[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[H.R. 546 Introduced in House (IH)]
107th CONGRESS
1st Session
H. R. 546
To amend the Internal Revenue Code of 1986 to provide tax benefits for
small businesses, to amend the Fair Labor Standards Act of 1938 to
increase the minimum wage, and for other purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
February 8, 2001
Mr. Quinn introduced the following bill; which was referred to the
Committee on Ways and Means, and in addition to the Committee on
Education and the Workforce, for a period to be subsequently determined
by the Speaker, in each case for consideration of such provisions as
fall within the jurisdiction of the committee concerned
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to provide tax benefits for
small businesses, to amend the Fair Labor Standards Act of 1938 to
increase the minimum wage, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE; REFERENCES; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Small Business Tax
Fairness Act of 2001''.
(b) Amendment of 1986 Code.--Except as otherwise expressly
provided, whenever in this Act an amendment or repeal is expressed in
terms of an amendment to, or repeal of, a section or other provision,
the reference shall be considered to be made to a section or other
provision of the Internal Revenue Code of 1986.
(c) Table of Contents.--The table of contents of this Act is as
follows:
Sec. 1. Short title; references; table of contents.
TITLE I--SMALL BUSINESS PROVISIONS
Sec. 101. Deduction for 100 percent of health insurance costs of self-
employed individuals.
Sec. 102. Increase in expense treatment for small businesses.
Sec. 103. Increased deduction for meal expenses.
Sec. 104. Increased deductibility of business meal expenses for
individuals subject to Federal limitations
on hours of service.
Sec. 105. Income averaging for farmers and fishermen not to increase
alternative minimum tax liability.
Sec. 106. Repeal of occupational taxes relating to distilled spirits,
wine, and beer.
TITLE II--PENSION PROVISIONS
Subtitle A--Expanding Coverage
Sec. 201. Increase in benefit and contribution limits.
Sec. 202. Plan loans for subchapter S owners, partners, and sole
proprietors.
Sec. 203. Modification of top-heavy rules.
Sec. 204. Elective deferrals not taken into account for purposes of
deduction limits.
Sec. 205. Repeal of coordination requirements for deferred compensation
plans of State and local governments and
tax-exempt organizations.
Sec. 206. Elimination of user fee for requests to IRS regarding pension
plans.
Sec. 207. Deduction limits.
Sec. 208. Option to treat elective deferrals as after-tax
contributions.
Subtitle B--Enhancing Fairness for Women
Sec. 221. Catchup contributions for individuals age 50 or over.
Sec. 222. Equitable treatment for contributions of employees to defined
contribution plans.
Sec. 223. Faster vesting of certain employer matching contributions.
Sec. 224. Simplify and update the minimum distribution rules.
Sec. 225. Clarification of tax treatment of division of section 457
plan benefits upon divorce.
Sec. 226. Modification of safe harbor relief for hardship withdrawals
from cash or deferred arrangements.
Subtitle C--Increasing Portability for Participants
Sec. 231. Rollovers allowed among various types of plans.
Sec. 232. Rollovers of IRAs into workplace retirement plans.
Sec. 233. Rollovers of after-tax contributions.
Sec. 234. Hardship exception to 60-day rule.
Sec. 235. Treatment of forms of distribution.
Sec. 236. Rationalization of restrictions on distributions.
Sec. 237. Purchase of service credit in governmental defined benefit
plans.
Sec. 238. Employers may disregard rollovers for purposes of cash-out
amounts.
Sec. 239. Minimum distribution and inclusion requirements for section
457 plans.
Subtitle D--Strengthening Pension Security and Enforcement
Sec. 241. Repeal of 150 percent of current liability funding limit.
Sec. 242. Maximum contribution deduction rules modified and applied to
all defined benefit plans.
Sec. 243. Excise tax relief for sound pension funding.
Sec. 244. Excise tax on failure to provide notice by defined benefit
plans significantly reducing future benefit
accruals.
Sec. 245. Treatment of multiemployer plans under section 415.
Subtitle E--Reducing Regulatory Burdens
Sec. 261. Modification of timing of plan valuations.
Sec. 262. ESOP dividends may be reinvested without loss of dividend
deduction.
Sec. 263. Repeal of transition rule relating to certain highly
compensated employees.
Sec. 264. Employees of tax-exempt entities.
Sec. 265. Clarification of treatment of employer-provided retirement
advice.
Sec. 266. Reporting simplification.
Sec. 267. Improvement of employee plans compliance resolution system.
Sec. 268. Modification of exclusion for employer provided transit
passes.
Sec. 269. Repeal of the multiple use test.
Sec. 270. Flexibility in nondiscrimination, coverage, and line of
business rules.
Sec. 271. Extension to international organizations of moratorium on
application of certain nondiscrimination
rules applicable to State and local plans.
Sec. 272. Notice and consent period regarding distributions.
Subtitle F--Plan Amendments
Sec. 281. Provisions relating to plan amendments.
TITLE III--ESTATE TAX RELIEF
Subtitle A--Reductions of Estate and Gift Tax Rates
Sec. 301. Reductions of estate and gift tax rates.
Sec. 302. Sense of the Congress concerning repeal of the death tax.
Subtitle B--Unified Credit Replaced With Unified Exemption Amount
Sec. 311. Unified credit against estate and gift taxes replaced with
unified exemption amount.
Subtitle C--Modifications of Generation-Skipping Transfer Tax
Sec. 321. Deemed allocation of GST exemption to lifetime transfers to
trusts; retroactive allocations.
Sec. 322. Severing of trusts.
Sec. 323. Modification of certain valuation rules.
Sec. 324. Relief provisions.
Subtitle D--Conservation Easements
Sec. 331. Expansion of estate tax rule for conservation easements.
TITLE IV--TIMBER INCENTIVE
Sec. 401. Temporary suspension of maximum amount of amortizable
reforestation expenditures.
TITLE V--REAL ESTATE PROVISIONS
Subtitle A--Private Activity Bond Volume Cap
Sec. 501. Acceleration of phase-in of increase in volume cap on private
activity bonds.
Subtitle B--Exclusion From Gross Income for Certain Forgiven Mortgage
Obligations
Sec. 502. Exclusion from gross income for certain forgiven mortgage
obligations.
TITLE VI--AMENDMENTS TO THE FAIR LABOR STANDARDS ACT OF 1938
Sec. 601. Short title.
Sec. 602. Minimum Wage.
Sec. 603. Exemption for computer professionals.
Sec. 604. Exemption for certain sales employees.
Sec. 605. Exemption for funeral directors.
TITLE I--SMALL BUSINESS PROVISIONS
SEC. 101. DEDUCTION FOR 100 PERCENT OF HEALTH INSURANCE COSTS OF SELF-
EMPLOYED INDIVIDUALS.
(a) In General.--Paragraph (1) of section 162(l) is amended to read
as follows:
``(1) Allowance of deduction.--In the case of an individual
who is an employee within the meaning of section 401(c)(1),
there shall be allowed as a deduction under this section an
amount equal to 100 percent of the amount paid during the
taxable year for insurance which constitutes medical care for
the taxpayer and the taxpayer's spouse and dependents.''.
(b) Clarification of Limitations on Other Coverage.--The first
sentence of section 162(l)(2)(B) is amended to read as follows:
``Paragraph (1) shall not apply to any taxpayer for any calendar month
for which the taxpayer participates in any subsidized health plan
maintained by any employer (other than an employer described in section
401(c)(4)) of the taxpayer or the spouse of the taxpayer.''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2000.
SEC. 102. INCREASE IN EXPENSE TREATMENT FOR SMALL BUSINESSES.
(a) In General.--Paragraph (1) of section 179(b) (relating to
dollar limitation) is amended to read as follows:
``(1) Dollar limitation.--The aggregate cost which may be
taken into account under subsection (a) for any taxable year
shall not exceed $30,000.''.
(b) Effective Date.--The amendment made by this section shall apply
to taxable years beginning after December 31, 2000.
SEC. 103. INCREASED DEDUCTION FOR MEAL EXPENSES.
(a) In General.--Paragraph (1) of section 274(n) (relating to only
50 percent of meal and entertainment expenses allowed as deduction) is
amended by striking ``50 percent'' in the text and inserting ``the
allowable percentage''.
(b) Allowable Percentages.--Subsection (n) of section 274 is
amended by redesignating paragraphs (2) and (3) as paragraphs (3) and
(4), respectively, and by inserting after paragraph (1) the following
new paragraph:
``(2) Allowable percentage.--For purposes of paragraph (1),
the allowable percentage is--
``(A) in the case of amounts for items described in
paragraph (1)(B), 50 percent, and
``(B) in the case of expenses for food or
beverages, 60 percent (55 percent for taxable years
beginning during 2001).''.
(c) Conforming Amendment.--The heading for subsection (n) of
section 274 is amended by striking ``50 Percent'' and inserting
``Limited Percentages''.
(d) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2000.
SEC. 104. INCREASED DEDUCTIBILITY OF BUSINESS MEAL EXPENSES FOR
INDIVIDUALS SUBJECT TO FEDERAL LIMITATIONS ON HOURS OF
SERVICE.
(a) In General.--Paragraph (4) of section 274(n) (relating to
limited percentages of meal and entertainment expenses allowed as
deduction), as redesignated by section 103, is amended to read as
follows:
``(4) Special rule for individuals subject to federal hours
of service.--In the case of any expenses for food or beverages
consumed while away from home (within the meaning of section
162(a)(2)) by an individual during, or incident to, the period
of duty subject to the hours of service limitations of the
Department of Transportation, paragraph (2)(B) shall be applied
by substituting `80 percent' for the percentage otherwise
applicable under paragraph (2)(B).''.
(b) Effective Date.--The amendment made by subsection (a) shall
apply to taxable years beginning after December 31, 2000.
SEC. 105. INCOME AVERAGING FOR FARMERS AND FISHERMEN NOT TO INCREASE
ALTERNATIVE MINIMUM TAX LIABILITY.
(a) In General.--Section 55(c) (defining regular tax) is amended by
redesignating paragraph (2) as paragraph (3) and by inserting after
paragraph (1) the following:
``(2) Coordination with income averaging for farmers and
fishermen.--Solely for purposes of this section, section 1301
(relating to averaging of farm and fishing income) shall not
apply in computing the regular tax.''.
(b) Allowing Income Averaging for Fishermen.--
(1) In general.--Section 1301(a) is amended by striking
``farming business'' and inserting ``farming business or
fishing business,''.
(2) Definition of elected farm income.--
(A) In general.--Clause (i) of section
1301(b)(1)(A) is amended by inserting ``or fishing
business'' before the semicolon.
(B) Conforming amendment.--Subparagraph (B) of
section 1301(b)(1) is amended by inserting ``or fishing
business'' after ``farming business'' both places it
occurs.
(3) Definition of fishing business.--Section 1301(b) is
amended by adding at the end the following new paragraph:
``(4) Fishing business.--The term `fishing business' means
the conduct of commercial fishing as defined in section 3 of
the Magnuson-Stevens Fishery Conservation and Management Act
(16 U.S.C. 1802).''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2000.
SEC. 106. REPEAL OF OCCUPATIONAL TAXES RELATING TO DISTILLED SPIRITS,
WINE, AND BEER.
(a) Repeal of Occupational Taxes.--
(1) In general.--The following provisions of part II of
subchapter A of chapter 51 of the Internal Revenue Code of 1986
(relating to occupational taxes) are hereby repealed:
(A) Subpart A (relating to proprietors of distilled
spirits plants, bonded wine cellars, etc.).
(B) Subpart B (relating to brewer).
(C) Subpart D (relating to wholesale dealers)
(other than sections 5114 and 5116).
(D) Subpart E (relating to retail dealers) (other
than section 5124).
(E) Subpart G (relating to general provisions)
(other than sections 5142, 5143, 5145, and 5146).
(2) Nonbeverage domestic drawback.--Section 5131 is amended
by striking ``, on payment of a special tax per annum,''.
(3) Industrial use of distilled spirits.--Section 5276 is
hereby repealed.
(b) Conforming Amendments.--
(1)(A) The heading for part II of subchapter A of chapter
51 and the table of subparts for such part are amended to read
as follows:
``PART II--MISCELLANEOUS PROVISIONS
``Subpart A. Manufacturers of stills.
``Subpart B. Nonbeverage domestic
drawback claimants.
``Subpart C. Recordkeeping by dealers.
``Subpart D. Other provisions.''.
(B) The table of parts for such subchapter A is amended by
striking the item relating to part II and inserting the
following new item:
``Part II. Miscellaneous provisions.''.
(2) Subpart C of part II of such subchapter (relating to
manufacturers of stills) is redesignated as subpart A.
(3)(A) Subpart F of such part II (relating to nonbeverage
domestic drawback claimants) is redesignated as subpart B and
sections 5131 through 5134 are redesignated as sections 5111
through 5114, respectively.
(B) The table of sections for such subpart B, as so
redesignated, is amended--
(i) by redesignating the items relating to sections
5131 through 5134 as relating to sections 5111 through
5114, respectively; and
(ii) by striking ``and rate of tax'' in the item
relating to section 5111, as so redesignated.
(C) Section 5111, as redesignated by subparagraph (A), is
amended--
(i) by striking ``and rate of tax'' in the section
heading;
(ii) by striking ``(a) Eligibility for Drawback.--
''; and
(iii) by striking subsection (b).
(4) Part II of subchapter A of chapter 51 is amended by
adding after subpart B, as redesignated by paragraph (3), the
following new subpart:
``Subpart C--Recordkeeping by Dealers
``Sec. 5121. Recordkeeping by wholesale
dealers.
``Sec. 5122. Recordkeeping by retail
dealers.
``Sec. 5123. Preservation and inspection
of records, and entry of
premises for inspection.''.
(5)(A) Section 5114 (relating to records) is moved to
subpart C of such part II and inserted after the table of
sections for such subpart.
(B) Section 5114 is amended--
(i) by striking the section heading and inserting
the following new heading:
``SEC. 5121. RECORDKEEPING BY WHOLESALE DEALERS.'';
and
(ii) by redesignating subsection (c) as subsection
(d) and by inserting after subsection (b) the following
new subsection:
``(c) Wholesale Dealers.--For purposes of this part--
``(1) Wholesale dealer in liquors.--The term `wholesale
dealer in liquors' means any dealer (other than a wholesale
dealer in beer) who sells, or offers for sale, distilled
spirits, wines, or beer, to another dealer.
``(2) Wholesale dealer in beer.--The term `wholesale dealer
in beer' means any dealer who sells, or offers for sale, beer,
but not distilled spirits or wines, to another dealer.
``(3) Dealer.--The term `dealer' means any person who
sells, or offers for sale, any distilled spirits, wines, or
beer.
``(4) Presumption in case of sale of 20 wine gallons or
more.--The sale, or offer for sale, of distilled spirits,
wines, or beer, in quantities of 20 wine gallons or more to the
same person at the same time, shall be presumptive evidence
that the person making such sale, or offer for sale, is engaged
in or carrying on the business of a wholesale dealer in liquors
or a wholesale dealer in beer, as the case may be. Such
presumption may be overcome by evidence satisfactorily showing
that such sale, or offer for sale, was made to a person other
than a dealer.''.
(C) Paragraph (3) of section 5121(d), as so redesignated,
is amended by striking ``section 5146'' and inserting ``section
5123''.
(6)(A) Section 5124 (relating to records) is moved to
subpart C of part II of subchapter A of chapter 51 and inserted
after section 5121.
(B) Section 5124 is amended--
(i) by striking the section heading and inserting
the following new heading:
``SEC. 5122. RECORDKEEPING BY RETAIL DEALERS.'';
(ii) by striking ``section 5146'' in subsection (c)
and inserting ``section 5123''; and
(iii) by redesignating subsection (c) as subsection
(d) and inserting after subsection (b) the following
new subsection:
``(c) Retail Dealers.--For purposes of this section--
``(1) Retail dealer in liquors.--The term `retail dealer in
liquors' means any dealer (other than a retail dealer in beer)
who sells, or offers for sale, distilled spirits, wines, or
beer, to any person other than a dealer.
``(2) Retail dealer in beer.--The term `retail dealer in
beer' means any dealer who sells, or offers for sale, beer, but
not distilled spirits or wines, to any person other than a
dealer.
``(3) Dealer.--The term `dealer' has the meaning given such
term by section 5121(c)(3).''.
(7) Section 5146 is moved to subpart C of part II of
subchapter A of chapter 51, inserted after section 5122, and
redesignated as section 5123.
(8) Part II of subchapter A of chapter 51 is amended by
inserting after subpart C the following new subpart:
``Subpart D--Other Provisions
``Sec. 5131. Packaging distilled spirits
for industrial uses.
``Sec. 5132. Prohibited purchases by
dealers.''.
(9) Section 5116 is moved to subpart D of part II of
subchapter A of chapter 51, inserted after the table of
sections, redesignated as section 5131, and amended by
inserting ``(as defined in section 5121(c))'' after ``dealer''
in subsection (a).
(10) Subpart D of part II of subchapter A of chapter 51 is
amended by adding at the end thereof the following new section:
``SEC. 5132. PROHIBITED PURCHASES BY DEALERS.
``(a) In General.--Except as provided in regulations prescribed by
the Secretary, it shall be unlawful for a dealer to purchase distilled
spirits from any person other than a wholesale dealer in liquors who is
required to keep the records prescribed by section 5121.
``(b) Penalty and Forfeiture.--
``For penalty and forfeiture provisions
applicable to violations of subsection (a), see sections 5687 and
7302.''.
(11) Subsection (b) of section 5002 is amended--
(A) by striking ``section 5112(a)'' and inserting
``section 5121(c)(3)'';
(B) by striking ``section 5112'' and inserting
``section 5121(c)''; and
(C) by striking ``section 5122'' and inserting
``section 5122(c)''.
(12) Subparagraph (A) of section 5010(c)(2) is amended by
striking ``section 5134'' and inserting ``section 5114''.
(13) Subsection (d) of section 5052 is amended to read as
follows:
``(d) Brewer.--For purposes of this chapter, the term `brewer'
means any person who brews beer or produces beer for sale. Such term
shall not include any person who produces only beer exempt from tax
under section 5053(e).''.
(14) The text of section 5182 is amended to read as
follows:
``For provisions requiring
recordkeeping by wholesale liquor dealers, see section 5112, and by
retail liquor dealers, see section 5122.''.
(15) Subsection (b) of section 5402 is amended by striking
``section 5092'' and inserting ``section 5052(d)''.
(16) Section 5671 is amended by striking ``or 5091''.
(17)(A) Part V of subchapter J of chapter 51 is hereby
repealed.
(B) The table of parts for such subchapter J is amended by
striking the item relating to part V.
(18)(A) Sections 5142, 5143, and 5145 are moved to
subchapter D of chapter 52, inserted after section 5731,
redesignated as sections 5732, 5733, and 5734, respectively,
and amended--
(i) by striking ``this part'' each place it appears
and inserting ``this subchapter''; and
(ii) by striking ``this subpart'' in section
5732(c)(2) (as so redesignated) and inserting ``this
subchapter''.
(B) Section 5732, as redesignated by subparagraph (A), is
amended by striking ``(except the tax imposed by section
5131)'' each place it appears.
(C) Subsection (c) of section 5733, as redesignated by
subparagraph (A), is amended by striking paragraph (2) and by
redesignating paragraph (3) as paragraph (2).
(D) The table of sections for subchapter D of chapter 52 is
amended by adding at the end thereof the following:
``Sec. 5732. Payment of tax.
``Sec. 5733. Provisions relating to
liability for occupational
taxes.
``Sec. 5734. Application of State
laws.''.
(E) Section 5731 is amended by striking subsection (c) and
by redesignating subsection (d) as subsection (c).
(19) Subsection (c) of section 6071 is amended by striking
``section 5142'' and inserting ``section 5732''.
(20) Paragraph (1) of section 7652(g) is amended--
(A) by striking ``subpart F'' and inserting
``subpart B''; and
(B) by striking ``section 5131(a)'' and inserting
``section 5111(a)''.
(21) The table of sections for subchapter D of chapter 51
is amended by striking the item relating to section 5276.
(c) Effective Date.--The amendments made by this section shall take
effect on July 1, 2001, but shall not apply to taxes imposed for
periods before such date.
TITLE II--PENSION PROVISIONS
Subtitle A--Expanding Coverage
SEC. 201. INCREASE IN BENEFIT AND CONTRIBUTION LIMITS.
(a) Defined Benefit Plans.--
(1) Dollar limit.--
(A) Subparagraph (A) of section 415(b)(1) (relating
to limitation for defined benefit plans) is amended by
striking ``$90,000'' and inserting ``$160,000''.
(B) Subparagraphs (C) and (D) of section 415(b)(2)
are each amended by striking ``$90,000'' each place it
appears in the headings and the text and inserting
``$160,000''.
(C) Paragraph (7) of section 415(b) (relating to
benefits under certain collectively bargained plans) is
amended by striking ``the greater of $68,212 or one-
half the amount otherwise applicable for such year
under paragraph (1)(A) for `$90,000''' and inserting
``one-half the amount otherwise applicable for such
year under paragraph (1)(A) for `$160,000'''.
(2) Limit reduced when benefit begins before age 62.--
Subparagraph (C) of section 415(b)(2) is amended by striking
``the social security retirement age'' each place it appears in
the heading and text and inserting ``age 62''.
(3) Limit increased when benefit begins after age 65.--
Subparagraph (D) of section 415(b)(2) is amended by striking
``the social security retirement age'' each place it appears in
the heading and text and inserting ``age 65''.
(4) Cost-of-living adjustments.--Subsection (d) of section
415 (related to cost-of-living adjustments) is amended--
(A) by striking ``$90,000'' in paragraph (1)(A) and
inserting ``$160,000''; and
(B) in paragraph (3)(A)--
(i) by striking ``$90,000'' in the heading
and inserting ``$160,000''; and
(ii) by striking ``October 1, 1986'' and
inserting ``July 1, 2000''.
(5) Conforming amendment.--Section 415(b)(2) is amended by
striking subparagraph (F).
(b) Defined Contribution Plans.--
(1) Dollar limit.--Subparagraph (A) of section 415(c)(1)
(relating to limitation for defined contribution plans) is
amended by striking ``$30,000'' and inserting ``$40,000''.
(2) Cost-of-living adjustments.--Subsection (d) of section
415 (related to cost-of-living adjustments) is amended--
(A) by striking ``$30,000'' in paragraph (1)(C) and
inserting ``$40,000''; and
(B) in paragraph (3)(D)--
(i) by striking ``$30,000'' in the heading
and inserting ``$40,000''; and
(ii) by striking ``October 1, 1993'' and
inserting ``July 1, 2000''.
(c) Qualified Trusts.--
(1) Compensation limit.--Sections 401(a)(17), 404(l),
408(k), and 505(b)(7) are each amended by striking ``$150,000''
each place it appears and inserting ``$200,000''.
(2) Base period and rounding of cost-of-living
adjustment.--Subparagraph (B) of section 401(a)(17) is
amended--
(A) by striking ``October 1, 1993'' and inserting
``July 1, 2000''; and
(B) by striking ``$10,000'' both places it appears
and inserting ``$5,000''.
(d) Elective Deferrals.--
(1) In general.--Paragraph (1) of section 402(g) (relating
to limitation on exclusion for elective deferrals) is amended
to read as follows:
``(1) In general.--
``(A) Limitation.--Notwithstanding subsections
(e)(3) and (h)(1)(B), the elective deferrals of any
individual for any taxable year shall be included in
such individual's gross income to the extent the amount
of such deferrals for the taxable year exceeds the
applicable dollar amount.
``(B) Applicable dollar amount.--For purposes of
subparagraph (A), the applicable dollar amount shall be
the amount determined in accordance with the following
table:
``For taxable years
The applicable
beginning in
dollar amount:
calendar year:
2001................................... $11,000
2002................................... $12,000
2003................................... $13,000
2004 or thereafter..................... $14,000.''.
(2) Cost-of-living adjustment.--Paragraph (5) of section
402(g) is amended to read as follows:
``(5) Cost-of-living adjustment.--In the case of taxable
years beginning after December 31, 2004, the Secretary shall
adjust the $14,000 amount under paragraph (1)(B) at the same
time and in the same manner as under section 415(d), except
that the base period shall be the calendar quarter beginning
July 1, 2003, and any increase under this paragraph which is
not a multiple of $500 shall be rounded to the next lowest
multiple of $500.''.
(3) Conforming amendments.--
(A) Section 402(g) (relating to limitation on
exclusion for elective deferrals), as amended by
paragraphs (1) and (2), is further amended by striking
paragraph (4) and redesignating paragraphs (5), (6),
(7), (8), and (9) as paragraphs (4), (5), (6), (7), and
(8), respectively.
(B) Paragraph (2) of section 457(c) is amended by
striking ``402(g)(8)(A)(iii)'' and inserting
``402(g)(7)(A)(iii)''.
(C) Clause (iii) of section 501(c)(18)(D) is
amended by striking ``(other than paragraph (4)
thereof)''.
(e) Deferred Compensation Plans of State and Local Governments and
Tax-Exempt Organizations.--
(1) In general.--Section 457 (relating to deferred
compensation plans of State and local governments and tax-
exempt organizations) is amended--
(A) in subsections (b)(2)(A) and (c)(1) by striking
``$7,500'' each place it appears and inserting ``the
applicable dollar amount''; and
(B) in subsection (b)(3)(A) by striking ``$15,000''
and inserting ``twice the dollar amount in effect under
subsection (b)(2)(A)''.
(2) Applicable dollar amount; cost-of-living adjustment.--
Paragraph (15) of section 457(e) is amended to read as follows:
``(15) Applicable dollar amount.--
``(A) In general.--The applicable dollar amount
shall be the amount determined in accordance with the
following table:
``For taxable years
The applicable
beginning in
dollar amount:
calendar year:
2001................................... $11,000
2002................................... $12,000
2003................................... $13,000
2004 or thereafter..................... $14,000.
``(B) Cost-of-living adjustments.--In the case of
taxable years beginning after December 31, 2004, the
Secretary shall adjust the $14,000 amount specified in
the table in subparagraph (A) at the same time and in
the same manner as under section 415(d), except that
the base period shall be the calendar quarter beginning
July 1, 2003, and any increase under this paragraph
which is not a multiple of $500 shall be rounded to the
next lowest multiple of $500.''.
(f) Simple Retirement Accounts.--
(1) Limitation.--Clause (ii) of section 408(p)(2)(A)
(relating to general rule for qualified salary reduction
arrangement) is amended by striking ``$6,000'' and inserting
``the applicable dollar amount''.
(2) Applicable dollar amount.--Subparagraph (E) of
408(p)(2) is amended to read as follows:
``(E) Applicable dollar amount; cost-of-living
adjustment.--
``(i) In general.--For purposes of
subparagraph (A)(ii), the applicable dollar
amount shall be the amount determined in
accordance with the following table:
``For taxable years
The applicable
beginning in
dollar amount:
calendar year:
2001......................... $7,000
2002......................... $8,000
2003......................... $9,000
2004 or thereafter........... $10,000.
``(ii) Cost-of-living adjustment.--In the
case of a year beginning after December 31,
2004, the Secretary shall adjust the $10,000
amount under clause (i) at the same time and in
the same manner as under section 415(d), except
that the base period taken into account shall
be the calendar quarter beginning July 1, 2003,
and any increase under this subparagraph which
is not a multiple of $500 shall be rounded to
the next lower multiple of $500.''.
(3) Conforming amendments.--
(A) Clause (I) of section 401(k)(11)(B)(i) is
amended by striking ``$6,000'' and inserting ``the
amount in effect under section 408(p)(2)(A)(ii)''.
(B) Section 401(k)(11) is amended by striking
subparagraph (E).
(g) Rounding Rule Relating to Defined Benefit Plans and Defined
Contribution Plans.--Paragraph (4) of section 415(d) is amended to read
as follows:
``(4) Rounding.--
``(A) $160,000 amount.--Any increase under
subparagraph (A) of paragraph (1) which is not a
multiple of $5,000 shall be rounded to the next lowest
multiple of $5,000.
``(B) $40,000 amount.--Any increase under
subparagraph (C) of paragraph (1) which is not a
multiple of $1,000 shall be rounded to the next lowest
multiple of $1,000.''.
(h) Effective Date.--The amendments made by this section shall
apply to years beginning after December 31, 2000.
SEC. 202. PLAN LOANS FOR SUBCHAPTER S OWNERS, PARTNERS, AND SOLE
PROPRIETORS.
(a) Amendment to 1986 Code.--Subparagraph (B) of section 4975(f)(6)
(relating to exemptions not to apply to certain transactions) is
amended by adding at the end the following new clause:
``(iii) Loan exception.--For purposes of
subparagraph (A)(i), the term `owner-employee'
shall only include a person described in
subclause (II) or (III) of clause (i).''.
(b) Effective Date.--The amendment made by this section shall apply
to loans made after December 31, 2000.
SEC. 203. MODIFICATION OF TOP-HEAVY RULES.
(a) Simplification of Definition of Key Employee.--
(1) In general.--Section 416(i)(1)(A) (defining key
employee) is amended--
(A) by striking ``or any of the 4 preceding plan
years'' in the matter preceding clause (i);
(B) by striking clause (i) and inserting the
following:
``(i) an officer of the employer having an
annual compensation greater than $150,000,'';
(C) by striking clause (ii) and redesignating
clauses (iii) and (iv) as clauses (ii) and (iii),
respectively; and
(D) by striking the second sentence in the matter
following clause (iii), as redesignated by subparagraph
(C).
(2) Conforming amendment.--Section 416(i)(1)(B)(iii) is
amended by striking ``and subparagraph (A)(ii)''.
(b) Matching Contributions Taken Into Account for Minimum
Contribution Requirements.--Section 416(c)(2)(A) (relating to defined
contribution plans) is amended by adding at the end the following:
``Employer matching contributions (as defined in section 401(m)(4)(A))
shall be taken into account for purposes of this subparagraph.''.
(c) Distributions During Last Year Before Determination Date Taken
Into Account.--
(1) In general.--Paragraph (3) of section 416(g) is amended
to read as follows:
``(3) Distributions during last year before determination
date taken into account.--
``(A) In general.--For purposes of determining--
``(i) the present value of the cumulative
accrued benefit for any employee, or
``(ii) the amount of the account of any
employee,
such present value or amount shall be increased by the
aggregate distributions made with respect to such
employee under the plan during the 1-year period ending
on the determination date. The preceding sentence shall
also apply to distributions under a terminated plan
which if it had not been terminated would have been
required to be included in an aggregation group.
``(B) 5-year period in case of in-service
distribution.--In the case of any distribution made for
a reason other than separation from service, death, or
disability, subparagraph (A) shall be applied by
substituting `5-year period' for `1-year period'.''.
(2) Benefits not taken into account.--Subparagraph (E) of
section 416(g)(4) is amended--
(A) by striking ``last 5 years'' in the heading and
inserting ``last year before determination date''; and
(B) by striking ``5-year period'' and inserting
``1-year period''.
(d) Definition of Top-Heavy Plans.--Paragraph (4) of section 416(g)
(relating to other special rules for top-heavy plans) is amended by
adding at the end the following new subparagraph:
``(H) Cash or deferred arrangements using
alternative methods of meeting nondiscrimination
requirements.--The term `top-heavy plan' shall not
include a plan which consists solely of--
``(i) a cash or deferred arrangement which
meets the requirements of section 401(k)(12),
and
``(ii) matching contributions with respect
to which the requirements of section 401(m)(11)
are met.
If, but for this subparagraph, a plan would be treated
as a top-heavy plan because it is a member of an
aggregation group which is a top-heavy group,
contributions under the plan may be taken into account
in determining whether any other plan in the group
meets the requirements of subsection (c)(2).''.
(e) Frozen Plan Exempt From Minimum Benefit Requirement.--
Subparagraph (C) of section 416(c)(1) (relating to defined benefit
plans) is amended--
(A) by striking ``clause (ii)'' in clause (i) and
inserting ``clause (ii) or (iii)''; and
(B) by adding at the end the following:
``(iii) Exception for frozen plan.--For
purposes of determining an employee's years of
service with the employer, any service with the
employer shall be disregarded to the extent
that such service occurs during a plan year
when the plan benefits (within the meaning of
section 410(b)) no employee or former
employee.''.
(f) Elimination of Family Attribution.--Section 416(i)(1)(B)
(defining 5-percent owner) is amended by adding at the end the
following new clause:
``(iv) Family attribution disregarded.--
Solely for purposes of applying this paragraph
(and not for purposes of any provision of this
title which incorporates by reference the
definition of a key employee or 5-percent owner
under this paragraph), section 318 shall be
applied without regard to subsection (a)(1)
thereof in determining whether any person is a
5-percent owner.''.
(g) Effective Date.--The amendments made by this section shall
apply to years beginning after December 31, 2000.
SEC. 204. ELECTIVE DEFERRALS NOT TAKEN INTO ACCOUNT FOR PURPOSES OF
DEDUCTION LIMITS.
(a) In General.--Section 404 (relating to deduction for
contributions of an employer to an employees' trust or annuity plan and
compensation under a deferred payment plan) is amended by adding at the
end the following new subsection:
``(n) Elective Deferrals Not Taken Into Account for Purposes of
Deduction Limits.--Elective deferrals (as defined in section 402(g)(3))
shall not be subject to any limitation contained in paragraph (3), (7),
or (9) of subsection (a), and such elective deferrals shall not be
taken into account in applying any such limitation to any other
contributions.''.
(b) Effective Date.--The amendment made by this section shall apply
to years beginning after December 31, 2000.
SEC. 205. REPEAL OF COORDINATION REQUIREMENTS FOR DEFERRED COMPENSATION
PLANS OF STATE AND LOCAL GOVERNMENTS AND TAX-EXEMPT
ORGANIZATIONS.
(a) In General.--Subsection (c) of section 457 (relating to
deferred compensation plans of State and local governments and tax-
exempt organizations), as amended by section 211, is amended to read as
follows:
``(c) Limitation.--The maximum amount of the compensation of any
one individual which may be deferred under subsection (a) during any
taxable year shall not exceed the amount in effect under subsection
(b)(2)(A) (as modified by any adjustment provided under subsection
(b)(3)).''.
(b) Effective Date.--The amendment made by subsection (a) shall
apply to years beginning after December 31, 2000.
SEC. 206. ELIMINATION OF USER FEE FOR REQUESTS TO IRS REGARDING PENSION
PLANS.
(a) Elimination of Certain User Fees.--The Secretary of the
Treasury or the Secretary's delegate shall not require payment of user
fees under the program established under section 7527 of the Internal
Revenue Code of 1986 for requests to the Internal Revenue Service for
determination letters with respect to the qualified status of a pension
benefit plan maintained solely by one or more eligible employers or any
trust which is part of the plan. The preceding sentence shall not apply
to any request--
(1) made after the fifth plan year the pension benefit plan
is in existence; or
(2) made by the sponsor of any prototype or similar plan
which the sponsor intends to market to participating employers.
(b) Pension Benefit Plan.--For purposes of this section, the term
``pension benefit plan'' means a pension, profit-sharing, stock bonus,
annuity, or employee stock ownership plan.
(c) Eligible Employer.--For purposes of this section, the term
``eligible employer'' has the same meaning given such term in section
408(p)(2)(C)(i)(I) of the Internal Revenue Code of 1986. The
determination of whether an employer is an eligible employer under this
section shall be made as of the date of the request described in
subsection (a).
(d) Effective Date.--The provisions of this section shall apply
with respect to requests made after December 31, 2000.
SEC. 207. DEDUCTION LIMITS.
(a) In General.--Section 404(a) (relating to general rule) is
amended by adding at the end the following:
``(12) Definition of compensation.--For purposes of
paragraphs (3), (7), (8), and (9), the term `compensation'
shall include amounts treated as participant's compensation
under subparagraph (C) or (D) of section 415(c)(3).''.
(b) Conforming Amendment.--Subparagraph (B) of section 404(a)(3) is
amended by striking the last sentence thereof.
(c) Effective Date.--The amendments made by this section shall
apply to years beginning after December 31, 2000.
SEC. 208. OPTION TO TREAT ELECTIVE DEFERRALS AS AFTER-TAX
CONTRIBUTIONS.
(a) In General.--Subpart A of part I of subchapter D of chapter 1
(relating to deferred compensation, etc.) is amended by inserting after
section 402 the following new section:
``SEC. 402A. OPTIONAL TREATMENT OF ELECTIVE DEFERRALS AS PLUS
CONTRIBUTIONS.
``(a) General Rule.--If an applicable retirement plan includes a
qualified plus contribution program--
``(1) any designated plus contribution made by an employee
pursuant to the program shall be treated as an elective
deferral for purposes of this chapter, except that such
contribution shall not be excludable from gross income, and
``(2) such plan (and any arrangement which is part of such
plan) shall not be treated as failing to meet any requirement
of this chapter solely by reason of including such program.
``(b) Qualified Plus Contribution Program.--For purposes of this
section--
``(1) In general.--The term `qualified plus contribution
program' means a program under which an employee may elect to
make designated plus contributions in lieu of all or a portion
of elective deferrals the employee is otherwise eligible to
make under the applicable retirement plan.
``(2) Separate accounting required.--A program shall not be
treated as a qualified plus contribution program unless the
applicable retirement plan--
``(A) establishes separate accounts (`designated
plus accounts') for the designated plus contributions
of each employee and any earnings properly allocable to
the contributions, and
``(B) maintains separate recordkeeping with respect
to each account.
``(c) Definitions and Rules Relating to Designated Plus
Contributions.--For purposes of this section--
``(1) Designated plus contribution.--The term `designated
plus contribution' means any elective deferral which--
``(A) is excludable from gross income of an
employee without regard to this section, and
``(B) the employee designates (at such time and in
such manner as the Secretary may prescribe) as not
being so excludable.
``(2) Designation limits.--The amount of elective deferrals
which an employee may designate under paragraph (1) shall not
exceed the excess (if any) of--
``(A) the maximum amount of elective deferrals
excludable from gross income of the employee for the
taxable year (without regard to this section), over
``(B) the aggregate amount of elective deferrals of
the employee for the taxable year which the employee
does not designate under paragraph (1).
``(3) Rollover contributions.--
``(A) In general.--A rollover contribution of any
payment or distribution from a designated plus account
which is otherwise allowable under this chapter may be
made only if the contribution is to--
``(i) another designated plus account of
the individual from whose account the payment
or distribution was made, or
``(ii) a Roth IRA of such individual.
``(B) Coordination with limit.--Any rollover
contribution to a designated plus account under
subparagraph (A) shall not be taken into account for
purposes of paragraph (1).
``(d) Distribution Rules.--For purposes of this title--
``(1) Exclusion.--Any qualified distribution from a
designated plus account shall not be includible in gross
income.
``(2) Qualified distribution.--For purposes of this
subsection--
``(A) In general.--The term `qualified
distribution' has the meaning given such term by
section 408A(d)(2)(A) (without regard to clause (iv)
thereof).
``(B) Distributions within nonexclusion period.--A
payment or distribution from a designated plus account
shall not be treated as a qualified distribution if
such payment or distribution is made within the 5-
taxable-year period beginning with the earlier of--
``(i) the first taxable year for which the
individual made a designated plus contribution
to any designated plus account established for
such individual under the same applicable
retirement plan, or
``(ii) if a rollover contribution was made
to such designated plus account from a
designated plus account previously established
for such individual under another applicable
retirement plan, the first taxable year for
which the individual made a designated plus
contribution to such previously established
account.
``(C) Distributions of excess deferrals and
earnings.--The term `qualified distribution' shall not
include any distribution of any excess deferral under
section 402(g)(2) and any income on the excess
deferral.
``(3) Aggregation rules.--Section 72 shall be applied
separately with respect to distributions and payments from a
designated plus account and other distributions and payments
from the plan.
``(e) Other Definitions.--For purposes of this section--
``(1) Applicable retirement plan.--The term `applicable
retirement plan' means--
``(A) an employees' trust described in section
401(a) which is exempt from tax under section 501(a),
and
``(B) a plan under which amounts are contributed by
an individual's employer for an annuity contract
described in section 403(b).
``(2) Elective deferral.--The term `elective deferral'
means any elective deferral described in subparagraph (A) or
(C) of section 402(g)(3).''.
(b) Excess Deferrals.--Section 402(g) (relating to limitation on
exclusion for elective deferrals) is amended--
(1) by adding at the end of paragraph (1) the following new
sentence: ``The preceding sentence shall not apply to so much
of such excess as does not exceed the designated plus
contributions of the individual for the taxable year.''; and
(2) by inserting ``(or would be included but for the last
sentence thereof)'' after ``paragraph (1)'' in paragraph
(2)(A).
(c) Rollovers.--Subparagraph (B) of section 402(c)(8) is amended by
adding at the end the following:
``If any portion of an eligible rollover distribution
is attributable to payments or distributions from a
designated plus account (as defined in section 402A),
an eligible retirement plan with respect to such
portion shall include only another designated plus
account and a Roth IRA.''.
(d) Reporting Requirements.--
(1) W-2 information.--Section 6051(a)(8) is amended by
inserting ``, including the amount of designated plus
contributions (as defined in section 402A)'' before the comma
at the end.
(2) Information.--Section 6047 is amended by redesignating
subsection (f) as subsection (g) and by inserting after
subsection (e) the following new subsection:
``(f) Designated Plus Contributions.--The Secretary shall require
the plan administrator of each applicable retirement plan (as defined
in section 402A) to make such returns and reports regarding designated
plus contributions (as so defined) to the Secretary, participants and
beneficiaries of the plan, and such other persons as the Secretary may
prescribe.''.
(e) Conforming Amendments.--
(1) Section 408A(e) is amended by adding after the first
sentence the following new sentence: ``Such term includes a
rollover contribution described in section 402A(c)(3)(A).''.
(2) The table of sections for subpart A of part I of
subchapter D of chapter 1 is amended by inserting after the
item relating to section 402 the following new item:
``Sec. 402A. Optional treatment of
elective deferrals as plus
contributions.''.
(f) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2000.
Subtitle B--Enhancing Fairness for Women
SEC. 221. CATCHUP CONTRIBUTIONS FOR INDIVIDUALS AGE 50 OR OVER.
(a) In General.--Section 414 (relating to definitions and special
rules) is amended by adding at the end the following new subsection:
``(v) Catchup Contributions for Individuals Age 50 or Over.--
``(1) In general.--An applicable employer plan shall not be
treated as failing to meet any requirement of this title solely
because the plan permits an eligible participant to make
additional elective deferrals in any plan year.
``(2) Limitation on amount of additional deferrals.--
``(A) In general.--A plan shall not permit
additional elective deferrals under paragraph (1) for
any year in an amount greater than the lesser of--
``(i) the applicable percentage of the
applicable dollar amount for such elective
deferrals for such year, or
``(ii) the excess (if any) of--
``(I) the participant's
compensation for the year, over
``(II) any other elective deferrals
of the participant for such year which
are made without regard to this
subsection.
``(B) Applicable percentage.--For purposes of this
paragraph, the applicable percentage shall be
determined in accordance with the following table:
``For taxable years The applicable
beginning in: percentage is:
2001.......................................... 10 percent
2002.......................................... 20 percent
2003.......................................... 30 percent
2004 and thereafter........................... 40 percent.
``(3) Treatment of contributions.--In the case of any
contribution to a plan under paragraph (1)--
``(A) such contribution shall not, with respect to
the year in which the contribution is made--
``(i) be subject to any otherwise
applicable limitation contained in section
402(g), 402(h), 403(b), 404(a), 404(h), 408,
415, or 457, or
``(ii) be taken into account in applying
such limitations to other contributions or
benefits under such plan or any other such
plan, and
``(B) 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), 408(p), 408B, 410(b), or 416 by reason of the
making of (or the right to make) such contribution.
``(4) Eligible participant.--For purposes of this
subsection, the term `eligible participant' means, with respect
to any plan year, a participant in a plan--
``(A) who has attained the age of 50 before the
close of the plan year, and
``(B) with respect to whom no other elective
deferrals may (without regard to this subsection) be
made to the plan for the plan year by reason of the
application of any limitation or other restriction
described in paragraph (3) or contained in the terms of
the plan.
``(5) Other definitions and rules.--For purposes of this
subsection--
``(A) Applicable dollar amount.--The term
`applicable dollar amount' means, with respect to any
year, the amount in effect under section 402(g)(1)(B),
408(p)(2)(E)(i), or 457(e)(15)(A), whichever is
applicable to an applicable employer plan, for such
year.
``(B) Applicable employer plan.--The term
`applicable employer plan' means--
``(i) an employees' trust described in
section 401(a) which is exempt from tax under
section 501(a),
``(ii) a plan under which amounts are
contributed by an individual's employer for an
annuity contract described in section 403(b),
``(iii) an eligible deferred compensation
plan under section 457 of an eligible employer
as defined in section 457(e)(1)(A), and
``(iv) an arrangement meeting the
requirements of section 408 (k) or (p).
``(C) Elective deferral.--The term `elective
deferral' has the meaning given such term by subsection
(u)(2)(C).
``(D) Exception for section 457 plans.--This
subsection shall not apply to an applicable employer
plan described in subparagraph (B)(iii) for any year to
which section 457(b)(3) applies.''.
(b) Effective Date.--The amendment made by this section shall apply
to contributions in taxable years beginning after December 31, 2000.
SEC. 222. EQUITABLE TREATMENT FOR CONTRIBUTIONS OF EMPLOYEES TO DEFINED
CONTRIBUTION PLANS.
(a) Equitable Treatment.--
(1) In general.--Subparagraph (B) of section 415(c)(1)
(relating to limitation for defined contribution plans) is
amended by striking ``25 percent'' and inserting ``100
percent''.
(2) Application to section 403(b).--Section 403(b) is
amended--
(A) by striking ``the exclusion allowance for such
taxable year'' in paragraph (1) and inserting ``the
applicable limit under section 415'';
(B) by striking paragraph (2); and
(C) by inserting ``or any amount received by a
former employee after the fifth taxable year following
the taxable year in which such employee was
terminated'' before the period at the end of the second
sentence of paragraph (3).
(3) Conforming amendments.--
(A) Subsection (f) of section 72 is amended by
striking ``section 403(b)(2)(D)(iii))'' and inserting
``section 403(b)(2)(D)(iii), as in effect before the
enactment of the Small Business Tax Fairness Act of
2001)''.
(B) Section 404(a)(10)(B) is amended by striking
``, the exclusion allowance under section 403(b)(2),''.
(C) Section 415(a)(2) is amended by striking ``,
and the amount of the contribution for such portion
shall reduce the exclusion allowance as provided in
section 403(b)(2)''.
(D) Section 415(c)(3) is amended by adding at the
end the following new subparagraph:
``(E) Annuity contracts.--In the case of an annuity
contract described in section 403(b), the term
`participant's compensation' means the participant's
includible compensation determined under section
403(b)(3).''.
(E) Section 415(c) is amended by striking paragraph
(4).
(F) Section 415(c)(7) is amended to read as
follows:
``(7) Certain contributions by church plans not treated as
exceeding limit.--
``(A) In general.--Notwithstanding any other
provision of this subsection, at the election of a
participant who is an employee of a church or a
convention or association of churches, including an
organization described in section 414(e)(3)(B)(ii),
contributions and other additions for an annuity
contract or retirement income account described in
section 403(b) with respect to such participant, when
expressed as an annual addition to such participant's
account, shall be treated as not exceeding the
limitation of paragraph (1) if such annual addition is
not in excess of $10,000.
``(B) $40,000 aggregate limitation.--The total
amount of additions with respect to any participant
which may be taken into account for purposes of this
subparagraph for all years may not exceed $40,000.
``(C) Annual addition.--For purposes of this
paragraph, the term `annual addition' has the meaning
given such term by paragraph (2).''.
(G) Subparagraph (B) of section 402(g)(7) (as
redesignated by section 211) is amended by inserting
before the period at the end the following: ``(as in
effect before the enactment of the Small Business Tax
Fairness Act of 2001)''.
(3) Effective date.--The amendments made by this subsection
shall apply to years beginning after December 31, 2000.
(b) Special Rules for Sections 403(b) and 408.--
(1) In general.--Subsection (k) of section 415 is amended
by adding at the end the following new paragraph:
``(4) Special rules for sections 403(b) and 408.--For
purposes of this section, any annuity contract described in
section 403(b) for the benefit of a participant shall be
treated as a defined contribution plan maintained by each
employer with respect to which the participant has the control
required under subsection (b) or (c) of section 414 (as
modified by subsection (h)). For purposes of this section, any
contribution by an employer to a simplified employee pension
plan for an individual for a taxable year shall be treated as
an employer contribution to a defined contribution plan for
such individual for such year.''.
(2) Effective date.--
(A) In general.--The amendment made by paragraph
(1) shall apply to limitation years beginning after
December 31, 1999.
(B) Exclusion allowance.--Effective for limitation
years beginning in 2000, in the case of any annuity
contract described in section 403(b) of the Internal
Revenue Code of 1986, the amount of the contribution
disqualified by reason of section 415(g) of such Code
shall reduce the exclusion allowance as provided in
section 403(b)(2) of such Code.
(3) Modification of 403(b) exclusion allowance to conform
to 415 modification.--The Secretary of the Treasury shall
modify the regulations regarding the exclusion allowance under
section 403(b)(2) of the Internal Revenue Code of 1986 to
render void the requirement that contributions to a defined
benefit pension plan be treated as previously excluded amounts
for purposes of the exclusion allowance. For taxable years
beginning after December 31, 1999, such regulations shall be
applied as if such requirement were void.
(c) Deferred Compensation Plans of State and Local Governments and
Tax-Exempt Organizations.--
(1) In general.--Subparagraph (B) of section 457(b)(2)
(relating to salary limitation on eligible deferred
compensation plans) is amended by striking ``33\1/3\ percent''
and inserting ``100 percent''.
(2) Effective date.--The amendment made by this subsection
shall apply to years beginning after December 31, 2000.
SEC. 223. FASTER VESTING OF CERTAIN EMPLOYER MATCHING CONTRIBUTIONS.
(a) Amendments to 1986 Code.--Section 411(a) (relating to minimum
vesting standards) is amended--
(1) in paragraph (2), by striking ``A plan'' and inserting
``Except as provided in paragraph (12), a plan''; and
(2) by adding at the end the following:
``(12) Faster vesting for matching contributions.--In the
case of matching contributions (as defined in section
401(m)(4)(A)), paragraph (2) shall be applied--
``(A) by substituting `3 years' for `5 years' in
subparagraph (A), and
``(B) by substituting the following table for the
table contained in subparagraph (B):
The nonforfeitable
``Years of service: percentage is:
2............................................. 20
3............................................. 40
4............................................. 60
5............................................. 80
6............................................. 100.''.
(b) Effective Dates.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to contributions
for plan years beginning after December 31, 2000.
(2) Collective bargaining agreements.--In the case of a
plan maintained pursuant to one or more collective bargaining
agreements between employee representatives and one or more
employers ratified by the date of the enactment of this Act,
the amendments made by this section shall not apply to
contributions on behalf of employees covered by any such
agreement for plan years beginning before the earlier of--
(A) the later of--
(i) the date on which the last of such
collective bargaining agreements terminates
(determined without regard to any extension
thereof on or after such date of the enactment); or
(ii) January 1, 2001; or
(B) January 1, 2005.
(3) Service required.--With respect to any plan, the
amendments made by this section shall not apply to any employee
before the date that such employee has 1 hour of service under
such plan in any plan year to which the amendments made by this
section apply.
SEC. 224. SIMPLIFY AND UPDATE THE MINIMUM DISTRIBUTION RULES.
(a) Simplification and Finalization of Minimum Distribution
Requirements.--
(1) In general.--The Secretary of the Treasury shall--
(A) simplify and finalize the regulations relating
to minimum distribution requirements under sections
401(a)(9), 408(a)(6) and (b)(3), 403(b)(10), and
457(d)(2) of the Internal Revenue Code of 1986; and
(B) modify such regulations to--
(i) reflect current life expectancy; and
(ii) revise the required distribution
methods so that, under reasonable assumptions,
the amount of the required minimum distribution
does not decrease over a participant's life
expectancy.
(2) Fresh start.--Notwithstanding subparagraph (D) of
section 401(a)(9) of such Code, during the first year that
regulations are in effect under this subsection, required
distributions for future years may be redetermined to reflect
changes under such regulations. Such redetermination shall
include the opportunity to choose a new designated beneficiary
and to elect a new method of calculating life expectancy.
(3) Effective date for regulations.--Regulations referred
to in paragraph (1) shall be effective for years beginning
after December 31, 2000, and shall apply in such years without
regard to whether an individual had previously begun receiving
minimum distributions.
(b) Repeal of Rule Where Distributions Had Begun Before Death
Occurs.--
(1) In general.--Subparagraph (B) of section 401(a)(9) is
amended by striking clause (i) and redesignating clauses (ii),
(iii), and (iv) as clauses (i), (ii), and (iii), respectively.
(2) Conforming changes.--
(A) Clause (i) of section 401(a)(9)(B) (as so
redesignated) is amended--
(i) by striking ``for other cases'' in the
heading; and
(ii) by striking ``the distribution of the
employee's interest has begun in accordance
with subparagraph (A)(ii)'' and inserting ``his
entire interest has been distributed to him,''.
(B) Clause (ii) of section 401(a)(9)(B) (as so
redesignated) is amended by striking ``clause (ii)''
and inserting ``clause (i)''.
(C) Clause (iii) of section 401(a)(9)(B) (as so
redesignated) is amended--
(i) by striking ``clause (iii)(I)'' and
inserting ``clause (ii)(I)'';
(ii) by striking ``clause (iii)(III)'' in
subclause (I) and inserting ``clause
(ii)(III)'';
(iii) by striking ``the date on which the
employee would have attained the age 70\1/2\,''
in subclause (I) and inserting ``April 1 of the
calendar year following the calendar year in
which the spouse attains 70\1/2\,''; and
(iv) by striking ``the distributions to
such spouse begin,'' in subclause (II) and
inserting ``his entire interest has been
distributed to him,''.
(3) Effective date.--The amendments made by this subsection
shall apply to years beginning after December 31, 2000.
(c) Reduction in Excise Tax.--
(1) In general.--Subsection (a) of section 4974 is amended
by striking ``50 percent'' and inserting ``10 percent''.
(2) Effective date.--The amendment made by this subsection
shall apply to years beginning after December 31, 2000.
SEC. 225. CLARIFICATION OF TAX TREATMENT OF DIVISION OF SECTION 457
PLAN BENEFITS UPON DIVORCE.
(a) In General.--Section 414(p)(11) (relating to application of
rules to governmental and church plans) is amended--
(1) by inserting ``or an eligible deferred compensation
plan (within the meaning of section 457(b))'' after
``subsection (e))''; and
(2) in the heading, by striking ``governmental and church
plans'' and inserting ``certain other plans''.
(b) Waiver of Certain Distribution Requirements.--Paragraph (10) of
section 414(p) is amended by striking ``and section 409(d)'' and
inserting ``section 409(d), and section 457(d)''.
(c) Tax Treatment of Payments From a Section 457 Plan.--Subsection
(p) of section 414 is amended by redesignating paragraph (12) as
paragraph (13) and inserting after paragraph (11) the following new
paragraph:
``(12) Tax treatment of payments from a section 457 plan.--
If a distribution or payment from an eligible deferred
compensation plan described in section 457(b) is made pursuant
to a qualified domestic relations order, rules similar to the
rules of section 402(e)(1)(A) shall apply to such distribution
or payment.''.
(d) Effective Date.--The amendments made by this section shall
apply to transfers, distributions, and payments made after December 31,
2000.
SEC. 226. MODIFICATION OF SAFE HARBOR RELIEF FOR HARDSHIP WITHDRAWALS
FROM CASH OR DEFERRED ARRANGEMENTS.
(a) In General.--The Secretary of the Treasury shall revise the
regulations relating to hardship distributions under section
401(k)(2)(B)(i)(IV) of the Internal Revenue Code of 1986 to provide
that the period an employee is prohibited from making elective and
employee contributions in order for a distribution to be deemed
necessary to satisfy financial need shall be equal to 6 months.
(b) Effective Date.--The revised regulations under subsection (a)
shall apply to years beginning after December 31, 2000.
Subtitle C--Increasing Portability for Participants
SEC. 231. ROLLOVERS ALLOWED AMONG VARIOUS TYPES OF PLANS.
(a) Rollovers From and to Section 457 Plans.--
(1) Rollovers from section 457 plans.--
(A) In general.--Section 457(e) (relating to other
definitions and special rules) is amended by adding at
the end the following:
``(16) Rollover amounts.--
``(A) General rule.--In the case of an eligible
deferred compensation plan established and maintained
by an employer described in subsection (e)(1)(A), if--
``(i) any portion of the balance to the
credit of an employee in such plan is paid to
such employee in an eligible rollover
distribution (within the meaning of section
402(c)(4) without regard to subparagraph (C)
thereof),
``(ii) the employee transfers any portion
of the property such employee receives in such
distribution to an eligible retirement plan
described in section 402(c)(8)(B), and
``(iii) in the case of a distribution of
property other than money, the amount so
transferred consists of the property
distributed,
then such distribution (to the extent so transferred)
shall not be includible in gross income for the taxable
year in which paid.
``(B) Certain rules made applicable.--The rules of
paragraphs (2) through (7) (other than paragraph
(4)(C)) and (9) of section 402(c) and section 402(f)
shall apply for purposes of subparagraph (A).
``(C) Reporting.--Rollovers under this paragraph
shall be reported to the Secretary in the same manner
as rollovers from qualified retirement plans (as
defined in section 4974(c)).''.
(B) Deferral limit determined without regard to
rollover amounts.--Section 457(b)(2) (defining eligible
deferred compensation plan) is amended by inserting
``(other than rollover amounts)'' after ``taxable
year''.
(C) Direct rollover.--Paragraph (1) of section
457(d) is amended by striking ``and'' at the end of
subparagraph (A), by striking the period at the end of
subparagraph (B) and inserting ``, and'', and by
inserting after subparagraph (B) the following:
``(C) in the case of a plan maintained by an
employer described in subsection (e)(1)(A), the plan
meets requirements similar to the requirements of
section 401(a)(31).
Any amount transferred in a direct trustee-to-trustee transfer
in accordance with section 401(a)(31) shall not be includible
in gross income for the taxable year of transfer.''.
(D) Withholding.--
(i) Paragraph (12) of section 3401(a) is
amended by adding at the end the following:
``(E) under or to an eligible deferred compensation
plan which, at the time of such payment, is a plan
described in section 457(b) maintained by an employer
described in section 457(e)(1)(A); or''.
(ii) Paragraph (3) of section 3405(c) is
amended to read as follows:
``(3) Eligible rollover distribution.--For purposes of this
subsection, the term `eligible rollover distribution' has the
meaning given such term by section 402(f)(2)(A).''.
(iii) Liability for withholding.--
Subparagraph (B) of section 3405(d)(2) is
amended by striking ``or'' at the end of clause
(ii), by striking the period at the end of
clause (iii) and inserting ``, or'', and by
adding at the end the following:
``(iv) section 457(b).''.
(2) Rollovers to section 457 plans.--
(A) In general.--Section 402(c)(8)(B) (defining
eligible retirement plan) is amended by striking
``and'' at the end of clause (iii), by striking the
period at the end of clause (iv) and inserting ``,
and'', and by inserting after clause (iv) the following
new clause:
``(v) an eligible deferred compensation
plan described in section 457(b) of an employer
described in section 457(e)(1)(A).''.
(B) Separate accounting.--Section 402(c) is amended
by adding at the end the following new paragraph:
``(11) Separate accounting.--Unless a plan described in
clause (v) of paragraph (8)(B) agrees to separately account for
amounts rolled into such plan from eligible retirement plans
not described in such clause, the plan described in such clause
may not accept transfers or rollovers from such retirement
plans.''.
(C) 10 percent additional tax.--Subsection (t) of
section 72 (relating to 10-percent additional tax on
early distributions from qualified retirement plans) is
amended by adding at the end the following new
paragraph:
``(9) Special rule for rollovers to section 457 plans.--For
purposes of this subsection, a distribution from an eligible
deferred compensation plan (as defined in section 457(b)) of an
employer described in section 457(e)(1)(A) shall be treated as
a distribution from a qualified retirement plan described in 4974(c)(1)
to the extent that such distribution is attributable to an amount
transferred to an eligible deferred compensation plan from a qualified
retirement plan (as defined in section 4974(c)).''.
(b) Allowance of Rollovers From and to 403(b) Plans.--
(1) Rollovers from section 403(b) plans.--Section
403(b)(8)(A)(ii) (relating to rollover amounts) is amended by
striking ``such distribution'' and all that follows and
inserting ``such distribution to an eligible retirement plan
described in section 402(c)(8)(B), and''.
(2) Rollovers to section 403(b) plans.--Section
402(c)(8)(B) (defining eligible retirement plan), as amended by
subsection (a), is amended by striking ``and'' at the end of
clause (iv), by striking the period at the end of clause (v)
and inserting ``, and'', and by inserting after clause (v) the
following new clause:
``(vi) an annuity contract described in
section 403(b).''.
(c) Expanded Explanation to Recipients of Rollover Distributions.--
Paragraph (1) of section 402(f) (relating to written explanation to
recipients of distributions eligible for rollover treatment) is amended
by striking ``and'' at the end of subparagraph (C), by striking the
period at the end of subparagraph (D) and inserting ``, and'', and by
adding at the end the following new subparagraph:
``(E) of the provisions under which distributions
from the eligible retirement plan receiving the
distribution may be subject to restrictions and tax
consequences which are different from those applicable
to distributions from the plan making such
distribution.''.
(d) Spousal Rollovers.--Section 402(c)(9) (relating to rollover
where spouse receives distribution after death of employee) is amended
by striking ``; except that'' and all that follows up to the end
period.
(e) Conforming Amendments.--
(1) Section 72(o)(4) is amended by striking ``and
408(d)(3)'' and inserting ``403(b)(8), 408(d)(3), and
457(e)(16)''.
(2) Section 219(d)(2) is amended by striking ``or
408(d)(3)'' and inserting ``408(d)(3), or 457(e)(16)''.
(3) Section 401(a)(31)(B) is amended by striking ``and
403(a)(4)'' and inserting ``, 403(a)(4), 403(b)(8), and
457(e)(16)''.
(4) Subparagraph (A) of section 402(f)(2) is amended by
striking ``or paragraph (4) of section 403(a)'' and inserting
``, paragraph (4) of section 403(a), subparagraph (A) of
section 403(b)(8), or subparagraph (A) of section 457(e)(16)''.
(5) Paragraph (1) of section 402(f) is amended by striking
``from an eligible retirement plan''.
(6) Subparagraphs (A) and (B) of section 402(f)(1) are
amended by striking ``another eligible retirement plan'' and
inserting ``an eligible retirement plan''.
(7) Subparagraph (B) of section 403(b)(8) is amended to
read as follows:
``(B) Certain rules made applicable.--The rules of
paragraphs (2) through (7) and (9) of section 402(c)
and section 402(f) shall apply for purposes of
subparagraph (A), except that section 402(f) shall be
applied to the payor in lieu of the plan
administrator.''.
(8) Section 408(a)(1) is amended by striking ``or
403(b)(8)'' and inserting ``, 403(b)(8), or 457(e)(16)''.
(9) Subparagraphs (A) and (B) of section 415(b)(2) are each
amended by striking ``and 408(d)(3)'' and inserting
``403(b)(8), 408(d)(3), and 457(e)(16)''.
(10) Section 415(c)(2) is amended by striking ``and
408(d)(3)'' and inserting ``408(d)(3), and 457(e)(16)''.
(11) Section 4973(b)(1)(A) is amended by striking ``or
408(d)(3)'' and inserting ``408(d)(3), or 457(e)(16)''.
(f) Effective Date; Special Rule.--
(1) Effective date.--The amendments made by this section
shall apply to distributions after December 31, 2000.
(2) Special rule.--Notwithstanding any other provision of
law, subsections (h)(3) and (h)(5) of section 1122 of the Tax
Reform Act of 1986 shall not apply to any distribution from an
eligible retirement plan (as defined in clause (iii) or (iv) of
section 402(c)(8)(B) of the Internal Revenue Code of 1986) on
behalf of an individual if there was a rollover to such plan on
behalf of such individual which is permitted solely by reason
of any amendment made by this section.
SEC. 232. ROLLOVERS OF IRAS INTO WORKPLACE RETIREMENT PLANS.
(a) In General.--Subparagraph (A) of section 408(d)(3) (relating to
rollover amounts) is amended by adding ``or'' at the end of clause (i),
by striking clauses (ii) and (iii), and by adding at the end the
following:
``(ii) the entire amount received
(including money and any other property) is
paid into an eligible retirement plan for the
benefit of such individual not later than the
60th day after the date on which the payment or
distribution is received, except that the
maximum amount which may be paid into such plan
may not exceed the portion of the amount
received which is includible in gross income
(determined without regard to this paragraph).
For purposes of clause (ii), the term `eligible
retirement plan' means an eligible retirement plan
described in clause (iii), (iv), (v), or (vi) of
section 402(c)(8)(B).''.
(b) Conforming Amendments.--
(1) Paragraph (1) of section 403(b) is amended by striking
``section 408(d)(3)(A)(iii)'' and inserting ``section
408(d)(3)(A)(ii)''.
(2) Clause (i) of section 408(d)(3)(D) is amended by
striking ``(i), (ii), or (iii)'' and inserting ``(i) or (ii)''.
(3) Subparagraph (G) of section 408(d)(3) is amended to
read as follows:
``(G) Simple retirement accounts.--In the case of
any payment or distribution out of a simple retirement
account (as defined in subsection (p)) to which section
72(t)(6) applies, this paragraph shall not apply unless
such payment or distribution is paid into another
simple retirement account.''.
(c) Effective Date; Special Rule.--
(1) Effective date.--The amendments made by this section
shall apply to distributions after December 31, 2000.
(2) Special rule.--Notwithstanding any other provision of
law, subsections (h)(3) and (h)(5) of section 1122 of the Tax
Reform Act of 1986 shall not apply to any distribution from an
eligible retirement plan (as defined in clause (iii) or (iv) of
section 402(c)(8)(B) of the Internal Revenue Code of 1986) on
behalf of an individual if there was a rollover to such plan on
behalf of such individual which is permitted solely by reason
of the amendments made by this section.
SEC. 233. ROLLOVERS OF AFTER-TAX CONTRIBUTIONS.
(a) Rollovers From Exempt Trusts.--Paragraph (2) of section 402(c)
(relating to maximum amount which may be rolled over) is amended by
adding at the end the following: ``The preceding sentence shall not
apply to such distribution to the extent--
``(A) such portion is transferred in a direct
trustee-to-trustee transfer to a qualified trust which
is part of a plan which is a defined contribution plan
and which agrees to separately account for amounts so
transferred, including separately accounting for the
portion of such distribution which is includible in
gross income and the portion of such distribution which
is not so includible, or
``(B) such portion is transferred to an eligible
retirement plan described in clause (i) or (ii) of
paragraph (8)(B).''.
(b) Optional Direct Transfer of Eligible Rollover Distributions.--
Subparagraph (B) of section 401(a)(31) (relating to limitation) is
amended by adding at the end the following: ``The preceding sentence
shall not apply to such distribution if the plan to which such
distribution is transferred--
``(i) agrees to separately account for
amounts so transferred, including separately
accounting for the portion of such distribution
which is includible in gross income and the
portion of such distribution which is not so
includible, or
``(ii) is an eligible retirement plan
described in clause (i) or (ii) of section
402(c)(8)(B).''.
(c) Rules for Applying Section 72 to IRAs.--Paragraph (3) of
section 408(d) (relating to special rules for applying section 72) is
amended by inserting at the end the following:
``(H) Application of section 72.--
``(i) In general.--If--
``(I) a distribution is made from
an individual retirement plan, and
``(II) a rollover contribution is
made to an eligible retirement plan
described in section 402(c)(8)(B)(iii),
(iv), (v), or (vi) with respect to all
or part of such distribution,
then, notwithstanding paragraph (2), the rules
of clause (ii) shall apply for purposes of
applying section 72.
``(ii) Applicable rules.--In the case of a
distribution described in clause (i)--
``(I) section 72 shall be applied
separately to such distribution,
``(II) notwithstanding the pro rata
allocation of income on, and investment
in, the contract to distributions under
section 72, the portion of such
distribution rolled over to an eligible
retirement plan described in clause (i)
shall be treated as from income on the
contract (to the extent of the
aggregate income on the contract from
all individual retirement plans of the
distributee), and
``(III) appropriate adjustments
shall be made in applying section 72 to
other distributions in such taxable
year and subsequent taxable years.''.
(d) Effective Date.--The amendments made by this section shall
apply to distributions made after December 31, 2000.
SEC. 234. HARDSHIP EXCEPTION TO 60-DAY RULE.
(a) Exempt Trusts.--Paragraph (3) of section 402(c) (relating to
transfer must be made within 60 days of receipt) is amended to read as
follows:
``(3) Transfer must be made within 60 days of receipt.--
``(A) In general.--Except as provided in
subparagraph (B), paragraph (1) shall not apply to any
transfer of a distribution made after the 60th day
following the day on which the distributee received the
property distributed.
``(B) Hardship exception.--The Secretary may waive
the 60-day requirement under subparagraph (A) where the
failure to waive such requirement would be against
equity or good conscience, including casualty,
disaster, or other events beyond the reasonable control
of the individual subject to such requirement.''.
(b) IRAs.--Paragraph (3) of section 408(d) (relating to rollover
contributions), as amended by section 233, is amended by adding after
subparagraph (H) the following new subparagraph:
``(I) Waiver of 60-day requirement.--The Secretary
may waive the 60-day requirement under subparagraphs
(A) and (D) where the failure to waive such requirement
would be against equity or good conscience, including
casualty, disaster, or other events beyond the
reasonable control of the individual subject to such
requirement.''.
(c) Effective Date.--The amendments made by this section shall
apply to distributions after December 31, 2000.
SEC. 235. TREATMENT OF FORMS OF DISTRIBUTION.
(a) Plan Transfers.--
(1) Amendment to internal revenue code of 1986.--Paragraph
(6) of section 411(d) (relating to accrued benefit not to be
decreased by amendment) is amended by adding at the end the
following:
``(D) Plan transfers.--
``(i) A defined contribution plan (in this
subparagraph referred to as the `transferee
plan') shall not be treated as failing to meet
the requirements of this subsection merely
because the transferee plan does not provide
some or all of the forms of distribution
previously available under another defined
contribution plan (in this subparagraph
referred to as the `transferor plan') to the
extent that--
``(I) the forms of distribution
previously available under the
transferor plan applied to the account
of a participant or beneficiary under
the transferor plan that was
transferred from the transferor plan to
the transferee plan pursuant to a
direct transfer rather than pursuant to
a distribution from the transferor
plan,
``(II) the terms of both the
transferor plan and the transferee plan
authorize the transfer described in
subclause (I),
``(III) the transfer described in
subclause (I) was made pursuant to a
voluntary election by the participant
or beneficiary whose account was
transferred to the transferee plan,
``(IV) the election described in
subclause (III) was made after the
participant or beneficiary received a
notice describing the consequences of
making the election,
``(V) if the transferor plan
provides for an annuity as the normal
form of distribution under the plan in
accordance with section 417, the
transfer is made with the consent of
the participant's spouse (if any), and
such consent meets requirements similar
to the requirements imposed by section
417(a)(2), and
``(VI) the transferee plan allows
the participant or beneficiary
described in clause (iii) to receive
any distribution to which the
participant or beneficiary is entitled
under the transferee plan in the form
of a single sum distribution.
``(ii) Clause (i) shall apply to plan
mergers and other transactions having the
effect of a direct transfer, including
consolidations of benefits attributable to
different employers within a multiple employer
plan.
``(E) Elimination of form of distribution.--Except
to the extent provided in regulations, a defined
contribution plan shall not be treated as failing to
meet the requirements of this section merely because of
the elimination of a form of distribution previously
available thereunder. This subparagraph shall not apply
to the elimination of a form of distribution with
respect to any participant unless--
``(i) a single sum payment is available to
such participant at the same time or times as
the form of distribution being eliminated, and
``(ii) such single sum payment is based on
the same or greater portion of the
participant's account as the form of
distribution being eliminated.''.
(2) Effective date.--The amendment made by this subsection
shall apply to years beginning after December 31, 2000.
(b) Regulations.--
(1) Amendment to internal revenue code of 1986.--The last
sentence of paragraph (6)(B) of section 411(d) (relating to
accrued benefit not to be decreased by amendment) is amended to
read as follows: ``The Secretary shall by regulations provide
that this subparagraph shall not apply to any plan amendment
that does not adversely affect the rights of participants in a
material manner.''.
(2) Secretary directed.--Not later than December 31, 2001,
the Secretary of the Treasury is directed to issue final
regulations under section 411(d)(6) of the Internal Revenue
Code of 1986, including the regulations required by the
amendments made by this subsection. Such regulations shall
apply to plan years beginning after December 31, 2001, or such
earlier date as is specified by the Secretary of the Treasury.
SEC. 236. RATIONALIZATION OF RESTRICTIONS ON DISTRIBUTIONS.
(a) Modification of Same Desk Exception.--
(1) Section 401(k).--
(A) Section 401(k)(2)(B)(i)(I) (relating to
qualified cash or deferred arrangements) is amended by
striking ``separation from service'' and inserting
``severance from employment''.
(B) Subparagraph (A) of section 401(k)(10)
(relating to distributions upon termination of plan or
disposition of assets or subsidiary) is amended to read
as follows:
``(A) In general.--An event described in this
subparagraph is the termination of the plan without
establishment or maintenance of another defined
contribution plan (other than an employee stock
ownership plan as defined in section 4975(e)(7)).''.
(C) Section 401(k)(10) is amended--
(i) in subparagraph (B)--
(I) by striking ``An event'' in
clause (i) and inserting ``A
termination''; and
(II) by striking ``the event'' in
clause (i) and inserting ``the
termination'';
(ii) by striking subparagraph (C); and
(iii) by striking ``or disposition of
assets or subsidiary'' in the heading.
(2) Section 403(b).--
(A) Paragraphs (7)(A)(ii) and (11)(A) of section
403(b) are each amended by striking ``separates from
service'' and inserting ``has a severance from
employment''.
(B) The heading for paragraph (11) of section
403(b) is amended by striking ``separation from
service'' and inserting ``severance from employment''.
(3) Section 457.--Clause (ii) of section 457(d)(1)(A) is
amended by striking ``is separated from service'' and inserting
``has a severance from employment''.
(b) Effective Date.--The amendments made by this section shall
apply to distributions after December 31, 2000.
SEC. 237. PURCHASE OF SERVICE CREDIT IN GOVERNMENTAL DEFINED BENEFIT
PLANS.
(a) 403(b) Plans.--Subsection (b) of section 403 is amended by
adding at the end the following new paragraph:
``(13) Trustee-to-trustee transfers to purchase permissive
service credit.--No amount shall be includible in gross income
by reason of a direct trustee-to-trustee transfer to a defined
benefit governmental plan (as defined in section 414(d)) if
such transfer is--
``(A) for the purchase of permissive service credit
(as defined in section 415(n)(3)(A)) under such plan,
or
``(B) a repayment to which section 415 does not
apply by reason of subsection (k)(3) thereof.''.
(b) 457 Plans.--
(1) Subsection (e) of section 457 is amended by adding
after paragraph (16) the following new paragraph:
``(17) Trustee-to-trustee transfers to purchase permissive
service credit.--No amount shall be includible in gross income
by reason of a direct trustee-to-trustee transfer to a defined
benefit governmental plan (as defined in section 414(d)) if
such transfer is--
``(A) for the purchase of permissive service credit
(as defined in section 415(n)(3)(A)) under such plan,
or
``(B) a repayment to which section 415 does not
apply by reason of subsection (k)(3) thereof.''.
(2) Section 457(b)(2) is amended by striking ``(other than
rollover amounts)'' and inserting ``(other than rollover
amounts and amounts received in a transfer referred to in
subsection (e)(17))''.
(c) Effective Date.--The amendments made by this section shall
apply to trustee-to-trustee transfers after December 31, 2000.
SEC. 238. EMPLOYERS MAY DISREGARD ROLLOVERS FOR PURPOSES OF CASH-OUT
AMOUNTS.
(a) Qualified Plans.--Section 411(a)(11) (relating to restrictions
on certain mandatory distributions) is amended by adding at the end the
following:
``(D) Special rule for rollover contributions.--A
plan shall not fail to meet the requirements of this
paragraph if, under the terms of the plan, the present
value of the nonforfeitable accrued benefit is
determined without regard to that portion of such
benefit which is attributable to rollover contributions
(and earnings allocable thereto). For purposes of this
subparagraph, the term `rollover contributions' means
any rollover contribution under sections 402(c),
403(a)(4), 403(b)(8), 408(d)(3)(A)(ii), and
457(e)(16).''.
(b) Eligible Deferred Compensation Plans.--Clause (i) of section
457(e)(9)(A) is amended by striking ``such amount'' and inserting ``the
portion of such amount which is not attributable to rollover
contributions (as defined in section 411(a)(11)(D))''.
(c) Effective Date.--The amendments made by this section shall
apply to distributions after December 31, 2000.
SEC. 239. MINIMUM DISTRIBUTION AND INCLUSION REQUIREMENTS FOR SECTION
457 PLANS.
(a) Minimum Distribution Requirements.--Paragraph (2) of section
457(d) (relating to distribution requirements) is amended to read as
follows:
``(2) Minimum distribution requirements.--A plan meets the
minimum distribution requirements of this paragraph if such
plan meets the requirements of section 401(a)(9).''.
(b) Inclusion in Gross Income.--
(1) Year of inclusion.--Subsection (a) of section 457
(relating to year of inclusion in gross income) is amended to
read as follows:
``(a) Year of inclusion in gross income.--
``(1) In general.--Any amount of compensation deferred
under an eligible deferred compensation plan, and any income
attributable to the amounts so deferred, shall be includible in
gross income only for the taxable year in which such
compensation or other income--
``(A) is paid to the participant or other
beneficiary, in the case of a plan of an eligible
employer described in subsection (e)(1)(A), and
``(B) is paid or otherwise made available to the
participant or other beneficiary, in the case of a plan
of an eligible employer described in subsection
(e)(1)(B).
``(2) Special rule for rollover amounts.--To the extent
provided in section 72(t)(9), section 72(t) shall apply to any
amount includible in gross income under this subsection.''.
(2) Conforming amendments.--
(A) So much of paragraph (9) of section 457(e) as
precedes subparagraph (A) is amended to read as
follows:
``(9) Benefits of tax exempt organization plans not treated
as made available by reason of certain elections, etc.--In the
case of an eligible deferred compensation plan of an employer
described in subsection (e)(1)(B)--''.
(B) Section 457(d) is amended by adding at the end
the following new paragraph:
``(3) Special rule for government plan.--An eligible
deferred compensation plan of an employer described in
subsection (e)(1)(A) shall not be treated as failing to meet
the requirements of this subsection solely by reason of making a
distribution described in subsection (e)(9)(A).''.
(c) Effective Date.--The amendments made by this section shall
apply to distributions after December 31, 2000.
Subtitle D--Strengthening Pension Security and Enforcement
SEC. 241. REPEAL OF 150 PERCENT OF CURRENT LIABILITY FUNDING LIMIT.
(a) Amendment to Internal Revenue Code of 1986.--Section 412(c)(7)
(relating to full-funding limitation) is amended--
(1) by striking ``the applicable percentage'' in
subparagraph (A)(i)(I) and inserting ``in the case of plan
years beginning before January 1, 2004, the applicable
percentage''; and
(2) by amending subparagraph (F) to read as follows:
``(F) Applicable percentage.--For purposes of
subparagraph (A)(i)(I), the applicable percentage shall
be determined in accordance with the following table:
``In the case of any plan year
The applicable
beginning in--
percentage is--
2001................................... 160
2002................................... 165
2003................................... 170.''.
(b) Effective Date.--The amendments made by this section shall
apply to plan years beginning after December 31, 2000.
SEC. 242. MAXIMUM CONTRIBUTION DEDUCTION RULES MODIFIED AND APPLIED TO
ALL DEFINED BENEFIT PLANS.
(a) In General.--Subparagraph (D) of section 404(a)(1) (relating to
special rule in case of certain plans) is amended to read as follows:
``(D) Special rule in case of certain plans.--
``(i) In general.--In the case of any
defined benefit plan, except as provided in
regulations, the maximum amount deductible
under the limitations of this paragraph shall
not be less than the unfunded termination
liability (determined as if the proposed
termination date referred to in section
4041(b)(2)(A)(i)(II) of the Employee Retirement
Income Security Act of 1974 were the last day
of the plan year).
``(ii) Plans with less than 100
participants.--For purposes of this
subparagraph, in the case of a plan which has
less than 100 participants for the plan year,
termination liability shall not include the
liability attributable to benefit increases for
highly compensated employees (as defined in
section 414(q)) resulting from a plan amendment
which is made or becomes effective, whichever
is later, within the last 2 years before the
termination date.
``(iii) Rule for determining number of
participants.--For purposes of determining
whether a plan has more than 100 participants,
all defined benefit plans maintained by the
same employer (or any member of such employer's
controlled group (within the meaning of section
412(l)(8)(C))) shall be treated as one plan,
but only employees of such member or employer
shall be taken into account.
``(iv) Plans established and maintain by
professional service employers.--Clause (i)
shall not apply to a plan described in section
4021(b)(13) of the Employee Retirement Income
Security Act of 1974.''.
(b) Conforming Amendment.--Paragraph (6) of section 4972(c) is
amended to read as follows:
``(6) Exceptions.--In determining the amount of
nondeductible contributions for any taxable year, there shall
not be taken into account so much of the contributions to one
or more defined contribution plans which are not deductible
when contributed solely because of section 404(a)(7) as does
not exceed the greater of--
``(A) the amount of contributions not in excess of
6 percent of compensation (within the meaning of
section 404(a)) paid or accrued (during the taxable
year for which the contributions were made) to
beneficiaries under the plans, or
``(B) the sum of--
``(i) the amount of contributions described
in section 401(m)(4)(A), plus
``(ii) the amount of contributions
described in section 402(g)(3)(A).
For purposes of this paragraph, the deductible limits under
section 404(a)(7) shall first be applied to amounts contributed
to a defined benefit plan and then to amounts described in
subparagraph (B).''.
(c) Effective Date.--The amendments made by this section shall
apply to plan years beginning after December 31, 2000.
SEC. 243. EXCISE TAX RELIEF FOR SOUND PENSION FUNDING.
(a) In General.--Subsection (c) of section 4972 (relating to
nondeductible contributions) is amended by adding at the end the
following new paragraph:
``(7) Defined benefit plan exception.--In determining the
amount of nondeductible contributions for any taxable year, an
employer may elect for such year not to take into account any
contributions to a defined benefit plan except to the extent
that such contributions exceed the full-funding limitation (as
defined in section 412(c)(7), determined without regard to
subparagraph (A)(i)(I) thereof). For purposes of this
paragraph, the deductible limits under section 404(a)(7) shall
first be applied to amounts contributed to defined contribution
plans and then to amounts described in this paragraph. If an
employer makes an election under this paragraph for a taxable
year, paragraph (6) shall not apply to such employer for such
taxable year.''.
(b) Effective Date.--The amendments made by this section shall
apply to years beginning after December 31, 2000.
SEC. 244. EXCISE TAX ON FAILURE TO PROVIDE NOTICE BY DEFINED BENEFIT
PLANS SIGNIFICANTLY REDUCING FUTURE BENEFIT ACCRUALS.
(a) Amendment to 1986 Code.--Chapter 43 (relating to qualified
pension, etc., plans) is amended by adding at the end the following new
section:
``SEC. 4980F. FAILURE OF APPLICABLE PLANS REDUCING BENEFIT ACCRUALS TO
SATISFY NOTICE REQUIREMENTS.
``(a) Imposition of Tax.--There is hereby imposed a tax on the
failure of any applicable pension plan to meet the requirements of
subsection (e) with respect to any applicable individual.
``(b) Amount of Tax.--
``(1) In general.--The amount of the tax imposed by
subsection (a) on any failure with respect to any applicable
individual shall be $100 for each day in the noncompliance
period with respect to such failure.
``(2) Noncompliance period.--For purposes of this section,
the term `noncompliance period' means, with respect to any
failure, the period beginning on the date the failure first
occurs and ending on the date the failure is corrected.
``(c) Limitations on Amount of Tax.--
``(1) Overall limitation for unintentional failures.--In
the case of failures that are due to reasonable cause and not
to willful neglect, the tax imposed by subsection (a) for
failures during the taxable year of the employer (or, in the
case of a multiemployer plan, the taxable year of the trust
forming part of the plan) shall not exceed $500,000. For
purposes of the preceding sentence, all multiemployer plans of
which the same trust forms a part shall be treated as one plan.
For purposes of this paragraph, if not all persons who are
treated as a single employer for purposes of this section have
the same taxable year, the taxable years taken into account
shall be determined under principles similar to the principles
of section 1561.
``(2) Waiver by secretary.--In the case of a failure which
is due to reasonable cause and not to willful neglect, the
Secretary may waive part or all of the tax imposed by
subsection (a) to the extent that the payment of such tax would
be excessive relative to the failure involved.
``(d) Liability for Tax.--The following shall be liable for the tax
imposed by subsection (a):
``(1) In the case of a plan other than a multiemployer
plan, the employer.
``(2) In the case of a multiemployer plan, the plan.
``(e) Notice Requirements for Plans Significantly Reducing Benefit
Accruals.--
``(1) In general.--If an applicable pension plan is amended
to provide for a significant reduction in the rate of future
benefit accrual, the plan administrator shall provide written
notice to each applicable individual (and to each employee
organization representing applicable individuals).
``(2) Notice.--The notice required by paragraph (1) shall
be written in a manner calculated to be understood by the
average plan participant and shall provide sufficient
information (as determined in accordance with regulations
prescribed by the Secretary) to allow applicable individuals to
understand the effect of the plan amendment.
``(3) Timing of notice.--Except as provided in regulations,
the notice required by paragraph (1) shall be provided within a
reasonable time before the effective date of the plan
amendment.
``(4) Designees.--Any notice under paragraph (1) may be
provided to a person designated, in writing, by the person to
which it would otherwise be provided.
``(5) Notice before adoption of amendment.--A plan shall
not be treated as failing to meet the requirements of paragraph
(1) merely because notice is provided before the adoption of
the plan amendment if no material modification of the amendment
occurs before the amendment is adopted.
``(f) Applicable Individual; Applicable Pension Plan.--For purposes
of this section--
``(1) Applicable individual.--The term `applicable
individual' means, with respect to any plan amendment--
``(A) any participant in the plan, and
``(B) any beneficiary who is an alternate payee
(within the meaning of section 414(p)(8)) under an
applicable qualified domestic relations order (within
the meaning of section 414(p)(1)(A)),
who may reasonably be expected to be affected by such plan
amendment.
``(2) Applicable pension plan.--The term `applicable
pension plan' means--
``(A) any defined benefit plan, or
``(B) an individual account plan which is subject
to the funding standards of section 412,
which had 100 or more participants who had accrued a benefit,
or with respect to whom contributions were made, under the plan
(whether or not vested) as of the last day of the plan year
preceding the plan year in which the plan amendment becomes
effective. Such term shall not include a governmental plan
(within the meaning of section 414(d)) or a church plan (within
the meaning of section 414(e)) with respect to which the
election provided by section 410(d) has not been made.''.
(b) Clerical Amendment.--The table of sections for chapter 43 is
amended by adding at the end the following new item:
``Sec. 4980F. Failure of applicable
plans reducing benefit accruals
to satisfy notice
requirements.''.
(c) Effective Dates.--
(1) In general.--The amendments made by this section shall
apply to plan amendments taking effect on or after the date of
the enactment of this Act.
(2) Transition.--Until such time as the Secretary of the
Treasury issues regulations under sections 4980F(e)(2) and (3)
of the Internal Revenue Code of 1986 (as added by the
amendments made by this section), a plan shall be treated as
meeting the requirements of such sections if it makes a good
faith effort to comply with such requirements.
(3) Special rule.--The period for providing any notice
required by the amendments made by this section shall not end
before the date which is 3 months after the date of the
enactment of this Act.
SEC. 245. TREATMENT OF MULTIEMPLOYER PLANS UNDER SECTION 415.
(a) Compensation Limit.--Paragraph (11) of section 415(b) (relating
to limitation for defined benefit plans) is amended to read as follows:
``(11) Special limitation rule for governmental and
multiemployer plans.--In the case of a governmental plan (as
defined in section 414(d)) or a multiemployer plan (as defined
in section 414(f)), subparagraph (B) of paragraph (1) shall not
apply.''.
(b) Effective Date.--The amendment made by this section shall apply
to years beginning after December 31, 2000.
Subtitle E--Reducing Regulatory Burdens
SEC. 261. MODIFICATION OF TIMING OF PLAN VALUATIONS.
(a) Amendments to 1986 Code.--Section 412(c)(9) (relating to annual
valuation) is amended--
(1) by striking ``For purposes'' and inserting the
following:
``(A) In general.--For purposes''; and
(2) by adding at the end the following:
``(B) Election to use prior year valuation.--
``(i) In general.--Except as provided in
clause (ii), if, for any plan year--
``(I) an election is in effect
under this subparagraph with respect to
a plan, and
``(II) the assets of the plan are
not less than 125 percent of the plan's
current liability (as defined in
paragraph (7)(B)), determined as of the
valuation date for the preceding plan
year,
then this section shall be applied using the
information available as of such valuation
date.
``(ii) Exceptions.--
``(I) Actual valuation every 3
years.--Clause (i) shall not apply for
more than 2 consecutive plan years and
valuation shall be under subparagraph
(A) with respect to any plan year to
which clause (i) does not apply by
reason of this subclause.
``(II) Regulations.--Clause (i)
shall not apply to the extent that more
frequent valuations are required under
the regulations under subparagraph (A).
``(iii) Adjustments.--Information under
clause (i) shall, in accordance with
regulations, be actuarially adjusted to reflect
significant differences in participants.
``(iv) Election.--An election under this
subparagraph, once made, shall be irrevocable
without the consent of the Secretary.''.
(b) Effective Date.--The amendments made by this section shall
apply to plan years beginning after December 31, 2000.
SEC. 262. ESOP DIVIDENDS MAY BE REINVESTED WITHOUT LOSS OF DIVIDEND
DEDUCTION.
(a) In General.--Section 404(k)(2)(A) (defining applicable
dividends) is amended by striking ``or'' at the end of clause (ii), by
redesignating clause (iii) as clause (iv), and by inserting after
clause (ii) the following new clause:
``(iii) is, at the election of such
participants or their beneficiaries--
``(I) payable as provided in clause
(i) or (ii), or
``(II) paid to the plan and
reinvested in qualifying employer
securities, or''.
(b) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2000.
SEC. 263. REPEAL OF TRANSITION RULE RELATING TO CERTAIN HIGHLY
COMPENSATED EMPLOYEES.
(a) In General.--Paragraph (4) of section 1114(c) of the Tax Reform
Act of 1986 is hereby repealed.
(b) Effective Date.--The repeal made by subsection (a) shall apply
to plan years beginning after December 31, 2000.
SEC. 264. EMPLOYEES OF TAX-EXEMPT ENTITIES.
(a) In General.--The Secretary of the Treasury shall modify
Treasury Regulations section 1.410(b)-6(g) to provide that employees of
an organization described in section 403(b)(1)(A)(i) of the Internal
Revenue Code of 1986 who are eligible to make contributions under
section 403(b) of such Code pursuant to a salary reduction agreement
may be treated as excludable with respect to a plan under section
401(k) or (m) of such Code that is provided under the same general
arrangement as a plan under such section 401(k), if--
(1) no employee of an organization described in section
403(b)(1)(A)(i) of such Code is eligible to participate in such
section 401(k) plan or section 401(m) plan; and
(2) 95 percent of the employees who are not employees of an
organization described in section 403(b)(1)(A)(i) of such Code
are eligible to participate in such plan under such section
401(k) or (m).
(b) Effective Date.--The modification required by subsection (a)
shall apply as of the same date set forth in section 1426(b) of the
Small Business Job Protection Act of 1996.
SEC. 265. CLARIFICATION OF TREATMENT OF EMPLOYER-PROVIDED RETIREMENT
ADVICE.
(a) In General.--Subsection (a) of section 132 (relating to
exclusion from gross income) is amended by striking ``or'' at the end
of paragraph (5), by striking the period at the end of paragraph (6)
and inserting ``, or'', and by adding at the end the following new
paragraph:
``(7) qualified retirement planning services.''.
(b) Qualified Retirement Planning Services Defined.--Section 132 is
amended by redesignating subsection (m) as subsection (n) and by
inserting after subsection (l) the following:
``(m) Qualified Retirement Planning Services.--
``(1) In general.--For purposes of this section, the term
`qualified retirement planning services' means any retirement
planning service provided to an employee and his spouse by an
employer maintaining a qualified employer plan.
``(2) Nondiscrimination rule.--Subsection (a)(7) shall
apply in the case of highly compensated employees only if such
services are available on substantially the same terms to each
member of the group of employees normally provided education
and information regarding the employer's qualified employer
plan.
``(3) Qualified employer plan.--For purposes of this
subsection, the term `qualified employer plan' means a plan,
contract, pension, or account described in section
219(g)(5).''.
(c) Effective Date.--The amendments made by this section shall
apply to years beginning after December 31, 2000.
SEC. 266. REPORTING SIMPLIFICATION.
(a) Simplified Annual Filing Requirement for Owners and Their
Spouses.--
(1) In general.--The Secretary of the Treasury shall modify
the requirements for filing annual returns with respect to one-
participant retirement plans to ensure that such plans with
assets of $250,000 or less as of the close of the plan year
need not file a return for that year.
(2) One-participant retirement plan defined.--For purposes
of this subsection, the term ``one-participant retirement
plan'' means a retirement plan that--
(A) on the first day of the plan year--
(i) covered only the employer (and the
employer's spouse) and the employer owned the
entire business (whether or not incorporated);
or
(ii) covered only one or more partners (and
their spouses) in a business partnership
(including partners in an S or C corporation);
(B) meets the minimum coverage requirements of
section 410(b) of the Internal Revenue Code of 1986
without being combined with any other plan of the
business that covers the employees of the business;
(C) does not provide benefits to anyone except the
employer (and the employer's spouse) or the partners
(and their spouses);
(D) does not cover a business that is a member of
an affiliated service group, a controlled group of
corporations, or a group of businesses under common
control; and
(E) does not cover a business that leases
employees.
(3) Other definitions.--Terms used in paragraph (2) which
are also used in section 414 of the Internal Revenue Code of
1986 shall have the respective meanings given such terms by
such section.
(b) Simplified Annual Filing Requirement for Plans With Fewer Than
25 Employees.--In the case of a retirement plan which covers less than
25 employees on the first day of the plan year and meets the
requirements described in subparagraphs (B), (D), and (E) of subsection
(a)(2), the Secretary of the Treasury shall provide for the filing of a
simplified annual return that is substantially similar to the annual
return required to be filed by a one-participant retirement plan.
(c) Effective Date.--The provisions of this section shall take
effect on January 1, 2001.
SEC. 267. IMPROVEMENT OF EMPLOYEE PLANS COMPLIANCE RESOLUTION SYSTEM.
The Secretary of the Treasury shall continue to update and improve
the Employee Plans Compliance Resolution System (or any successor
program) giving special attention to--
(1) increasing the awareness and knowledge of small
employers concerning the availability and use of the program;
(2) taking into account special concerns and circumstances
that small employers face with respect to compliance and
correction of compliance failures;
(3) extending the duration of the self-correction period
under the Administrative Policy Regarding Self-Correction for
significant compliance failures;
(4) expanding the availability to correct insignificant
compliance failures under the Administrative Policy Regarding
Self-Correction during audit; and
(5) assuring that any tax, penalty, or sanction that is
imposed by reason of a compliance failure is not excessive and
bears a reasonable relationship to the nature, extent, and
severity of the failure.
SEC. 268. MODIFICATION OF EXCLUSION FOR EMPLOYER PROVIDED TRANSIT
PASSES.
(a) In General.--Section 132(f)(3) (relating to cash
reimbursements) is amended by striking the last sentence.
(b) Effective Date.--The amendment made by this section shall apply
to taxable years beginning after December 31, 2000.
SEC. 269. REPEAL OF THE MULTIPLE USE TEST.
(a) In General.--Paragraph (9) of section 401(m) is amended to read
as follows:
``(9) Regulations.--The Secretary shall prescribe such
regulations as may be necessary to carry out the purposes of
this subsection and subsection (k), including regulations
permitting appropriate aggregation of plans and
contributions.''.
(b) Effective Date.--The amendment made by this section shall apply
to years beginning after December 31, 2000.
SEC. 270. FLEXIBILITY IN NONDISCRIMINATION, COVERAGE, AND LINE OF
BUSINESS RULES.
(a) Nondiscrimination.--
(1) In general.--The Secretary of the Treasury shall, by
regulation, provide that a plan shall be deemed to satisfy the
requirements of section 401(a)(4) of the Internal Revenue Code
of 1986 if such plan satisfies the facts and circumstances test
under section 401(a)(4) of such Code, as in effect before
January 1, 1994, but only if--
(A) the plan satisfies conditions prescribed by the
Secretary to appropriately limit the availability of
such test; and
(B) the plan is submitted to the Secretary for a
determination of whether it satisfies such test.
Subparagraph (B) shall only apply to the extent provided by the
Secretary.
(2) Effective dates.--
(A) Regulations.--The regulation required by
paragraph (1) shall apply to years beginning after
December 31, 2000.
(B) Conditions of availability.--Any condition of
availability prescribed by the Secretary under
paragraph (1)(A) shall not apply before the first year
beginning not less than 120 days after the date on
which such condition is prescribed.
(b) Coverage Test.--
(1) In general.--Section 410(b)(1) (relating to minimum
coverage requirements) is amended by adding at the end the
following:
``(D) In the case that the plan fails to meet the
requirements of subparagraphs (A), (B) and (C), the
plan--
``(i) satisfies subparagraph (B), as in
effect immediately before the enactment of the
Tax Reform Act of 1986,
``(ii) is submitted to the Secretary for a
determination of whether it satisfies the
requirement described in clause (i), and
``(iii) satisfies conditions prescribed by
the Secretary by regulation that appropriately
limit the availability of this subparagraph.
Clause (ii) shall apply only to the extent provided by
the Secretary.''.
(2) Effective dates.--
(A) In general.--The amendment made by paragraph
(1) shall apply to years beginning after December 31,
2000.
(B) Conditions of availability.--Any condition of
availability prescribed by the Secretary under
regulations prescribed by the Secretary under section
410(b)(1)(D) of the Internal Revenue Code of 1986 shall
not apply before the first year beginning not less than
120 days after the date on which such condition is
prescribed.
(c) Line of Business Rules.--The Secretary of the Treasury shall,
on or before December 31, 2000, modify the existing regulations issued
under section 414(r) of the Internal Revenue Code of 1986 in order to
expand (to the extent that the Secretary determines appropriate) the
ability of a pension plan to demonstrate compliance with the line of
business requirements based upon the facts and circumstances
surrounding the design and operation of the plan, even though the plan
is unable to satisfy the mechanical tests currently used to determine
compliance.
SEC. 271. EXTENSION TO INTERNATIONAL ORGANIZATIONS OF MORATORIUM ON
APPLICATION OF CERTAIN NONDISCRIMINATION RULES APPLICABLE
TO STATE AND LOCAL PLANS.
(a) In General.--Subparagraph (G) of section 401(a)(5),
subparagraph (H) of section 401(a)(26), subparagraph (G) of section
401(k)(3), and paragraph (2) of section 1505(d) of the Taxpayer Relief
Act of 1997 are each amended by inserting ``or by an international
organization which is described in section 414(d)'' after ``or
instrumentality thereof)''.
(b) Conforming Amendments.--
(1) The headings for subparagraph (G) of section 401(a)(5)
and subparagraph (H) of section 401(a)(26) are each amended by
inserting ``and international organization'' after
``governmental''.
(2) Subparagraph (G) of section 401(k)(3) is amended by
inserting ``State and local governmental and international
organization plans.--'' after ``(G)''.
(c) Effective Date.--The amendments made by this section shall
apply to years beginning after December 31, 2000.
SEC. 272. NOTICE AND CONSENT PERIOD REGARDING DISTRIBUTIONS.
(a) Expansion of Period.--
(1) Amendment to 1986 code.--Subparagraph (A) of section
417(a)(6) is amended by striking ``90-day'' and inserting
``180-day''.
(2) Modification of regulations.--The Secretary of the
Treasury shall modify the regulations under sections 402(f),
411(a)(11), and 417 of the Internal Revenue Code of 1986 to
substitute ``180 days'' for ``90 days'' each place it appears
in Treasury Regulations sections 1.402(f)-1, 1.411(a)-11(c),
and 1.417(e)-1(b).
(3) Effective date.--The amendment made by paragraph (1)
and the modifications required by paragraph (2) shall apply to
years beginning after December 31, 2000.
(b) Consent Regulation Inapplicable to Certain Distributions.--
(1) In general.--The Secretary of the Treasury shall modify
the regulations under section 411(a)(11) of the Internal
Revenue Code of 1986 to provide that the description of a
participant's right, if any, to defer receipt of a distribution
shall also describe the consequences of failing to defer such
receipt.
(2) Effective date.--The modifications required by
paragraph (1) shall apply to years beginning after December 31,
2000.
Subtitle F--Plan Amendments
SEC. 281. PROVISIONS RELATING TO PLAN AMENDMENTS.
(a) In General.--If this section applies to any plan or contract
amendment--
(1) such plan or contract shall be treated as being
operated in accordance with the terms of the plan during the
period described in subsection (b)(2)(A); and
(2) such plan shall not fail to meet the requirements of
section 411(d)(6) of the Internal Revenue Code of 1986 by
reason of such amendment.
(b) Amendments to Which Section Applies.--
(1) In general.--This section shall apply to any amendment
to any plan or annuity contract which is made--
(A) pursuant to any amendment made by this title,
or pursuant to any regulation issued under this title;
and
(B) on or before the last day of the first plan
year beginning on or after January 1, 2003.
In the case of a governmental plan (as defined in section
414(d) of the Internal Revenue Code of 1986), this paragraph
shall be applied by substituting ``2005'' for ``2003''.
(2) Conditions.--This section shall not apply to any
amendment unless--
(A) during the period--
(i) beginning on the date the legislative
or regulatory amendment described in paragraph
(1)(A) takes effect (or in the case of a plan
or contract amendment not required by such
legislative or regulatory amendment, the
effective date specified by the plan); and
(ii) ending on the date described in
paragraph (1)(B) (or, if earlier, the date the
plan or contract amendment is adopted),
the plan or contract is operated as if such plan or
contract amendment were in effect; and
(B) such plan or contract amendment applies
retroactively for such period.
TITLE III--ESTATE TAX RELIEF
Subtitle A--Reductions of Estate and Gift Tax Rates
SEC. 301. REDUCTIONS OF ESTATE AND GIFT TAX RATES.
(a) Maximum Rate of Tax Reduced to 50 Percent.--
(1) In general.--The table contained in section 2001(c)(1)
is amended by striking the two highest brackets and inserting
the following:
``Over $2,500,000..............
$1,025,800, plus 50% of the
excess over
$2,500,000.''.
(2) Phase-in of reduced rate.--Subsection (c) of section
2001 is amended by adding at the end the following new
paragraph:
``(3) Phase-in of reduced rate.--In the case of decedents
dying, and gifts made, during 2001, the last item in the table
contained in paragraph (1) shall be applied by substituting
`53%' for `50%'.''.
(b) Repeal of Phaseout of Graduated Rates.--Subsection (c) of
section 2001 is amended by striking paragraph (2) and redesignating
paragraph (3), as added by subsection (a), as paragraph (2).
(c) Additional Reductions of Rates of Tax.--Subsection (c) of
section 2001, as so amended, is amended by adding at the end the
following new paragraph:
``(3) Phasedown of tax.--In the case of estates of
decedents dying, and gifts made, during any calendar year after
2002--
``(A) In general.--Except as provided in
subparagraph (C), the tentative tax under this
subsection shall be determined by using a table
prescribed by the Secretary (in lieu of using the table
contained in paragraph (1)) which is the same as such
table; except that--
``(i) each of the rates of tax shall be
reduced by the number of percentage points
determined under subparagraph (B), and
``(ii) the amounts setting forth the tax
shall be adjusted to the extent necessary to
reflect the adjustments under clause (i).
``(B) Percentage points of reduction.--
The number of
``For calendar year:
percentage points is:
2003................................... 1.0
2004................................... 2.0.
``(C) Table for years after 2004.--The table
applicable under this subsection to estates of
decedents dying, and gifts made, during calendar year
2004 shall apply to estates of decedents dying, and
gifts made, after calendar year 2004.
``(D) Coordination with credit for state death
taxes.--Rules similar to the rules of subparagraph (A)
shall apply to the table contained in section 2011(b)
except that the Secretary shall prescribe percentage
point reductions which maintain the proportionate
relationship (as in effect before any reduction under
this paragraph) between the credit under section 2011
and the tax rates under subsection (c).''.
(d) Effective Dates.--
(1) Subsections (a) and (b).--The amendments made by
subsections (a) and (b) shall apply to estates of decedents
dying, and gifts made, after December 31, 2000.
(2) Subsection (c).--The amendment made by subsection (c)
shall apply to estates of decedents dying, and gifts made,
after December 31, 2002.
SEC. 302. SENSE OF THE CONGRESS CONCERNING REPEAL OF THE DEATH TAX.
(a) Findings.--Congress finds the following:
(1) The death tax stifles economic growth by taking
productive resources out of the private sector, thereby causing
unemployment and inhibiting job creation.
(2) The death tax penalizes hard work and entrepreneurial
activity by causing the demise of small, family-owned
businesses when an owner dies.
(3) The death tax rates in the United States are the second
highest among all industrialized nations.
(4) The death tax prevents minorities from gaining an
economic foothold in the economy since it limits the inter-
generational transfer of wealth, which is critical to
establishing a legacy and power base for minorities in our
society.
(5) The death tax presents serious challenges for farmers
whose value is in their land, not liquid assets, and who must
sell land to pay the tax, thereby jeopardizing the future
existence of the already-struggling family farm.
(6) The death tax contributes to the development of rural
areas by causing farms and ranches to be sold and subdivided.
(7) Previous attempts by Congress to create death tax
exemptions have been ineffective due to an inability to
legislatively duplicate the complex family relationships that
exist in our society.
(8) Increasing entrepreneurship and investment in
retirement will bring a whole new class of people under the
death tax.
(b) Sense of Congress.--It is the sense of the Congress that the
death tax relief in this Act is considered a first step in our effort
to ultimately repeal this onerous tax.
Subtitle B--Unified Credit Replaced With Unified Exemption Amount
SEC. 311. UNIFIED CREDIT AGAINST ESTATE AND GIFT TAXES REPLACED WITH
UNIFIED EXEMPTION AMOUNT.
(a) In General.--
(1) Estate tax.--Subsection (b) of section 2001 (relating
to computation of tax) is amended to read as follows:
``(b) Computation of Tax.--
``(1) In general.--The tax imposed by this section shall be
the amount equal to the excess (if any) of--
``(A) the tentative tax determined under paragraph
(2), over
``(B) the aggregate amount of tax which would have
been payable under chapter 12 with respect to gifts
made by the decedent after December 31, 1976, if the
provisions of subsection (c) (as in effect at the
decedent's death) had been applicable at the time of
such gifts.
``(2) Tentative tax.--For purposes of paragraph (1), the
tentative tax determined under this paragraph is a tax computed
under subsection (c) on the excess of--
``(A) the sum of--
``(i) the amount of the taxable estate, and
``(ii) the amount of the adjusted taxable
gifts, over
``(B) the exemption amount for the calendar year in
which the decedent died.
``(3) Exemption amount.--For purposes of paragraph (2), the
term `exemption amount' means the amount determined in
accordance with the following table:
``In the case of
The exemption
calendar year:
amount is:
2001......................................... $675,000
2002 and 2003................................ $700,000
2004......................................... $850,000
2005......................................... $950,000
2006 or thereafter........................... $1,000,000.
``(4) Adjusted taxable gifts.--For purposes of paragraph
(2), the term `adjusted taxable gifts' means the total amount
of the taxable gifts (within the meaning of section 2503) made
by the decedent after December 31, 1976, other than gifts which
are includible in the gross estate of the decedent.''.
(2) Gift tax.--Subsection (a) of section 2502 (relating to
computation of tax) is amended to read as follows:
``(a) Computation of Tax.--
``(1) In general.--The tax imposed by section 2501 for each
calendar year shall be the amount equal to the excess (if any)
of--
``(A) the tentative tax determined under paragraph
(2), over
``(B) the tax paid under this section for all prior
calendar periods.
``(2) Tentative tax.--For purposes of paragraph (1), the
tentative tax determined under this paragraph for a calendar
year is a tax computed under section 2001(c) on the excess of--
``(A) the aggregate sum of the taxable gifts for
such calendar year and for each of the preceding
calendar periods, over
``(B) the exemption amount under section 2001(b)(3)
for such calendar year.''.
(b) Repeal of Unified Credits.--
(1) Section 2010 (relating to unified credit against estate
tax) is hereby repealed.
(2) Section 2505 (relating to unified credit against gift
tax) is hereby repealed.
(c) Conforming Amendments.--
(1)(A) Subsection (b) of section 2011 is amended--
(i) by striking ``adjusted'' in the table; and
(ii) by striking the last sentence.
(B) Subsection (f) of section 2011 is amended by striking
``, reduced by the amount of the unified credit provided by
section 2010''.
(2) Subsection (a) of section 2012 is amended by striking
``and the unified credit provided by section 2010''.
(3) Subparagraph (A) of section 2013(c)(1) is amended by
striking ``2010,''.
(4) Paragraph (2) of section 2014(b) is amended by striking
``2010,''.
(5) Clause (ii) of section 2056A(b)(12)(C) is amended to
read as follows:
``(ii) to treat any reduction in the tax
imposed by paragraph (1)(A) by reason of the
credit allowable under section 2010 (as in
effect on the day before the date of the
enactment of the Small Business Tax Fairness
Act of 2001) or the exemption amount allowable
under section 2001(b) with respect to the
decedent as a credit under section 2505 (as so
in effect) or exemption under section 2521 (as the case may be)
allowable to such surviving spouse for purposes of determining the
amount of the exemption allowable under section 2521 with respect to
taxable gifts made by the surviving spouse during the year in which the
spouse becomes a citizen or any subsequent year,''.
(6) Subsection (a) of section 2057 is amended by striking
paragraphs (2) and (3) and inserting the following new
paragraph:
``(2) Maximum deduction.--The deduction allowed by this
section shall not exceed the excess of $1,300,000 over the
exemption amount (as defined in section 2001(b)(3)).''.
(7)(A) Subsection (b) of section 2101 is amended to read as
follows:
``(b) Computation of Tax.--
``(1) In general.--The tax imposed by this section shall be
the amount equal to the excess (if any) of--
``(A) the tentative tax determined under paragraph
(2), over
``(B) a tentative tax computed under section
2001(c) on the amount of the adjusted taxable gifts.
``(2) Tentative tax.--For purposes of paragraph (1), the
tentative tax determined under this paragraph is a tax computed
under section 2001(c) on the excess of--
``(A) the sum of--
``(i) the amount of the taxable estate, and
``(ii) the amount of the adjusted taxable
gifts, over
``(B) the exemption amount for the calendar year in
which the decedent died.
``(3) Exemption amount.--
``(A) In general.--The term `exemption amount'
means $60,000.
``(B) Residents of possessions of the united
states.--In the case of a decedent who is considered to
be a nonresident not a citizen of the United States
under section 2209, the exemption amount under this
paragraph shall be the greater of--
``(i) $60,000, or
``(ii) that proportion of $175,000 which
the value of that part of the decedent's gross
estate which at the time of his death is
situated in the United States bears to the
value of his entire gross estate wherever
situated.
``(C) Special rules.--
``(i) Coordination with treaties.--To the
extent required under any treaty obligation of
the United States, the exemption amount allowed
under this paragraph shall be equal to the
amount which bears the same ratio to the
exemption amount under section 2001(b)(3) (for
the calendar year in which the decedent died)
as the value of the part of the decedent's
gross estate which at the time of his death is
situated in the United States bears to the
value of his entire gross estate wherever
situated. 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.
``(ii) Coordination with gift tax exemption
and unified credit.--If an exemption has been
allowed under section 2521 (or a credit has
been allowed under section 2505 as in effect on
the day before the date of the enactment of the
Small Business Tax Fairness Act of 2001) with
respect to any gift made by the decedent, each
dollar amount contained in subparagraph (A) or
(B) or the exemption amount applicable under
clause (i) of this subparagraph (whichever
applies) shall be reduced by the exemption so
allowed under 2521 (or, in the case of such a
credit, by the amount of the gift for which the
credit was so allowed).''.
(8) Section 2102 is amended by striking subsection (c).
(9)(A) Subsection (a) of section 2107 is amended by adding
at the end the following new paragraph:
``(3) Limitation on exemption amount.--Subparagraphs (B)
and (C) of section 2101(b)(3) shall not apply in applying
section 2101 for purposes of this section.''.
(B) Subsection (c) of section 2107 is amended--
(i) by striking paragraph (1) and by redesignating
paragraphs (2) and (3) as paragraphs (1) and (2),
respectively; and
(ii) by striking the second sentence of paragraph
(2) (as so redesignated).
(10) Paragraph (1) of section 6018(a) is amended by
striking ``the applicable exclusion amount in effect under
section 2010(c)'' and inserting ``the exemption amount under
section 2001(b)(3)''.
(11) Subparagraph (A) of section 6601(j)(2) is amended to
read as follows:
``(A) the amount of the tentative tax which would
be determined under the rate schedule set forth in
section 2001(c) if the amount with respect to which
such tentative tax is to be computed were $1,000,000,
or''.
(12) The table of sections for part II of subchapter A of
chapter 11 is amended by striking the item relating to section
2010.
(13) The table of sections for subchapter A of chapter 12
is amended by striking the item relating to section 2505.
(14) The table of sections for subchapter C of chapter 12
is amended by inserting before the item relating to section
2522 the following new item:
``Sec. 2521. Exemption.''.
(d) Effective Date.--The amendments made by this section--
(1) insofar as they relate to the tax imposed by chapter 11
of the Internal Revenue Code of 1986, shall apply to estates of
decedents dying after December 31, 2000; and
(2) insofar as they relate to the tax imposed by chapter 12
of such Code, shall apply to gifts made after December 31,
2000.
Subtitle C--Modifications of Generation-skipping Transfer Tax
SEC. 321. DEEMED ALLOCATION OF GST EXEMPTION TO LIFETIME TRANSFERS TO
TRUSTS; RETROACTIVE ALLOCATIONS.
(a) In General.--Section 2632 (relating to special rules for
allocation of GST exemption) is amended by redesignating subsection (c)
as subsection (e) and by inserting after subsection (b) the following
new subsections:
``(c) Deemed Allocation to Certain Lifetime Transfers to GST
Trusts.--
``(1) In general.--If any individual makes an indirect skip
during such individual's lifetime, any unused portion of such
individual's GST exemption shall be allocated to the property
transferred to the extent necessary to make the inclusion ratio
for such property zero. If the amount of the indirect skip
exceeds such unused portion, the entire unused portion shall be
allocated to the property transferred.
``(2) Unused portion.--For purposes of paragraph (1), the
unused portion of an individual's GST exemption is that portion
of such exemption which has not previously been--
``(A) allocated by such individual,
``(B) treated as allocated under subsection (b)
with respect to a direct skip occurring during or
before the calendar year in which the indirect skip is
made, or
``(C) treated as allocated under paragraph (1) with
respect to a prior indirect skip.
``(3) Definitions.--
``(A) Indirect skip.--For purposes of this
subsection, the term `indirect skip' means any transfer
of property (other than a direct skip) subject to the
tax imposed by chapter 12 made to a GST trust.
``(B) GST trust.--The term `GST trust' means a
trust that could have a generation-skipping transfer
with respect to the transferor unless--
``(i) the trust instrument provides that
more than 25 percent of the trust corpus must
be distributed to or may be withdrawn by one or
more individuals who are non-skip persons--
``(I) before the date that the
individual attains age 46,
``(II) on or before one or more
dates specified in the trust instrument
that will occur before the date that
such individual attains age 46, or
``(III) upon the occurrence of an
event that, in accordance with
regulations prescribed by the
Secretary, may reasonably be expected
to occur before the date that such
individual attains age 46;
``(ii) the trust instrument provides that
more than 25 percent of the trust corpus must
be distributed to or may be withdrawn by one or
more individuals who are non-skip persons and
who are living on the date of death of another
person identified in the instrument (by name or
by class) who is more than 10 years older than
such individuals;
``(iii) the trust instrument provides that,
if one or more individuals who are non-skip
persons die on or before a date or event
described in clause (i) or (ii), more than 25
percent of the trust corpus either must be
distributed to the estate or estates of one or
more of such individuals or is subject to a
general power of appointment exercisable by one
or more of such individuals;
``(iv) the trust is a trust any portion of
which would be included in the gross estate of
a non-skip person (other than the transferor)
if such person died immediately after the
transfer;
``(v) the trust is a charitable lead
annuity trust (within the meaning of section
2642(e)(3)(A)) or a charitable remainder
annuity trust or a charitable remainder
unitrust (within the meaning of section
664(d)); or
``(vi) the trust is a trust with respect to
which a deduction was allowed under section
2522 for the amount of an interest in the form
of the right to receive annual payments of a
fixed percentage of the net fair market value
of the trust property (determined yearly) and
which is required to pay principal to a non-
skip person if such person is alive when the
yearly payments for which the deduction was
allowed terminate.
For purposes of this subparagraph, the value of
transferred property shall not be considered to be
includible in the gross estate of a non-skip person or
subject to a right of withdrawal by reason of such
person holding a right to withdraw so much of such
property as does not exceed the amount referred to in
section 2503(b) with respect to any transferor, and it
shall be assumed that powers of appointment held by
non-skip persons will not be exercised.
``(4) Automatic allocations to certain gst trusts.--For
purposes of this subsection, an indirect skip to which section
2642(f) applies shall be deemed to have been made only at the
close of the estate tax inclusion period. The fair market value
of such transfer shall be the fair market value of the trust property
at the close of the estate tax inclusion period.
``(5) Applicability and effect.--
``(A) In general.--An individual--
``(i) may elect to have this subsection not
apply to--
``(I) an indirect skip, or
``(II) any or all transfers made by
such individual to a particular trust,
and
``(ii) may elect to treat any trust as a
GST trust for purposes of this subsection with
respect to any or all transfers made by such
individual to such trust.
``(B) Elections.--
``(i) Elections with respect to indirect
skips.--An election under subparagraph
(A)(i)(I) shall be deemed to be timely if filed
on a timely filed gift tax return for the
calendar year in which the transfer was made or
deemed to have been made pursuant to paragraph
(4) or on such later date or dates as may be
prescribed by the Secretary.
``(ii) Other elections.--An election under
clause (i)(II) or (ii) of subparagraph (A) may
be made on a timely filed gift tax return for
the calendar year for which the election is to
become effective.
``(d) Retroactive Allocations.--
``(1) In general.--If--
``(A) a non-skip person has an interest or a future
interest in a trust to which any transfer has been
made,
``(B) such person--
``(i) is a lineal descendant of a
grandparent of the transferor or of a
grandparent of the transferor's spouse or
former spouse, and
``(ii) is assigned to a generation below
the generation assignment of the transferor,
and
``(C) such person predeceases the transferor,
then the transferor may make an allocation of any of such
transferor's unused GST exemption to any previous transfer or
transfers to the trust on a chronological basis.
``(2) Special rules.--If the allocation under paragraph (1)
by the transferor is made on a gift tax return filed on or
before the date prescribed by section 6075(b) for gifts made
within the calendar year within which the non-skip person's
death occurred--
``(A) the value of such transfer or transfers for
purposes of section 2642(a) shall be determined as if
such allocation had been made on a timely filed gift
tax return for each calendar year within which each
transfer was made,
``(B) such allocation shall be effective
immediately before such death, and
``(C) the amount of the transferor's unused GST
exemption available to be allocated shall be determined
immediately before such death.
``(3) Future interest.--For purposes of this subsection, a
person has a future interest in a trust if the trust may permit
income or corpus to be paid to such person on a date or dates
in the future.''.
(b) Conforming Amendment.--Paragraph (2) of section 2632(b) is
amended by striking ``with respect to a direct skip'' and inserting
``or subsection (c)(1)''.
(c) Effective Dates.--
(1) Deemed allocation.--Section 2632(c) of the Internal
Revenue Code of 1986 (as added by subsection (a)), and the
amendment made by subsection (b), shall apply to transfers
subject to chapter 11 or 12 made after December 31, 1999, and
to estate tax inclusion periods ending after December 31, 1999.
(2) Retroactive allocations.--Section 2632(d) of the
Internal Revenue Code of 1986 (as added by subsection (a))
shall apply to deaths of non-skip persons occurring after
December 31, 1999.
SEC. 322. SEVERING OF TRUSTS.
(a) In General.--Subsection (a) of section 2642 (relating to
inclusion ratio) is amended by adding at the end the following new
paragraph:
``(3) Severing of trusts.--
``(A) In general.--If a trust is severed in a
qualified severance, the trusts resulting from such
severance shall be treated as separate trusts
thereafter for purposes of this chapter.
``(B) Qualified severance.--For purposes of
subparagraph (A)--
``(i) In general.--The term `qualified
severance' means the division of a single trust
and the creation (by any means available under
the governing instrument or under local law) of
two or more trusts if--
``(I) the single trust was divided
on a fractional basis, and
``(II) the terms of the new trusts,
in the aggregate, provide for the same
succession of interests of
beneficiaries as are provided in the
original trust.
``(ii) Trusts with inclusion ratio greater
than zero.--If a trust has an inclusion ratio
of greater than zero and less than 1, a
severance is a qualified severance only if the
single trust is divided into two trusts, one of
which receives a fractional share of the total
value of all trust assets equal to the
applicable fraction of the single trust
immediately before the severance. In such case,
the trust receiving such fractional share shall
have an inclusion ratio of zero and the other
trust shall have an inclusion ratio of 1.
``(iii) Regulations.--The term `qualified
severance' includes any other severance
permitted under regulations prescribed by the
Secretary.
``(C) Timing and manner of severances.--A severance
pursuant to this paragraph may be made at any time. The
Secretary shall prescribe by forms or regulations the
manner in which the qualified severance shall be
reported to the Secretary.''.
(b) Effective Date.--The amendment made by this section shall apply
to severances after December 31, 1999.
SEC. 323. MODIFICATION OF CERTAIN VALUATION RULES.
(a) Gifts for Which Gift Tax Return Filed or Deemed Allocation
Made.--Paragraph (1) of section 2642(b) (relating to valuation rules,
etc.) is amended to read as follows:
``(1) Gifts for which gift tax return filed or deemed
allocation made.--If the allocation of the GST exemption to any
transfers of property is made on a gift tax return filed on or
before the date prescribed by section 6075(b) for such transfer
or is deemed to be made under section 2632(b)(1) or (c)(1)--
``(A) the value of such property for purposes of
subsection (a) shall be its value as finally determined
for purposes of chapter 12 (within the meaning of
section 2001(f)(2)), or, in the case of an allocation
deemed to have been made at the close of an estate tax
inclusion period, its value at the time of the close of
the estate tax inclusion period, and
``(B) such allocation shall be effective on and
after the date of such transfer, or, in the case of an
allocation deemed to have been made at the close of an
estate tax inclusion period, on and after the close of
such estate tax inclusion period.''.
(b) Transfers at Death.--Subparagraph (A) of section 2642(b)(2) is
amended to read as follows:
``(A) Transfers at death.--If property is
transferred as a result of the death of the transferor,
the value of such property for purposes of subsection
(a) shall be its value as finally determined for
purposes of chapter 11; except that, if the
requirements prescribed by the Secretary respecting
allocation of post-death changes in value are not met,
the value of such property shall be determined as of
the time of the distribution concerned.''.
(c) Effective Date.--The amendments made by this section shall
apply to transfers subject to chapter 11 or 12 of the Internal Revenue
Code of 1986 made after December 31, 1999.
SEC. 324. RELIEF PROVISIONS.
(a) In General.--Section 2642 is amended by adding at the end the
following new subsection:
``(g) Relief Provisions.--
``(1) Relief for late elections.--
``(A) In general.--The Secretary shall by
regulation prescribe such circumstances and procedures
under which extensions of time will be granted to
make--
``(i) an allocation of GST exemption
described in paragraph (1) or (2) of subsection
(b), and
``(ii) an election under subsection (b)(3)
or (c)(5) of section 2632.
Such regulations shall include procedures for
requesting comparable relief with respect to transfers
made before the date of the enactment of this
paragraph.
``(B) Basis for determinations.--In determining
whether to grant relief under this paragraph, the
Secretary shall take into account all relevant
circumstances, including evidence of intent contained
in the trust instrument or instrument of transfer and
such other factors as the Secretary deems relevant. For
purposes of determining whether to grant relief under
this paragraph, the time for making the allocation (or
election) shall be treated as if not expressly
prescribed by statute.
``(2) Substantial compliance.--An allocation of GST
exemption under section 2632 that demonstrates an intent to
have the lowest possible inclusion ratio with respect to a
transfer or a trust shall be deemed to be an allocation of so
much of the transferor's unused GST exemption as produces the
lowest possible inclusion ratio. In determining whether there
has been substantial compliance, all relevant circumstances
shall be taken into account, including evidence of intent
contained in the trust instrument or instrument of transfer and
such other factors as the Secretary deems relevant.''.
(b) Effective Dates.--
(1) Relief for late elections.--Section 2642(g)(1) of the
Internal Revenue Code of 1986 (as added by subsection (a))
shall apply to requests pending on, or filed after, December
31, 1999.
(2) Substantial compliance.--Section 2642(g)(2) of such
Code (as so added) shall take effect on the date of the
enactment of this Act and shall apply to transfers subject to
chapter 11 or 12 of the Internal Revenue Code of 1986 made
after December 31, 1999.
Subtitle D--Conservation Easements
SEC. 331. EXPANSION OF ESTATE TAX RULE FOR CONSERVATION EASEMENTS.
(a) Where Land Is Located.--
(1) In general.--Clause (i) of section 2031(c)(8)(A)
(defining land subject to a conservation easement) is amended--
(A) by striking ``25 miles'' both places it appears
and inserting ``50 miles''; and
(B) striking ``10 miles'' and inserting ``25
miles''.
(2) Effective date.--The amendments made by this subsection
shall apply to estates of decedents dying after December 31,
1999.
(b) Clarification of Date for Determining Value of Land and
Easement.--
(1) In general.--Section 2031(c)(2) (defining applicable
percentage) is amended by adding at the end the following new
sentence: ``The values taken into account under the preceding
sentence shall be such values as of the date of the
contribution referred to in paragraph (8)(B).''.
(2) Effective date.--The amendment made by this subsection
shall apply to estates of decedents dying after December 31,
1997.
TITLE IV--TIMBER INCENTIVE
SEC. 401. TEMPORARY SUSPENSION OF MAXIMUM AMOUNT OF AMORTIZABLE
REFORESTATION EXPENDITURES.
(a) Increase in Dollar Limitation.--Paragraph (1) of section 194(b)
(relating to amortization of reforestation expenditures) is amended by
striking ``$10,000 ($5,000'' and inserting ``$25,000 ($12,500''.
(b) Temporary Suspension of Increased Dollar Limitation.--
Subsection (b) of section 194(b) (relating to amortization of
reforestation expenditures) is amended by adding at the end the
following new paragraph:
``(5) Suspension of dollar limitation.--Paragraph (1) shall
not apply to taxable years beginning after December 31, 2000,
and before January 1, 2004.
(c) Conforming Amendment.--Paragraph (1) of section 48(b) is
amended by striking ``section 194(b)(1)'' and inserting ``section
194(b)(1) and without regard to section 194(b)(5)''.
(d) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2000.
TITLE V--REAL ESTATE PROVISIONS
Subtitle A--Private Activity Bond Volume Cap
SEC. 501. ACCELERATION OF PHASE-IN OF INCREASE IN VOLUME CAP ON PRIVATE
ACTIVITY BONDS.
(a) In General.--The table contained in section 146(d)(2) (relating
to per capita limit; aggregate limit) is amended to read as follows:
``Calendar Year Per Capita Limit Aggregate Limit
------------------------------------------------------------------------
2001....................... $55.00 $165,000,000
2002....................... 60.00 180,000,000
2003....................... 65.00 195,000,000
2004, 2005, and 2006....... 70.00 210,000,000
2007 and thereafter........ 75.00 225,000,000.''.
(b) Effective Date.--The amendment made by this section shall apply
to calendar years beginning after 2000.
Subtitle B--Exclusion From Gross Income for Certain Forgiven Mortgage
Obligations
SEC. 502. EXCLUSION FROM GROSS INCOME FOR CERTAIN FORGIVEN MORTGAGE
OBLIGATIONS.
(a) In General.--Paragraph (1) of section 108(a) (relating to
exclusion from gross income) is amended by striking ``or'' at the end
of both subparagraphs (A) and (C), by striking the period at the end of
subparagraph (D) and inserting ``, or'', and by inserting after
subparagraph (D) the following new subparagraph:
``(E) in the case of an individual, the
indebtedness discharged is qualified residential
indebtedness.''.
(b) Qualified Residential Indebtedness Shortfall.--Section 108
(relating to discharge of indebtedness) is amended by adding at the end
the following new subsection:
``(h) Qualified Residential Indebtedness.--
``(1) Limitations.--The amount excluded under subparagraph
(E) of subsection (a)(1) with respect to any qualified
residential indebtedness shall not exceed the excess (if any)
of--
``(A) the outstanding principal amount of such
indebtedness (immediately before the discharge), over
``(B) the sum of--
``(i) the amount realized from the sale of
the real property securing such indebtedness
reduced by the cost of such sale, and
``(ii) the outstanding principal amount of
any other indebtedness secured by such
property.
``(2) Qualified residential indebtedness.--
``(A) In general.--The term `qualified residential
indebtedness' means indebtedness which--
``(i) was incurred or assumed by the
taxpayer in connection with real property used
as the principal residence (within the meaning
of section 121) of the taxpayer and is secured
by such real property,
``(ii) is incurred or assumed to acquire,
construct, reconstruct, or substantially
improve such real property, and
``(iii) with respect to which such taxpayer
makes an election to have this paragraph apply.
``(B) Refinanced indebtedness.--Such term shall
include indebtedness resulting from the refinancing of
indebtedness under subparagraph (A)(ii), but only to
the extent the amount of the indebtedness resulting
from such refinancing does not exceed the amount of the
refinanced indebtedness.
``(C) Exceptions.--Such term shall not include
qualified farm indebtedness or qualified real property
business indebtedness.''.
(c) Conforming Amendments.--
(1) Paragraph (2) of section 108(a) is amended--
(A) in subparagraph (A) by striking ``and (D)'' and
inserting ``(D), and (E)''; and
(B) by amending subparagraph (B) to read as
follows:
``(B) Insolvency exclusion takes precedence over
qualified farm exclusion; qualified real property
business exclusion; and qualified residential shortfall
exclusion.--Subparagraphs (C), (D), and (E) of
paragraph (1) shall not apply to a discharge to the
extent the taxpayer is insolvent.''.
(2) Paragraph (1) of section 108(b) is amended by striking
``or (C)'' and inserting ``(C), or (E)''.
(3) Subsection (c) of section 121 of such Code is amended
by adding at the end the following new paragraph:
``(4) Special rule relating to discharge of indebtedness.--
The amount of gain which (but for this paragraph) would be
excluded from gross income under subsection (a) with respect to
a principal residence shall be reduced by the amount excluded
from gross income under section 108(a)(1)(E) with respect to
such residence.''.
(d) Effective Date.--The amendments made by this section shall
apply to discharges after December 31, 2000.
TITLE VI--AMENDMENTS TO THE FAIR LABOR STANDARDS ACT OF 1938
SEC. 601. SHORT TITLE.
This title may be cited as the ``Minimum Wage Increase Act of
2001''.
SEC. 602. MINIMUM WAGE.
Section 6(a)(1) of the Fair Labor Standards Act of 1938 (29 U.S.C.
206(a)(1)) is amended to read as follows:
``(1) except as otherwise provided in this section, not
less than--
``(A) $5.15 an hour beginning September 1, 1997,
``(B) $5.65 an hour during the year beginning April
1, 2001, and
``(C) $6.15 an hour beginning April 1, 2002;''.
SEC. 603. EXEMPTION FOR COMPUTER PROFESSIONALS.
Section 13(a) of the Fair Labor Standards Act of 1938 (29 U.S.C.
213(a)) is amended by amending paragraph (17) to read as follows:
``(17) any employee who is a computer systems, network, or
database analyst, designer, developer, programmer, software
engineer, or other similarly skilled worker--
``(A) whose primary duty is--
``(i) the application of systems or network
or database analysis techniques and procedures,
including consulting with users, to determine
hardware, software, systems, network, or
database specifications (including functional
specifications);
``(ii) the design, configuration,
development, integration, documentation,
analysis, creation, testing, securing, or
modification of, or problem resolution for,
computer systems, networks, databases, or
programs, including prototypes, based on and
related to user, system, network, or database
specifications, including design specifications
and machine operating systems;
``(iii) the management or training of
employees performing duties described in clause
(i) or (ii); or
``(iv) a combination of duties described in
clauses (i), (ii), or (iii) the performance of
which requires the same level of skills; and
``(B) who, in the case of an employee who is
compensated on an hourly basis, is compensated at a
rate of not less than $27.63 an hour.
For purposes of this paragraph, the term `network' includes the
Internet and intranet networks and the world wide web. An
employee who meets the exemption provided by this paragraph
shall be considered an employee in a professional capacity
pursuant to paragraph (1); or''.
SEC. 604. EXEMPTION FOR CERTAIN SALES EMPLOYEES.
(a) Amendment.--Section 13(a) of the Fair Labor Standards Act of
1938 (29 U.S.C. 213(a)) is further amended by adding after paragraph
(17) the following:
``(18) any employee employed in a sales position if--
``(A) the employee has specialized or technical
knowledge related to products or services being sold;
``(B) the employee's--
``(i) sales are predominantly to persons or
entities to whom the employee's position has
made previous sales; or
``(ii) position does not involve initiating
sales contacts;
``(C) the employee has a detailed understanding of
the needs of those to whom the employee is selling;
``(D) the employee exercises discretion in offering
a variety of products and services;
``(E) the employee receives--
``(i) base compensation, determined without
regard to the number of hours worked by the
employee, of not less than an amount equal to
one and one-half times the minimum wage in
effect under section 6(a)(1) multiplied by
2,080; and
``(ii) in addition to the employee's base
compensation, compensation based upon each sale
attributable to the employee;
``(F) the employee's aggregate compensation based
upon sales attributable to the employee is not less
than 40 percent of one and one-half times the minimum
wage multiplied by 2,080;
``(G) the employee receives a rate of compensation
based upon each sale attributable to the employee which
is beyond sales required to reach the compensation
required by subparagraph (F) which rate is not less
than the rate on which the compensation required by
subparagraph (F) is determined; and
``(H) the rate of annual compensation or base
compensation for any employee who did not work for an
employer for an entire calendar year is prorated to
reflect annual compensation which would have been
earned if the employee had been compensated at the same
rate for the entire calendar year; or''.
(b) Construction.--The amendment made by subsection (a) may not be
construed to apply to individuals who are employed as route sales
drivers.
SEC. 605. EXEMPTION FOR FUNERAL DIRECTORS.
Section 13(a) of the Fair Labor Standards Act of 1938 (29 U.S.C.
213(a)) is further amended by adding after paragraph (18) the
following:
``(19) any employee employed as a licensed funeral director
or a licensed embalmer.''.
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