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American Association of Airport Executives &
Airports Council International - North America Legislative Affairs Representing the nation's airports in Washington, D.C. |
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H.R. 3448
(8) EMPLOYMENT TAXES-
(A) Paragraph (5) of section 3121(a) is amended by
striking `or' at the end of subparagraph (F), by inserting
`or' at the end of subparagraph (G), and by adding at the
end the following new subparagraph:
`(H) under an arrangement to which section 408(p)
applies, other than any elective contributions under
paragraph (2)(A)(i) thereof,'.
(B) Section 209(a)(4) of the Social Security Act is
amended by inserting `; or (J) under an arrangement to
which section 408(p) of such Code applies, other than any
elective contributions under paragraph (2)(A)(i) thereof'
before the semicolon at the end thereof.
(C) Paragraph (5) of section 3306(b) is amended by
striking `or' at the end of subparagraph (F), by inserting
`or' at the end of subparagraph (G), and by adding at the
end the following new subparagraph:
`(H) under an arrangement to which section 408(p)
applies, other than any elective contributions under
paragraph (2)(A)(i) thereof,'.
(D) Paragraph (12) of section 3401(a) is amended by
adding the following new subparagraph:
`(D) under an arrangement to which section 408(p)
applies; or'.
(9) CONFORMING AMENDMENTS-
(A) Section 280G(b)(6) is amended by striking `or' at the
end of subparagraph (B), by striking the period at the end
of subparagraph (C) and inserting `, or' and by adding
after subparagraph (C) the following new subparagraph:
`(D) a simple retirement account described in section
408(p).'.
(B) Section 402(g)(3) is amended by striking `and' at the
end of subparagraph (B), by striking the period at the end
of subparagraph (C) and inserting `, and', and by adding
after subparagraph (C) the following new subparagraph:
`(D) any elective employer contribution under section
408(p)(2)(A)(i).'.
(C) Subsections (b), (c), (m)(4)(B), and (n)(3)(B) of
section 414 are each amended by inserting `408(p),' after
`408(k),'.
(D) Section 4972(d)(1)(A) is amended by striking `and' at
the end of clause (ii), by striking the period at the end
of clause (iii) and inserting `, and', and by adding after
clause (iii) the following new clause:
`(iv) any simple retirement account (within the
meaning of section 408(p)).'.
(c) REPEAL OF SALARY REDUCTION SIMPLIFIED EMPLOYEE PENSIONS-
Section 408(k)(6) is amended by adding at the end the following new
subparagraph:
`(H) TERMINATION- This paragraph shall not apply to years
beginning after December 31, 1996. The preceding sentence
shall not apply to a simplified employee pension if the
terms of such pension, as in effect on December 31, 1996,
provide that an employee may make the election described in
subparagraph (A).'.
(d) MODIFICATIONS OF ERISA-
(1) REPORTING REQUIREMENTS- Section 101 of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1021) is
amended by redesignating subsection (g) as subsection (h) and
by inserting after subsection (f) the following new subsection:
`(g) SIMPLE RETIREMENT ACCOUNTS-
`(1) NO EMPLOYER REPORTS- Except as provided in this
subsection, no report shall be required under this section by
an employer maintaining a qualified salary reduction
arrangement under section 408(p) of the Internal Revenue Code
of 1986.
`(2) SUMMARY DESCRIPTION- The trustee of any simple
retirement account established pursuant to a qualified salary
reduction arrangement under section 408(p) of such Code shall
provide to the employer maintaining the arrangement each year a
description containing the following information:
`(A) The name and address of the employer and the trustee.
`(B) The requirements for eligibility for participation.
`(C) The benefits provided with respect to the arrangement.
`(D) The time and method of making elections with respect
to the arrangement.
`(E) The procedures for, and effects of, withdrawals
(including rollovers) from the arrangement.
`(3) EMPLOYEE NOTIFICATION- The employer shall notify each
employee immediately before the period for which an election
described in section 408(p)(5)(C) of such Code may be made of
the employee's opportunity to make such election. Such notice
shall include a copy of the description described in paragraph
(2).'
(2) FIDUCIARY DUTIES- Section 404(c) of such Act (29 U.S.C.
1104(c)) is amended by inserting `(1)' after `(c)', by
redesignating paragraphs (1) and (2) as subparagraphs (A) and
(B), respectively, and by adding at the end the following new
paragraph:
`(2) In the case of a simple retirement account established
pursuant to a qualified salary reduction arrangement under
section 408(p) of the Internal Revenue Code of 1986, a
participant or beneficiary shall, for purposes of paragraph
(1), be treated as exercising control over the assets in the
account upon the earliest of--
`(A) an affirmative election among investment options
with respect to the initial investment of any contribution,
`(B) a rollover to any other simple retirement account or
individual retirement plan, or
`(C) one year after the simple retirement account is
established.
No reports, other than those required under section 101(g),
shall be required with respect to a simple retirement account
established pursuant to such a qualified salary reduction
arrangement.'.
(e) EFFECTIVE DATE- The amendments made by this section shall
apply to taxable years beginning after December 31, 1996.
SEC. 1422. EXTENSION OF SIMPLE PLAN TO 401(k) ARRANGEMENTS.
(a) ALTERNATIVE METHOD OF SATISFYING SECTION 401(k)
NONDISCRIMINATION TESTS- Section 401(k) (relating to cash or
deferred arrangements) is amended by adding at the end the
following new paragraph:
`(11) ADOPTION OF SIMPLE PLAN TO MEET NONDISCRIMINATION TESTS-
`(A) IN GENERAL- A cash or deferred arrangement
maintained by an eligible employer shall be treated as
meeting the requirements of paragraph (3)(A)(ii) if such
arrangement meets--
`(i) the contribution requirements of subparagraph (B),
`(ii) the exclusive plan requirements of subparagraph
(C), and
`(iii) the vesting requirements of section 408(p)(3).
`(B) CONTRIBUTION REQUIREMENTS-
`(i) IN GENERAL- The requirements of this
subparagraph are met if, under the arrangement--
`(I) an employee may elect to have the employer make elective
contributions for the year on behalf of the employee to a trust
under the plan in an amount which is expressed as a percentage of
compensation of the employee but which in no event exceeds $6,000,
`(II) the employer is required to make a matching contribution to
the trust for the year in an amount equal to so much of the amount
the employee elects under subclause (I) as does not exceed 3
percent of compensation for the year, and
`(III) no other contributions may be made other than
contributions described in subclause (I) or (II).
`(ii) EMPLOYER MAY ELECT 2-PERCENT NONELECTIVE
CONTRIBUTION- An employer shall be treated as meeting
the requirements of clause (i)(II) for any year if, in
lieu of the contributions described in such clause, the
employer elects (pursuant to the terms of the
arrangement) to make nonelective contributions of 2
percent of compensation for each employee who is
eligible to participate in the arrangement and who has
at least $5,000 of compensation from the employer for
the year. If an employer makes an election under this
subparagraph for any year, the employer shall notify
employees of such election within a reasonable period
of time before the 60th day before the beginning of
such year.
`(C) EXCLUSIVE PLAN REQUIREMENT- The requirements of this
subparagraph are met for any year to which this paragraph
applies if no contributions were made, or benefits were
accrued, for services during such year under any qualified
plan of the employer on behalf of any employee eligible to
participate in the cash or deferred arrangement, other than
contributions described in subparagraph (B).
`(D) DEFINITIONS AND SPECIAL RULE-
`(i) DEFINITIONS- For purposes of this paragraph, any
term used in this paragraph which is also used in
section 408(p) shall have the meaning given such term
by such section.
`(ii) COORDINATION WITH TOP-HEAVY RULES- A plan
meeting the requirements of this paragraph for any year
shall not be treated as a top-heavy plan under section
416 for such year.'.
(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 defined
contribution plan shall be treated as meeting the requirements
of paragraph (2) with respect to matching contributions if the
plan--
`(A) meets the contribution requirements of subparagraph
(B) of subsection (k)(11),
`(B) meets the exclusive plan requirements of subsection
(k)(11)(C), and
`(C) meets the vesting requirements of section 408(p)(3).'.
(c) EFFECTIVE DATE- The amendments made by this section shall
apply to plan years beginning after December 31, 1996.
[BOLD->] SUBCHAPTER B--OTHER PROVISIONS [<-BOLD]
SEC. 1426. TAX-EXEMPT ORGANIZATIONS ELIGIBLE UNDER SECTION 401(K).
(a) IN GENERAL- Subparagraph (B) of section 401(k)(4) is amended
to read as follows:
`(B) ELIGIBILITY OF STATE AND LOCAL GOVERNMENTS AND
TAX-EXEMPT ORGANIZATIONS-
`(i) TAX-EXEMPTS ELIGIBLE- Except as provided in
clause (ii), any organization exempt from tax under
this subtitle may include a qualified cash or deferred
arrangement as part of a plan maintained by it.
`(ii) GOVERNMENTS INELIGIBLE- 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
clause shall not apply to a rural cooperative plan or
to a plan of an employer described in clause (iii).
`(iii) TREATMENT OF INDIAN TRIBAL GOVERNMENTS- An
employer which is an Indian tribal government (as
defined in section 7701(a)(40)), a subdivision of an
Indian tribal government (determined in accordance with
section 7871(d)), an agency or instrumentality of an
Indian tribal government or subdivision thereof, or a
corporation chartered under Federal, State, or tribal
law which is owned in whole or in part by any of the
foregoing may include a qualified cash or deferred
arrangement as part of a plan maintained by the
employer.'.
(b) EFFECTIVE DATE- The amendment made by this section shall
apply to plan years beginning after December 31, 1996, 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. 1427. HOMEMAKERS ELIGIBLE FOR FULL IRA DEDUCTION.
(a) SPOUSAL IRA COMPUTED ON BASIS OF COMPENSATION OF BOTH
SPOUSES- Subsection (c) of section 219 (relating to special rules
for certain married individuals) is amended to read as follows:
`(c) SPECIAL RULES FOR CERTAIN MARRIED INDIVIDUALS-
`(1) IN GENERAL- In the case of an individual to whom this
paragraph applies for the taxable year, the limitation of
paragraph (1) of subsection (b) shall be equal to the lesser of--
`(A) the dollar amount in effect under subsection
(b)(1)(A) for the taxable year, or
`(B) the sum of--
`(i) the compensation includible in such individual's
gross income for the taxable year, plus
`(ii) the compensation includible in the gross income
of such individual's spouse for the taxable year
reduced by the amount allowed as a deduction under
subsection (a) to such spouse for such taxable year.
`(2) INDIVIDUALS TO WHOM PARAGRAPH (1) APPLIES- Paragraph (1)
shall apply to any individual if--
`(A) such individual files a joint return for the taxable
year, and
`(B) the amount of compensation (if any) includible in
such individual's gross income for the taxable year is less
than the compensation includible in the gross income of
such individual's spouse for the taxable year.'.
(b) CONFORMING AMENDMENTS-
(1) Paragraph (2) of section 219(f) (relating to other
definitions and special rules) is amended by striking
`subsections (b) and (c)' and inserting `subsection (b)'.
(2) Section 219(g)(1) is amended by striking `(c)(2)' and
inserting `(c)(1)(A)'.
(3) Section 408(d)(5) is amended by striking `$2,250' and
inserting `the dollar amount in effect under section
219(b)(1)(A)'.
(c) EFFECTIVE DATE- The amendments made by this section shall
apply to taxable years beginning after December 31, 1996.
[BOLD->] CHAPTER 3--NONDISCRIMINATION PROVISIONS [<-BOLD]
SEC. 1431. DEFINITION OF HIGHLY COMPENSATED EMPLOYEES; REPEAL OF
FAMILY AGGREGATION.
(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) for the preceding year--
`(i) had compensation from the employer in excess of
$80,000, and
`(ii) if the employer elects the application of this
clause for such preceding year, was in the top-paid
group of employees for such preceding year.
The Secretary shall adjust the $80,000 amount under
subparagraph (B) at the same time and in the same manner as
under section 415(d), except that the base period shall be the
calendar quarter ending September 30, 1996.'.
(b) REPEAL OF FAMILY AGGREGATION RULES-
(1) IN GENERAL- Paragraph (6) of section 414(q) is hereby
repealed.
(2) COMPENSATION LIMIT- Paragraph (17)(A) of section 401(a)
is amended by striking the last sentence.
(3) DEDUCTION- Subsection (l) of section 404 is amended by
striking the last sentence.
(c) CONFORMING AMENDMENTS-
(1)(A) Subsection (q) of section 414 is amended by striking
paragraphs (2), (5), and (12) and by redesignating paragraphs
(3), (4), (7), (8), (9), (10), and (11) as paragraphs (2)
through (8), respectively.
(B) Sections 129(d)(8)(B), 401(a)(5)(D)(ii), 408(k)(2)(C),
and 416(i)(1)(D) are each amended by striking `section
414(q)(7)' and inserting `section 414(q)(4)'.
(C) Section 416(i)(1)(A) is amended by striking `section
414(q)(8)' and inserting `section 414(q)(5)'.
(D) Subparagraph (A) of section 414(r)(2) is amended by
striking `subsection (q)(8)' and inserting `subsection (q)(5)'.
(E) Section 414(q)(5), as redesignated by subparagraph (A),
is amended by striking `under paragraph (4), or the number of
officers taken into account under paragraph (5)'.
(2) 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 on the day before
the date of the enactment of the Small Business Job Protection
Act of 1996.'.
(d) EFFECTIVE DATE-
(1) IN GENERAL- The amendments made by this section shall
apply to years beginning after December 31, 1996, except that
in determining whether an employee is a highly compensated
employee for years beginning in 1997, such amendments shall be
treated as having been in effect for years beginning in 1996.
(2) FAMILY AGGREGATION- The amendments made by subsection (b)
shall apply to years beginning after December 31, 1996.
SEC. 1432. 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 amendments made by this section shall
apply to years beginning after December 31, 1996.
SEC. 1433. 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), as amended by section 1422, is amended by
adding at the end the following new paragraph:
`(12) 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 rate of matching contribution with
respect to any elective contribution of a highly
compensated employee at any rate of elective
contribution is greater than that with respect to an
employee who is not a highly compensated employee.
`(iii) ALTERNATIVE PLAN DESIGNS- If the rate of any
matching contribution with respect to any rate of
elective contribution 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 rate of an employer's matching contribution does not
increase as an employee's rate of elective contributions increase,
and
`(II) the aggregate amount of matching contributions at such rate
of elective contribution is at least equal to the aggregate 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
apprise 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) of this
paragraph unless the requirements of subparagraphs (B)
and (C) of paragraph (2) are met with respect to all
employer contributions (including matching
contributions) taken into account in determining
whether the requirements of subparagraphs (B) and (C)
of this paragraph are met.
`(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), as amended by section 1422(b), is amended by
redesignating paragraph (11) as paragraph (12) and by adding after
paragraph (10) the following new paragraph:
`(11) 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)(12),
`(ii) meets the notice requirements of subsection
(k)(12)(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 rate of an employer's matching contribution
does not increase as the rate of an employee's
contributions or elective deferrals increase, and
`(iii) the matching contribution with respect to any
highly compensated employee at any rate of an employee
contribution or rate of elective deferral 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- Section 401(k)(3)(A) is
amended--
(A) by striking `such year' in clause (ii) and inserting
`the plan year',
(B) by striking `for such plan year' in clause (ii) and
inserting `for the preceding plan year', and
(C) by adding at the end the following new sentence: `An
arrangement may apply clause (ii) by using the plan year
rather than the preceding plan year if the employer so
elects, except that if such an election is made, it may not
be changed except as provided by the Secretary.'.
(2) MATCHING AND EMPLOYEE CONTRIBUTIONS- Section 401(m)(2)(A)
is amended--
(A) by inserting `for such plan year' after `highly
compensated employees',
(B) by inserting `for the preceding plan year' after
`eligible employees' each place it appears in clause (i)
and clause (ii), and
(C) by adding at the end the following flush sentence:
`This subparagraph may be applied by using the plan year
rather than the preceding plan year if the employer so
elects, except that if such an election is made, it may not
be changed except as provided by the Secretary.'.
(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 the following new subparagraph:
`(E) For purposes of this paragraph, in the case of the
first plan year of any plan (other than a successor 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 the following: `Rules similar to the rules of
subsection (k)(3)(E) shall apply for purposes of this
subsection.'.
(e) DISTRIBUTION OF EXCESS CONTRIBUTIONS AND EXCESS AGGREGATE
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 DATES-
(1) IN GENERAL- The amendments made by this section shall
apply to years beginning after December 31, 1998.
(2) EXCEPTIONS- The amendments made by subsections (c), (d),
and (e) shall apply to years beginning after December 31, 1996.
SEC. 1434. DEFINITION OF COMPENSATION FOR SECTION 415 PURPOSES.
(a) GENERAL RULE- Section 415(c)(3) (defining participant's
compensation) is amended by adding at the end the following new
subparagraph:
`(D) CERTAIN DEFERRALS INCLUDED- The term `participant's
compensation' shall include--
`(i) any elective deferral (as defined in section
402(g)(3)), and
`(ii) any amount which is contributed or deferred by
the employer at the election of the employee and which
is not includible in the gross income of the employee
by reason of section 125 or 457.'.
(b) CONFORMING AMENDMENTS-
(1) Section 414(q)(4), as redesignated by section 1431, is
amended to read as follows:
`(4) COMPENSATION- For purposes of this subsection, the term
`compensation' has the meaning given such term by section
415(c)(3).'.
(2) Section 414(s)(2) is amended by inserting `not' after
`elect' in the text and heading thereof.
(c) EFFECTIVE DATE- The amendments made by this section shall
apply to years beginning after December 31, 1997.
[BOLD->] CHAPTER 4--MISCELLANEOUS PROVISIONS [<-BOLD]
SEC. 1441. 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, 1996.
SEC. 1442. ELIMINATION OF SPECIAL VESTING RULE FOR MULTIEMPLOYER
PLANS.
(a) AMENDMENTS TO 1986 CODE- 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) AMENDMENTS TO ERISA- Paragraph (2) of section 203(a) of the
Employee Retirement Income Security Act of 1974 (29 U.S.C. 1053(a))
is amended--
(1) by striking `subparagraph (A), (B), or (C)' and inserting
`subparagraph (A) or (B)'; and
(2) by striking subparagraph (C).
(c) 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, 1997, 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, 1999.
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. 1443. DISTRIBUTIONS UNDER RURAL COOPERATIVE PLANS.
(a) DISTRIBUTIONS FOR HARDSHIP OR AFTER A CERTAIN AGE- Section
401(k)(7) is amended by adding at the end 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) or of paragraph (2) merely
by reason of a hardship distribution or a distribution to a
participant after attainment of age 59 1/2 . For purposes
of this section, the term `hardship distribution' means a
distribution described in paragraph (2)(B)(i)(IV) (without
regard to the limitation of its application to
profit-sharing or stock bonus plans).'.
(b) PUBLIC UTILITY DISTRICTS- Clause (i) of section 401(k)(7)(B)
(defining rural cooperative) is amended to read as follows:
`(i) any organization which--
`(I) is engaged primarily in providing electric service on a
mutual or cooperative basis, or
`(II) is engaged primarily in providing electric service to the
public in its area of service and which is exempt from tax under
this subtitle or which is a State or local government (or an agency
or instrumentality thereof), other than a municipality (or an
agency or instrumentality thereof),'.
(c) EFFECTIVE DATES-
(1) DISTRIBUTIONS- The amendments made by subsection (a)
shall apply to distributions after the date of the enactment of
this Act.
(2) PUBLIC UTILITY DISTRICTS- The amendments made by
subsection (b) shall apply to plan years beginning after
December 31, 1996.
SEC. 1444. TREATMENT OF GOVERNMENTAL PLANS UNDER SECTION 415.
(a) 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.'.
(b) TREATMENT OF CERTAIN EXCESS BENEFIT PLANS-
(1) IN GENERAL- Section 415 is amended by adding at the end
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 the following new paragraph:
`(14) 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 `and' at the end of subparagraph (C), by
striking the period at the end of subparagraph (D) and
inserting `, and', and by inserting immediately thereafter the
following new subparagraph:
`(E) a qualified governmental excess benefit arrangement
described in section 415(m).'.
(c) EXEMPTION FOR SURVIVOR AND DISABILITY BENEFITS- Paragraph (2)
of section 415(b) is amended by adding at the end the following new
subparagraph:
`(I) EXEMPTION FOR SURVIVOR AND DISABILITY BENEFITS
PROVIDED UNDER GOVERNMENTAL PLANS- 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.'.
(d) REVOCATION OF GRANDFATHER ELECTION-
(1) IN GENERAL- Subparagraph (C) of section 415(b)(10) is
amended by adding at the end the following new clause:
`(ii) REVOCATION OF ELECTION- An election under
clause (i) may be revoked not later than the last day
of the third plan year beginning after the date of the
enactment of this clause. The revocation shall apply to
all plan years to which the election applied and to all
subsequent plan years. Any amount paid by a plan in a
taxable year ending after the revocation shall be
includible in income in such taxable year under the
rules of this chapter in effect for such taxable year,
except that, for purposes of applying the limitations
imposed by this section, any portion of such amount
which is attributable to any taxable year during which
the election was in effect shall be treated as received
in such taxable year.'.
(2) CONFORMING AMENDMENT- Subparagraph (C) of section
415(b)(10) is amended by striking `This' and inserting:
`(i) IN GENERAL- This'.
(e) EFFECTIVE DATE-
(1) IN GENERAL- The amendments made by subsections (a), (b),
and (c) shall apply to years beginning after December 31, 1994.
The amendments made by subsection (d) shall apply with respect
to revocations adopted after the date of the enactment of this
Act.
(2) TREATMENT FOR YEARS BEGINNING BEFORE JANUARY 1, 1995-
Nothing in the amendments made by this section shall be
construed to imply that a governmental plan (as defined in
section 414(d) of the Internal Revenue Code of 1986) fails to
satisfy the requirements of section 415 of such Code for any
taxable year beginning before January 1, 1995.
SEC. 1445. 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 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 amendment made by this section shall
apply to years beginning after December 31, 1996.
SEC. 1446. CONTRIBUTIONS ON BEHALF OF DISABLED EMPLOYEES.
(a) ALL DISABLED PARTICIPANTS RECEIVING CONTRIBUTIONS- Section
415(c)(3)(C) is amended by adding at the end 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 amendment made by this section shall
apply to years beginning after December 31, 1996.
SEC. 1447. 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, as amended by section 1444(b)(2)
(relating to governmental plans), is amended by adding at the end
the following new paragraph:
`(15) 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 period
shall be the calendar quarter ending September 30, 1994, and
any increase under this paragraph which is not a multiple of
$500 shall be rounded to the next lowest multiple of $500.'.
(c) EFFECTIVE DATE- The amendments made by this section shall
apply to taxable years beginning after December 31, 1996.
SEC. 1448. TRUST REQUIREMENT FOR DEFERRED COMPENSATION PLANS OF
STATE AND LOCAL GOVERNMENTS.
(a) IN GENERAL- Section 457 is amended by adding at the end the
following new subsection:
`(g) GOVERNMENTAL PLANS MUST MAINTAIN SET-ASIDES FOR EXCLUSIVE
BENEFIT OF PARTICIPANTS-
`(1) IN GENERAL- A plan maintained by an eligible employer
described in subsection (e)(1)(A) shall not be treated as an
eligible deferred compensation plan unless all assets and
income of the plan described in subsection (b)(6) are held in
trust for the exclusive benefit of participants and their
beneficiaries.
`(2) TAXABILITY OF TRUSTS AND PARTICIPANTS- For purposes of
this title--
`(A) a trust described in paragraph (1) shall be treated
as an organization exempt from taxation under section
501(a), and
`(B) notwithstanding any other provision of this title,
amounts in the trust shall be includible in the gross
income of participants and beneficiaries only to the
extent, and at the time, provided in this section.
`(3) CUSTODIAL ACCOUNTS AND CONTRACTS- For purposes of this
subsection, custodial accounts and contracts described in
section 401(f) shall be treated as trusts under rules similar
to the rules under section 401(f).'.
(b) CONFORMING AMENDMENT- Paragraph (6) of section 457(b) is
amended by inserting `except as provided in subsection (g),' before
`which provides that'.
(c) EFFECTIVE DATES-
(1) IN GENERAL- Except as provided in paragraph (2), the
amendments made by this section shall apply to assets and
income described in section 457(b)(6) of the Internal Revenue
Code of 1986 held by a plan on and after the date of the
enactment of this Act.
(2) TRANSITION RULE- In the case of a plan in existence on
the date of the enactment of this Act, a trust need not be
established by reason of the amendments made by this section
before January 1, 1999.
SEC. 1449. TRANSITION RULE FOR COMPUTING MAXIMUM BENEFITS UNDER
SECTION 415 LIMITATIONS.
(a) IN GENERAL- Subparagraph (A) of section 767(d)(3) of the
Uruguay Round Agreements Act is amended to read as follows:
`(A) EXCEPTION- A plan that was adopted and in effect
before December 8, 1994, shall not be required to apply the
amendments made by subsection (b) with respect to benefits
accrued before the earlier of--
`(i) the later of the date a plan amendment applying
the amendments made by subsection (b) is adopted or
made effective, or
`(ii) the first day of the first limitation year
beginning after December 31, 1999.
Determinations under section 415(b)(2)(E) of the Internal
Revenue Code of 1986 before such earlier date shall be made
with respect to such benefits on the basis of such section
as in effect on December 7, 1994 (except that the
modification made by section 1449(b) of the Small Business
Job Protection Act of 1996 shall be taken into account),
and the provisions of the plan as in effect on December 7,
1994, but only if such provisions of the plan meet the
requirements of such section (as so in effect).'.
(b) MODIFICATION OF CERTAIN ASSUMPTIONS FOR ADJUSTING BENEFITS OF
DEFINED BENEFIT PLANS FOR EARLY RETIREES- Subparagraph (E) of
section 415(b)(2) (relating to limitation on certain assumptions)
is amended--
(1) by striking `Except as provided in clause (ii), for
purposes of adjusting any benefit or limitation under
subparagraph (B) or (C),' in clause (i) and inserting `For
purposes of adjusting any limitation under subparagraph (C)
and, except as provided in clause (ii), for purposes of
adjusting any benefit under subparagraph (B),', and
(2) by striking `For purposes of adjusting the benefit or
limitation of any form of benefit subject to section
417(e)(3),' in clause (ii) and inserting `For purposes of
adjusting any benefit under subparagraph (B) for any form of
benefit subject to section 417(e)(3),'.
(c) EFFECTIVE DATE- The amendments made by this section shall
take effect as if included in the provisions of section 767 of the
Uruguay Round Agreements Act.
(d) TRANSITIONAL RULE- In the case of a plan that was adopted and
in effect before December 8, 1994, if--
(1) a plan amendment was adopted or made effective on or
before the date of the enactment of this Act applying the
amendments made by section 767 of the Uruguay Round Agreements
Act, and
(2) within 1 year after the date of the enactment of this
Act, a plan amendment is adopted which repeals the amendment
referred to in paragraph (1),
the amendment referred to in paragraph (1) shall not be taken into
account in applying section 767(d)(3)(A) of the Uruguay Round
Agreements Act, as amended by subsection (a).
SEC. 1450. MODIFICATIONS OF SECTION 403(b).
(a) MULTIPLE SALARY REDUCTION AGREEMENTS PERMITTED-
(1) GENERAL RULE- For purposes of section 403(b) of the
Internal Revenue Code of 1986, the frequency that an employee
is permitted to enter into a salary reduction agreement, the
salary to which such an agreement may apply, and the ability to
revoke such an agreement shall be determined under the rules
applicable to cash or deferred elections under section 401(k)
of such Code.
(2) CONSTRUCTIVE RECEIPT- Section 402(e)(3) is amended by
inserting `or which is part of a salary reduction agreement
under section 403(b)' after `section 401(k)(2))'.
(3) EFFECTIVE DATE- This subsection shall apply to taxable
years beginning after December 31, 1995.
(b) TREATMENT OF INDIAN TRIBAL GOVERNMENTS-
(1) IN GENERAL- In the case of any contract purchased in a
plan year beginning before January 1, 1995, section 403(b) of
the Internal Revenue Code of 1986 shall be applied as if any
reference to an employer described in section 501(c)(3) of the
Internal Revenue Code of 1986 which is exempt from tax under
section 501 of such Code included a reference to an employer
which is an Indian tribal government (as defined by section
7701(a)(40) of such Code), a subdivision of an Indian tribal
government (determined in accordance with section 7871(d) of
such Code), an agency or instrumentality of an Indian tribal
government or subdivision thereof, or a corporation chartered
under Federal, State, or tribal law which is owned in whole or
in part by any of the foregoing.
(2) ROLLOVERS- Solely for purposes of applying section
403(b)(8) of such Code to a contract to which paragraph (1)
applies, a qualified cash or deferred arrangement under section
401(k) of such Code shall be treated as if it were a plan or
contract described in clause (ii) of section 403(b)(8)(A) of
such Code.
(c) ELECTIVE DEFERRALS-
(1) IN GENERAL- Subparagraph (E) of section 403(b)(1) is
amended to read as follows:
`(E) in the case of a contract purchased under a salary
reduction agreement, the contract meets the requirements of
section 401(a)(30),'.
(2) EFFECTIVE DATE- The amendment made by this subsection
shall apply to years beginning after December 31, 1995, except
a contract shall not be required to meet any change in any
requirement by reason of such amendment before the 90th day
after the date of the enactment of this Act.
SEC. 1451. SPECIAL RULES RELATING TO JOINT AND SURVIVOR ANNUITY
EXPLANATIONS.
(a) AMENDMENT TO INTERNAL REVENUE CODE- Section 417(a) is amended
by adding at the end the following new paragraph:
`(7) SPECIAL RULES RELATING TO TIME FOR WRITTEN EX-PLANATION-
Notwithstanding any other provision of this subsection--
`(A) EXPLANATION MAY BE PROVIDED AFTER ANNUITY STARTING
DATE-
`(i) IN GENERAL- A plan may provide the written
explanation described in paragraph (3)(A) after the
annuity starting date. In any case to which this
subparagraph applies, the applicable election period
under paragraph (6) shall not end before the 30th day
after the date on which such explanation is provided.
`(ii) REGULATORY AUTHORITY- The Secretary may by
regulations limit the application of clause (i), except
that such regulations may not limit the period of time
by which the annuity starting date precedes the
provision of the written explanation other than by
providing that the annuity starting date may not be
earlier than termination of employment.
`(B) WAIVER OF 30-DAY PERIOD- A plan may permit a
participant to elect (with any applicable spousal consent)
to waive any requirement that the written explanation be
provided at least 30 days before the annuity starting date
(or to waive the 30-day requirement under subparagraph (A))
if the distribution commences more than 7 days after such
explanation is provided.'.
(b) AMENDMENT TO ERISA- Section 205(c) of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1055(c)) is amended by
adding at the end the following new paragraph:
`(8) Notwithstanding any other provision of this subsection--
`(A)(i) A plan may provide the written explanation
described in paragraph (3)(A) after the annuity starting
date. In any case to which this subparagraph applies, the
applicable election period under paragraph (7) shall not
end before the 30th day after the date on which such
explanation is provided.
`(ii) The Secretary may by regulations limit the
application of clause (i), except that such regulations may
not limit the period of time by which the annuity starting
date precedes the provision of the written explanation
other than by providing that the annuity starting date may
not be earlier than termination of employment.
`(B) A plan may permit a participant to elect (with any
applicable spousal consent) to waive any requirement that
the written explanation be provided at least 30 days before
the annuity starting date (or to waive the 30-day
requirement under subparagraph (A)) if the distribution
commences more than 7 days after such explanation is
provided.'.
(c) EFFECTIVE DATE- The amendments made by this section shall
apply to plan years beginning after December 31, 1996.
SEC. 1452. REPEAL OF LIMITATION IN CASE OF DEFINED BENEFIT PLAN AND
DEFINED CONTRIBUTION PLAN FOR SAME EMPLOYEE; EXCESS DISTRIBUTIONS.
(a) IN GENERAL- Section 415(e) is repealed.
(b) EXCESS DISTRIBUTIONS- Section 4980A is amended by adding at
the end the following new subsection:
`(g) LIMITATION ON APPLICATION- This section shall not apply to
distributions during years beginning after December 31, 1996, and
before January 1, 2000, and such distributions shall be treated as
made first from amounts not described in subsection (f).'.
(c) CONFORMING AMENDMENTS-
(1) Paragraph (1) of section 415(a) is amended--
(A) by adding `or' at the end of subparagraph (A),
(B) by striking `, or' at the end of subparagraph (B) and
inserting a period, and
(C) by striking subparagraph (C).
(2) Subparagraph (B) of section 415(b)(5) is amended by
striking `and subsection (e)'.
(3) Paragraph (1) of section 415(f) is amended by striking
`subsections (b), (c), and (e)' and inserting `subsections (b)
and (c)'.
(4) Subsection (g) of section 415 is amended by striking
`subsections (e) and (f)' in the last sentence and inserting
`subsection (f)'.
(5) Clause (i) of section 415(k)(2)(A) is amended to read as
follows:
`(i) any contribution made directly by an employee
under such an arrangement shall not be treated as an
annual addition for purposes of subsection (c), and'.
(6) Clause (ii) of section 415(k)(2)(A) is amended by
striking `subsections (c) and (e)' and inserting `subsection
(c)'.
(7) Section 416 is amended by striking subsection (h).
(d) EFFECTIVE DATE-
(1) IN GENERAL- Except as provided in paragraph (2), the
amendments made by this section shall apply to limitation years
beginning after December 31, 1999.
(2) EXCESS DISTRIBUTIONS- The amendment made by subsection
(b) shall apply to years beginning after December 31, 1996.
SEC. 1453. TAX ON PROHIBITED TRANSACTIONS.
(a) IN GENERAL- Section 4975(a) is amended by striking `5
percent' and inserting `10 percent'.
(b) EFFECTIVE DATE- The amendment made by this section shall
apply to prohibited transactions occurring after the date of the
enactment of this Act.
SEC. 1454. 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 primary direction
or control by the recipient.'.
(b) EFFECTIVE DATE- The amendment made by subsection (a) shall
apply to years beginning after December 31, 1996, 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. 1455. UNIFORM PENALTY PROVISIONS TO APPLY TO CERTAIN PENSION
REPORTING REQUIREMENTS.
(a) PENALTIES-
(1) STATEMENTS- 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) REPORTS- Paragraph (2) of section 6724(d) is amended by
striking `or' at the end of subparagraph (U), by striking the
period at the end of subparagraph (V) and inserting a comma,
and by inserting after subparagraph (V) the following new
subparagraphs:
`(W) 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
`(X) 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 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 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)(X).'.
(3) Subsection (a) of section 6693 is amended by adding at
the end 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)(W).'.
(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, 1996.
SEC. 1456. RETIREMENT BENEFITS OF MINISTERS NOT SUBJECT TO TAX ON
NET EARNINGS FROM SELF-EMPLOYMENT.
(a) IN GENERAL- Section 1402(a)(8) (defining net earnings from
self-employment) is amended by inserting `, but shall not include
in such net earnings from self-employment the rental value of any
parsonage or any parsonage allowance (whether or not excludable
under section 107) provided after the individual retires, or any
other retirement benefit received by such individual from a church
plan (as defined in section 414(e)) after the individual retires'
before the semicolon at the end.
(b) EFFECTIVE DATE- The amendments made by this section shall
apply to years beginning before, on, or after December 31, 1994.
SEC. 1457. SAMPLE LANGUAGE FOR SPOUSAL CONSENT AND QUALIFIED
DOMESTIC RELATIONS FORMS.
(a) DEVELOPMENT OF SAMPLE LANGUAGE- Not later than January 1,
1997, the Secretary of the Treasury shall develop--
(1) sample language for inclusion in a form for the spousal
consent required under section 417(a)(2) of the Internal
Revenue Code of 1986 and section 205(c)(2) of the Employee
Retirement Income Security Act of 1974 which--
(A) is written in a manner calculated to be understood by
the average person, and
(B) discloses in plain form--
(i) whether the waiver to which the spouse consents
is irrevocable, and
(ii) whether such waiver may be revoked by a
qualified domestic relations order, and
(2) sample language for inclusion in a form for a qualified
domestic relations order described in section 414(p)(1)(A) of
such Code and section 206(d)(3)(B)(i) of such Act which--
(A) meets the requirements contained in such sections, and
(B) the provisions of which focus attention on the need
to consider the treatment of any lump sum payment,
qualified joint and survivor annuity, or qualified
preretirement survivor annuity.
(b) PUBLICITY- The Secretary of the Treasury shall include
publicity for the sample language developed under subsection (a) in
the pension outreach efforts undertaken by the Secretary.
SEC. 1458. TREATMENT OF LENGTH OF SERVICE AWARDS TO VOLUNTEERS
PERFORMING FIRE FIGHTING OR PREVENTION SERVICES, EMERGENCY MEDICAL
SERVICES, OR AMBULANCE SERVICES.
(a) IN GENERAL- Paragraph (11) of section 457(e) (relating to
deferred compensation plans of State and local governments and
tax-exempt organizations) is amended to read as follows:
`(11) CERTAIN PLANS EXCLUDED-
`(A) IN GENERAL- The following plans shall be treated as
not providing for the deferral of compensation:
`(i) Any bona fide vacation leave, sick leave,
compensatory time, severance pay, disability pay, or
death benefit plan.
`(ii) Any plan paying solely length of service awards
to bona fide volunteers (or their beneficiaries) on
account of qualified services performed by such
volunteers.
`(B) SPECIAL RULES APPLICABLE TO LENGTH OF SERVICE AWARD
PLANS-
`(i) BONA FIDE VOLUNTEER- An individual shall be
treated as a bona fide volunteer for purposes of
subparagraph (A)(ii) if the only compensation received
by such individual for performing qualified services is
in the form of--
`(I) reimbursement for (or a reasonable allowance for) reasonable
expenses incurred in the performance of such services, or
`(II) reasonable benefits (including length of service awards),
and nominal fees for such services, customarily paid by eligible
employers in connection with the performance of such services
byvolunteers.
`(ii) LIMITATION ON ACCRUALS- A plan shall not be
treated as described in subparagraph (A)(ii) if the
aggregate amount of length of service awards accruing
with respect to any year of service for any bona fide
volunteer exceeds $3,000.
`(C) QUALIFIED SERVICES- For purposes of this paragraph,
the term `qualified services' means fire fighting and
prevention services, emergency medical services, and
ambulance services.'.
(b) EXEMPTION FROM SOCIAL SECURITY TAXES-
(1) Subsection (a)(5) of section 3121, as amended by section
1421, is amended by striking `(or)' at the end of subparagraph
(G), by inserting `or' at the end of subparagraph (H), and by
adding at the end the following new subparagraph:
`(I) under a plan described in section 457(e)(11)(A)(ii)
and maintained by an eligible employer (as defined in
section 457(e)(1)).'.
(2) Section 209(a)(4) of the Social Security Act is amended
by inserting `; or (K) under a plan described in section
457(e)(11)(A)(ii) of the Internal Revenue Code of 1986 and
maintained by an eligible employer (as defined in section
457(e)(1) of such Code)' before the semicolon at the end thereof.
(c) EFFECTIVE DATE-
(1) SUBSECTION (a)- The amendment made by subsection (a)
shall apply to accruals of length of service awards after
December 31, 1996.
(2) SUBSECTION (b)- The amendments made by subsection (b)
shall apply to remuneration paid after December 31, 1996.
SEC. 1459. ALTERNATIVE NONDISCRIMINATION RULES FOR CERTAIN PLANS
THAT PROVIDE FOR EARLY PARTICIPATION.
(a) CASH OR DEFERRED ARRANGEMENTS- Paragraph (3) of section
401(k) (relating to application of participation and discrimination
standards), as amended by section 1433(d)(1) of this Act, is
amended by adding at the end the following new subparagraph:
`(F) SPECIAL RULE FOR EARLY PARTICIPATION- If an employer
elects to apply section 410(b)(4)(B) in determining whether
a cash or deferred arrangement meets the requirements of
subparagraph (A)(i), the employer may, in determining
whether the arrangement meets the requirements of
subparagraph (A)(ii), exclude from consideration all
eligible employees (other than highly compensated
employees) who have not met the minimum age and service
requirements of section 410(a)(1)(A).'.
(b) MATCHING CONTRIBUTIONS- Paragraph (5) of section 401(m)
(relating to employees taken into consideration) is amended by
adding at the end the following new subparagraph:
`(C) SPECIAL RULE FOR EARLY PARTICIPATION- If an employer
elects to apply section 410(b)(4)(B) in determining whether
a plan meets the requirements of section 410(b), the
employer may, in determining whether the plan meets the
requirements of paragraph (2), exclude from consideration
all eligible employees (other than highly compensated
employees) who have not met the minimum age and service
requirements of section 410(a)(1)(A).'.
(c) EFFECTIVE DATE- The amendments made by this section shall
apply to plan years beginning after December 31, 1998.
SEC. 1460. CLARIFICATION OF APPLICATION OF ERISA TO INSURANCE
COMPANY GENERAL ACCOUNTS.
(a) IN GENERAL- Section 401 of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1101) is amended by adding at the
end the following new subsection:
`(c)(1)(A) Not later than June 30, 1997, the Secretary shall
issue proposed regulations to provide guidance for the purpose of
determining, in cases where an insurer issues 1 or more policies to
or for the benefit of an employee benefit plan (and such policies
are supported by assets of such insurer's general account), which
assets held by the insurer (other than plan assets held in its
separate accounts) constitute assets of the plan for purposes of
this part and section 4975 of the Internal Revenue Code of 1986 and
to provide guidance with respect to the application of this title
to the general account assets of insurers.
`(B) The proposed regulations under subparagraph (A) shall be
subject to public notice and comment until September 30, 1997.
`(C) The Secretary shall issue final regulations providing the
guidance described in subparagraph (A) not later than December 31,
1997.
`(D) Such regulations shall only apply with respect to policies
which are issued by an insurer on or before December 31, 1998, to
or for the benefit of an employee benefit plan which is supported
by assets of such insurer's general account. With respect to
policies issued on or before December 31, 1998, such regulations
shall take effect at the end of the 18-month period following the
date on which such regulations become final.
`(2) The Secretary shall ensure that the regulations issued under
paragraph (1)--
`(A) are administratively feasible, and
`(B) protect the interests and rights of the plan and of its
participants and beneficiaries (including meeting the
requirements of paragraph (3)).
`(3) The regulations prescribed by the Secretary pursuant to
paragraph (1) shall require, in connection with any policy issued
by an insurer to or for the benefit of an employee benefit plan to
the extent that the policy is not a guaranteed benefit policy (as
defined in subsection (b)(2)(B))--
`(A) that a plan fiduciary totally independent of the insurer
authorize the purchase of such policy (unless such purchase is
a transaction exempt under section 408(b)(5)),
`(B) that the insurer describe (in such form and manner as
shall be prescribed in such regulations), in annual reports and
in policies issued to the policyholder after the date on which
such regulations are issued in final form pursuant to paragraph
(1)(C)--
`(i) a description of the method by which any income and
expenses of the insurer's general account are allocated to
the policy during the term of the policy and upon the
termination of the policy, and
`(ii) for each report, the actual return to the plan
under the policy and such other financial information as
the Secretary may deem appropriate for the period covered
by each such annual report,
`(C) that the insurer disclose to the plan fiduciary the
extent to which alternative arrangements supported by assets of
separate accounts of the insurer (which generally hold plan
assets) are available, whether there is a right under the
policy to transfer funds to a separate account and the terms
governing any such right, and the extent to which support by
assets of the insurer's general account and support by assets
of separate accounts of the insurer might pose differing risks
to the plan, and
`(D) that the insurer manage those assets of the insurer
which are assets of such insurer's general account
(irrespective of whether any such assets are plan assets) with
the care, skill, prudence, and diligence under the
circumstances then prevailing that a prudent man acting in a
like capacity and familiar with such matters would use in the
conduct of an enterprise of a like character and with like
aims, taking into account all obligations supported by such
enterprise.
`(4) Compliance by the insurer with all requirements of the
regulations issued by the Secretary pursuant to paragraph (1) shall
be deemed compliance by such insurer with sections 404, 406, and
407 with respect to those assets of the insurer's general account
which support a policy described in paragraph (3).
`(5)(A) Subject to subparagraph (B), any regulations issued under
paragraph (1) shall not take effect before the date on which such
regulations become final.
`(B) No person shall be subject to liability under this part or
section 4975 of the Internal Revenue Code of 1986 for conduct which
occurred before the date which is 18 months following the date
described in subparagraph (A) on the basis of a claim that the
assets of an insurer (other than plan assets held in a separate
account) constitute assets of the plan, except--
`(i) as otherwise provided by the Secretary in regulations
intended to prevent avoidance of the regulations issued under
paragraph (1), or
`(ii) as provided in an action brought by the Secretary
pursuant to paragraph (2) or (5) of section 502(a) for a breach
of fiduciary responsibilities which would also constitute a
violation of Federal or State criminal law.
The Secretary shall bring a cause of action described in clause
(ii) if a participant, beneficiary, or fiduciary demonstrates to
the satisfaction of the Secretary that a breach described in clause
(ii) has occurred.
`(6) Nothing in this subsection shall preclude the application of
any Federal criminal law.
`(7) For purposes of this subsection, the term `policy' includes
a contract.'.
(b) EFFECTIVE DATE-
(1) IN GENERAL- Except as provided in paragraph (2), the
amendment made by this section shall take effect on January 1,
1975.
(2) CIVIL ACTIONS- The amendment made by this section shall
not apply to any civil action commenced before November 7, 1995.
SEC. 1461. SPECIAL RULES FOR CHAPLAINS AND SELF-EMPLOYED MINISTERS.
(a) IN GENERAL- Section 414(e) (defining church plan) is amended
by adding at the end the following new paragraph:
`(5) SPECIAL RULES FOR CHAPLAINS AND SELF-EMPLOYED MINISTERS-
`(A) CERTAIN MINISTERS MAY PARTICIPATE- For purposes of
this part--
`(i) IN GENERAL- An employee of a church or a
convention or association of churches shall include a
duly ordained, commissioned, or licensed minister of a
church who, in connection with the exercise of his or
her ministry--
`(I) is a self-employed individual (within the meaning of section
401(c)(1)(B)), or
`(II) is employed by an organization other than an organization
described in section 501(c)(3).
`(ii) TREATMENT AS EMPLOYER AND EMPLOYEE-
`(I) SELF-EMPLOYED- A minister described in clause (i)(I) shall
be treated as his or her own employer which is an organization
described in section 501(c)(3) and which is exempt from tax under
section 501(a).
`(II) OTHERS- A minister described in clause (i)(II) shall be
treated as employed by an organization described in section
501(c)(3) and exempt from tax under section 501(a).
`(B) SPECIAL RULES FOR APPLYING SECTION 403(b) TO
SELF-EMPLOYED MINISTERS- In the case of a minister
described in subparagraph (A)(i)(I)--
`(i) the minister's includible compensation under
section 403(b)(3) shall be determined by reference to
the minister's earned income (within the meaning of
section 401(c)(2)) from such ministry rather than the
amount of compensation which is received from an
employer, and
`(ii) the years (and portions of years) in which such
minister was a self-employed individual (within the
meaning of section 401(c)(1)(B)) with respect to such
ministry shall be included for purposes of section
403(b)(4).
`(C) EFFECT ON NON-DENOMINATIONAL PLANS- If a duly
ordained, commissioned, or licensed minister of a church in
the exercise of his or her ministry participates in a
church plan (within the meaning of this section) and in the
exercise of such ministry is employed by an employer not
eligible to participate in such church plan, then such
employer may exclude such minister from being treated as an
employee of such employer for purposes of applying sections
401(a)(3), 401(a)(4), and 401(a)(5), as in effect on
September 1, 1974, and sections 401(a)(4), 401(a)(5),
401(a)(26), 401(k)(3), 401(m), 403(b)(1)(D) (including
section 403(b)(12)), and 410 to any stock bonus, pension,
profit-sharing, or annuity plan (including an annuity
described in section 403(b) or a retirement income account
described in section 403(b)(9)). The Secretary shall
prescribe such regulations as may be necessary or
appropriate to carry out the purpose of, and prevent the
abuse of, this subparagraph.
`(D) COMPENSATION TAKEN INTO ACCOUNT ONLY ONCE- If any
compensation is taken into account in determining the
amount of any contributions made to, or benefits to be
provided under, any church plan, such compensation shall
not also be taken into account in determining the amount of
any contributions made to, or benefits to be provided
under, any other stock bonus, pension, profit-sharing, or
annuity plan which is not a church plan.'.
(b) CONTRIBUTIONS BY CERTAIN MINISTERS TO RETIREMENT INCOME
ACCOUNTS- Section 404(a) (relating to deduction for contributions
of an employer to an employees' trust or annuity plan and
compensation under a deferred-payment plan) is amended by adding at
the end the following new paragraph:
`(10) CONTRIBUTIONS BY CERTAIN MINISTERS TO RETIREMENT INCOME
ACCOUNTS- In the case of contributions made by a minister
described in section 414(e)(5) to a retirement income account
described in section 403(b)(9) and not by a person other than
such minister, such contributions--
`(A) shall be treated as made to a trust which is exempt
from tax under section 501(a) and which is part of a plan
which is described in section 401(a), and
`(B) shall be deductible under this subsection to the
extent such contributions do not exceed the limit on
elective deferrals under section 402(g), the exclusion
allowance under section 403(b)(2), or the limit on annual
additions under section 415.
For purposes of this paragraph, all plans in which the minister
is a participant shall be treated as one plan.'.
(c) EFFECTIVE DATE- The amendments made by this section shall
apply to years beginning after December 31, 1996.
SEC. 1462. DEFINITION OF HIGHLY COMPENSATED EMPLOYEE FOR PRE-ERISA
RULES FOR CHURCH PLANS.
(a) IN GENERAL- Section 414(q) (defining highly compensated
employee), as amended by section 1431(c)(1)(A) of this Act, is
amended by adding at the end the following new paragraph:
`(7) CERTAIN EMPLOYEES NOT CONSIDERED HIGHLY COMPENSATED AND
EXCLUDED EMPLOYEES UNDER PRE-ERISA RULES FOR CHURCH PLANS- In
the case of a church plan (as defined in subsection (e)), no
employee shall be considered an officer, a person whose
principal duties consist of supervising the work of other
employees, or a highly compensated employee for any year unless
such employee is a highly compensated employee under paragraph
(1) for such year.'.
(b) SAFEHARBOR AUTHORITY- The Secretary of the Treasury may
design nondiscrimination and coverage safe harbors for church plans.
(c) EFFECTIVE DATE- The amendments made by subsection (a) shall
apply to years beginning after December 31, 1996.
SEC. 1463. RULE RELATING TO INVESTMENT IN CONTRACT NOT TO APPLY TO
FOREIGN MISSIONARIES.
(a) IN GENERAL- The last sentence of section 72(f) is amended by
inserting `, or to the extent such credits are attributable to
services performed as a foreign missionary (within the meaning of
section 403(b)(2)(D)(iii))' before the last period.
(b) EFFECTIVE DATE- The amendment made by this section shall
apply to taxable years beginning after December 31, 1996.
SEC. 1464. WAIVER OF EXCISE TAX ON FAILURE TO PAY LIQUIDITY
SHORTFALL.
(a) IN GENERAL- Section 4971(f) (relating to failure to pay
liquidity shortfall) is amended by adding at the end the following
new paragraph:
`(4) WAIVER BY SECRETARY- If the taxpayer establishes to the
satisfaction of the Secretary that--
`(A) the liquidity shortfall described in paragraph (1)
was due to reasonable cause and not willful neglect, and
`(B) reasonable steps have been taken to remedy such
liquidity shortfall,
the Secretary may waive all or part of the tax imposed by this
subsection.'.
(b) EFFECTIVE DATE- The amendment made by this section shall take
effect as if included in the amendment made by clause (ii) of
section 751(a)(9)(B) of the Retirement Protection Act of 1994 (108
Stat. 5020).
SEC. 1465. DATE FOR ADOPTION OF PLAN AMENDMENTS.
If any amendment made by this subtitle requires an amendment to
any plan or annuity contract, such amendment shall not be required
to be made before the first day of the first plan year beginning on
or after January 1, 1998, if--
(1) during the period after such amendment takes effect and
before such first plan year, the plan or contract is operated
in accordance with the requirements of such amendment, and
(2) such amendment applies retroactively to such period.
In the case of a governmental plan (as defined in section 414(d) of
the Internal Revenue Code of 1986), this section shall be applied
by substituting `2000' for `1998'.
SUBTITLE E--FOREIGN SIMPLIFICATION
SEC. 1501. REPEAL OF INCLUSION OF CERTAIN EARNINGS INVESTED IN
EXCESS PASSIVE ASSETS.
(a) IN GENERAL-
(1) REPEAL OF INCLUSION- Paragraph (1) of section 951(a)
(relating to amounts included in gross income of United States
shareholders) is amended by striking subparagraph (C), by
striking `; and' at the end of subparagraph (B) and inserting a
period, and by adding `and' at the end of subparagraph (A).
(2) REPEAL OF INCLUSION AMOUNT- Section 956A (relating to
earnings invested in excess passive assets) is repealed.
(b) CONFORMING AMENDMENTS-
(1) Subparagraph (G) of section 904(d)(3), as amended by
section 1703(i)(1), is amended by striking `subparagraph (B) or
(C) of section 951(a)(1)' and inserting `section 951(a)(1)(B)'.
(2) Paragraph (1) of section 956(b) is amended to read as
follows:
`(1) APPLICABLE EARNINGS- For purposes of this section, the
term `applicable earnings' means, with respect to any
controlled foreign corporation, the sum of--
`(A) the amount (not including a deficit) referred to in
section 316(a)(1), and
`(B) the amount referred to in section 316(a)(2),
but reduced by distributions made during the taxable year and
by earnings and profits described in section 959(c)(1).'.
(3) Paragraph (3) of section 956(b) is amended to read as
follows:
`(3) SPECIAL RULE WHERE CORPORATION CEASES TO BE CONTROLLED
FOREIGN CORPORATION- If any foreign corporation ceases to be a
controlled foreign corporation during any taxable year--
`(A) the determination of any United States shareholder's
pro rata share shall be made on the basis of stock owned
(within the meaning of section 958(a)) by such shareholder
on the last day during the taxable year on which the
foreign corporation is a controlled foreign corporation,
`(B) the average referred to in subsection (a)(1)(A) for
such taxable year shall be determined by only taking into
account quarters ending on or before such last day, and
`(C) in determining applicable earnings, the amount taken
into account by reason of being described in paragraph (2)
of section 316(a) shall be the portion of the amount so
described which is allocable (on a pro rata basis) to the
part of such year during which the corporation is a
controlled foreign corporation.'.
(4) Subsection (a) of section 959 (relating to exclusion from
gross income of previously taxed earnings and profits) is
amended by adding `or' at the end of paragraph (1), by striking
`or' at the end of paragraph (2), and by striking paragraph (3).
(5) Subsection (a) of section 959 is amended by striking
`paragraphs (2) and (3)' in the last sentence and inserting
`paragraph (2)'.
(6) Subsection (c) of section 959 is amended by adding at the
end the following flush sentence:
`References in this subsection to section 951(a)(1)(C) and
subsection (a)(3) shall be treated as references to such provisions
as in effect on the day before the date of the enactment of the
Small Business Job Protection Act of 1996.'.
(7) Paragraph (1) of section 959(f) is amended to read as
follows:
`(1) IN GENERAL- For purposes of this section, amounts that
would be included under subparagraph (B) of section 951(a)(1)
(determined without regard to this section) shall be treated as
attributable first to earnings described in subsection (c)(2),
and then to earnings described in subsection (c)(3).'.
(8) Paragraph (2) of section 959(f) is amended by striking
`subparagraphs (B) and (C) of section 951(a)(1)' and inserting
`section 951(a)(1)(B)'.
(9) Subsection (b) of section 989 is amended by striking
`subparagraph (B) or (C) of section 951(a)(1)' and inserting
`section 951(a)(1)(B)'.
(10) Paragraph (9) of section 1297(b) is amended by striking
`subparagraph (B) or (C) of section 951(a)(1)' and inserting
`section 951(a)(1)(B)'.
(11) Subsections (d)(3)(B) and (e)(2)(B)(ii) of section 1297
are each amended by striking `or section 956A'.
(12) Subparagraph (G) of section 904(d)(3) is amended by
striking `subparagraph (B) or (C) of section 951(a)(1)' and
inserting `section 951(a)(1)(B)'.
(c) CLERICAL AMENDMENT- The table of sections for subpart F of
part III of subchapter N of chapter 1 is amended by striking the
item relating to section 956A.
(d) EFFECTIVE DATE- The amendments made by this section shall
apply to taxable years of foreign corporations beginning after
December 31, 1996, and to taxable years of United States
shareholders within which or with which such taxable years of
foreign corporations end.
SUBTITLE F--REVENUE OFFSETS
PART I--GENERAL PROVISIONS
SEC. 1601. TERMINATION OF PUERTO RICO AND POSSESSION TAX CREDIT.
(a) IN GENERAL- Section 936 is amended by adding at the end the
following new subsection:
`(j) TERMINATION-
`(1) IN GENERAL- Except as otherwise provided in this
subsection, this section shall not apply to any taxable year
beginning after December 31, 1995.
`(2) TRANSITION RULES FOR ACTIVE BUSINESS INCOME CREDIT-
Except as provided in paragraph (3)--
`(A) ECONOMIC ACTIVITY CREDIT- In the case of an existing
credit claimant--
`(i) with respect to a possession other than Puerto
Rico, and
`(ii) to which subsection (a)(4)(B) does not apply,
the credit determined under subsection (a)(1)(A) shall be
allowed for taxable years beginning after December 31,
1995, and before January 1, 2002.
`(B) SPECIAL RULE FOR REDUCED CREDIT-
`(i) IN GENERAL- In the case of an existing credit
claimant to which subsection (a)(4)(B) applies, the
credit determined under subsection (a)(1)(A) shall be
allowed for taxable years beginning after December 31,
1995, and before January 1, 1998.
`(ii) ELECTION IRREVOCABLE AFTER 1997- An election
under subsection (a)(4)(B)(iii) which is in effect for
the taxpayer's last taxable year beginning before 1997
may not be revoked unless it is revoked for the
taxpayer's first taxable year beginning in 1997 and all
subsequent taxable years.
`(C) ECONOMIC ACTIVITY CREDIT FOR PUERTO RICO-
`For economic activity credit for Puerto Rico, see section 30A.
`(3) ADDITIONAL RESTRICTED CREDIT-
`(A) IN GENERAL- In the case of an existing credit
claimant--
`(i) the credit under subsection (a)(1)(A) shall be
allowed for the period beginning with the first taxable
year after the last taxable year to which subparagraph
(A) or (B) of paragraph (2), whichever is appropriate,
applied and ending with the last taxable year beginning
before January 1, 2006, except that
`(ii) the aggregate amount of taxable income taken
into account under subsection (a)(1)(A) for any such
taxable year shall not exceed the adjusted base period
income of such claimant.
`(B) COORDINATION WITH SUBSECTION (a)(4)- The amount of
income described in subsection (a)(1)(A) which is taken
into account in applying subsection (a)(4) shall be such
income as reduced under this paragraph.
`(4) ADJUSTED BASE PERIOD INCOME- For purposes of paragraph
(3)--
`(A) IN GENERAL- The term `adjusted base period income'
means the average of the inflation-adjusted possession
incomes of the corporation for each base period year.
`(B) INFLATION-ADJUSTED POSSESSION INCOME- For purposes
of subparagraph (A), the inflation-adjusted possession
income of any corporation for any base period year shall be
an amount equal to the sum of--
`(i) the possession income of such corporation for
such base period year, plus
`(ii) such possession income multiplied by the
inflation adjustment percentage for such base period
year.
`(C) INFLATION ADJUSTMENT PERCENTAGE- For purposes of
subparagraph (B), the inflation adjustment percentage for
any base period year means the percentage (if any) by which--
`(i) the CPI for 1995, exceeds
`(ii) the CPI for the calendar year in which the base
period year for which the determination is being made
ends.
For purposes of the preceding sentence, the CPI for any
calendar year is the CPI (as defined in section 1(f)(5))
for such year under section 1(f)(4).
