondary education.
SUBTITLE B--EXPANDED EDUCATION INVESTMENT SAVINGS OPPORTUNITIES
Sec. 211. Eligible educational institutions permitted to maintain
qualified tuition programs; other modifications of qualified
State tuition programs.
Sec. 212. Education investment accounts.
SUBTITLE C--OTHER EDUCATION INITIATIVES
Sec. 221. Extension of exclusion for employer-provided educational
assistance.
Sec. 222. Increase in limitation on qualified 501(c)(3) bonds other
than hospital bonds.
Sec. 223. Contributions of computer technology and equipment for
elementary or secondary school purposes.
Sec. 224. Treatment of cancellation of certain student loans.
TITLE III--SAVINGS AND INVESTMENT INCENTIVES
SUBTITLE A--RETIREMENT SAVINGS
Sec. 301. Establishment of American Dream IRA.
SUBTITLE B--CAPITAL GAINS
PART I--INDIVIDUAL CAPITAL GAINS
Sec. 311. 20 percent maximum capital gains rate for individuals.
Sec. 312. Indexing of certain assets acquired after December 31,
2000, for purposes of determining gain.
Sec. 313. Exemption from tax for gain on sale of principal residence.
PART II--CORPORATE CAPITAL GAINS
Sec. 321. Reduction of alternative capital gain tax for corporations.
TITLE IV--ALTERNATIVE MINIMUM TAX REFORM
Sec. 401. Adjustment of exemption amounts for taxpayers other than
corporations.
Sec. 402. Exemption from alternative minimum tax for small
corporations.
Sec. 403. Repeal of adjustment for depreciation.
Sec. 404. Minimum tax not to apply to farmers' installment sales.
TITLE V--ESTATE, GIFT, AND GENERATION-SKIPPING TAX PROVISIONS
SUBTITLE A--ESTATE AND GIFT TAX PROVISIONS
Sec. 501. Cost-of-living adjustments relating to estate and gift
tax provisions.
Sec. 502. 20-year installment payment where estate consists largely
of interest in closely held business.
Sec. 503. No interest on certain portion of estate tax extended
under section 6166, reduced interest on remaining portion, and
no deduction for such reduced interest.
Sec. 504. Extension of treatment of certain rents under section
2032A to lineal descendants.
Sec. 505. Clarification of judicial review of eligibility for
extension of time for payment of estate tax.
Sec. 506. Gifts may not be revalued for estate tax purposes after
expiration of statute of limitations.
Sec. 507. Termination of throwback rules for domestic trusts.
Sec. 508. Unified credit of decedent increased by unified credit of
spouse used on split gift included in decedent's gross estate.
Sec. 509. Reformation of defective bequests, etc., to spouse of
decedent.
SUBTITLE B--GENERATION-SKIPPING TAX PROVISIONS
Sec. 511. Severing of trusts holding property having an inclusion
ratio of greater than zero.
Sec. 512. Expansion of exception from generation-skipping transfer
tax for transfers to individuals with deceased parents.
TITLE VI--EXTENSION AND MODIFICATION OF CERTAIN EXPIRING PROVISIONS
Sec. 601. Research tax credit.
Sec. 602. Contributions of stock to private foundations.
Sec. 603. Work opportunity tax credit.
Sec. 604. Orphan drug tax credit.
Sec. 605. Budgetary treatment of expiring preferential excise tax
rates which are dedicated to trust funds.
TITLE VII--INCENTIVES FOR REVITALIZATION OF THE DISTRICT OF COLUMBIA
Sec. 701. Tax incentives for revitalization of the District of
Columbia.
Sec. 702. Incentives conditioned on other DC reform.
TITLE VIII--WELFARE-TO-WORK INCENTIVES
Sec. 801. Incentives for employing long-term family assistance
recipients.
TITLE IX--MISCELLANEOUS PROVISIONS
SUBTITLE A--PROVISIONS RELATING TO EXCISE TAXES
Sec. 901. Repeal of tax on diesel fuel used in recreational boats.
Sec. 902. Continued application of tax on imported recycled
Halon-1211.
Sec. 903. Uniform rate of tax on vaccines.
Sec. 904. Operators of multiple gasoline retail outlets treated as
wholesale distributor for refund purposes.
Sec. 905. Exemption of electric and other clean-fuel motor vehicles
from luxury automobile classification.
SUBTITLE B--PROVISIONS RELATING TO PENSIONS AND FRINGE BENEFITS
Sec. 911. Section 401(k) plans for certain irrigation and drainage
entities.
Sec. 912. Extension of moratorium on application of certain
nondiscrimination rules to State and local governments.
Sec. 913. Treatment of certain disability benefits received by
former police officers or firefighters.
Sec. 914. Portability of permissive service credit under
governmental pension plans.
Sec. 915. Gratuitous transfers for the benefit of employees.
Sec. 916. Treatment of certain transportation on non-commercially
operated aircraft as a fringe benefit excludable from gross
income.
Sec. 917. Minimum pension accrued benefit distributable without
consent increased to $5,000.
Sec. 918. Clarification of certain rules relating to employee stock
ownership plans of S corporations.
SUBTITLE C--REVISIONS RELATING TO DISASTERS
Sec. 921. Authority to postpone certain tax-related deadlines by
reason of presidentially declared disaster.
Sec. 922. Use of certain appraisals to establish amount of disaster
loss.
Sec. 923. Treatment of livestock sold on account of weather-related
conditions.
Sec. 924. Mortgage financing for residences located in disaster
areas.
SUBTITLE D--PROVISIONS RELATING TO EMPLOYMENT TAXES
Sec. 931. Clarification of employment tax status of individuals
distributing bakery products.
Sec. 932. Clarification of standard to be used in determining
employment tax status of retail securities brokers.
Sec. 933. Clarification of exemption from self-employment tax for
certain termination payments received by former insurance
salesmen.
Sec. 934. Standards for determining whether individuals are not
employees.
SUBTITLE E--PROVISIONS RELATING TO SMALL BUSINESSES
Sec. 941. Waiver of penalty through 1998 on small businesses
failing to make electronic fund transfers of taxes.
Sec. 942. Clarification of treatment of home office use for
administrative and management activities.
SUBTITLE F--OTHER PROVISIONS
Sec. 951. Use of estimates of shrinkage for inventory accounting.
Sec. 952. Assignment of workmen's compensation liability eligible
for exclusion relating to personal injury liability assignments.
Sec. 953. Tax-exempt status for certain State worker's compensation
act companies.
Sec. 954. Election to continue exception from treatment of publicly
traded partnerships as corporations.
Sec. 955. Exclusion from unrelated business taxable income for
certain sponsorship payments.
Sec. 956. Associations of holders of timeshare interests to be
taxed like other homeowners associations.
Sec. 957. Additional advance refunding of certain Virgin Island
bonds.
Sec. 958. Nonrecognition of gain on sale of stock to certain
farmers' cooperatives.
Sec. 959. Exception from reporting of real estate transactions for
sales and exchanges of certain principal residences.
Sec. 960. Increased deductibility of business meal expenses for
individuals subject to Federal hours of service.
Sec. 961. Qualified lessee construction allowances for short-term
leases.
Sec. 962. Tax treatment of consolidations of life insurance
departments of mutual savings banks.
Sec. 963. Offset of past-due, legally enforceable State tax
obligations against overpayments.
Sec. 964. Exemption of the incremental cost of a clean fuel vehicle
from the limits on depreciation for vehicles.
Sec. 965. Tax benefits for law enforcement officers killed in the
line of duty.
Sec. 966. Temporary suspension of taxable income limit on
percentage depletion for marginal production.
SUBTITLE G--EXTENSION OF DUTY-FREE TREATMENT UNDER GENERALIZED
SYSTEM OF PREFERENCES; TARIFF TREATMENT OF CERTAIN EQUIPMENT AND
REPAIR OF VESSELS
Sec. 971. Generalized system of preferences.
Sec. 972. Equipment and repair of vessels.
SUBTITLE H--UNITED STATES-CARIBBEAN BASIN TRADE PARTNERSHIP ACT
Sec. 981. Short title.
Sec. 982. Findings and policy.
Sec. 983. Definitions.
Sec. 984. Temporary provisions to provide NAFTA parity to
partnership countries.
Sec. 985. Effect of NAFTA on sugar imports from beneficiary
countries.
Sec. 986. Duty-free treatment for certain beverages made with
Caribbean rum.
Sec. 987. Meetings of trade ministers and USTR.
Sec. 988. Report on economic development and market oriented
reforms in the Caribbean.
TITLE X--REVENUES
SUBTITLE A--FINANCIAL PRODUCTS
Sec. 1001. Constructive sales treatment for appreciated financial
positions.
Sec. 1002. Limitation on exception for investment companies under
section 351.
Sec. 1003. Modification of rules for allocating interest expense to
tax-exempt interest.
Sec. 1004. Gains and losses from certain terminations with respect
to property.
Sec. 1005. Determination of original issue discount where pooled
debt obligations subject to acceleration.
Sec. 1006. Denial of interest deductions on certain debt instruments.
SUBTITLE B--CORPORATE ORGANIZATIONS AND REORGANIZATIONS
Sec. 1011. Tax treatment of certain extraordinary dividends.
Sec. 1012. Application of section 355 to distributions followed by
acquisitions and to intragroup transactions.
Sec. 1013. Tax treatment of redemptions involving related
corporations.
Sec. 1014. Modification of holding period applicable to dividends
received deduction.
SUBTITLE C--OTHER CORPORATE PROVISIONS
Sec. 1021. Registration and other provisions relating to
confidential corporate tax shelters.
Sec. 1022. Certain preferred stock treated as boot.
SUBTITLE D--ADMINISTRATIVE PROVISIONS
Sec. 1031. Reporting of certain payments made to attorneys.
Sec. 1032. Decrease of threshold for reporting payments to
corporations performing services for Federal agencies.
Sec. 1033. Disclosure of return information for administration of
certain veterans programs.
Sec. 1034. Continuous levy on certain payments.
Sec. 1035. Modification of levy exemption.
Sec. 1036. Confidentiality and disclosure of returns and return
information.
Sec. 1037. Returns of beneficiaries of estates and trusts required
to file returns consistent with estate or trust return or to
notify secretary of inconsistency.
SUBTITLE E--EXCISE TAX PROVISIONS
Sec. 1041. Extension and modification of Airport and Airway Trust
Fund taxes.
Sec. 1042. Kerosene taxed as diesel fuel.
Sec. 1043. Restoration of Leaking Underground Storage Tank Trust
Fund taxes.
Sec. 1044. Application of communications tax to long-distance
prepaid telephone cards.
SUBTITLE F--PROVISIONS RELATING TO TAX-EXEMPT ENTITIES
Sec. 1051. Expansion of look-thru rule for interest, annuities,
royalties, and rents derived by subsidiaries of tax-exempt
organizations.
Sec. 1052. Limitation on increase in basis of property resulting
from sale by tax-exempt entity to a related person.
Sec. 1053. Modifications to exception from reporting, etc. of
lobbying activities.
Sec. 1054. Termination of certain exceptions from rules relating to
exempt organizations which provide commercial-type insurance.
SUBTITLE G--OTHER REVENUE PROVISIONS
Sec. 1061. Termination of suspense accounts for family corporations
required to use accrual method of accounting.
Sec. 1062. Modification of taxable years to which net operating
losses may be carried.
Sec. 1063. Expansion of denial of deduction for certain amounts
paid in connection with insurance.
Sec. 1064. Allocation of basis among properties distributed by
partnership.
Sec. 1065. Repeal of requirement that inventory be substantially
appreciated.
Sec. 1066. Extension of time for taxing precontribution gain.
Sec. 1067. Restrictions on availability of earned income credit for
taxpayers who improperly claimed credit in prior year.
Sec. 1068. Limitation on property for which income forecast method
may be used.
Sec. 1069. Repeal of special rule for rental use of vacation homes,
etc., for less than 15 days.
Sec. 1070. Expansion of requirement that involuntarily converted
property be replaced with property acquired from an unrelated
person.
Sec. 1071. Treatment of exception from installment sales rules for
sales of property by a manufacturer to a dealer.
TITLE XI--SIMPLIFICATION AND OTHER FOREIGN-RELATED PROVISIONS
SUBTITLE A--GENERAL PROVISIONS
Sec. 1101. Treatment of computer software as FSC export property.
Sec. 1102. Adjustment of dollar limitation on section 911 exclusion.
Sec. 1103. Certain individuals exempt from foreign tax credit
limitation.
Sec. 1104. Exchange rate used in translating foreign taxes.
Sec. 1105. Election to use simplified section 904 limitation for
alternative minimum tax.
Sec. 1106. Treatment of personal transactions by individuals under
foreign currency rules.
Sec. 1107. All noncontrolled section 902 corporations which are not
passive foreign investment companies in one foreign tax
limitation basket.
SUBTITLE B--TREATMENT OF CONTROLLED FOREIGN CORPORATIONS
Sec. 1111. Gain on certain stock sales by controlled foreign
corporations treated as dividends.
Sec. 1112. Miscellaneous modifications to subpart F.
Sec. 1113. Indirect foreign tax credit allowed for certain lower
tier companies.
SUBTITLE C--TREATMENT OF PASSIVE FOREIGN INVESTMENT COMPANIES
Sec. 1121. United States shareholders of controlled foreign
corporations not subject to PFIC inclusion.
Sec. 1122. Election of mark to market for marketable stock in
passive foreign investment company.
Sec. 1123. Effective date.
SUBTITLE D--REPEAL OF EXCISE TAX ON TRANSFERS TO FOREIGN ENTITIES
Sec. 1131. Repeal of excise tax on transfers to foreign entities;
recognition of gain on certain transfers to foreign trusts and
estates.
SUBTITLE E--INFORMATION REPORTING
Sec. 1141. Clarification of application of return requirement to
foreign partnerships.
Sec. 1142. Controlled foreign partnerships subject to information
reporting comparable to information reporting for controlled
foreign corporations.
Sec. 1143. Modifications relating to returns required to be filed
by reason of changes in ownership interests in foreign
partnership.
Sec. 1144. Transfers of property to foreign partnerships subject to
information reporting comparable to information reporting for
such transfers to foreign corporations.
Sec. 1145. Extension of statute of limitation for foreign transfers.
Sec. 1146. Increase in filing thresholds for returns as to
organization of foreign corporations and acquisitions of stock
in such corporations.
SUBTITLE F--DETERMINATION OF FOREIGN OR DOMESTIC STATUS OF
PARTNERSHIPS
Sec. 1151. Determination of foreign or domestic status of
partnerships.
SUBTITLE G--OTHER SIMPLIFICATION PROVISIONS
Sec. 1161. Transition rule for certain trusts.
Sec. 1162. Repeal of stock and securities safe harbor requirement
that principal office be outside the United States.
SUBTITLE H--OTHER PROVISIONS
Sec. 1171. Definition of foreign personal holding company income.
Sec. 1172. Personal property used predominantly in the United
States treated as not property of a like kind with respect to
property used predominantly outside the United States.
Sec. 1173. Holding period requirement for certain foreign taxes.
Sec. 1174. Penalties for failure to disclose position that certain
international transportation income is not includible in gross
income.
Sec. 1175. Denial of treaty benefits for certain payments through
hybrid entities.
Sec. 1176. Interest on underpayments not reduced by foreign tax
credit carrybacks.
Sec. 1177. Clarification of period of limitations on claim for
credit or refund attributable to foreign tax credit carryforward.
Sec. 1178. Miscellaneous clarifications.
TITLE XII--SIMPLIFICATION PROVISIONS RELATING TO INDIVIDUALS AND
BUSINESSES
SUBTITLE A--PROVISIONS RELATING TO INDIVIDUALS
Sec. 1201. Basic standard deduction and minimum tax exemption
amount for certain dependents.
Sec. 1202. Increase in amount of tax exempt from estimated tax
requirements.
Sec. 1203. Optional methods for computing SECA tax combined.
Sec. 1204. Treatment of certain reimbursed expenses of rural mail
carriers.
Sec. 1205. Treatment of traveling expenses of certain Federal
employees engaged in criminal investigations.
Sec. 1206. Payment of tax by commercially acceptable means.
SUBTITLE B--PROVISIONS RELATING TO BUSINESSES GENERALLY
Sec. 1211. Modifications to look-back method for long-term contracts.
Sec. 1212. Minimum tax treatment of certain property and casualty
insurance companies.
SUBTITLE C--SIMPLIFICATION RELATING TO ELECTING LARGE PARTNERSHIPS
PART I--GENERAL PROVISIONS
Sec. 1221. Simplified flow-through for electing large partnerships.
Sec. 1222. Simplified audit procedures for electing large
partnerships.
Sec. 1223. Due date for furnishing information to partners of
electing large partnerships.
Sec. 1224. Returns may be required on magnetic media.
Sec. 1225. Treatment of partnership items of individual retirement
accounts.
Sec. 1226. Effective date.
PART II--PROVISIONS RELATED TO TEFRA PARTNERSHIP PROCEEDINGS
Sec. 1231. Treatment of partnership items in deficiency proceedings.
Sec. 1232. Partnership return to be determinative of audit
procedures to be followed.
Sec. 1233. Provisions relating to statute of limitations.
Sec. 1234. Expansion of small partnership exception.
Sec. 1235. Exclusion of partial settlements from 1-year limitation
on assessment.
Sec. 1236. Extension of time for filing a request for
administrative adjustment.
Sec. 1237. Availability of innocent spouse relief in context of
partnership proceedings.
Sec. 1238. Determination of penalties at partnership level.
Sec. 1239. Provisions relating to court jurisdiction, etc.
Sec. 1240. Treatment of premature petitions filed by notice
partners or 5-percent groups.
Sec. 1241. Bonds in case of appeals from certain proceeding.
Sec. 1242. Suspension of interest where delay in computational
adjustment resulting from certain settlements.
Sec. 1243. Special rules for administrative adjustment requests
with respect to bad debts or worthless securities.
PART III--PROVISION RELATING TO CLOSING OF PARTNERSHIP TAXABLE YEAR
WITH RESPECT TO DECEASED PARTNER, ETC.
Sec. 1246. Closing of partnership taxable year with respect to
deceased partner, etc.
SUBTITLE D--PROVISIONS RELATING TO REAL ESTATE INVESTMENT TRUSTS
Sec. 1251. Clarification of limitation on maximum number of
shareholders.
Sec. 1252. De minimis rule for tenant services income.
Sec. 1253. Attribution rules applicable to tenant ownership.
Sec. 1254. Credit for tax paid by REIT on retained capital gains.
Sec. 1255. Repeal of 30-percent gross income requirement.
Sec. 1256. Modification of earnings and profits rules for
determining whether REIT has earnings and profits from non-REIT
year.
Sec. 1257. Treatment of foreclosure property.
Sec. 1258. Payments under hedging instruments.
Sec. 1259. Excess noncash income.
Sec. 1260. Prohibited transaction safe harbor.
Sec. 1261. Shared appreciation mortgages.
Sec. 1262. Wholly owned subsidiaries.
Sec. 1263. Effective date.
SUBTITLE E--PROVISIONS RELATING TO REGULATED INVESTMENT COMPANIES
Sec. 1271. Repeal of 30-percent gross income limitation.
SUBTITLE F--TAXPAYER PROTECTIONS
Sec. 1281. Reasonable cause exception for certain penalties.
Sec. 1282. Clarification of period for filing claims for refunds.
Sec. 1283. Repeal of authority to disclose whether prospective
juror has been audited.
Sec. 1284. Clarification of statute of limitations.
Sec. 1285. Awarding of administrative costs.
Sec. 1286. Penalty for unauthorized inspection of tax returns or
tax return information.
Sec. 1287. Civil damages for unauthorized inspection of returns and
return information; notification of unlawful inspection or
disclosure.
TITLE XIII--SIMPLIFICATION PROVISIONS RELATING TO ESTATE AND GIFT
TAXES
Sec. 1301. Gifts to charities exempt from gift tax filing
requirements.
Sec. 1302. Clarification of waiver of certain rights of recovery.
Sec. 1303. Transitional rule under section 2056A.
Sec. 1304. Clarifications relating to disclaimers.
Sec. 1305. Increase of amount of lapse of general power of
appointment not treated as release for purposes of estate and
gift tax (5 or 5 power).
Sec. 1306. Treatment for estate tax purposes of short-term
obligations held by nonresident aliens.
Sec. 1307. Certain revocable trusts treated as part of estate.
Sec. 1308. Distributions during first 65 days of taxable year of
estate.
Sec. 1309. Separate share rules available to estates.
Sec. 1310. Executor of estate and beneficiaries treated as related
persons for disallowance of losses, etc.
Sec. 1311. Limitation on taxable year of estates.
Sec. 1312. Treatment of funeral trusts.
Sec. 1313. Adjustments for gifts within 3 years of decedent's death.
Sec. 1314. Clarification of treatment of survivor annuities under
qualified terminable interest rules.
Sec. 1315. Treatment under qualified domestic trust rules of forms
of ownership which are not trusts.
Sec. 1316. Opportunity to correct certain failures under section
2032A.
Sec. 1317. Authority to waive requirement of United States trustee
for qualified domestic trusts.
TITLE XIV--SIMPLIFICATION PROVISIONS RELATING TO EXCISE TAXES,
TAX-EXEMPT BONDS, AND OTHER MATTERS
SUBTITLE A--EXCISE TAX SIMPLIFICATION
PART I--EXCISE TAXES ON HEAVY TRUCKS AND LUXURY CARS
Sec. 1401. Increase in de minimis limit for after-market
alterations for heavy trucks and luxury cars.
Sec. 1402. Credit for tire tax in lieu of exclusion of value of
tires in computing price.
PART II--PROVISIONS RELATED TO DISTILLED SPIRITS, WINES, AND BEER
Sec. 1411. Credit or refund for imported bottled distilled spirits
returned to distilled spirits plant.
Sec. 1412. Authority to cancel or credit export bonds without
submission of records.
Sec. 1413. Repeal of required maintenance of records on premises of
distilled spirits plant.
Sec. 1414. Fermented material from any brewery may be received at a
distilled spirits plant.
Sec. 1415. Repeal of requirement for wholesale dealers in liquors
to post sign.
Sec. 1416. Refund of tax to wine returned to bond not limited to
unmerchantable wine.
Sec. 1417. Use of additional ameliorating material in certain wines.
Sec. 1418. Domestically produced beer may be withdrawn free of tax
for use of foreign embassies, legations, etc.
Sec. 1419. Beer may be withdrawn free of tax for destruction.
Sec. 1420. Authority to allow drawback on exported beer without
submission of records.
Sec. 1421. Transfer to brewery of beer imported in bulk without
payment of tax.
Sec. 1422. Transfer to bonded wine cellars of wine imported in bulk
without payment of tax.
PART III--OTHER EXCISE TAX PROVISIONS
Sec. 1431. Authority to grant exemptions from registration
requirements.
Sec. 1432. Repeal of expired provisions.
SUBTITLE B--TAX-EXEMPT BOND PROVISIONS
Sec. 1441. Repeal of $100,000 limitation on unspent proceeds under
1-year exception from rebate.
Sec. 1442. Exception from rebate for earnings on bona fide debt
service fund under construction bond rules.
Sec. 1443. Repeal of debt service-based limitation on investment in
certain nonpurpose investments.
Sec. 1444. Repeal of expired provisions.
Sec. 1445. Effective date.
SUBTITLE C--TAX COURT PROCEDURES
Sec. 1451. Overpayment determinations of Tax Court.
Sec. 1452. Redetermination of interest pursuant to motion.
Sec. 1453. Application of net worth requirement for awards of
litigation costs.
Sec. 1454. Proceedings for determination of employment status.
SUBTITLE D--OTHER PROVISIONS
Sec. 1461. Extension of due date of first quarter estimated tax
payment by private foundations.
Sec. 1462. Clarification of authority to withhold Puerto Rico
income taxes from salaries of Federal employees.
Sec. 1463. Certain notices disregarded under provision increasing
interest rate on large corporate underpayments.
TITLE XV--TECHNICAL AMENDMENTS RELATED TO SMALL BUSINESS JOB
PROTECTION ACT OF 1996 AND OTHER LEGISLATION
Sec. 1501. Amendments related to Small Business Job Protection Act
of 1996.
Sec. 1502. Amendments related to Health Insurance Portability and
Accountability Act of 1996.
Sec. 1503. Amendments related to Taxpayer Bill of Rights 2.
Sec. 1504. Miscellaneous provisions.
TITLE I--CHILD TAX CREDIT; MODIFICATION OF DEPENDENT CARE CREDIT
SEC. 101. CHILD TAX CREDIT.
(a) IN GENERAL- Subpart A of part IV of subchapter A of chapter 1
(relating to nonrefundable personal credits) is amended by
inserting after section 23 the following new section:
`SEC. 24. CHILD TAX CREDIT.
`(a) ALLOWANCE OF CREDIT- There shall be allowed as a credit
against the tax imposed by this chapter for the taxable year an
amount equal to $500 multiplied by the number of qualifying
children of the taxpayer.
`(b) LIMITATIONS-
`(1) LIMITATION BASED ON ADJUSTED GROSS INCOME- For
limitation based on adjusted gross income, see section 26(c).
`(2) REDUCTION FOR DEPENDENT CARE CREDIT- In the case of
taxable years beginning after December 31, 1999--
`(A) IN GENERAL- The credit allowed by subsection (a) for
the taxable year (determined after paragraph (1) but before
paragraph (3)) shall be reduced by the amount equal to 50
percent of the credit allowed under section 21 for such
taxable year (determined after section 26(c)).
`(B) EXCEPTION BASED ON ADJUSTED GROSS INCOME-
`(i) IN GENERAL- Subparagraph (A) shall not apply to
a taxpayer whose modified adjusted gross income for the
taxable year does not exceed the threshold amount.
`(ii) PHASEIN OF REDUCTION- If the modified adjusted
gross income of the taxpayer for the taxable year
exceeds the threshold amount by less than $5,000, the
amount of the reduction under subparagraph (A) shall be
an amount which bears the same ratio to the amount of
such reduction (determined without regard to this
clause) as the excess of the taxpayer's modified
adjusted gross income over the threshold amount bears
to $5,000. In the case of a joint return, the preceding
sentence shall be applied by substituting `$10,000' for
`$5,000' each place it appears.
`(iii) THRESHOLD AMOUNT- For purposes of this
subparagraph, the term `threshold amount' means--
`(I) $60,000 in the case of a joint return,
`(II) $33,000 in the case of an individual who is not married, and
`(III) $25,000 in the case of a married individual filing a
separate return.
For purposes of this clause, marital status shall be
determined under section 7703.
`(iv) MODIFIED ADJUSTED GROSS INCOME- For purposes of
this subparagraph, the term `modified adjusted gross
income' has the meaning given such term by section
26(c).'.
`(C) NO REDUCTION FOR DEPENDENT CARE OF INDIVIDUALS
INCAPABLE OF SELF-CARE- Subparagraph (A) shall not apply to
so much of the credit which would have been allowed under
section 21 (determined without regard to section 26(c)) if
only qualifying individuals described in subparagraph (B)
or (C) of section 21(b)(1) were taken into account.
`(3) LIMITATION BASED ON AMOUNT OF TAX- The credit allowed by
subsection (a) (determined after paragraphs (1) and (2)) shall
not exceed the excess (if any) of--
`(A) the taxpayer's regular tax liability for the taxable
year reduced by the credits allowable against such tax
under this subpart (other than this section), over
`(B) the sum of--
`(i) the taxpayer's tentative minimum tax for such
taxable year (determined without regard to the
alternative minimum tax foreign tax credit), plus
`(ii) the credit allowed for the taxable year under
section 32.
`(c) QUALIFYING CHILD- For purposes of this section--
`(1) IN GENERAL- The term `qualifying child' means any
individual if--
`(A) the taxpayer is allowed a deduction under section
151 with respect to such individual for the taxable year,
`(B) such individual has not attained the age of 17 as of
the close of the calendar year in which the taxable year of
the taxpayer begins, and
`(C) such individual bears a relationship to the taxpayer
described in section 32(c)(3)(B).
`(2) EXCEPTION FOR CERTAIN NONCITIZENS- The term `qualifying
child' shall not include any individual who would not be a
dependent if the first sentence of section 152(b)(3) were
applied without regard to all that follows `resident of the
United States'.
`(d) TAXABLE YEAR MUST BE FULL TAXABLE YEAR- Except in the case
of a taxable year closed by reason of the death of the taxpayer, no
credit shall be allowable under this section in the case of a
taxable year covering a period of less than 12 months.
`(e) PHASEIN OF CREDIT- In the case of taxable years beginning in
1998, subsection (a) shall be applied by substituting `$400' for
`$500'.'.
(b) HIGH RISK POOLS PERMITTED TO COVER DEPENDENTS OF HIGH RISK
INDIVIDUALS- Paragraph (26) of section 501(c) is amended by adding
at the end the following flush sentence:
`A qualifying child (as defined in section 24(c)) of an
individual described in subparagraph (B) (without regard to
this sentence) shall be treated as described in subparagraph
(B).'.
(c) CONFORMING AMENDMENTS-
(1) Subsection (a) of section 26 is amended by inserting
`(other than the credit allowed by section 24)' after `credits
allowed by this subpart'.
(2) The table of sections for subpart A of part IV of
subchapter A of chapter 1 is amended by inserting after the
item relating to section 23 the following new item:
`SEC. 24. CHILD TAX CREDIT.'.
(d) EFFECTIVE DATE- The amendments made by this section shall
apply to taxable years beginning after December 31, 1997.
(e) NOTICE OF CREDIT- The Secretary of the Treasury or his
delegate shall include in any booklet of instructions for Form
1040, 1040A, or 1040EZ prepared by such Secretary for filing
individual income tax returns for taxable years beginning in 1998 a
notice which states only the following: `The Taxpayer Relief Act of
1997 which was recently passed by the Congress has fulfilled its
promise to provide tax relief to American families. The Act's child
tax credit allows American families to reduce their taxes by $400
per child for 1998 and $500 per child after 1998. You may wish to
check with your employer about changing your tax withholding.'.
(f) ADJUSTMENTS TO WITHHOLDING-
(1) IN GENERAL- The Secretary of the Treasury or his delegate
shall modify the tables and procedures under section 3402 of
the Internal Revenue Code of 1986 such that every employer
making payment of wages during calendar year 1998 to any
specified employee--
(A) shall reduce the amount deducted and withheld as tax
under chapter 24 of such Code for any payroll or other
period during such year to reflect such period's
proportionate share of the child care credit amount, and
(B) shall, before implementing such reduction, provide
reasonable notice to such employees that such a reduction
will apply to each specified employee who does not provide
the employer with the notice referred to in paragraph (5).
(2) SPECIFIED EMPLOYEE- For purposes of this subsection, the
term `specified employee' means any employee--
(A) whose wages from the employer on an annualized basis
are reasonably expected to be at least $30,000 but not more
than $100,000, and
(B) who claims more than the base number of withholding
exemptions on the withholding exemption certificate
furnished to the employer.
For purposes of the preceding sentence, the term `base number'
means 1 withholding exemption if the certificate reflects
withholding for an unmarried individual and 2 withholding
exemptions if the certificate reflects withholding for a
married individual.
(3) CHILD CARE CREDIT AMOUNT- For purposes of this
subsection, the term `child care credit amount' means the
lesser of $800 or the amount equal to the product of--
(A) $400, and
(B) the number of withholding exemptions claimed by the
employee on the withholding exemption certificate furnished
to the employer to the extent such number exceeds the base
number (as defined in paragraph (2)) of such exemptions.
(4) PROPORTIONATE SHARE- For purposes of this subsection,
except as provided by the Secretary of the Treasury or his
delegate, a period's proportionate share of the child care
credit amount is the amount which bears the same ratio to the
child care credit amount as the number of days in such period
bears to 365.
(5) NOTICE TO HAVE SUBSECTION NOT APPLY TO EMPLOYEE- This
subsection shall not apply to any employee who provides written
notice (in such form as the Secretary shall prescribe) to the
employer of such employee's decision not to have this
subsection apply to such employee.
(6) DEFINITIONS- Terms used in this subsection which are also
used in chapter 24 of the Internal Revenue Code of 1986 shall
have the respective meanings given such terms by such chapter.
SEC. 102. INFLATION ADJUSTMENT OF LIMITS AND OTHER MODIFICATIONS OF
DEPENDENT CARE CREDIT.
(a) INFLATION ADJUSTMENT-
(1) IN GENERAL- Subsection (c) of section 21 (relating to
expenses for household and dependent care services necessary
for gainful employment) is amended to read as follows:
`(c) DOLLAR LIMIT ON AMOUNT CREDITABLE-
`(1) IN GENERAL- The amount of the employment-related
expenses incurred during any taxable year which may be taken
into account under subsection (a) shall not exceed--
`(A) $2,400 if there is 1 qualifying individual with
respect to the taxpayer for such taxable year, or
`(B) $4,800 if there are 2 or more qualifying individuals
with respect to the taxpayer for such taxable year.
The amount determined under subparagraph (A) or (B) (whichever
is applicable) shall be reduced by the aggregate amount
excludable from gross income under section 129 for the taxable
year.
`(2) INFLATION ADJUSTMENT- In the case of taxable years
beginning in a calendar year after 1997, each of the dollar
amounts contained in paragraph (1) shall be increased by an
amount equal to--
`(A) such dollar amount, multiplied by
`(B) the cost-of-living adjustment determined under
section 1(f)(3) for such calendar year by substituting
`calendar year 1996' for `calendar year 1992' in
subparagraph (B) thereof.
If any amount as adjusted under the preceding sentence is not a
multiple of $50, such amount shall be rounded to the next
lowest multiple of $50.'.
(2) CONFORMING AMENDMENT- Paragraph (2) of section 21(d) is
amended by striking `(c)(1)' and inserting `(c)(1)(A)' and by
striking `(c)(2)' and inserting `(c)(1)(B)'.
(b) REDUCTION OF BENEFIT BASED ON ADJUSTED GROSS INCOME-
(1) IN GENERAL- Section 26 is amended by redesignating
subsection (c) as subsection (d) and by inserting after
subsection (b) the following new subsection:
`(c) REDUCTION OF DEPENDENT CARE CREDIT AND CHILD CREDIT BASED ON
ADJUSTED GROSS INCOME-
`(1) IN GENERAL- The aggregate amount which would (but for
subsection (a), this subsection, and paragraphs (2) and (3) of
section 24(b)) be allowed under sections 21 and 24 shall be
reduced (but not below zero) by $25 for each $1,000 (or
fraction thereof) by which the taxpayer's modified adjusted
gross income exceeds the threshold amount. For purposes of the
preceding sentence, the term `modified adjusted gross income'
means adjusted gross income increased by any amount excluded
from gross income under section 911, 931, or 933.
`(2) THRESHOLD AMOUNT- For purposes of paragraph (1), the
term `threshold amount' means--
`(A) $110,000 in the case of a joint return,
`(B) $75,000 in the case of an individual who is not
married, and
`(C) $55,000 in the case of a married individual filing a
separate return.
For purposes of this paragraph, marital status shall be
determined under section 7703.
`(3) REMAINING CREDIT TREATED AS ATTRIBUTABLE TO DEPENDENT
CARE TAX CREDIT- The aggregate amount allowable under sections
21 and 24 after the application of paragraph (1) shall be
treated as allowable solely under section 21 to the extent such
amount does not exceed the amount allowable under section 21
(determined without regard to section 21(a)(3)).'.
(2) CONFORMING AMENDMENTS-
(A) Subsection (a) of section 21 is amended by adding at
the end the following new paragraph:
`(3) LIMITATION BASED ON ADJUSTED GROSS INCOME-
`For limitation based on adjusted gross income, see section 26(c).'.
(B) The section heading for section 26 is amended by
inserting before the period `; phaseout of certain credits
based on income'.
(C) The item relating to section 26 in the table of
sections for subpart A of part IV of subchapter A of
chapter 1 is amended by inserting before the period `;
phaseout of certain credits based on income'.
(c) EFFECTIVE DATE- The amendments made by this section shall
apply to taxable years beginning after December 31, 1997.
TITLE II--EDUCATION INCENTIVES
SUBTITLE A--TAX BENEFITS RELATING TO EDUCATION EXPENSES
SEC. 201. HOPE CREDIT FOR HIGHER EDUCATION TUITION AND RELATED
EXPENSES.
(a) IN GENERAL- Subpart A of part IV of subchapter A of chapter 1
(relating to nonrefundable personal credits) is amended by
inserting after section 25 the following new section:
`SEC. 25A. HIGHER EDUCATION TUITION AND RELATED EXPENSES.
`(a) ALLOWANCE OF CREDIT- In the case of an individual, there
shall be allowed as a credit against the tax imposed by this
chapter for the taxable year the amount equal to 50 percent of
qualified tuition and related expenses paid by the taxpayer during
such taxable year for education furnished during any academic
period beginning in such year.
`(b) LIMITATIONS-
`(1) DOLLAR LIMITATION- The amount allowed as a credit under
subsection (a) for any taxable year with respect to the
qualified tuition and related expenses of any 1 individual
shall not exceed $1,500.
`(2) CREDIT ALLOWED ONLY FOR 2 TAXABLE YEARS- No credit shall
be allowed under subsection (a) for a taxable year with respect
to the qualified tuition and related expenses of an individual
unless the taxpayer elects to have this section apply with
respect to such individual for such year. An election under
this paragraph shall not take effect with respect to an
individual for any taxable year if an election under this
paragraph (by the taxpayer or any other individual) is in
effect with respect to such individual for any 2 prior taxable
years.
`(3) CREDIT ALLOWED FOR YEAR ONLY IF INDIVIDUAL IS AT LEAST
1/2 TIME STUDENT FOR PORTION OF YEAR- No credit shall be
allowed under subsection (a) for a taxable year with respect to
the qualified tuition and related expenses of an individual
unless such individual is an eligible student for at least one
academic period which begins during such year.
`(4) CREDIT ALLOWED ONLY FOR FIRST TWO YEARS OF POSTSECONDARY
EDUCATION- No credit shall be allowed under subsection (a) for
a taxable year with respect to the qualified tuition and
related expenses of an individual if the individual has
completed (before the beginning of such taxable year) the first
2 years of postsecondary education at an eligible educational
institution.
`(c) LIMITATION BASED ON MODIFIED ADJUSTED GROSS INCOME-
`(1) IN GENERAL- The amount which would (but for this
subsection) be taken into account under subsection (a) for the
taxable year shall be reduced (but not below zero) by the
amount determined under paragraph (2).
`(2) AMOUNT OF REDUCTION- The amount determined under this
paragraph is the amount which bears the same ratio to the
amount which would be so taken into account as--
`(A) the excess of--
`(i) the taxpayer's modified adjusted gross income
for such taxable year, over
`(ii) $40,000 ($80,000 in the case of a joint
return), bears to
`(B) $10,000 ($20,000 in the case of a joint return).
`(3) MODIFIED ADJUSTED GROSS INCOME- The term `modified
adjusted gross income' means the adjusted gross income of the
taxpayer for the taxable year increased by any amount excluded
from gross income under section 911, 931, or 933.
`(d) DEFINITIONS- For purposes of this section--
`(1) QUALIFIED TUITION AND RELATED EXPENSES-
`(A) IN GENERAL- The term `qualified tuition and related
expenses' means tuition and fees required for the
enrollment or attendance of--
`(i) the taxpayer,
`(ii) the taxpayer's spouse, or
`(iii) any dependent of the taxpayer with respect to
whom the taxpayer is allowed a deduction under section
151,
at an eligible educational institution and books required
for courses of instruction of such individual at such
institution.
`(B) EXCEPTION FOR EDUCATION INVOLVING SPORTS, ETC- Such
term does not include expenses with respect to any course
or other education involving sports, games, or hobbies,
unless such course or other education is part of the
individual's degree program.
`(C) EXCEPTION FOR NONACADEMIC FEES- Such term does not
include student activity fees, athletic fees, insurance
expenses, or other expenses unrelated to an individual's
academic course of instruction.
`(2) ELIGIBLE EDUCATIONAL INSTITUTION- The term `eligible
educational institution' means an institution--
`(A) which is described in section 481 of the Higher
Education Act of 1965 (20 U.S.C. 1088), as in effect on the
date of the enactment of this section, and
`(B) which is eligible to participate in a program under
title IV of such Act.
`(3) ELIGIBLE STUDENT- The term `eligible student' means,
with respect to any academic period, a student who--
`(A) meets the requirements of section 484(a)(1) of the
Higher Education Act of 1965 (20 U.S.C. 1091(a)(1)), as in
effect on the date of the enactment of this section, and
`(B) is carrying at least 1/2 the normal full-time work
load for the course of study the student is pursuing.
`(4) OTHER TERMS RELATING TO THE HIGHER EDUCATION ACT- The
following terms shall have the meanings prescribed in
regulations under section 481(g) of the Higher Education Act of
1965 (20 U.S.C. 1088(g)), as added by the Student Financial Aid
Improvements Act of 1997:
`(A) Academic period.
`(B) Normal full-time workload.
`(C) First two years of postsecondary education.
`(e) TREATMENT OF EXPENSES PAID BY DEPENDENT- If a deduction
under section 151 with respect to an individual is allowed to
another taxpayer for a taxable year beginning in the calendar year
in which such individual's taxable year begins--
`(1) no credit shall be allowed under subsection (a) to such
individual for such individual's taxable year, and
`(2) qualified tuition and related expenses paid by such
individual during such individual's taxable year shall be
treated for purposes of this section as paid by such other
taxpayer.
`(f) TREATMENT OF CERTAIN PREPAYMENTS- If qualified tuition and
related expenses are paid by the taxpayer during a taxable year for
an academic period which begins during the first 3 months following
such taxable year, such academic period shall be treated for
purposes of this section as beginning during such taxable year.
`(g) SPECIAL RULES-
`(1) IDENTIFICATION REQUIREMENT- No credit shall be allowed
under subsection (a) to a taxpayer with respect to the
qualified tuition and related expenses of an individual unless
the taxpayer includes the name and taxpayer identification
number of such individual on the return of tax for the taxable
year.
`(2) ADJUSTMENT FOR CERTAIN SCHOLARSHIPS, ETC- The amount of
qualified tuition and related expenses otherwise taken into
account under subsection (a) with respect to an individual for
an academic period shall be reduced (before the application of
subsections (b) and (c)) by the sum of any amounts paid for the
benefit of such individual which are allocable to such period
as--
`(A) a qualified scholarship which is excludable from
gross income under section 117,
`(B) an educational assistance allowance under chapter
30, 31, 32, 34, or 35 of title 38, United States Code, or
under chapter 1606 of title 10, United States Code, and
`(C) a payment (other than a gift, bequest, devise, or
inheritance within the meaning of section 102(a)) for such
individual's educational expenses, or attributable to such
individual's enrollment at an eligible educational
institution, which is excludable from gross income under
any law of the United States.
`(3) DENIAL OF CREDIT IF STUDENT CONVICTED OF A FELONY DRUG
OFFENSE- No credit shall be allowed under subsection (a) for
qualified tuition and related expenses for the enrollment or
attendance of a student for any academic period if such student
has been convicted of a Federal or State felony offense
consisting of the possession or distribution of a controlled
substance before the end of the taxable year with or within
which such period ends.
`(4) DENIAL OF DOUBLE BENEFIT- No credit shall be allowed
under this section for any expense for which a deduction is
allowed under any other provision of this chapter.
`(5) NO CREDIT FOR MARRIED INDIVIDUALS FILING SEPARATE
RETURNS- If the taxpayer is a married individual (within the
meaning of section 7703), this section shall apply only if the
taxpayer and the taxpayer's spouse file a joint return for the
taxable year.
`(6) NONRESIDENT ALIENS- If the taxpayer is a nonresident
alien individual for any portion of the taxable year, this
section shall apply only if such individual is treated as a
resident alien of the United States for purposes of this
chapter by reason of an election under subsection (g) or (h) of
section 6013.
`(h) INFLATION ADJUSTMENTS-
`(1) DOLLAR LIMITATION ON AMOUNT OF CREDIT-
`(A) IN GENERAL- In the case of a taxable year beginning
after 1998, the $1,500 amount in subsection (b)(1) shall be
increased by an amount equal to--
`(i) such dollar amount, multiplied by
`(ii) the cost-of-living adjustment determined under
section 1(f)(3) for the calendar year in which the
taxable year begins, determined by substituting
`calendar year 1997' for `calendar year 1992' in
subparagraph (B) thereof.
`(B) ROUNDING- If any amount as adjusted under
subparagraph (A) is not a multiple of $50, such amount
shall be rounded to the next lowest multiple of $50.
`(2) INCOME LIMITS-
`(A) IN GENERAL- In the case of a taxable year beginning
after 2000, the $40,000 and $80,000 amounts in subsection
(c)(2) shall each be increased by an amount equal to--
`(i) such dollar amount, multiplied by
`(ii) the cost-of-living adjustment determined under
section 1(f)(3) for the calendar year in which the
taxable year begins, determined by substituting
`calendar year 1999' for `calendar year 1992' in
subparagraph (B) thereof.
`(B) ROUNDING- If any amount as adjusted under
subparagraph (A) is not a multiple of $5,000, such amount
shall be rounded to the next lowest multiple of $5,000.
`(i) REGULATIONS- The Secretary may prescribe such regulations as
may be necessary or appropriate to carry out this section,
including regulations providing for a recapture of credit allowed
under this section in cases where there is a refund in a subsequent
taxable year of any amount which was taken into account in
determining the amount of such credit.'.
(b) EXTENSION OF PROCEDURES APPLICABLE TO MATHEMATICAL OR
CLERICAL ERRORS- Paragraph (2) of section 6213(g) (relating to the
definition of mathematical or clerical errors) is amended by
striking `and' at the end of subparagraph (G), by striking the
period at the end of subparagraph (H) and inserting `, and', and by
inserting after subparagraph (H) the following new subparagraph:
`(I) an omission of a correct TIN required under section
25A(g)(1) (relating to higher education tuition and related
expenses) to be included on a return.'.
(c) RETURNS RELATING TO TUITION AND RELATED EXPENSES-
(1) IN GENERAL- Subpart B of part III of subchapter A of
chapter 61 (relating to information concerning transactions
with other persons) is amended by inserting after section 6050R
the following new section:
PAGE 2
