 |
American Association of Airport Executives &
Airports Council International - North America Legislative Affairs Representing the nation's airports in Washington, D.C. |
 |
|
|
||
H.R. 3448
SEC. 1704. MISCELLANEOUS PROVISIONS.
(a) APPLICATION OF AMENDMENTS MADE BY TITLE XII OF OMNIBUS BUDGET
RECONCILIATION ACT OF 1990- Except as otherwise expressly provided,
whenever in title XII of the Omnibus Budget Reconciliation Act of
1990 an amendment or repeal is expressed in terms of an amendment
to, or repeal of, a section or other provision, the reference shall
be considered to be made to a section or other provision of the
Internal Revenue Code of 1986.
(b) TREATMENT OF CERTAIN AMOUNTS UNDER HEDGE BOND RULES-
(1) IN GENERAL- Clause (iii) of section 149(g)(3)(B) is
amended to read as follows:
`(iii) AMOUNTS HELD PENDING REINVESTMENT OR
REDEMPTION- Amounts held for not more than 30 days
pending reinvestment or bond redemption shall be
treated as invested in bonds described in clause (i).'.
(2) EFFECTIVE DATE- The amendment made by paragraph (1) shall
take effect as if included in the amendments made by section
7651 of the Omnibus Budget Reconciliation Act of 1989.
(c) TREATMENT OF CERTAIN DISTRIBUTIONS UNDER SECTION 1445-
(1) IN GENERAL- Paragraph (3) of section 1445(e) is amended
by adding at the end thereof the following new sentence: `Rules
similar to the rules of the preceding provisions of this
paragraph shall apply in the case of any distribution to which
section 301 applies and which is not made out of the earnings
and profits of such a domestic corporation.'.
(2) EFFECTIVE DATE- The amendment made by paragraph (1) shall
apply to distributions after the date of the enactment of this
Act.
(d) TREATMENT OF CERTAIN CREDITS UNDER SECTION 469-
(1) IN GENERAL- Subparagraph (B) of section 469(c)(3) is
amended by adding at the end thereof the following new
sentence: `If the preceding sentence applies to the net income
from any property for any taxable year, any credits allowable
under subpart B (other than section 27(a)) or D of part IV of
subchapter A for such taxable year which are attributable to
such property shall be treated as credits not from a passive
activity to the extent the amount of such credits does not
exceed the regular tax liability of the taxpayer for the
taxable year which is allocable to such net income.'.
(2) EFFECTIVE DATE- The amendment made by paragraph (1) shall
apply to taxable years beginning after December 31, 1986.
(e) TREATMENT OF DISPOSITIONS UNDER PASSIVE LOSS RULES-
(1) IN GENERAL- Subparagraph (A) of section 469(g)(1) is
amended to read as follows:
`(A) IN GENERAL- If all gain or loss realized on such
disposition is recognized, the excess of--
`(i) any loss from such activity for such taxable
year (determined after the application of subsection
(b)), over
`(ii) any net income or gain for such taxable year
from all other passive activities (determined after the
application of subsection (b)),
shall be treated as a loss which is not from a passive
activity.'.
(2) EFFECTIVE DATE- The amendment made by paragraph (1) shall
apply to taxable years beginning after December 31, 1986.
(f) MISCELLANEOUS AMENDMENTS TO FOREIGN PROVISIONS-
(1) COORDINATION OF UNIFIED ESTATE TAX CREDIT WITH TREATIES-
Subparagraph (A) of section 2102(c)(3) is amended by adding at
the end thereof the following new sentence: `For purposes of
the preceding sentence, property shall not be treated as
situated in the United States if such property is exempt from
the tax imposed by this subchapter under any treaty obligation
of the United States.'.
(2) TREATMENT OF CERTAIN INTEREST PAID TO RELATED PERSON-
(A) Subparagraph (B) of section 163(j)(1) is amended by
inserting before the period at the end thereof the
following: `(and clause (ii) of paragraph (2)(A) shall not
apply for purposes of applying this subsection to the
amount so treated)'.
(B) Subsection (j) of section 163 is amended by
redesignating paragraph (7) as paragraph (8) and by
inserting after paragraph (6) the following new paragraph:
`(7) COORDINATION WITH PASSIVE LOSS RULES, ETC- This
subsection shall be applied before sections 465 and 469.'.
(C) The amendments made by this paragraph shall apply as
if included in the amendments made by section 7210(a) of
the Revenue Reconciliation Act of 1989.
(3) TREATMENT OF INTEREST ALLOCABLE TO EFFECTIVELY CONNECTED
INCOME-
(A) IN GENERAL-
(i) Subparagraph (B) of section 884(f)(1) is amended
by striking `to the extent' and all that follows down
through `subparagraph (A)' and inserting `to the extent
that the allocable interest exceeds the interest
described in subparagraph (A)'.
(ii) The second sentence of section 884(f)(1) is
amended by striking `reasonably expected' and all that
follows down through the period at the end thereof and
inserting `reasonably expected to be allocable
interest.'.
(iii) Paragraph (2) of section 884(f) is amended to
read as follows:
`(2) ALLOCABLE INTEREST- For purposes of this subsection, the
term `allocable interest' means any interest which is allocable
to income which is effectively connected (or treated as
effectively connected) with the conduct of a trade or business
in the United States.'.
(B) EFFECTIVE DATE- The amendments made by subparagraph
(A) shall take effect as if included in the amendments made
by section 1241(a) of the Tax Reform Act of 1986.
(4) CLARIFICATION OF SOURCE RULE-
(A) IN GENERAL- Paragraph (2) of section 865(b) is
amended by striking `863(b)' and inserting `863'.
(B) EFFECTIVE DATE- The amendment made by subparagraph
(A) shall take effect as if included in the amendments made
by section 1211 of the Tax Reform Act of 1986.
(5) REPEAL OF OBSOLETE PROVISIONS-
(A) Paragraph (1) of section 6038(a) is amended by
striking `, and' at the end of subparagraph (E) and
inserting a period, and by striking subparagraph (F).
(B) Subsection (b) of section 6038A is amended by adding
`and' at the end of paragraph (2), by striking `, and' at
the end of paragraph (3) and inserting a period, and by
striking paragraph (4).
(g) CLARIFICATION OF TREATMENT OF MEDICARE ENTITLEMENT UNDER
COBRA PROVISIONS-
(1) In general-
(A) Subclause (V) of section 4980B(f)(2)(B)(i) is amended
to read as follows:
`(V) MEDICARE ENTITLEMENT FOLLOWED BY QUALIFYING EVENT- In the
case of a qualifying event described in paragraph (3)(B) that
occurs less than 18 months after the date the covered employee
became entitled to benefits under title XVIII of the Social
Security Act, the period of coverage for qualified beneficiaries
other than the covered employee shall not terminate under this
clause before the close of the 36-month period beginning on the
date the covered employee became so entitled.'.
(B) Clause (v) of section 602(2)(A) of the Employee
Retirement Income Security Act of 1974 is amended to read
as follows:
`(v) MEDICARE ENTITLEMENT FOLLOWED BY QUALIFYING
EVENT- In the case of a qualifying event described in
section 603(2) that occurs less than 18 months after
the date the covered employee became entitled to
benefits under title XVIII of the Social Security Act,
the period of coverage for qualified beneficiaries
other than the covered employee shall not terminate
under this subparagraph before the close of the
36-month period beginning on the date the covered
employee became so entitled.'.
(C) Clause (iv) of section 2202(2)(A) of the Public
Health Service Act is amended to read as follows:
`(iv) MEDICARE ENTITLEMENT FOLLOWED BY QUALIFYING
EVENT- In the case of a qualifying event described in
section 2203(2) that occurs less than 18 months after
the date the covered employee became entitled to
benefits under title XVIII of the Social Security Act,
the period of coverage for qualified beneficiaries
other than the covered employee shall not terminate
under this subparagraph before the close of the
36-month period beginning on the date the covered
employee became so entitled.'.
(2) EFFECTIVE DATE- The amendments made by this subsection
shall apply to plan years beginning after December 31, 1989.
(h) TREATMENT OF CERTAIN REMIC INCLUSIONS-
(1) IN GENERAL- Subsection (a) of section 860E is amended by
adding at the end thereof the following new paragraph:
`(6) COORDINATION WITH MINIMUM TAX- For purposes of part VI
of subchapter A of this chapter--
`(A) the reference in section 55(b)(2) to taxable income
shall be treated as a reference to taxable income
determined without regard to this subsection,
`(B) the alternative minimum taxable income of any holder
of a residual interest in a REMIC for any taxable year
shall in no event be less than the excess inclusion for
such taxable year, and
`(C) any excess inclusion shall be disregarded for
purposes of computing the alternative tax net operating
loss deduction.
The preceding sentence shall not apply to any organization to
which section 593 applies, except to the extent provided in
regulations prescribed by the Secretary under paragraph (2).'.
(2) EFFECTIVE DATE- The amendment made by paragraph (1) shall
take effect as if included in the amendments made by section
671 of the Tax Reform Act of 1986 unless the taxpayer elects to
apply such amendment only to taxable years beginning after the
date of the enactment of this Act.
(i) EXEMPTION FROM HARBOR MAINTENANCE TAX FOR CERTAIN PASSENGERS-
(1) IN GENERAL- Subparagraph (D) of section 4462(b)(1)
(relating to special rule for Alaska, Hawaii, and possessions)
is amended by inserting before the period the following: `, or
passengers transported on United States flag vessels operating
solely within the State waters of Alaska or Hawaii and adjacent
international waters'.
(2) EFFECTIVE DATE- The amendment made by paragraph (1) shall
take effect as if included in the amendments made by section
1402(a) of the Harbor Maintenance Revenue Act of 1986.
(j) AMENDMENTS RELATED TO REVENUE PROVISIONS OF ENERGY POLICY ACT
OF 1992-
(1) Effective with respect to taxable years beginning after
December 31, 1990, subclause (II) of section 53(d)(1)(B)(iv) is
amended to read as follows:
`(II) the adjusted net minimum tax for any taxable year is the
amount of the net minimum tax for such year increased in the manner
provided in clause (iii).'.
(2) Subsection (g) of section 179A is redesignated as
subsection (f).
(3) Subparagraph (E) of section 6724(d)(3) is amended by
striking `section 6109(f)' and inserting `section 6109(h)'.
(4)(A) Subsection (d) of section 30 is amended--
(i) by inserting `(determined without regard to
subsection (b)(3))' before the period at the end of
paragraph (1) thereof, and
(ii) by adding at the end thereof the following new
paragraph:
`(4) ELECTION TO NOT TAKE CREDIT- No credit shall be allowed
under subsection (a) for any vehicle if the taxpayer elects to
not have this section apply to such vehicle.'.
(B) Subsection (m) of section 6501 (as redesignated by
section 1602) is amended by striking `section 40(f)' and
inserting `sections 30(d)(4), 40(f)'.
(5) Subclause (III) of section 501(c)(21)(D)(ii) is amended
by striking `section 101(6)' and inserting `section 101(7)' and
by striking `1752(6)' and inserting `1752(7)'.
(6) Paragraph (1) of section 1917(b) of the Energy Policy Act
of 1992 shall be applied as if `at a rate' appeared instead of
`at the rate' in the material proposed to be stricken.
(7) Paragraph (2) of section 1921(b) of the Energy Policy Act
of 1992 shall be applied as if a comma appeared after `(2)' in
the material proposed to be stricken.
(8) Subsection (a) of section 1937 of the Energy Policy Act
of 1992 shall be applied as if `Subpart B' appeared instead of
`Subpart C'.
(k) TREATMENT OF QUALIFIED FOOTBALL COACHES PLAN-
(1) IN GENERAL- For purposes of the Internal Revenue Code of
1986, a qualified football coaches plan--
(A) shall be treated as a multiemployer collectively
bargained plan, and
(B) notwithstanding section 401(k)(4)(B) of such Code,
may include a qualified cash and deferred arrangement under
section 401(k) of such Code.
(2) QUALIFIED FOOTBALL COACHES PLAN- For purposes of this
subsection, the term `qualified football coaches plan' means
any defined contribution plan which is established and
maintained by an organization--
(A) which is described in section 501(c) of such Code,
(B) the membership of which consists entirely of
individuals who primarily coach football as full-time
employees of 4-year colleges or universities described in
section 170(b)(1)(A)(ii) of such Code, and
(C) which was in existence on September 18, 1986.
(3) EFFECTIVE DATE- This subsection shall apply to years
beginning after December 22, 1987.
(l) DETERMINATION OF UNRECOVERED INVESTMENT IN ANNUITY CONTRACT-
(1) IN GENERAL- Subparagraph (A) of section 72(b)(4) is
amended by inserting `(determined without regard to subsection
(c)(2))' after `contract'.
(2) EFFECTIVE DATE- The amendment made by paragraph (1) shall
take effect as if included in the amendments made by section
1122(c) of the Tax Reform Act of 1986.
(m) MODIFICATIONS TO ELECTION TO INCLUDE CHILD'S INCOME ON
PARENT'S RETURN-
(1) ELIGIBILITY FOR ELECTION- Clause (ii) of section
1(g)(7)(A) (relating to election to include certain unearned
income of child on parent's return) is amended to read as
follows:
`(ii) such gross income is more than the amount
described in paragraph (4)(A)(ii)(I) and less than 10
times the amount so described,'.
(2) COMPUTATION OF TAX- Subparagraph (B) of section 1(g)(7)
(relating to income included on parent's return) is amended--
(A) by striking `$1,000' in clause (i) and inserting
`twice the amount described in paragraph (4)(A)(ii)(I)', and
(B) by amending subclause (II) of clause (ii) to read as
follows:
`(II) for each such child, 15 percent of the lesser of the amount
described in paragraph (4)(A)(ii)(I) or the excess of the gross
income of such child over the amount so described, and'.
(3) MINIMUM TAX- Subparagraph (B) of section 59(j)(1) is
amended by striking `$1,000' and inserting `twice the amount in
effect for the taxable year under section 63(c)(5)(A)'.
(4) EFFECTIVE DATE- The amendments made by this subsection
shall apply to taxable years beginning after December 31, 1995.
(n) TREATMENT OF CERTAIN VETERANS' REEMPLOYMENT RIGHTS-
(1) IN GENERAL- Section 414 is amended by adding at the end
the following new subsection:
`(u) SPECIAL RULES RELATING TO VETERANS' REEMPLOYMENT RIGHTS
UNDER USERRA-
`(1) TREATMENT OF CERTAIN CONTRIBUTIONS MADE PURSUANT TO
VETERANS' REEMPLOYMENT RIGHTS- If any contribution is made by
an employer or an employee under an individual account plan
with respect to an employee, or by an employee to a defined
benefit plan that provides for employee contributions, and such
contribution is required by reason of such employee's rights
under chapter 43 of title 38, United States Code, resulting
from qualified military service, then--
`(A) such contribution shall not be subject to any
otherwise applicable limitation contained in section
402(g), 402(h), 403(b), 404(a), 404(h), 408, 415, or 457,
and shall not be taken into account in applying such
limitations to other contributions or benefits under such
plan or any other plan, with respect to the year in which
the contribution is made,
`(B) such contribution shall be subject to the
limitations referred to in subparagraph (A) with respect to
the year to which the contribution relates (in accordance
with rules prescribed by the Secretary), and
`(C) such plan shall not be treated as failing to meet
the requirements of section 401(a)(4), 401(a)(26),
401(k)(3), 401(k)(11), 401(k)(12), 401(m), 403(b)(12),
408(k)(3), 408(k)(6), 408(p), 410(b), or 416 by reason of
the making of (or the right to make) such contribution.
For purposes of the preceding sentence, any elective deferral
or employee contribution made under paragraph (2) shall be
treated as required by reason of the employee's rights under
such chapter 43.
`(2) REEMPLOYMENT RIGHTS UNDER USERRA WITH RESPECT TO
ELECTIVE DEFERRALS-
`(A) IN GENERAL- For purposes of this subchapter and
section 457, if an employee is entitled to the benefits of
chapter 43 of title 38, United States Code, with respect to
any plan which provides for elective deferrals, the
employer sponsoring the plan shall be treated as meeting
the requirements of such chapter 43 with respect to such
elective deferrals only if such employer--
`(i) permits such employee to make additional
elective deferrals under such plan (in the amount
determined under subparagraph (B) or such lesser amount
as is elected by the employee) during the period which
begins on the date of the reemployment of such employee
with such employer and has the same length as the
lesser of--
`(I) the product of 3 and the period of qualified military
service which resulted in such rights, and
`(II) 5 years, and
`(ii) makes a matching contribution with respect to
any additional elective deferral made pursuant to
clause (i) which would have been required had such
deferral actually been made during the period of such
qualified military service.
`(B) AMOUNT OF MAKEUP REQUIRED- The amount determined
under this subparagraph with respect to any plan is the
maximum amount of the elective deferrals that the
individual would have been permitted to make under the plan
in accordance with the limitations referred to in paragraph
(1)(A) during the period of qualified military service if
the individual had continued to be employed by the employer
during such period and received compensation as determined
under paragraph (7). Proper adjustment shall be made to the
amount determined under the preceding sentence for any
elective deferrals actually made during the period of such
qualified military service.
`(C) ELECTIVE DEFERRAL- For purposes of this paragraph,
the term `elective deferral' has the meaning given such
term by section 402(g)(3); except that such term shall
include any deferral of compensation under an eligible
deferred compensation plan (as defined in section 457(b)).
`(D) AFTER-TAX EMPLOYEE CONTRIBUTIONS- References in
subparagraphs (A) and (B) to elective deferrals shall be
treated as including references to employee contributions.
`(3) CERTAIN RETROACTIVE ADJUSTMENTS NOT REQUIRED- For
purposes of this subchapter and subchapter E, no provision of
chapter 43 of title 38, United States Code, shall be construed
as requiring--
`(A) any crediting of earnings to an employee with
respect to any contribution before such contribution is
actually made, or
`(B) any allocation of any forfeiture with respect to the
period of qualified military service.
`(4) LOAN REPAYMENT SUSPENSIONS PERMITTED- If any plan
suspends the obligation to repay any loan made to an employee
from such plan for any part of any period during which such
employee is performing service in the uniformed services (as
defined in chapter 43 of title 38, United States Code), whether
or not qualified military service, such suspension shall not be
taken into account for purposes of section 72(p), 401(a), or
4975(d)(1).
`(5) QUALIFIED MILITARY SERVICE- For purposes of this
subsection, the term `qualified military service' means any
service in the uniformed services (as defined in chapter 43 of
title 38, United States Code) by any individual if such
individual is entitled to reemployment rights under such
chapter with respect to such service.
`(6) INDIVIDUAL ACCOUNT PLAN- For purposes of this
subsection, the term `individual account plan' means any
defined contribution plan (including any tax-sheltered annuity
plan under section 403(b), any simplified employee pension
under section 408(k), any qualified salary reduction
arrangement under section 408(p), and any eligible deferred
compensation plan (as defined in section 457(b)).
`(7) COMPENSATION- For purposes of sections 403(b)(3),
415(c)(3), and 457(e)(5), an employee who is in qualified
military service shall be treated as receiving compensation
from the employer during such period of qualified military
service equal to--
`(A) the compensation the employee would have received
during such period if the employee were not in qualified
military service, determined based on the rate of pay the
employee would have received from the employer but for
absence during the period of qualified military service, or
`(B) if the compensation the employee would have received
during such period was not reasonably certain, the
employee's average compensation from the employer during
the 12-month period immediately preceding the qualified
military service (or, if shorter, the period of employment
immediately preceding the qualified military service).
`(8) USERRA REQUIREMENTS FOR QUALIFIED RETIREMENT PLANS- For
purposes of this subchapter and section 457, an employer
sponsoring a retirement plan shall be treated as meeting the
requirements of chapter 43 of title 38, United States Code,
only if each of the following requirements is met:
`(A) An individual reemployed under such chapter is
treated with respect to such plan as not having incurred a
break in service with the employer maintaining the plan by
reason of such individual's period of qualified military
service.
`(B) Each period of qualified military service served by
an individual is, upon reemployment under such chapter,
deemed with respect to such plan to constitute service with
the employer maintaining the plan for the purpose of
determining the nonforfeitability of the individual's
accrued benefits under such plan and for the purpose of
determining the accrual of benefits under such plan.
`(C) An individual reemployed under such chapter is
entitled to accrued benefits that are contingent on the
making of, or derived from, employee contributions or
elective deferrals only to the extent the individual makes
payment to the plan with respect to such contributions or
deferrals. No such payment may exceed the amount the
individual would have been permitted or required to
contribute had the individual remained continuously
employed by the employer throughout the period of qualified
military service. Any payment to such plan shall be made
during the period beginning with the date of reemployment
and whose duration is 3 times the period of the qualified
military service (but not greater than 5 years).
`(9) PLANS NOT SUBJECT TO TITLE 38- This subsection shall not
apply to any retirement plan to which chapter 43 of title 38,
United States Code, does not apply.
`(10) REFERENCES- For purposes of this section, any reference
to chapter 43 of title 38, United States Code, shall be treated
as a reference to such chapter as in effect on December 12,
1994 (without regard to any subsequent amendment).'.
(2) AMENDMENT TO ERISA- Section 408(b)(1) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1148(b)) is
amended by adding at the end the following new sentence: `A
loan made by a plan shall not fail to meet the requirements of
the preceding sentence by reason of a loan repayment suspension
described under section 414(u)(4) of the Internal Revenue Code
of 1986.'.
(3) EFFECTIVE DATE- The amendments made by this subsection
shall be effective as of December 12, 1994.
(o) REPORTING OF REAL ESTATE TRANSACTIONS-
(1) IN GENERAL- Paragraph (3) of section 6045(e) (relating to
prohibition of separate charge for filing return) is amended by
adding at the end the following new sentence: `Nothing in this
paragraph shall be construed to prohibit the real estate
reporting person from taking into account its cost of complying
with such requirement in establishing its charge (other than a
separate charge for complying with such requirement) to any
customer for performing services in the case of a real estate
transaction.'.
(2) EFFECTIVE DATE- The amendment made by paragraph (1) shall
take effect as if included in section 1015(e)(2)(A) of the
Technical and Miscellaneous Revenue Act of 1988.
(p) Clarification of Denial of Deduction for Stock Redemption
Expenses.
(1) IN GENERAL- Paragraph (1) of section 162(k) is amended by
striking `the redemption of its stock' and inserting `the
reacquisition of its stock or of the stock of any related
person (as defined in section 465(b)(3)(C))'.
(2) CERTAIN DEDUCTIONS PERMITTED- Subparagraph (A) of section
162(k)(2) is amended by striking `or' at the end of clause (i),
by redesignating clause (ii) as clause (iii), and by inserting
after clause (i) the following new clause:
`(ii) deduction for amounts which are properly
allocable to indebtedness and amortized over the term
of such indebtedness, or'.
(3) CLERICAL AMENDMENT- The subsection heading for subsection
(k) of section 162 is amended by striking `REDEMPTION' and
inserting `REACQUISITION'.
(4) EFFECTIVE DATE-
(A) IN GENERAL- Except as provided in subparagraph (B),
the amendments made by this subsection shall apply to
amounts paid or incurred after September 13, 1995, in
taxable years ending after such date.
(B) PARAGRAPH (2)- The amendment made by paragraph (2)
shall take effect as if included in the amendment made by
section 613 of the Tax Reform Act of 1986.
(q) CLERICAL AMENDMENT TO SECTION 404-
(1) IN GENERAL- Paragraph (1) of section 404(j) is amended by
striking `(10)' and inserting `(9)'.
(2) EFFECTIVE DATE- The amendment made by paragraph (1) shall
take effect as if included in the amendments made by section
713(d)(4)(A) of the Deficit Reduction Act of 1984.
(r) PASSIVE INCOME NOT TO INCLUDE FSC INCOME, ETC-
(1) IN GENERAL- Paragraph (2) of section 1296(b) 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 inserting after subparagraph (C) the following new
subparagraph:
`(D) which is foreign trade income of an FSC or export
trade income of an export trade corporation (as defined in
section 971).'.
(2) EFFECTIVE DATE- The amendments made by paragraph (1)
shall take effect as if included in the amendments made by
section 1235 of the Tax Reform Act of 1986.
(s) TECHNICAL CORRECTION OF INTERMEDIATE SANCTIONS PROVISIONS-
(1) Subparagraph (C) of section 6652(c)(1) is amended by
striking `$10' and inserting `$20', and by striking `$5,000'
and inserting `$10,000'.
(2) Subparagraph (D) of section 6652(c)(1) is amended by
striking `$10' and inserting `$20'.
(t) MISCELLANEOUS CLERICAL AMENDMENTS-
(1) Subclause (II) of section 56(g)(4)(C)(ii) is amended by
striking `of the subclause' and inserting `of subclause'.
(2) Paragraph (2) of section 72(m) is amended by inserting
`and' at the end of subparagraph (A), by striking subparagraph
(B), and by redesignating subparagraph (C) as subpara-graph (B).
(3) Paragraph (2) of section 86(b) is amended by striking
`adusted' and inserting `adjusted'.
(4)(A) The heading for section 112 is amended by striking
`combat pay' and inserting `combat zone compensation'.
(B) The item relating to section 112 in the table of sections
for part III of subchapter B of chapter 1 is amended by
striking `combat pay' and inserting `combat zone compensation'.
(C) Paragraph (1) of section 3401(a) is amended by striking
`combat pay' and inserting `combat zone compensation'.
(5) Clause (i) of section 172(h)(3)(B) is amended by striking
the comma at the end thereof and inserting a period.
(6) Clause (ii) of section 543(a)(2)(B) is amended by
striking `section 563(c)' and inserting `section 563(d)'.
(7) Paragraph (1) of section 958(a) is amended by striking
`sections 955(b)(1) (A) and (B), 955(c)(2)(A)(ii), and
960(a)(1)' and inserting `section 960(a)(1)'.
(8) Subsection (g) of section 642 is amended by striking
`under 2621(a)(2)' and inserting `under section 2621(a)(2)'.
(9) Section 1463 is amended by striking `this subsection' and
inserting `this section'.
(10) Subsection (k) of section 3306 is amended by inserting a
period at the end thereof.
(11) The item relating to section 4472 in the table of
sections for subchapter B of chapter 36 is amended by striking
`and special rules'.
(12) Paragraph (3) of section 5134(c) is amended by striking
`section 6662(a)' and inserting `section 6665(a)'.
(13) Paragraph (2) of section 5206(f) is amended by striking
`section 5(e)' and inserting `section 105(e)'.
(14) Paragraph (1) of section 6050B(c) is amended by striking
`section 85(c)' and inserting `section 85(b)'.
(15) Subsection (k) of section 6166 is amended by striking
paragraph (6).
(16) Subsection (e) of section 6214 is amended to read as
follows:
`(e) CROSS REFERENCE-
`For provision giving Tax Court jurisdiction to order a refund of
an overpayment and to award sanctions, see section 6512(b)(2).'.
(17) The section heading for section 6043 is amended by
striking the semicolon and inserting a comma.
(18) The item relating to section 6043 in the table of
sections for subpart B of part III of subchapter A of chapter
61 is amended by striking the semicolon and inserting a comma.
(19) The table of sections for part I of subchapter A of
chapter 68 is amended by striking the item relating to section
6662.
(20)(A) Section 7232 is amended--
(i) by striking `lubricating oil,' in the heading, and
(ii) by striking `lubricating oil,' in the text.
(B) The table of sections for part II of subchapter A of
chapter 75 is amended by striking `lubricating oil,' in the
item relating to section 7232.
(21) Paragraph (1) of section 6701(a) of the Omnibus Budget
Reconciliation Act of 1989 is amended by striking `subclause
(IV)' and inserting `subclause (V)'.
(22) Clause (ii) of section 7304(a)(2)(D) of such Act is
amended by striking `subsection (c)(2)' and inserting
`subsection (c)'.
(23) Paragraph (1) of section 7646(b) of such Act is amended
by striking `section 6050H(b)(1)' and inserting `section
6050H(b)(2)'.
(24) Paragraph (10) of section 7721(c) of such Act is amended
by striking `section 6662(b)(2)(C)(ii)' and inserting `section
6661(b)(2)(C)(ii)'.
(25) Subparagraph (A) of section 7811(i)(3) of such Act is
amended by inserting `the first place it appears' before `in
clause (i)'.
(26) Paragraph (10) of section 7841(d) of such Act is amended
by striking `section 381(a)' and inserting `section 381(c)'.
(27) Paragraph (2) of section 7861(c) of such Act is amended
by inserting `the second place it appears' before `and
inserting'.
(28) Paragraph (1) of section 460(b) is amended by striking
`the look-back method of paragraph (3)' and inserting `the
look-back method of paragraph (2)'.
(29) Subparagraph (C) of section 50(a)(2) is amended by
striking `subsection (c)(4)' and inserting `subsection (d)(5)'.
(30) Subparagraph (B) of section 172(h)(4) is amended by
striking the material following the heading and preceding
clause (i) and inserting `For purposes of subsection (b)(2)--'.
(31) Subparagraph (A) of section 355(d)(7) is amended by
inserting `section' before `267(b)'.
(32) Subparagraph (C) of section 420(e)(1) is amended by
striking `mean' and inserting `means'.
(33) Paragraph (4) of section 537(b) is amended by striking
`section 172(i)' and inserting `section 172(f)'.
(34) Subparagraph (B) of section 613(e)(1) is amended by
striking the comma at the end thereof and inserting a period.
(35) Paragraph (4) of section 856(a) is amended by striking
`section 582(c)(5)' and inserting `section 582(c)(2)'.
(36) Sections 904(f)(2)(B)(i) and 907(c)(4)(B)(iii) are each
amended by inserting `(as in effect on the day before the date
of the enactment of the Revenue Reconciliation Act of 1990)'
after `section 172(h)'.
(37) Subsection (b) of section 936 is amended by striking
`subparagraphs (D)(ii)(I)' and inserting `subparagraphs (D)(ii)'.
(38) Subsection (c) of section 2104 is amended by striking
`subparagraph (A), (C), or (D) of section 861(a)(1)' and
inserting `section 861(a)(1)(A)'.
(39) Subparagraph (A) of section 280A(c)(1) is amended to
read as follows:
`(A) as the principal place of business for any trade or
business of the taxpayer,'.
(40) Section 6038 is amended by redesignating the subsection
relating to cross references as subsection (f).
(41) Clause (iv) of section 6103(e)(1)(A) is amended by
striking all that follows `provisions of' and inserting
`section 1(g) or 59(j);'.
(42) The subsection (f) of section 6109 of the Internal
Revenue Code of 1986 which was added by section 2201(d) of
Public Law 101-624 is redesignated as subsection (g).
(43) Subsection (b) of section 7454 is amended by striking
`section 4955(e)(2)' and inserting `section 4955(f)(2)'.
(44) Subsection (d) of section 11231 of the Revenue
Reconciliation Act of 1990 shall be applied as if `comma'
appeared instead of `period' and as if the paragraph (9)
proposed to be added ended with a comma.
(45) Paragraph (1) of section 11303(b) of the Revenue
Reconciliation Act of 1990 shall be applied as if `paragraph'
appeared instead of `subparagraph' in the material proposed to
be stricken.
(46) Subsection (f) of section 11701 of the Revenue
Reconciliation Act of 1990 is amended by inserting `(relating
to definitions)' after `section 6038(e)'.
(47) Subsection (i) of section 11701 of the Revenue
Reconciliation Act of 1990 shall be applied as if `subsection'
appeared instead of `section' in the material proposed to be
stricken.
(48) Subparagraph (B) of section 11801(c)(2) of the Revenue
Reconciliation Act of 1990 shall be applied as if `section
56(g)' appeared instead of `section 59(g)'.
(49) Subparagraph (C) of section 11801(c)(8) of the Revenue
Reconciliation Act of 1990 shall be applied as if
`reorganizations' appeared instead of `reorganization' in the
material proposed to be stricken.
(50) Subparagraph (H) of section 11801(c)(9) of the Revenue
Reconciliation Act of 1990 shall be applied as if `section
1042(c)(1)(B)' appeared instead of `section 1042(c)(2)(B)'.
(51) Subparagraph (F) of section 11801(c)(12) of the Revenue
Reconciliation Act of 1990 shall be applied as if `and (3)'
appeared instead of `and (E)'.
(52) Subparagraph (A) of section 11801(c)(22) of the Revenue
Reconciliation Act of 1990 shall be applied as if `chapters 21'
appeared instead of `chapter 21' in the material proposed to be
stricken.
(53) Paragraph (3) of section 11812(b) of the Revenue
Reconciliation Act of 1990 shall be applied by not executing
the amendment therein to the heading of section 42(d)(5)(B).
(54) Clause (i) of section 11813(b)(9)(A) of the Revenue
Reconciliation Act of 1990 shall be applied as if a comma
appeared after `(3)(A)(ix)' in the material proposed to be
stricken.
(55) Subparagraph (F) of section 11813(b)(13) of the Revenue
Reconciliation Act of 1990 shall be applied as if `tax'
appeared after `investment' in the material proposed to be
stricken.
(56) Paragraph (19) of section 11813(b) of the Revenue
Reconciliation Act of 1990 shall be applied as if `Paragraph
(20) of section 1016(a), as redesignated by section 11801,'
appeared instead of `Paragraph (21) of section 1016(a)'.
(57) Paragraph (5) section 8002(a) of the Surface
Transportation Revenue Act of 1991 shall be applied as if
`4481(e)' appeared instead of `4481(c)'.
(58) Section 7872 is amended--
(A) by striking `foregone' each place it appears in
subsections (a) and (e)(2) and inserting `forgone', and
(B) by striking `FOREGONE' in the heading for subsection
(e) and the heading for paragraph (2) of subsection (e) and
inserting `FORGONE'.
(59) Paragraph (7) of section 7611(h) is amended by striking
`approporiate' and inserting `appropriate'.
(60) The heading of paragraph (3) of section 419A(c) is
amended by striking `SEVERENCE' and inserting `SEVERANCE'.
(61) Clause (ii) of section 807(d)(3)(B) is amended by
striking `Commissoners' ' and inserting `Commissioners' '.
(62) Subparagraph (B) of section 1274A(c)(1) is amended by
striking `instument' and inserting `instrument'.
(63) Subparagraph (B) of section 724(d)(3) by striking
`Subparagaph' and inserting `Subparagraph'.
(64) The last sentence of paragraph (2) of section 42(c) is
amended by striking `of 1988'.
(65) Paragraph (1) of section 9707(d) is amended by striking
`diligence,' and inserting `diligence'.
(66) Subsection (c) of section 4977 is amended by striking
`section 132(i)(2)' and inserting `section 132(h)'.
(67) The last sentence of section 401(a)(20) is amended by
striking `section 211' and inserting `section 521'.
(68) Subparagraph (A) of section 402(g)(3) is amended by
striking `subsection (a)(8)' and inserting `subsection (e)(3)'.
(69) The last sentence of section 403(b)(10) is amended by
striking `an direct' and inserting `a direct'.
(70) Subparagraph (A) of section 4973(b)(1) is amended by
striking `sections 402(c)' and inserting `section 402(c)'.
(71) Paragraph (12) of section 3405(e) is amended by striking
`(b)(3)' and inserting `(b)(2)'.
(72) Paragraph (41) of section 521(b) of the Unemployment
Compensation Amendments of 1992 shall be applied as if
`section' appeared instead of `sections' in the material
proposed to be stricken.
(73) Paragraph (27) of section 521(b) of the Unemployment
Compensation Amendments of 1992 shall be applied as if `Section
691(c)(5)' appeared instead of `Section 691(c)'.
(74) Paragraph (5) of section 860F(a) is amended by striking
`paragraph (1)' and inserting `paragraph (2)'.
(75) Paragraph (1) of section 415(k) is amended by adding
`or' at the end of subparagraph (C), by striking subparagraphs
(D) and (E), and by redesignating subparagraph (F) as
subparagraph (D).
(76) Paragraph (2) of section 404(a) is amended by striking
`(18),'.
(77) Clause (ii) of section 72(p)(4)(A) is amended to read as
follows:
`(ii) SPECIAL RULE- The term `qualified employer
plan' shall include any plan which was (or was
determined to be) a qualified employer plan or a
government plan.'.
(78) Sections 461(i)(3)(C) and 1274(b)(3)(B)(i) are each
amended by striking `section 6662(d)(2)(C)(ii)' and inserting
`section 6662(d)(2)(C)(iii)'.
(79) Subsection (a) of section 164 is amended by striking the
paragraphs relating to the generation-skipping tax and the
environmental tax imposed by section 59A and by inserting after
paragraph (3) the following new paragraphs:
`(4) The GST tax imposed on income distributions.
`(5) The environmental tax imposed by section 59A.'.
(80) Subclause (I) of section 936(a)(4)(A)(ii) is amended by
striking `deprecation' and inserting `depreciation'.
SUBTITLE H--OTHER PROVISIONS
SEC. 1801. EXEMPTION FROM DIESEL FUEL DYEING REQUIREMENTS WITH
RESPECT TO CERTAIN STATES.
(a) IN GENERAL- Section 4082 (relating to exemptions for diesel
fuel) is amended by redesignating subsections (c) and (d) as
subsections (d) and (e), respectively, and by inserting after
subsection (b) the following new subsection:
`(c) EXCEPTION TO DYEING REQUIREMENTS- Paragraph (2) of
subsection (a) shall not apply with respect to any diesel fuel--
`(1) removed, entered, or sold in a State for ultimate sale
or use in an area of such State during the period such area is
exempted from the fuel dyeing requirements under subsection (i)
of section 211 of the Clean Air Act (as in effect on the date
of the enactment of this subsection) by the Administrator of
the Environmental Protection Agency under paragraph (4) of such
subsection (i) (as so in effect), and
`(2) the use of which is certified pursuant to regulations
issued by the Secretary.'.
(b) EFFECTIVE DATE- The amendments made by this section shall
apply with respect to fuel removed, entered, or sold on or after
the first day of the first calendar quarter beginning after the
date of the enactment of this Act.
SEC. 1802. TREATMENT OF CERTAIN UNIVERSITY ACCOUNTS.
(a) IN GENERAL- For purposes of subsection (s) of section 3121 of
the Internal Revenue Code of 1986 (relating to concurrent
employment by 2 or more employers)--
(1) the following entities shall be deemed to be related
corporations that concurrently employ the same individual:
(A) a State university which employs health professionals
as faculty members at a medical school, and
(B) an agency account of a State university which is
described in subparagraph (A) and from which there is
distributed to such faculty members payments forming a part
of the compensation that the State, or such State
university, as the case may be, agrees to pay to such
faculty members, but only if--
(i) such agency account is authorized by State law
and receives the funds for such payments from a faculty
practice plan described in section 501(c)(3) of such
Code and exempt from tax under section 501(a) of such
Code,
(ii) such payments are distributed by such agency
account to such faculty members who render patient care
at such medical school, and
(iii) such faculty members comprise at least 30
percent of the membership of such faculty practice
plan, and
(2) remuneration which is disbursed by such agency account to
any such faculty member of the medical school described in
paragraph (1)(A) shall be deemed to have been actually
disbursed by the State, or such State university, as the case
may be, as a common paymaster and not to have been actually
disbursed by such agency account.
(b) EFFECTIVE DATE- The provisions of subsection (a) shall apply
to remuneration paid after December 31, 1996.
SEC. 1803. MODIFICATIONS TO EXCISE TAX ON OZONE-DEPLETING CHEMICALS.
(a) RECYCLED HALON-
(1) IN GENERAL- Section 4682(d)(1) (relating to recycling) is
amended by inserting `, or on any recycled halon imported from
any country which is a signatory to the Montreal Protocol on
Substances that Deplete the Ozone Layer' before the period at
the end.
(2) CERTIFICATION SYSTEM- The Secretary of the Treasury,
after consultation with the Administrator of the Environmental
Protection Agency, shall develop a certification system to
ensure compliance with the recycling requirement for imported
halon under section 4682(d)(1) of the Internal Revenue Code of
1986, as amended by paragraph (1).
(b) CHEMICALS USED AS PROPELLANTS IN METERED-DOSE INHALERS
TAX-EXEMPT- Paragraph (4) of section 4682(g) (relating to phase-in
of tax on certain substances) is amended to read as follows:
`(4) CHEMICALS USED AS PROPELLANTS IN METERED-DOSE INHALERS-
`(A) TAX-EXEMPT-
`(i) IN GENERAL- No tax shall be imposed by section
4681 on--
`(I) any use of any substance as a propellant in metered-dose
inhalers, or
`(II) any qualified sale by the manufacturer, producer, or
importer of any substance.
`(ii) QUALIFIED SALE- For purposes of clause (i), the
term `qualified sale' means any sale by the
manufacturer, producer, or importer of any substance--
`(I) for use by the purchaser as a propellant in metered-dose
inhalers, or
`(II) for resale by the purchaser to a 2d purchaser for such use
by the 2d purchaser.
The preceding sentence shall apply only if the
manufacturer, producer, and importer, and the 1st and
2d purchasers (if any) meet such registration
requirements as may be prescribed by the Secretary.
`(B) OVERPAYMENTS- If any substance on which tax was paid
under this subchapter is used by any person as a propellant
in metered-dose inhalers, credit or refund without interest
shall be allowed to such person in an amount equal to the
tax so paid. Amounts payable under the preceding sentence
with respect to uses during the taxable year shall be
treated as described in section 34(a) for such year unless
claim thereof has been timely filed under this
subparagraph.'.
(c) EFFECTIVE DATES-
(1) RECYCLED HALON-
(A) IN GENERAL- Except as provided in subparagraph (B),
the amendment made by subsection (a)(1) shall take effect
on January 1, 1997.
(B) HALON-1211- In the case of Halon-1211, the amendment
made by subsection (a)(1) shall take effect on January 1,
1998.
(2) METERED-DOSE INHALERS- The amendment made by subsection
(b) shall take effect on the 7th day after the date of the
enactment of this Act.
SEC. 1804. TAX-EXEMPT BONDS FOR SALE OF ALASKA POWER ADMINISTRATION
FACILITY.
Sections 142(f)(3) (as added by section 1608) and 147(d) of the
Internal Revenue Code of 1986 shall not apply in determining
whether any private activity bond issued after the date of the
enactment of this Act and used to finance the acquisition of the
Snettisham hydroelectric project from the Alaska Power
Administration is a qualified bond for purposes of such Code.
SEC. 1805. NONRECOGNITION TREATMENT FOR CERTAIN TRANSFERS BY COMMON
TRUST FUNDS TO REGULATED INVESTMENT COMPANIES.
(a) GENERAL RULE- Section 584 (relating to common trust funds) is
amended by redesignating subsection (h) as subsection (i) and by
inserting after subsection (g) the following new subsection:
`(h) NONRECOGNITION TREATMENT FOR CERTAIN TRANSFERS TO REGULATED
INVESTMENT COMPANIES-
`(1) IN GENERAL- If--
`(A) a common trust fund transfers substantially all of
its assets to one or more regulated investment companies in
exchange solely for stock in the company or companies to
which such assets are so transferred, and
`(B) such stock is distributed by such common trust fund
to participants in such common trust fund in exchange
solely for their interests in such common trust fund,
no gain or loss shall be recognized by such common trust fund
by reason of such transfer or distribution, and no gain or loss
shall be recognized by any participant in such common trust
fund by reason of such exchange.
`(2) BASIS RULES-
`(A) REGULATED INVESTMENT COMPANY- The basis of any asset
received by a regulated investment company in a transfer
referred to in paragraph (1)(A) shall be the same as it
would be in the hands of the common trust fund.
`(B) PARTICIPANTS- The basis of the stock which is
received in an exchange referred to in paragraph (1)(B)
shall be the same as that of the property exchanged. If
stock in more than one regulated investment company is
received in such exchange, the basis determined under the
preceding sentence shall be allocated among the stock in
each such company on the basis of respective fair market
values.
`(3) TREATMENT OF ASSUMPTIONS OF LIABILITY-
`(A) IN GENERAL- In determining whether the transfer
referred to in paragraph (1)(A) is in exchange solely for
stock in one or more regulated investment companies, the
assumption by any such company of a liability of the common
trust fund, and the fact that any property transferred by
the common trust fund is subject to a liability, shall be
disregarded.
`(B) SPECIAL RULE WHERE ASSUMED LIABILITIES EXCEED BASIS-
`(i) IN GENERAL- If, in any transfer referred to in
paragraph (1)(A), the assumed liabilities exceed the
aggregate adjusted bases (in the hands of the common
trust fund) of the assets transferred to the regulated
investment company or companies--
`(I) notwithstanding paragraph (1), gain shall be recognized to
the common trust fund on such transfer in an amount equal to such
excess,
`(II) the basis of the assets received by the regulated
investment company or companies in such transfer shall be increased
by the amount so recognized, and
`(III) any adjustment to the basis of a participant's interest in
the common trust fund as a result of the gain so recognized shall
be treated as occurring immediately before the exchange referred to
in paragraph (1)(B).
If the transfer referred to in paragraph (1)(A) is to
two or more regulated investment companies, the basis
increase under subclause (II) shall be allocated among
such companies on the basis of the respective fair
market values of the assets received by each of such
companies.
`(ii) ASSUMED LIABILITIES- For purposes of clause
(i), the term `assumed liabilities' means the
aggre-gate of--
`(I) any liability of the common trust fund assumed by any
regulated investment company in connection with the transfer
referred to in paragraph (1)(A), and
`(II) any liability to which property so transferred is subject.
`(4) COMMON TRUST FUND MUST MEET DIVERSIFICATION RULES- This
subsection shall not apply to any common trust fund which would
not meet the requirements of section 368(a)(2)(F)(ii) if it
were a corporation. For purposes of the preceding sentence,
Government securities shall not be treated as securities of an
issuer in applying the 25-percent and 50-percent test and such
securities shall not be excluded for purposes of determining
total assets under clause (iv) of section 368(a)(2)(F).'.
(b) EFFECTIVE DATE- The amendment made by subsection (a) shall
apply to transfers after December 31, 1995.
SEC. 1806. QUALIFIED STATE TUITION PROGRAMS.
(a) IN GENERAL- Subchapter F of chapter 1 (relating to exempt
organizations) is amended by adding at the end the following new
part:
`PART VIII--QUALIFIED STATE TUITION PROGRAMS
`Sec. 529. Qualified State tuition programs.
`SEC. 529. QUALIFIED STATE TUITION PROGRAMS.
`(a) GENERAL RULE- A qualified State tuition program shall be
exempt from taxation under this subtitle. Notwithstanding the
preceding sentence, such program shall be subject to the taxes
imposed by section 511 (relating to imposition of tax on unrelated
business income of charitable organizations).
`(b) QUALIFIED STATE TUITION PROGRAM- For purposes of this
section--
`(1) IN GENERAL- The term `qualified State tuition program'
means a program established and maintained by a State or agency
or instrumentality thereof--
`(A) under which a person--
`(i) may purchase tuition credits or certificates on
behalf of a designated beneficiary which entitle the
beneficiary to the waiver or payment of qualified
higher education expenses of the beneficiary, or
`(ii) may make contributions to an account which is
established for the purpose of meeting the qualified
higher education expenses of the designated beneficiary
of the account, and
`(B) which meets the other requirements of this subsection.
`(2) CASH CONTRIBUTIONS- A program shall not be treated as a
qualified State tuition program unless it provides that
purchases or contributions may only be made in cash.
`(3) REFUNDS- A program shall not be treated as a qualified
State tuition program unless it imposes a more than de minimis
penalty on any refund of earnings from the account which are
not--
`(A) used for qualified higher education expenses of the
designated beneficiary,
`(B) made on account of the death or disability of the
designated beneficiary, or
`(C) made on account of a scholarship (or allowance or
payment described in section 135(d)(1) (B) or (C)) received
by the designated beneficiary to the extent the amount of
the refund does not exceed the amount of the scholarship,
allowance, or payment.
`(4) SEPARATE ACCOUNTING- A program shall not be treated as a
qualified State tuition program unless it provides separate
accounting for each designated beneficiary.
`(5) NO INVESTMENT DIRECTION- A program shall not be treated
as a qualified State tuition program unless it provides that
any contributor to, or designated beneficiary under, such
program may not direct the investment of any contributions to
the program (or any earnings thereon).
`(6) NO PLEDGING OF INTEREST AS SECURITY- A program shall not
be treated as a qualified State tuition program if it allows
any interest in the program or any portion thereof to be used
as security for a loan.
`(7) PROHIBITION ON EXCESS CONTRIBUTIONS- A program shall not
be treated as a qualified State tuition program unless it
provides adequate safeguards to prevent contributions on behalf
of a designated beneficiary in excess of those necessary to
provide for the qualified higher education expenses of the
beneficiary.
`(c) TAX TREATMENT OF DESIGNATED BENEFICIARIES AND CONTRIBUTORS-
`(1) IN GENERAL- Except as otherwise provided in this
subsection, no amount shall be includible in gross income of--
`(A) a designated beneficiary under a qualified State
tuition program, or
`(B) a contributor to such program on behalf of a
designated beneficiary,
with respect to any distribution or earnings under such program.
`(2) CONTRIBUTIONS- In no event shall a contribution to a
qualified State tuition program on behalf of a designated
beneficiary be treated as a taxable gift for purposes of
chapter 12.
`(3) DISTRIBUTIONS-
`(A) IN GENERAL- Any distribution under a qualified State
tuition program shall be includible in the gross income of
the distributee in the manner as provided under section 72
to the extent not excluded from gross income under any
other provision of this chapter.
`(B) IN-KIND DISTRIBUTIONS- Any benefit furnished to a
designated beneficiary under a qualified State tuition
program shall be treated as a distribution to the
beneficiary.
`(C) CHANGE IN BENEFICIARIES-
`(i) ROLLOVERS- Subparagraph (A) shall not apply to
that portion of any distribution which, within 60 days
of such distribution, is transferred to the credit of
another designated beneficiary under a qualified State
tuition program who is a member of the family of the
designated beneficiary with respect to which the
distribution was made.
`(ii) CHANGE IN DESIGNATED BENEFICIARIES- Any change
in the designated beneficiary of an interest in a
qualified State tuition program shall not be treated as
a distribution for purposes of subparagraph (A) if the
new beneficiary is a member of the family of the old
beneficiary.
`(D) OPERATING RULES- For purposes of applying section 72--
`(i) to the extent provided by the Secretary, all
qualified State tuition programs of which an individual
is a designated beneficiary shall be treated as one
program,
`(ii) all distributions during a taxable year shall
be treated as one distribution, and
`(iii) the value of the contract, income on the
contract, and investment in the contract shall be
computed as of the close of the calendar year in which
the taxable year begins.
`(4) ESTATE TAX INCLUSION- The value of any interest in any
qualified State tuition program which is attributable to
contributions made by an individual to such program on behalf
of any designated beneficiary shall be includible in the gross
estate of the contributor for purposes of chapter 11.
`(5) SPECIAL RULE FOR APPLYING SECTION 2503(e)- For purposes
of section 2503(e), the waiver (or payment to an educational
institution) of qualified higher education expenses of a
designated beneficiary under a qualified State tuition program
shall be treated as a qualified transfer.
`(d) REPORTING REQUIREMENTS-
`(1) IN GENERAL- If there is a distribution to any
indi-vidual with respect to an interest in a qualified State
tuition program during any calendar year, each officer or
employee having control of the qualified State tuition program
or their designee shall make such reports as the Secretary may
require regarding such distribution to the Secretary and to the
designated beneficiary or the individual to whom the
distribution was made. Any such report shall include such
information as the Secretary may prescribe.
`(2) TIMING OF REPORTS- Any report required by this
subsection--
`(A) shall be filed at such time and in such matter as
the Secretary prescribes, and
`(B) shall be furnished to individuals not later than
January 31 of the calendar year following the calendar year
to which such report relates.
`(e) OTHER DEFINITIONS AND SPECIAL RULES- For purposes of this
section--
`(1) DESIGNATED BENEFICIARY- The term `designated
beneficiary' means--
`(A) the individual designated at the commencement of
participation in the qualified State tuition program as the
beneficiary of amounts paid (or to be paid) to the program,
`(B) in the case of a change in beneficiaries described
in subsection (c)(2)(C), the individual who is the new
beneficiary, and
`(C) in the case of an interest in a qualified State
tuition program purchased by a State or local government or
an organization described in section 501(c)(3) and exempt
from taxation under section 501(a) as part of a scholarship
program operated by such government or organization, the
individual receiving such interest as a scholarship.
`(2) MEMBER OF FAMILY- The term `member of the family' has
the same meaning given such term as section 2032A(e)(2).
`(3) QUALIFIED HIGHER EDUCATION EXPENSES- The term `qualified
higher education expenses' means tuition, fees, books,
supplies, and equipment required for the enrollment or
attendance of a designated beneficiary at an eligible
educational institution (as defined in section 135(c)(3)).
`(4) APPLICATION OF SECTION 514- An interest in a qualified
State tuition program shall not be treated as debt for purposes
of section 514.'.
(b) CONFORMING AMENDMENTS-
(1) Section 135(d)(1) 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 at the end
the following new subparagraph:
`(D) a payment, waiver, or reimbursement of qualified
higher education expenses under a qualified State tuition
program (within the meaning of section 529(b)).'.
(2) The table of parts for subchapter F of chapter 1 is
amended by adding at the end the following new item:
`PART VIII. QUALIFIED STATE TUITION PROGRAMS.'.
(c) EFFECTIVE DATES-
(1) IN GENERAL- The amendments made by this section shall
apply to taxable years ending after the date of the enactment
of this Act.
(2) TRANSITION RULE- If--
(A) a State or agency or instrumentality thereof
maintains, on the date of the enactment of this Act, a
program under which persons may purchase tuition credits or
certificates on behalf of, or make contributions for
education expenses of, a designated beneficiary, and
(B) such program meets the requirements of a qualified
State tuition program before the later of--
(i) the date which is 1 year after such date of
enactment, or
(ii) the first day of the first calendar quarter
after the close of the first regular session of the
State legislature that begins after such date of
enactment,
the amendments made by this section shall apply to
contributions (and earnings allocable thereto) made before
the date such program meets the requirements of such
amendments without regard to whether any requirements of
such amendments are met with respect to such contributions
and earnings.
For purposes of subparagraph (B)(ii), if a State has a 2-year
legislative session, each year of such session shall be deemed
to be a separate regular session of the State legislature.
SEC. 1807. ADOPTION ASSISTANCE.
(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 22 the following new section:
`SEC. 23. ADOPTION EXPENSES.
`(a) ALLOWANCE OF CREDIT-
`(1) IN GENERAL- In the case of an individual, there shall be
allowed as a credit against the tax imposed by this chapter the
amount of the qualified adoption expenses paid or incurred by
the taxpayer.
`(2) YEAR CREDIT ALLOWED- The credit under paragraph (1) with
respect to any expense shall be allowed--
`(A) for the taxable year following the taxable year
during which such expense is paid or incurred, or
`(B) in the case of an expense which is paid or incurred
during the taxable year in which the adoption becomes
final, for such taxable year.
`(b) LIMITATIONS-
`(1) DOLLAR LIMITATION- The aggregate amount of qualified
adoption expenses which may be taken into account under
subsection (a) for all taxable years with respect to the
adoption of a child by the taxpayer shall not exceed $5,000
($6,000, in the case of a child with special needs).
`(2) INCOME LIMITATION-
`(A) IN GENERAL- The amount allowable as a credit under
subsection (a) for any taxable year shall be reduced (but
not below zero) by an amount which bears the same ratio to
the amount so allowable (determined without regard to this
paragraph but with regard to para-graph (1)) as--
`(i) the amount (if any) by which the taxpayer's
adjusted gross income exceeds $75,000, bears to
`(ii) $40,000.
`(B) DETERMINATION OF ADJUSTED GROSS INCOME- For purposes
of subparagraph (A), adjusted gross income shall be
determined--
`(i) without regard to sections 911, 931, and 933, and
`(ii) after the application of sections 86, 135, 137,
219, and 469.
`(3) DENIAL OF DOUBLE BENEFIT-
`(A) IN GENERAL- No credit shall be allowed under
subsection (a) for any expense for which a deduction or
credit is allowed under any other provision of this chapter.
`(B) GRANTS- No credit shall be allowed under subsection
(a) for any expense to the extent that funds for such
expense are received under any Federal, State, or local
program.
`(c) CARRYFORWARDS OF UNUSED CREDIT- If the credit allowable
under subsection (a) for any taxable year exceeds the limitation
imposed by section 26(a) for such taxable year reduced by the sum
of the credits allowable under this subpart (other than this
section), such excess shall be carried to the succeeding taxable
year and added to the credit allowable under subsection (a) for
such taxable year. No credit may be carried forward under this
subsection to any taxable year following the fifth taxable year
after the taxable year in which the credit arose. For purposes of
the preceding sentence, credits shall be treated as used on a
first-in first-out basis.
`(d) DEFINITIONS- For purposes of this section--
`(1) QUALIFIED ADOPTION EXPENSES- The term `qualified
adoption expenses' means reasonable and necessary adoption
fees, court costs, attorney fees, and other expenses--
`(A) which are directly related to, and the principal
purpose of which is for, the legal adoption of an eligible
child by the taxpayer,
`(B) which are not incurred in violation of State or
Federal law or in carrying out any surrogate parenting
arrangement,
`(C) which are not expenses in connection with the
adoption by an individual of a child who is the child of
such individual's spouse, and
`(D) which are not reimbursed under an employer program
or otherwise.
`(2) ELIGIBLE CHILD- The term `eligible child' means any
individual--
`(A) who--
`(i) has not attained age 18, or
`(ii) is physically or mentally incapable of caring
for himself, and
`(B) in the case of qualified adoption expenses paid or
incurred after December 31, 2001, who is a child with
special needs.
`(3) CHILD WITH SPECIAL NEEDS- The term `child with special
needs' means any child if--
`(A) a State has determined that the child cannot or
should not be returned to the home of his parents,
`(B) such State has determined that there exists with
respect to the child a specific factor or condition (such
as his ethnic background, age, or membership in a minority
or sibling group, or the presence of factors such as
medical conditions or physical, mental, or emotional
handicaps) because of which it is reasonable to conclude
that such child cannot be placed with adoptive parents
without providing adoption assistance, and
`(C) such child is a citizen or resident of the United
States (as defined in section 217(h)(3)).
`(e) SPECIAL RULES FOR FOREIGN ADOPTIONS- In the case of an
adoption of a child who is not a citizen or resident of the United
States (as defined in section 217(h)(3))--
`(1) subsection (a) shall not apply to any qualified adoption
expense with respect to such adoption unless such adoption
becomes final, and
`(2) any such expense which is paid or incurred before the
taxable year in which such adoption becomes final shall be
taken into account under this section as if such expense were
paid or incurred during such year.
`(f) FILING REQUIREMENTS-
`(1) MARRIED COUPLES MUST FILE JOINT RETURNS- Rules similar
to the rules of paragraphs (2), (3), and (4) of section 21(e)
shall apply for purposes of this section.
`(2) TAXPAYER MUST INCLUDE TIN-
`(A) IN GENERAL- No credit shall be allowed under this
section with respect to any eligible child unless the
taxpayer includes (if known) the name, age, and TIN of such
child on the return of tax for the taxable year.
`(B) OTHER METHODS- The Secretary may, in lieu of the
information referred to in subparagraph (A), require other
information meeting the purposes of subparagraph (A),
including identification of an agent assisting with the
adoption.
`(g) BASIS ADJUSTMENTS- For purposes of this subtitle, if a
credit is allowed under this section for any expenditure with
respect to any property, the increase in the basis of such property
which would (but for this subsection) result from such expenditure
shall be reduced by the amount of the credit so allowed.
`(h) REGULATIONS- The Secretary shall prescribe such regulations
as may be appropriate to carry out this section and section 137,
including regulations which treat unmarried individuals who pay or
incur qualified adoption expenses with respect to the same child as
1 taxpayer for
purposes of applying the dollar limitation in subsection (b)(1) of
this section and in section 137(b)(1).'.
(b) EXCLUSION OF AMOUNTS RECEIVED UNDER EMPLOYER'S ADOPTION
ASSISTANCE PROGRAMS- Part III of subchapter B of chapter 1
(relating to items specifically excluded from gross income) is
amended by redesignating section 137 as section 138 and by
inserting after section 136 the following new section:
`SEC. 137. ADOPTION ASSISTANCE PROGRAMS.
`(a) IN GENERAL- Gross income of an employee does not include
amounts paid or expenses incurred by the employer for qualified
adoption expenses in connection with the adoption of a child by an
employee if such amounts are furnished pursuant to an adoption
assistance program.
`(b) LIMITATIONS-
`(1) DOLLAR LIMITATION- The aggregate amount excludable from
gross income under subsection (a) for all taxable years with
respect to the adoption of a child by the taxpayer shall not
exceed $5,000 ($6,000, in the case of a child with special
needs).
`(2) INCOME LIMITATION- The amount excludable from gross
income under subsection (a) for any taxable year shall be
reduced (but not below zero) by an amount which bears the same
ratio to the amount so excludable (determined without regard to
this paragraph but with regard to paragraph (1)) as--
`(A) the amount (if any) by which the taxpayer's adjusted
gross income exceeds $75,000, bears to
`(B) $40,000.
`(3) DETERMINATION OF ADJUSTED GROSS INCOME- For purposes of
paragraph (2), adjusted gross income shall be determined--
`(A) without regard to this section and sections 911,
931, and 933, and
`(B) after the application of sections 86, 135, 219, and
469.
`(c) ADOPTION ASSISTANCE PROGRAM- For purposes of this section,
an adoption assistance program is a separate written plan of an
employer for the exclusive benefit of such employer's employees--
`(1) under which the employer provides such employees with
adoption assistance, and
`(2) which meets requirements similar to the requirements of
paragraphs (2), (3), (5), and (6) of section 127(b).
An adoption reimbursement program operated under section 1052 of
title 10, United States Code (relating to armed forces) or section
514 of title 14, United States Code (relating to members of the
Coast Guard) shall be treated as an adoption assistance program for
purposes of this section.
`(d) QUALIFIED ADOPTION EXPENSES- For purposes of this section,
the term `qualified adoption expenses' has the meaning given such
term by section 23(d) (determined without regard to reimbursements
under this section).
`(e) CERTAIN RULES TO APPLY- Rules similar to the rules of
subsections (e), (f), and (g) of section 23 shall apply for
purposes of this section.
`(f) TERMINATION- This section shall not apply to amounts paid or
expenses incurred after December 31, 2001.'.
(c) Conforming Amendments-
(1) Subparagraph (C) of section 25(e)(1) is amended by
inserting `and section 23' after `this section'.
(2) Sections 86(b)(2)(A) and 135(c)(4)(A) are each amended by
inserting `137,' before `911'.
(3) Clause (i) of section 219(g)(3)(A) is amended by
inserting `, 137,' before `and 911'.
(4) Clause (ii) of section 469(i)(3)(E) is amended to read as
follows:
`(ii) the amounts excludable from gross income under
sections 135 and 137,'.
(5) Subsection (a) of section 1016 is amended by striking
`and' at the end of paragraph (24), by striking the period at
the end of paragraph (25) and inserting `, and', and by adding
at the end the following new paragraph:
`(26) to the extent provided in sections 23(g) and 137(e).'.
(6) 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 22 the following new item:
`Sec. 23. Adoption expenses.'.
(7) The table of sections for part III of subchapter B of
chapter 1 is amended by striking the item relating to section
137 and inserting the following:
`Sec. 137. Adoption assistance programs.
`Sec. 138. Cross reference to other Acts.'.
(d) STUDY AND REPORT- The Secretary of the Treasury shall study
the effect on adoptions of the tax credit and gross income
exclusion established by the amendments made by this section and
shall submit a report regarding the study to the Committee on
Finance of the Senate and the Committee on Ways and Means of the
House of Representatives not later than January 1, 2000.
(e) EFFECTIVE DATE- The amendments made by this section shall
apply to taxable years beginning after December 31, 1996.
SEC. 1808. REMOVAL OF BARRIERS TO INTERETHNIC ADOPTION.
(a) STATE PLAN REQUIREMENTS- Section 471(a) of the Social
Security Act (42 U.S.C 671(a)) is amended--
(1) by striking `and' at the end of paragraph (16);
(2) by striking the period at the end of paragraph (17) and
inserting `; and'; and
(3) by adding at the end the following:
`(18) not later than January 1, 1997, provides that neither
the State nor any other entity in the State that receives funds
from the Federal Government and is involved in adoption or
foster care placements may--
`(A) deny to any person the opportunity to become an
adoptive or a foster parent, on the basis of the race,
color, or national origin of the person, or of the child,
involved; or
`(B) delay or deny the placement of a child for adoption
or into foster care, on the basis of the race, color, or
national origin of the adoptive or foster parent, or the
child, involved.'.
(b) ENFORCEMENT- Section 474 of such Act (42 U.S.C. 674) is
amended by adding at the end the following:
`(d)(1) If, during any quarter of a fiscal year, a State's
program operated under this part is found, as a result of a review
conducted under section 1123A, or otherwise, to have violated
section 471(a)(18) with respect to a person or to have failed to
implement a corrective action plan within a period of time not to
exceed 6 months with respect to such violation, then,
notwithstanding subsection (a) of this section and any regulations
promulgated under section 1123A(b)(3), the Secretary shall reduce
the amount otherwise payable to the State under this part, for that
fiscal year quarter and for any subsequent quarter of such fiscal
year, until the State program is found, as a result of a subsequent
review under section 1123A, to have implemented a corrective action
plan with respect to such violation, by--
`(A) 2 percent of such otherwise payable amount, in the case
of the 1st such finding for the fiscal year with respect to the
State;
`(B) 3 percent of such otherwise payable amount, in the case
of the 2nd such finding for the fiscal year with respect to the
State; or
`(C) 5 percent of such otherwise payable amount, in the case
of the 3rd or subsequent such finding for the fiscal year with
respect to the State.
In imposing the penalties described in this paragraph, the
Secretary shall not reduce any fiscal year payment to a State by
more than 5 percent.
`(2) Any other entity which is in a State that receives funds
under this part and which violates section 471(a)(18) during a
fiscal year quarter with respect to any person shall remit to the
Secretary all funds that were paid by the State to the entity
during the quarter from such funds.
`(3)(A) Any individual who is aggrieved by a violation of section
471(a)(18) by a State or other entity may bring an action seeking
relief from the State or other entity in any United States district
court.
`(B) An action under this paragraph may not be brought more than
2 years after the date the alleged violation occurred.
`(4) This subsection shall not be construed to affect the
application of the Indian Child Welfare Act of 1978.'.
(c) CIVIL RIGHTS-
(1) PROHIBITED CONDUCT- A person or government that is
involved in adoption or foster care placements may not--
(A) deny to any individual the opportunity to become an
adoptive or a foster parent, on the basis of the race,
color, or national origin of the individual, or of the
child, involved; or
(B) delay or deny the placement of a child for adoption
or into foster care, on the basis of the race, color, or
national origin of the adoptive or foster parent, or the
child, involved.
(2) ENFORCEMENT- Noncompliance with paragraph (1) is deemed a
violation of title VI of the Civil Rights Act of 1964.
(3) NO EFFECT ON THE INDIAN CHILD WELFARE ACT OF 1978- This
subsection shall not be construed to affect the application of
the Indian Child Welfare Act of 1978.
(d) CONFORMING AMENDMENT- Section 553 of the Howard M. Metzenbaum
Multiethnic Placement Act of 1994 (42 U.S.C. 5115a) is repealed.
SEC. 1809. 6-MONTH DELAY OF ELECTRONIC FUND TRANSFER REQUIREMENT.
Notwithstanding any other provision of law, the increase in the
applicable required percentages for fiscal year 1997 in clauses
(i)(IV) and (ii)(IV) of section 6302(h)(2)(C) of the Internal
Revenue Code of 1986 shall not take effect before July 1, 1997.
SUBTITLE I--FOREIGN TRUST TAX COMPLIANCE
SEC. 1901. IMPROVED INFORMATION REPORTING ON FOREIGN TRUSTS.
(a) IN GENERAL- Section 6048 (relating to returns as to certain
foreign trusts) is amended to read as follows:
`SEC. 6048. INFORMATION WITH RESPECT TO CERTAIN FOREIGN TRUSTS.
`(a) NOTICE OF CERTAIN EVENTS-
`(1) GENERAL RULE- On or before the 90th day (or such later
day as the Secretary may prescribe) after any reportable event,
the responsible party shall provide written notice of such
event to the Secretary in accordance with paragraph (2).
`(2) CONTENTS OF NOTICE- The notice required by paragraph (1)
shall contain such information as the Secretary may prescribe,
including--
`(A) the amount of money or other property (if any)
transferred to the trust in connection with the reportable
event, and
`(B) the identity of the trust and of each trustee and
beneficiary (or class of beneficiaries) of the trust.
`(3) REPORTABLE EVENT- For purposes of this subsection--
`(A) IN GENERAL- The term `reportable event' means--
`(i) the creation of any foreign trust by a United
States person,
`(ii) the transfer of any money or property (directly
or indirectly) to a foreign trust by a United States
person, including a transfer by reason of death, and
`(iii) the death of a citizen or resident of the
United States if--
`(I) the decedent was treated as the owner of any portion of a
foreign trust under the rules of subpart E of part I of subchapter
J of chapter 1, or
`(II) any portion of a foreign trust was included in the gross
estate of the decedent.
`(B) EXCEPTIONS-
`(i) FAIR MARKET VALUE SALES- Subparagraph (A)(ii)
shall not apply to any transfer of property to a trust
in exchange for consideration of at least the fair
market value of the transferred property. For purposes
of the preceding sentence, consideration other than
cash shall be taken into account at its fair market
value and the rules of section 679(a)(3) shall apply.
`(ii) DEFERRED COMPENSATION AND CHARITABLE TRUSTS-
Subparagraph (A) shall not apply with respect to a
trust which is--
`(I) described in section 402(b), 404(a)(4), or 404A, or
`(II) determined by the Secretary to be described in section
501(c)(3).
`(4) RESPONSIBLE PARTY- For purposes of this subsection, the
term `responsible party' means--
`(A) the grantor in the case of the creation of an inter
vivos trust,
`(B) the transferor in the case of a reportable event
described in paragraph (3)(A)(ii) other than a transfer by
reason of death, and
`(C) the executor of the decedent's estate in any other
case.
`(b) UNITED STATES GRANTOR OF FOREIGN TRUST-
`(1) IN GENERAL- If, at any time during any taxable year of a
United States person, such person is treated as the owner of
any portion of a foreign trust under the rules of subpart E of
part I of subchapter J of chapter 1, such person shall be
responsible to ensure that--
`(A) such trust makes a return for such year which sets
forth a full and complete accounting of all trust
activities and operations for the year, the name of the
United States agent for such trust, and such other
information as the Secretary may prescribe, and
`(B) such trust furnishes such information as the
Secretary may prescribe to each United States person (i)
who is treated as the owner of any portion of such trust or
(ii) who receives (directly or indirectly) any distribution
from the trust.
`(2) TRUSTS NOT HAVING UNITED STATES AGENT-
`(A) IN GENERAL- If the rules of this paragraph apply to
any foreign trust, the determination of amounts required to
be taken into account with respect to such trust by a
United States person under the rules of subpart E of part I
of subchapter J of chapter 1 shall be determined by the
Secretary.
`(B) UNITED STATES AGENT REQUIRED- The rules of this
paragraph shall apply to any foreign trust to which
paragraph (1) applies unless such trust agrees (in such
manner, subject to such conditions, and at such time as the
Secretary shall prescribe) to authorize a United States
person to act as such trust's limited agent solely for
purposes of applying sections 7602, 7603, and 7604 with
respect to--
`(i) any request by the Secretary to examine records
or produce testimony related to the proper treatment of
amounts required to be taken into account under the
rules referred to in subparagraph (A), or
`(ii) any summons by the Secretary for such records
or testimony.
The appearance of persons or production of records by
reason of a United States person being such an agent shall
not subject such persons or records to legal process for
any purpose other than determining the correct treatment
under this title of the amounts required to be taken into
account under the rules referred to in subparagraph (A). A
foreign trust which appoints an agent described in this
subparagraph shall not be considered to have an office or a
permanent establishment in the United States, or to be
engaged in a trade or business in the United States, solely
because of the activities of such agent pursuant to this
subsection.
`(C) OTHER RULES TO APPLY- Rules similar to the rules of
paragraphs (2) and (4) of section 6038A(e) shall apply for
purposes of this paragraph.
`(c) REPORTING BY UNITED STATES BENEFICIARIES OF FOREIGN TRUSTS-
`(1) IN GENERAL- If any United States person receives
(directly or indirectly) during any taxable year of such person
any distribution from a foreign
trust, such person shall make a return with respect to such trust
for such year which includes--
`(A) the name of such trust,
`(B) the aggregate amount of the distributions so
received from such trust during such taxable year, and
`(C) such other information as the Secretary may prescribe.
`(2) INCLUSION IN INCOME IF RECORDS NOT PROVIDED-
`(A) IN GENERAL- If adequate records are not provided to
the Secretary to determine the proper treatment of any
distribution from a foreign trust, such distribution shall
be treated as an accumulation distribution includible in
the gross income of the distributee under chapter 1. To the
extent provided in regulations, the preceding sentence
shall not apply if the foreign trust elects to be subject
to rules similar to the rules of subsection (b)(2)(B).
`(B) APPLICATION OF ACCUMULATION DISTRIBUTION RULES- For
purposes of applying section 668 in a case to which
subparagraph (A) applies, the applicable number of years
for purposes of section 668(a) shall be 1/2 of the number
of years the trust has been in existence.
`(d) SPECIAL RULES-
`(1) DETERMINATION OF WHETHER UNITED STATES PERSON MAKES
TRANSFER OR RECEIVES DISTRIBUTION- For purposes of this
section, in determining whether a United States person makes a
transfer to, or receives a distribution from, a foreign trust,
the fact that a portion of such trust is treated as owned by
another person under the rules of subpart E of part I of
subchapter J of chapter 1 shall be disregarded.
`(2) DOMESTIC TRUSTS WITH FOREIGN ACTIVITIES- To the extent
provided in regulations, a trust which is a United States
person shall be treated as a foreign trust for purposes of this
section and section 6677 if such trust has substantial
activities, or holds substantial property, outside the United
States.
`(3) TIME AND MANNER OF FILING INFORMATION- Any notice or
return required under this section shall be made at such time
and in such manner as the Secretary shall prescribe.
`(4) MODIFICATION OF RETURN REQUIREMENTS- The Secretary is
authorized to suspend or modify any requirement of this section
if the Secretary determines that the United States has no
significant tax interest in obtaining the required information.'.
(b) INCREASED PENALTIES- Section 6677 (relating to failure to
file information returns with respect to certain foreign trusts) is
amended to read as follows:
`SEC. 6677. FAILURE TO FILE INFORMATION WITH RESPECT TO CERTAIN
FOREIGN TRUSTS.
`(a) CIVIL PENALTY- In addition to any criminal penalty provided
by law, if any notice or return required to be filed by section
6048--
`(1) is not filed on or before the time provided in such
section, or
`(2) does not include all the information required pursuant
to such section or includes incorrect information,
the person required to file such notice or return shall pay a
penalty equal to 35 percent of the gross reportable amount. If any
failure described in the preceding sentence continues for more than
90 days after the day on which the Secretary mails notice of such
failure to the person required to pay such penalty, such person
shall pay a penalty (in addition to the amount determined under the
preceding sentence) of $10,000 for each 30-day period (or fraction
thereof) during which such failure continues after the expiration
of such 90-day period. In no event shall the penalty under this
subsection with respect to any failure exceed the gross reportable
amount.
`(b) SPECIAL RULES FOR RETURNS UNDER SECTION 6048(b)- In the case
of a return required under section 6048(b)--
`(1) the United States person referred to in such section
shall be liable for the penalty imposed by subsection (a), and
`(2) subsection (a) shall be applied by substituting `5
percent' for `35 percent'.
`(c) GROSS REPORTABLE AMOUNT- For purposes of subsection (a), the
term `gross reportable amount' means--
`(1) the gross value of the property involved in the event
(determined as of the date of the event) in the case of a
failure relating to section 6048(a),
`(2) the gross value of the portion of the trust's assets at
the close of the year treated as owned by the United States
person in the case of a failure relating to section 6048(b)(1),
and
`(3) the gross amount of the distributions in the case of a
failure relating to section 6048(c).
`(d) REASONABLE CAUSE EXCEPTION- No penalty shall be imposed by
this section on any failure which is shown to be due to reasonable
cause and not due to willful
neglect. The fact that a foreign jurisdiction would impose a civil
or criminal penalty on the taxpayer (or any other person) for
disclosing the required information is not reasonable cause.
`(e) DEFICIENCY PROCEDURES NOT TO APPLY- Subchapter B of chapter
63 (relating to deficiency procedures for income, estate, gift, and
certain excise taxes) shall not apply in respect of the assessment
or collection of any penalty imposed by subsection (a).'.
(c) CONFORMING AMENDMENTS-
(1) Paragraph (2) of section 6724(d) is amended by striking
`or' at the end of subparagraph (S), by striking the period at
the end of subparagraph (T) and inserting `, or', and by
inserting after subparagraph (T) the following new subparagraph:
`(U) section 6048(b)(1)(B) (relating to foreign trust
reporting requirements).'.
(2) The table of sections for subpart B of part III of
subchapter A of chapter 61 is amended by striking the item
relating to section 6048 and inserting the following new item:
`Sec. 6048. Information with respect to certain foreign trusts.'.
(3) The table of sections for part I of subchapter B of
chapter 68 is amended by striking the item relating to section
6677 and inserting the following new item:
`Sec. 6677. Failure to file information with respect to certain
foreign trusts.'.
(d) EFFECTIVE DATES-
(1) REPORTABLE EVENTS- To the extent related to subsection
(a) of section 6048 of the Internal Revenue Code of 1986, as
amended by this section, the amendments made by this section
shall apply to reportable events (as defined in such section
6048) occurring after the date of the enactment of this Act.
(2) GRANTOR TRUST REPORTING- To the extent related to
subsection (b) of such section 6048, the amendments made by
this section shall apply to taxable years of United States
persons beginning after December 31, 1995.
(3) REPORTING BY UNITED STATES BENEFICIARIES- To the extent
related to subsection (c) of such section 6048, the amendments
made by this section shall apply to distributions received
after the date of the enactment of this Act.
SEC. 1902. COMPARABLE PENALTIES FOR FAILURE TO FILE RETURN RELATING
TO TRANSFERS TO FOREIGN ENTITIES.
(a) IN GENERAL- Section 1494 is amended by adding at the end the
following new subsection:
`(c) PENALTY- In the case of any failure to file a return
required by the Secretary with respect to any transfer described in
section 1491, the person required to file such return shall be
liable for the penalties provided in section 6677 in the same
manner as if such failure were a failure to file a notice under
section 6048(a).'.
(b) EFFECTIVE DATE- The amendment made by subsection (a) shall
apply to transfers after the date of the enactment of this Act.
SEC. 1903. MODIFICATIONS OF RULES RELATING TO FOREIGN TRUSTS HAVING
ONE OR MORE UNITED STATES BENEFICIARIES.
(a) TREATMENT OF TRUST OBLIGATIONS, ETC-
(1) Paragraph (2) of section 679(a) is amended by striking
subparagraph (B) and inserting the following:
`(B) TRANSFERS AT FAIR MARKET VALUE- To any transfer of
property to a trust in exchange for consideration of at
least the fair market value of the transferred property.
For purposes of the preceding sentence, consideration other
than cash shall be taken into account at its fair market
value.'.
(2) Subsection (a) of section 679 (relating to foreign trusts
having one or more United States beneficiaries) is amended by
adding at the end the following new paragraph:
`(3) CERTAIN OBLIGATIONS NOT TAKEN INTO ACCOUNT UNDER FAIR
MARKET VALUE EXCEPTION-
`(A) IN GENERAL- In determining whether paragraph (2)(B)
applies to any transfer by a person described in clause
(ii) or (iii) of subparagraph (C), there shall not be taken
into account--
`(i) except as provided in regulations, any
obligation of a person described in subparagraph (C), and
`(ii) to the extent provided in regulations, any
obligation which is guaranteed by a person described in
subparagraph (C).
`(B) TREATMENT OF PRINCIPAL PAYMENTS ON OBLIGATION-
Principal payments by the trust on any obligation referred
to in subparagraph (A) shall be taken into account on and
after the date of the payment in determining the portion of
the trust attributable to the property transferred.
`(C) PERSONS DESCRIBED- The persons described in this
subparagraph are--
`(i) the trust,
`(ii) any grantor or beneficiary of the trust, and
`(iii) any person who is related (within the meaning
of section 643(i)(2)(B)) to any grantor or beneficiary
of the trust.'.
(b) EXEMPTION OF TRANSFERS TO CHARITABLE TRUSTS- Subsection (a)
of section 679 is amended by striking `section 404(a)(4) or 404A'
and inserting `section 6048(a)(3)(B)(ii)'.
(c) OTHER MODIFICATIONS- Subsection (a) of section 679 is amended
by adding at the end the following new paragraphs:
`(4) SPECIAL RULES APPLICABLE TO FOREIGN GRANTOR WHO LATER
BECOMES A UNITED STATES PERSON-
`(A) IN GENERAL- If a nonresident alien individual has a
residency starting date within 5 years after directly or
indirectly transferring property to a foreign trust, this
section and section 6048 shall be applied as if such
individual transferred to such trust on the residency
starting date an amount equal to the portion of such trust
attributable to the property transferred by such individual
to such trust in such transfer.
`(B) TREATMENT OF UNDISTRIBUTED INCOME- For purposes of
this section, undistributed net income for periods before
such individual's residency starting date shall be taken
into account in determining the portion of the trust which
is attributable to property transferred by such individual
to such trust but shall not otherwise be taken into account.
`(C) RESIDENCY STARTING DATE- For purposes of this
paragraph, an individual's residency starting date is the
residency starting date determined under section
7701(b)(2)(A).
`(5) OUTBOUND TRUST MIGRATIONS- If--
`(A) an individual who is a citizen or resident of the
United States transferred property to a trust which was not
a foreign trust, and
`(B) such trust becomes a foreign trust while such
individual is alive,
then this section and section 6048 shall be applied as if such
individual transferred to such trust on the date such trust
becomes a foreign trust an amount equal to the portion of such
trust attributable to the property previously transferred by
such individual to such trust. A rule similar to the rule of
paragraph (4)(B) shall apply for purposes of this paragraph.'.
(d) MODIFICATIONS RELATING TO WHETHER TRUST HAS UNITED STATES
BENEFICIARIES- Subsection (c) of section 679 is amended by adding
at the end the following new paragraph:
`(3) CERTAIN UNITED STATES BENEFICIARIES DISREGARDED- A
beneficiary shall not be treated as a United States person in
applying this section with respect to any transfer of property
to foreign trust if such beneficiary first became a United
States person more than 5 years after the date of such
transfer.'.
(e) TECHNICAL AMENDMENT- Subparagraph (A) of section 679(c)(2) is
amended to read as follows:
`(A) in the case of a foreign corporation, such
corporation is a controlled foreign corporation (as defined
in section 957(a)),'.
(f) REGULATIONS- Section 679 is amended by adding at the end the
following new subsection:
`(d) REGULATIONS- The Secretary shall prescribe such regulations
as may be necessary or appropriate to carry out the purposes of
this section.'.
(g) EFFECTIVE DATE- The amendments made by this section shall
apply to transfers of property after February 6, 1995.
SEC. 1904. FOREIGN PERSONS NOT TO BE TREATED AS OWNERS UNDER
GRANTOR TRUST RULES.
(a) GENERAL RULE-
(1) Subsection (f) of section 672 (relating to special rule
where grantor is foreign person) is amended to read as follows:
`(f) SUBPART NOT TO RESULT IN FOREIGN OWNERSHIP-
`(1) IN GENERAL- Notwithstanding any other provision of this
subpart, this subpart shall apply only to the extent such
application results in an amount (if any) being currently taken
into account (directly or through 1 or more entities) under
this chapter in computing the income of a citizen or resident
of the United States or a domestic corporation.
`(2) EXCEPTIONS-
`(A) CERTAIN REVOCABLE AND IRREVOCABLE TRUSTS- Paragraph
(1) shall not apply to any portion of a trust if--
`(i) the power to revest absolutely in the grantor
title to the trust property to which such portion is
attributable is exercisable solely by the grantor
without the approval or consent of any other person or
with the consent of a related or subordinate party who
is subservient to the grantor, or
`(ii) the only amounts distributable from such
portion (whether income or corpus) during the lifetime
of the grantor are amounts distributable to the grantor
or the spouse of the grantor.
`(B) COMPENSATORY TRUSTS- Except as provided in
regulations, paragraph (1) shall not apply to any portion
of a trust distributions from which are taxable as
compensation for services rendered.
`(3) SPECIAL RULES- Except as otherwise provided in
regulations prescribed by the Secretary--
`(A) a controlled foreign corporation (as defined in
section 957) shall be treated as a domestic corporation for
purposes of paragraph (1), and
`(B) paragraph (1) shall not apply for purposes of
applying section 1296.
`(4) RECHARACTERIZATION OF PURPORTED GIFTS- In the case of
any transfer directly or indirectly from a partnership or
foreign corporation which the transferee treats as a gift or
bequest, the Secretary may recharacterize such transfer in such
circumstances as the Secretary determines to be appropriate to
prevent the avoidance of the purposes of this subsection.
`(5) SPECIAL RULE WHERE GRANTOR IS FOREIGN PERSON- If--
`(A) but for this subsection, a foreign person would be
treated as the owner of any portion of a trust, and
`(B) such trust has a beneficiary who is a United States
person,
such beneficiary shall be treated as the grantor of such
portion to the extent such beneficiary has made (directly or
indirectly) transfers of property (other than in a sale for
full and adequate consideration) to such foreign person. For
purposes of the preceding sentence, any gift shall not be taken
into account to the extent such gift would be excluded from
taxable gifts under section 2503(b).
`(6) REGULATIONS- The Secretary shall prescribe such
regulations as may be necessary or appropriate to carry out the
purposes of this subsection, including regulations providing
that paragraph (1) shall not apply in appropriate cases.'.
(2) The last sentence of subsection (c) of section 672 is
amended by inserting `subsection (f) and' before `sections 674'.
(b) CREDIT FOR CERTAIN TAXES-
(1) Paragraph (2) of section 665(d) is amended by adding at
the end the following new sentence: `Under rules or regulations
prescribed by the Secretary, in the case of any foreign trust
of which the settlor or another person would be treated as
owner of any portion of the trust under subpart E but for
section 672(f), the term `taxes imposed on the trust' includes
the allocable amount of any income, war profits, and excess
profits taxes imposed by any foreign country or possession of
the United States on the settlor or such other person in
respect of trust income.'.
(2) Paragraph (5) of section 901(b) is amended by adding at
the end the following new sentence: `Under rules or regulations
prescribed by the Secretary, in the case of any foreign trust
of which the settlor or another person would be treated as
owner of any portion of the trust under subpart E but for
section 672(f), the allocable amount of any income, war
profits, and excess profits taxes imposed by any foreign
country or possession of the United States on the settlor or
such other person in respect of trust income.'.
(c) DISTRIBUTIONS BY CERTAIN FOREIGN TRUSTS THROUGH NOMINEES-
(1) Section 643 is amended by adding at the end the following
new subsection:
`(h) DISTRIBUTIONS BY CERTAIN FOREIGN TRUSTS THROUGH NOMINEES-
For purposes of this part, any amount paid to a United States
person which is derived directly or indirectly from a foreign trust
of which the payor is not the grantor shall be deemed in the year
of payment to have been directly paid by the foreign trust to such
United States person.'.
(2) Section 665 is amended by striking subsection (c).
(d) EFFECTIVE DATE-
(1) IN GENERAL- Except as provided by paragraph (2), the
amendments made by this section shall take effect on the date
of the enactment of this Act.
(2) EXCEPTION FOR CERTAIN TRUSTS- The amendments made by this
section shall not apply to any trust--
(A) which is treated as owned by the grantor under
section 676 or 677 (other than subsection (a)(3) thereof)
of the Internal Revenue Code of 1986, and
(B) which is in existence on September 19, 1995.
The preceding sentence shall not apply to the portion of any
such trust attributable to any transfer to such trust after
September 19, 1995.
(e) TRANSITIONAL RULE- If--
(1) by reason of the amendments made by this section, any
person other than a United States person ceases to be treated
as the owner of a portion of a domestic trust, and
(2) before January 1, 1997, such trust becomes a foreign
trust, or the assets of such trust are transferred to a foreign
trust,
no tax shall be imposed by section 1491 of the Internal Revenue
Code of 1986 by reason of such trust becoming a foreign trust or
the assets of such trust being transferred to a foreign trust.
