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<DOC>
[DOCID: f:publ206.105]


[[Page 112 STAT. 685]]

Public Law 105-206
105th Congress

                                 An Act


 
To amend the Internal Revenue Code of 1986 to restructure and reform the 
   Internal Revenue Service, and for other purposes. <<NOTE: July 22, 
                         1998 -  [H.R. 2676]>> 

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress <<NOTE: Internal Revenue Service 
Restructuring and Reform Act of 1998.>> assembled,

SECTION 1. SHORT TITLE; <<NOTE: 26 USC 1 note.>> AMENDMENT OF 1986 CODE; 
            WAIVER OF ESTIMATED TAX PENALTIES; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Internal 
Revenue Service Restructuring and Reform Act of 1998''.
    (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) Waiver <<NOTE: 26 USC 6654 note.>> of Estimated Tax Penalties.--
No addition to tax shall be made under section 6654 or 6655 of the 
Internal Revenue Code of 1986 with respect to any underpayment of an 
installment required to be paid on or before the 30th day after the date 
of the enactment of this Act to the extent such underpayment was created 
or increased by any provision of this Act.

    (d) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title; amendment of 1986 Code; waiver of estimated tax 
           penalties; table of contents.

  TITLE I--REORGANIZATION OF STRUCTURE AND MANAGEMENT OF THE INTERNAL 
                             REVENUE SERVICE

       Subtitle A--Reorganization of the Internal Revenue Service

Sec. 1001. Reorganization of the Internal Revenue Service.
Sec. 1002. Internal Revenue Service mission to focus on taxpayers' 
           needs.

      Subtitle B--Executive Branch Governance and Senior Management

Sec. 1101. Internal Revenue Service Oversight Board.
Sec. 1102. Commissioner of Internal Revenue; other officials.
Sec. 1103. Treasury Inspector General for Tax Administration.
Sec. 1104. Other personnel.
Sec. 1105. Prohibition on executive branch influence over taxpayer 
           audits and other investigations.

                   Subtitle C--Personnel Flexibilities

Sec. 1201. Improvements in personnel flexibilities.
Sec. 1202. Voluntary separation incentive payments.
Sec. 1203. Termination of employment for misconduct.
Sec. 1204. Basis for evaluation of Internal Revenue Service employees.
Sec. 1205. Employee training program.

                       TITLE II--ELECTRONIC FILING

Sec. 2001. Electronic filing of tax and information returns.

[[Page 112 STAT. 686]]

Sec. 2002. Due date for certain information returns.
Sec. 2003. Paperless electronic filing.
Sec. 2004. Return-free tax system.
Sec. 2005. Access to account information.

                TITLE III--TAXPAYER PROTECTION AND RIGHTS

Sec. 3000. Short title.

                       Subtitle A--Burden of Proof

Sec. 3001. Burden of proof.

                  Subtitle B--Proceedings by Taxpayers

Sec. 3101. Expansion of authority to award costs and certain fees.
Sec. 3102. Civil damages for collection actions.
Sec. 3103. Increase in size of cases permitted on small case calendar.
Sec. 3104. Actions for refund with respect to certain estates which have 
           elected the installment method of payment.
Sec. 3105. Administrative appeal of adverse Internal Revenue Service 
           determination of tax-exempt status of bond issue.
Sec. 3106. Civil action for release of erroneous lien.

  Subtitle C--Relief for Innocent Spouses and for Taxpayers Unable To 
           Manage Their Financial Affairs Due to Disabilities

Sec. 3201. Relief from joint and several liability on joint return.
Sec. 3202. Suspension of statute of limitations on filing refund claims 
           during 
           periods of disability.

        Subtitle D--Provisions Relating to Interest and Penalties

Sec. 3301. Elimination of interest rate differential on overlapping 
           periods of interest on tax overpayments and underpayments.
Sec. 3302. Increase in overpayment rate payable to taxpayers other than 
           corporations.
Sec. 3303. Mitigation of penalty on individual's failure to pay for 
           months during 
           period of installment agreement.
Sec. 3304. Mitigation of failure to deposit penalty.
Sec. 3305. Suspension of interest and certain penalties where Secretary 
           fails to 
           contact individual taxpayer.
Sec. 3306. Procedural requirements for imposition of penalties and 
           additions to tax.
Sec. 3307. Personal delivery of notice of penalty under section 6672.
Sec. 3308. Notice of interest charges.
Sec. 3309. Abatement of interest on underpayments by taxpayers in 
           Presidentially declared disaster areas.

  Subtitle E--Protections for Taxpayers Subject to Audit or Collection 
                               Activities

                           Part I--Due Process

Sec. 3401. Due process in Internal Revenue Service collection actions.

                     Part II--Examination Activities

Sec. 3411. Confidentiality privileges relating to taxpayer 
           communications.
Sec. 3412. Limitation on financial status audit techniques.
Sec. 3413. Software trade secrets protection.
Sec. 3414. Threat of audit prohibited to coerce tip reporting 
           alternative commitment agreements.
Sec. 3415. Taxpayers allowed motion to quash all third-party summonses.
Sec. 3416. Service of summonses to third-party recordkeepers permitted 
           by mail.
Sec. 3417. Notice of Internal Revenue Service contact of third parties.

                     Part III--Collection Activities

                       subpart a--approval process

Sec. 3421. Approval process for liens, levies, and seizures.
                       subpart b--liens and levies

Sec. 3431. Modifications to certain levy exemption amounts.
Sec. 3432. Release of levy upon agreement that amount is uncollectible.
Sec. 3433. Levy prohibited during pendency of refund proceedings.
Sec. 3434. Approval required for jeopardy and termination assessments 
           and 
           jeopardy levies.
Sec. 3435. Increase in amount of certain property on which lien not 
           valid.

[[Page 112 STAT. 687]]

Sec. 3436. Waiver of early withdrawal tax for Internal Revenue Service 
           levies on employer-sponsored retirement plans or IRAs.
                           subpart c--seizures

Sec. 3441. Prohibition of sales of seized property at less than minimum 
           bid.
Sec. 3442. Accounting of sales of seized property.
Sec. 3443. Uniform asset disposal mechanism.
Sec. 3444. Codification of Internal Revenue Service administrative 
           procedures for seizure of taxpayer's property.
Sec. 3445. Procedures for seizure of residences and businesses.

  Part IV--Provisions Relating to Examination and Collection Activities

Sec. 3461. Procedures relating to extensions of statute of limitations 
           by agreement.
Sec. 3462. Offers-in-compromise.
Sec. 3463. Notice of deficiency to specify deadlines for filing Tax 
           Court petition.
Sec. 3464. Refund or credit of overpayments before final determination.
Sec. 3465. Internal Revenue Service procedures relating to appeals of 
           examinations and collections.
Sec. 3466. Application of certain fair debt collection procedures.
Sec. 3467. Guaranteed availability of installment agreements.
Sec. 3468. Prohibition on requests to taxpayers to give up rights to 
           bring actions.

                  Subtitle F--Disclosures to Taxpayers

Sec. 3501. Explanation of joint and several liability.
Sec. 3502. Explanation of taxpayers' rights in interviews with the 
           Internal Revenue Service.
Sec. 3503. Disclosure of criteria for examination selection.
Sec. 3504. Explanations of appeals and collection process.
Sec. 3505. Explanation of reason for refund disallowance.
Sec. 3506. Statements regarding installment agreements.
Sec. 3507. Notification of change in tax matters partner.
Sec. 3508. Disclosure to taxpayers.
Sec. 3509. Disclosure of Chief Counsel advice.

                 Subtitle G--Low-Income Taxpayer Clinics

Sec. 3601. Low-income taxpayer clinics.

                        Subtitle H--Other Matters

Sec. 3701. Cataloging complaints.
Sec. 3702. Archive of records of Internal Revenue Service.
Sec. 3703. Payment of taxes.
Sec. 3704. Clarification of authority of Secretary relating to the 
           making of elections.
Sec. 3705. Internal Revenue Service employee contacts.
Sec. 3706. Use of pseudonyms by Internal Revenue Service employees.
Sec. 3707. Illegal tax protester designation.
Sec. 3708. Provision of confidential information to Congress by 
           whistleblowers.
Sec. 3709. Listing of local Internal Revenue Service telephone numbers 
           and addresses.
Sec. 3710. Identification of return preparers.
Sec. 3711. Offset of past-due, legally enforceable State income tax 
           obligations against overpayments.
Sec. 3712. Reporting requirements in connection with education tax 
           credit.

                           Subtitle I--Studies

Sec. 3801. Administration of penalties and interest.
Sec. 3802. Confidentiality of tax return information.
Sec. 3803. Study of noncompliance with internal revenue laws by 
           taxpayers.
Sec. 3804. Study of payments made for detection of underpayments and 
           fraud.

 TITLE IV--CONGRESSIONAL ACCOUNTABILITY FOR THE INTERNAL REVENUE SERVICE

                          Subtitle A--Oversight

Sec. 4001. Expansion of duties of the Joint Committee on Taxation.
Sec. 4002. Coordinated oversight reports.

                     Subtitle B--Century Date Change

Sec. 4011. Century date change.

                     Subtitle C--Tax Law Complexity

Sec. 4021. Role of the Internal Revenue Service.

[[Page 112 STAT. 688]]

Sec. 4022. Tax law complexity analysis.

                     TITLE V--ADDITIONAL PROVISIONS

Sec. 5001. Lower capital gains rates to apply to property held more than 
           1 year.
Sec. 5002. Clarification of exclusion of meals for certain employees.
Sec. 5003. Clarification of designation of normal trade relations.

                     TITLE VI--TECHNICAL CORRECTIONS

Sec. 6001. Short title; coordination with other titles.
Sec. 6002. Definitions.
Sec. 6003. Amendments related to title I of 1997 Act.
Sec. 6004. Amendments related to title II of 1997 Act.
Sec. 6005. Amendments related to title III of 1997 Act.
Sec. 6006. Amendment related to title IV of 1997 Act.
Sec. 6007. Amendments related to title V of 1997 Act.
Sec. 6008. Amendments related to title VII of 1997 Act.
Sec. 6009. Amendments related to title IX of 1997 Act.
Sec. 6010. Amendments related to title X of 1997 Act.
Sec. 6011. Amendments related to title XI of 1997 Act.
Sec. 6012. Amendments related to title XII of 1997 Act.
Sec. 6013. Amendments related to title XIII of 1997 Act.
Sec. 6014. Amendments related to title XIV of 1997 Act.
Sec. 6015. Amendments related to title XV of 1997 Act.
Sec. 6016. Amendments related to title XVI of 1997 Act.
Sec. 6017. Amendment related to Transportation Equity Act for the 21st 
           Century.
Sec. 6018. Amendments related to Small Business Job Protection Act of 
           1996.
Sec. 6019. Amendments related to Taxpayer Bill of Rights 2.
Sec. 6020. Amendment related to Omnibus Budget Reconciliation Act of 
           1993.
Sec. 6021. Amendment related to Revenue Reconciliation Act of 1990.
Sec. 6022. Amendment related to Tax Reform Act of 1986.
Sec. 6023. Miscellaneous clerical and deadwood changes.
Sec. 6024. Effective date.

                      TITLE VII--REVENUE PROVISIONS

Sec. 7001. Clarification of deduction for deferred compensation.
Sec. 7002. Termination of exception for certain real estate investment 
           trusts from the treatment of stapled entities.
Sec. 7003. Certain customer receivables ineligible for mark to market 
           treatment.
Sec. 7004. Modification of AGI limit for conversions to Roth IRAs.

TITLE VIII--IDENTIFICATION OF LIMITED TAX BENEFITS SUBJECT TO LINE ITEM 
                                  VETO

Sec. 8001. Identification of limited tax benefits subject to line item 
           veto.

  TITLE IX--TECHNICAL CORRECTIONS TO TRANSPORTATION EQUITY ACT FOR THE 
                              21ST CENTURY

Sec. 9001. Short title.
Sec. 9002. Authorization and program subtitle.
Sec. 9003. Restorations to general provisions subtitle.
Sec. 9004. Restorations to program streamlining and flexibility 
           subtitle.
Sec. 9005. Restorations to safety subtitle.
Sec. 9006. Elimination of duplicate provisions.
Sec. 9007. Highway finance.
Sec. 9008. High priority projects technical corrections.
Sec. 9009. Federal Transit Administration programs.
Sec. 9010. Motor carrier safety technical correction.
Sec. 9011. Restorations to research title.
Sec. 9012. Automobile safety and information.
Sec. 9013. Technical corrections regarding subtitle A of title VIII.
Sec. 9014. Corrections to veterans subtitle.
Sec. 9015. Technical corrections regarding title IX.
Sec. 9016. Effective date.

[[Page 112 STAT. 689]]

  TITLE I--REORGANIZATION OF STRUCTURE AND MANAGEMENT OF THE INTERNAL 
                             REVENUE SERVICE

       Subtitle A--Reorganization of the Internal Revenue Service

SEC. 1001. REORGANIZATION OF THE INTERNAL REVENUE SERVICE. <<NOTE: 26 
            USC 7801 note.>> 

    (a) In General.--The Commissioner of Internal Revenue shall develop 
and implement a plan to reorganize the Internal Revenue Service. The 
plan shall--
            (1) supersede any organization or reorganization of the 
        Internal Revenue Service based on any statute or reorganization 
        plan applicable on the effective date of this section;
            (2) eliminate or substantially modify the existing 
        organization of the Internal Revenue Service which is based on a 
        national, regional, and district structure;
            (3) establish organizational units serving particular groups 
        of taxpayers with similar needs; and
            (4) ensure an independent appeals function within the 
        Internal Revenue Service, including the prohibition in the plan 
        of ex parte communications between appeals officers and other 
        Internal Revenue Service employees to the extent that such 
        communications appear to compromise the independence of the 
        appeals officers.

    (b) Savings Provisions.--
            (1) Preservation of specific tax rights and remedies.--
        Nothing in the plan developed and implemented under subsection 
        (a) shall be considered to impair any right or remedy, including 
        trial by jury, to recover any internal revenue tax alleged to 
        have been erroneously or illegally assessed or collected, or any 
        penalty claimed to have been collected without authority, or any 
        sum alleged to have been excessive or in any manner wrongfully 
        collected under the internal revenue laws. For the purpose of 
        any action to recover any such tax, penalty, or sum, all 
        statutes, rules, and regulations referring to the collector of 
        internal revenue, the principal officer for the internal revenue 
        district, or the Secretary, shall be deemed to refer to the 
        officer whose act or acts referred to in the preceding sentence 
        gave rise to such action. The venue of any such action shall be 
        the same as under existing law.
            (2) Continuing effect of legal documents.--All orders, 
        determinations, rules, regulations, permits, agreements, grants, 
        contracts, certificates, licenses, registrations, privileges, 
        and other administrative actions--
                    (A) which have been issued, made, granted, or 
                allowed to become effective by the President, any 
                Federal agency or official thereof, or by a court of 
                competent jurisdiction, in the performance of any 
                function transferred or affected by the reorganization 
                of the Internal Revenue Service or any other 
                administrative unit of the Department of the Treasury 
                under this section; and
                    (B) which are in effect at the time this section 
                takes effect, or were final before the effective date of 
                this section

[[Page 112 STAT. 690]]

                and are to become effective on or after the effective 
                date of this section,
        shall continue in effect according to their terms until 
        modified, terminated, superseded, set aside, or revoked in 
        accordance with law by the President, the Secretary of the 
        Treasury, the Commissioner of Internal Revenue, or other 
        authorized official, a court of competent jurisdiction, or by 
        operation of law.
            (3) Proceedings not affected.--The provisions of this 
        section shall not affect any proceedings, including notices of 
        proposed rulemaking, or any application for any license, permit, 
        certificate, or financial assistance pending before the 
        Department of the Treasury (or any administrative unit of the 
        Department, including the Internal Revenue Service) at the time 
        this section takes effect, with respect to functions transferred 
        or affected by the reorganization under this section but such 
        proceedings and applications shall continue. Orders shall be 
        issued in such proceedings, appeals shall be taken therefrom, 
        and payments shall be made pursuant to such orders, as if this 
        section had not been enacted, and orders issued in any such 
        proceedings shall continue in effect until modified, terminated, 
        superseded, or revoked by a duly authorized official, by a court 
        of competent jurisdiction, or by operation of law. Nothing in 
        this paragraph shall be deemed to prohibit the discontinuance or 
        modification of any such proceeding under the same terms and 
        conditions and to the same extent that such proceeding could 
        have been discontinued or modified if this section had not been 
        enacted.
            (4) Suits not affected.--The provisions of this section 
        shall not affect suits commenced before the effective date of 
        this section, and in all such suits, proceedings shall be had, 
        appeals taken, and judgments rendered in the same manner and 
        with the same effect as if this section had not been enacted.
            (5) Nonabatement of actions.--No suit, action, or other 
        proceeding commenced by or against the Department of the 
        Treasury (or any administrative unit of the Department, 
        including the Internal Revenue Service), or by or against any 
        individual in the official capacity of such individual as an 
        officer of the Department of the Treasury, shall abate by reason 
        of the enactment of this section.
            (6) Administrative actions relating to promulgation of 
        regulations.--Any administrative action relating to the 
        preparation or promulgation of a regulation by the Department of 
        the Treasury (or any administrative unit of the Department, 
        including the Internal Revenue Service) relating to a function 
        transferred or affected by the reorganization under this section 
        may be continued by the Department of the Treasury through any 
        appropriate administrative unit of the Department, including the 
        Internal Revenue Service with the same effect as if this section 
        had not been enacted.

    (c) Effective Date.--This section shall take effect on the date of 
the enactment of this Act.

SEC. 1002. <<NOTE: 26 USC 7801 note.>> INTERNAL REVENUE SERVICE MISSION 
            TO FOCUS ON TAXPAYERS' NEEDS.

    The Internal Revenue Service shall review and restate its mission to 
place a greater emphasis on serving the public and meeting taxpayers' 
needs.

[[Page 112 STAT. 691]]

      Subtitle B--Executive Branch Governance and Senior Management

SEC. 1101. INTERNAL REVENUE SERVICE OVERSIGHT BOARD.

    (a) In General.--Section 7802 (relating to the Commissioner of 
Internal Revenue) is amended to read as follows:

``SEC. 7802. INTERNAL REVENUE SERVICE OVERSIGHT BOARD.

    ``(a) Establishment.--There is established within the Department of 
the Treasury the Internal Revenue Service Oversight Board (hereafter in 
this subchapter referred to as the `Oversight Board').
    ``(b) Membership.--
            ``(1) Composition.--The <<NOTE: President.>> Oversight Board 
        shall be composed of nine members, as follows:
                    ``(A) six members shall be individuals who are not 
                otherwise Federal officers or employees and who are 
                appointed by the President, by and with the advice and 
                consent of the Senate.
                    ``(B) one member shall be the Secretary of the 
                Treasury or, if the Secretary so designates, the Deputy 
                Secretary of the Treasury.
                    ``(C) one member shall be the Commissioner of 
                Internal Revenue.
                    ``(D) one member shall be an individual who is a 
                full-time Federal employee or a representative of 
                employees and who is appointed by the President, by and 
                with the advice and consent of the Senate.
            ``(2) Qualifications and terms.--
                    ``(A) Qualifications.--Members of the Oversight 
                Board described in paragraph (1)(A) shall be appointed 
                without regard to political affiliation and solely on 
                the basis of their professional experience and expertise 
                in one or more of the following areas:
                          ``(i) Management of large service 
                      organizations.
                          ``(ii) Customer service.
                          ``(iii) Federal tax laws, including tax 
                      administration and compliance.
                          ``(iv) Information technology.
                          ``(v) Organization development.
                          ``(vi) The needs and concerns of taxpayers.
                          ``(vii) The needs and concerns of small 
                      businesses.
                In the aggregate, the members of the Oversight Board 
                described in paragraph (1)(A) should collectively bring 
                to bear expertise in all of the areas described in the 
                preceding sentence.
                    ``(B) Terms.--Each member who is described in 
                subparagraph (A) or (D) of paragraph (1) shall be 
                appointed for a term of 5 years, except that of the 
                members first appointed under paragraph (1)(A)--
                          ``(i) two members shall be appointed for a 
                      term of 3 years,
                          ``(ii) two members shall be appointed for a 
                      term of 4 years; and
                          ``(iii) two members shall be appointed for a 
                      term of 5 years.

[[Page 112 STAT. 692]]

                    ``(C) Reappointment.--An individual who is described 
                in subparagraph (A) or (D) of paragraph (1) may be 
                appointed to no more than two 5-year terms on the 
                Oversight Board.
                    ``(D) Vacancy.--Any vacancy on the Oversight Board 
                shall be filled in the same manner as the original 
                appointment. Any member appointed to fill a vacancy 
                occurring before the expiration of the term for which 
                the member's predecessor was appointed shall be 
                appointed for the remainder of that term.
            ``(3) Ethical considerations.--
                    ``(A) Financial disclosure.--During the entire 
                period that an individual appointed under subparagraph 
                (A) or (D) of paragraph (1) is a member of the Oversight 
                Board, such individual shall be treated as serving as an 
                officer or employee referred to in section 101(f ) of 
                the Ethics in Government Act of 1978 for purposes of 
                title I of such Act, except that section 101(d) of such 
                Act shall apply without regard to the number of days of 
                service in the position.
                    ``(B) Restrictions on post-employment.--For purposes 
                of section 207(c) of title 18, United States Code, an 
                individual appointed under subparagraph (A) or (D) of 
                paragraph (1) shall be treated as an employee referred 
                to in section 207(c)(2)(A)(i) of such title during the 
                entire period the individual is a member of the Board, 
                except that subsections (c)(2)(B) and (f ) of section 
                207 of such title shall not apply.
                    ``(C) Members who are special government 
                employees.--If an individual appointed under 
                subparagraph (A) or (D) of paragraph (1) is a special 
                Government employee, the following additional rules 
                apply for purposes of chapter 11 of title 18, United 
                States Code:
                          ``(i) Restriction on representation.--In 
                      addition to any restriction under section 205(c) 
                      of title 18, United States Code, except as 
                      provided in subsections (d) through (i) of section 
                      205 of such title, such individual (except in the 
                      proper discharge of official duties) shall not, 
                      with or without compensation, represent anyone to 
                      or before any officer or employee of--
                                    ``(I) the Oversight Board or the 
                                Internal Revenue Service on any matter;
                                    ``(II) the Department of the 
                                Treasury on any matter involving the 
                                internal revenue laws or involving the 
                                management or operations of the Internal 
                                Revenue Service; or
                                    ``(III) the Department of Justice 
                                with respect to litigation involving a 
                                matter described in subclause (I) or 
                                (II).
                          ``(ii) Compensation for services provided by 
                      another.--For purposes of section 203 of such 
                      title--
                                    ``(I) such individual shall not be 
                                subject to the restrictions of 
                                subsection (a)(1) thereof for sharing in 
                                compensation earned by another for 
                                representations on matters covered by 
                                such section, and

[[Page 112 STAT. 693]]

                                    ``(II) a person shall not be subject 
                                to the restrictions of subsection (a)(2) 
                                thereof for sharing such compensation 
                                with such individual.
                    ``(D) Waiver.--The President may, only at the time 
                the President nominates the member of the Oversight 
                Board described in paragraph (1)(D), waive for the term 
                of the member any appropriate provision of chapter 11 of 
                title 18, United States Code, to the extent such waiver 
                is necessary to allow such member to participate in the 
                decisions of the Board while continuing to serve as a 
                full-time Federal employee or a representative of 
                employees. Any such waiver shall not be effective unless 
                a written intent of waiver to exempt such member (and 
                actual waiver language) is submitted to the Senate with 
                the nomination of such member.
            ``(4) Quorum.--Five members of the Oversight Board shall 
        constitute a quorum. A majority of members present and voting 
        shall be required for the Oversight Board to take action.
            ``(5) Removal.--
                    ``(A) In general.--Any member of the Oversight Board 
                appointed under subparagraph (A) or (D) of paragraph (1) 
                may be removed at the will of the President.
                    ``(B) Secretary and commissioner.--An individual 
                described in subparagraph (B) or (C) of paragraph (1) 
                shall be removed upon termination of service in the 
                office described in such subparagraph.
            ``(6) Claims.--
                    ``(A) In general.--Members of the Oversight Board 
                who are described in subparagraph (A) or (D) of 
                paragraph (1) shall have no personal liability under 
                Federal law with respect to any claim arising out of or 
                resulting from an act or omission by such member within 
                the scope of service as a member.
                    ``(B) Effect on other law.--This paragraph shall not 
                be construed--
                          ``(i) to affect any other immunities and 
                      protections that may be available to such member 
                      under applicable law with respect to such 
                      transactions;
                          ``(ii) to affect any other right or remedy 
                      against the United States under applicable law; or
                          ``(iii) to limit or alter in any way the 
                      immunities that are available under applicable law 
                      for Federal officers and employees.

    ``(c) General Responsibilities.--
            ``(1) Oversight.--
                    ``(A) In general.--The Oversight Board shall oversee 
                the Internal Revenue Service in its administration, 
                management, conduct, direction, and supervision of the 
                execution and application of the internal revenue laws 
                or related statutes and tax conventions to which the 
                United States is a party.
                    ``(B) Mission of irs.--As part of its oversight 
                functions described in subparagraph (A), the Oversight 
                Board shall ensure that the organization and operation 
                of the Internal Revenue Service allows it to carry out 
                its mission.

[[Page 112 STAT. 694]]

                    ``(C) Confidentiality.--The Oversight Board shall 
                ensure that appropriate confidentiality is maintained in 
                the exercise of its duties.
            ``(2) Exceptions.--The Oversight Board shall have no 
        responsibilities or authority with respect to--
                    ``(A) the development and formulation of Federal tax 
                policy relating to existing or proposed internal revenue 
                laws, related statutes, and tax conventions,
                    ``(B) specific law enforcement activities of the 
                Internal Revenue Service, including specific compliance 
                activities such as examinations, collection activities, 
                and criminal investigations,
                    ``(C) specific procurement activities of the 
                Internal Revenue Service, or
                    ``(D) except as provided in subsection (d)(3), 
                specific personnel actions.

    ``(d) Specific Responsibilities.--The Oversight Board shall have the 
following specific responsibilities:
            ``(1) Strategic plans.--To review and approve strategic 
        plans of the Internal Revenue Service, including the 
        establishment of--
                    ``(A) mission and objectives, and standards of 
                performance relative to either, and
                    ``(B) annual and long-range strategic plans.
            ``(2) Operational plans.--To review the operational 
        functions of the Internal Revenue Service, including--
                    ``(A) plans for modernization of the tax system,
                    ``(B) plans for outsourcing or managed competition, 
                and
                    ``(C) plans for training and education.
            ``(3) Management.--To--
                    ``(A) recommend to the President candidates for 
                appointment as the Commissioner of Internal Revenue and 
                recommend to the President the removal of the 
                Commissioner;
                    ``(B) review the Commissioner's selection, 
                evaluation, and compensation of Internal Revenue Service 
                senior executives who have program management 
                responsibility over significant functions of the 
                Internal Revenue Service; and
                    ``(C) review and approve the Commissioner's plans 
                for any major reorganization of the Internal Revenue 
                Service.
            ``(4) Budget.--To--
                    ``(A) review and approve the budget request of the 
                Internal Revenue Service prepared by the Commissioner;
                    ``(B) submit such budget request to the Secretary of 
                the Treasury; and
                    ``(C) ensure that the budget request supports the 
                annual and long-range strategic plans.
            ``(5) Taxpayer protection.--To ensure the proper treatment 
        of taxpayers by the employees of the Internal Revenue Service.

The Secretary shall submit the budget request referred to in paragraph 
(4)(B) for any fiscal year to the President who shall submit such 
request, without revision, to Congress together with the President's 
annual budget request for the Internal Revenue Service for such fiscal 
year.
    ``(e) Board Personnel Matters.--

[[Page 112 STAT. 695]]

            ``(1) Compensation of members.--
                    ``(A) In general.--Each member of the Oversight 
                Board who--
                          ``(i) is described in subsection (b)(1)(A); or
                          ``(ii) is described in subsection (b)(1)(D) 
                      and is not otherwise a Federal officer or 
                      employee,
                shall be compensated at a rate of $30,000 per year. All 
                other members shall serve without compensation for such 
                service.
                    ``(B) Chairperson.--In lieu of the amount specified 
                in subparagraph (A), the Chairperson of the Oversight 
                Board shall be compensated at a rate of $50,000 per 
                year.
            ``(2) Travel expenses.--
                    ``(A) In general.--The members of the Oversight 
                Board shall be allowed travel expenses, including per 
                diem in lieu of subsistence, at rates authorized for 
                employees of agencies under subchapter I of chapter 57 
                of title 5, United States Code, to attend meetings of 
                the Oversight Board and, with the advance approval of 
                the Chairperson of the Oversight Board, while otherwise 
                away from their homes or regular places of business for 
                purposes of duties as a member of the Oversight Board.
                    ``(B) Report.--The Oversight Board shall include in 
                its annual report under subsection (f )(3)(A) 
                information with respect to the travel expenses allowed 
                for members of the Oversight Board under this paragraph.
            ``(3) Staff.--
                    ``(A) In general.--The Chairperson of the Oversight 
                Board may appoint and terminate any personnel that may 
                be necessary to enable the Board to perform its duties.
                    ``(B) Detail of government employees.--Upon request 
                of the Chairperson of the Oversight Board, a Federal 
                agency shall detail a Federal Government employee to the 
                Oversight Board without reimbursement. Such detail shall 
                be without interruption or loss of civil service status 
                or privilege.
            ``(4) Procurement of temporary and intermittent services.--
        The Chairperson of the Oversight Board may procure temporary and 
        intermittent services under section 3109(b) of title 5, United 
        States Code.

    ``(f ) Administrative Matters.--
            ``(1) Chair.--
                    ``(A) Term.--The members of the Oversight Board 
                shall elect for a 2-year term a chairperson from among 
                the members appointed under subsection (b)(1)(A).
                    ``(B) Powers.--Except as otherwise provided by a 
                majority vote of the Oversight Board, the powers of the 
                Chairperson shall include--
                          ``(i) establishing committees;
                          ``(ii) setting meeting places and times;
                          ``(iii) establishing meeting agendas; and
                          ``(iv) developing rules for the conduct of 
                      business.
            ``(2) Meetings.--The Oversight Board shall meet at least 
        quarterly and at such other times as the Chairperson determines 
        appropriate.
            ``(3) Reports.--

[[Page 112 STAT. 696]]

                    ``(A) Annual.--The Oversight Board shall each year 
                report with respect to the conduct of its 
                responsibilities under this title to the President, the 
                Committees on Ways and Means, Government Reform and 
                Oversight, and Appropriations of the House of 
                Representatives and the Committees on Finance, 
                Governmental Affairs, and Appropriations of the Senate.
                    ``(B) Additional report.--Upon a determination by 
                the Oversight Board under subsection (c)(1)(B) that the 
                organization and operation of the Internal Revenue 
                Service are not allowing it to carry out its mission, 
                the Oversight Board shall report such determination to 
                the Committee on Ways and Means of the House of 
                Representatives and the Committee on Finance of the 
                Senate.''.

    (b) Restriction on Disclosure of Return Information to Oversight 
Board Members.--Section 6103(h) (relating to disclosure to certain 
Federal officers and employees for purposes of tax administration, etc.) 
is amended by adding at the end the following new paragraph:
            ``(5) Internal revenue service oversight board.--
                    ``(A) In general.--Notwithstanding paragraph (1), 
                and except as provided in subparagraph (B), no return or 
                return information may be disclosed to any member of the 
                Oversight Board described in subparagraph (A) or (D) of 
                section 7802(b)(1) or to any employee or detailee of 
                such Board by reason of their service with the Board. 
                Any request for information not permitted to be 
                disclosed under the preceding sentence, and any contact 
                relating to a specific taxpayer, made by any such 
                individual to an officer or employee of the Internal 
                Revenue Service shall be reported by such officer or 
                employee to the Secretary, the Treasury Inspector 
                General for Tax Administration, and the Joint Committee 
                on Taxation.
                    ``(B) Exception for reports to the board.--If--
                          ``(i) the Commissioner or the Treasury 
                      Inspector General for Tax Administration prepares 
                      any report or other matter for the Oversight Board 
                      in order to assist the Board in carrying out its 
                      duties; and
                          ``(ii) the Commissioner or such Inspector 
                      General determines it is necessary to include any 
                      return or return information in such report or 
                      other matter to enable the Board to carry out such 
                      duties,
                such return or return information (other than 
                information regarding taxpayer identity) may be 
                disclosed to members, employees, or detailees of the 
                Board solely for the purpose of carrying out such 
                duties.''.

    (c) Conforming Amendments.--
            (1) Section 4946(c) (relating to definitions and special 
        rules for chapter 42) 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) a member of the Internal Revenue Service Oversight 
        Board.''.

[[Page 112 STAT. 697]]

            (2) The table of sections for subchapter A of chapter 80 is 
        amended by striking the item relating to section 7802 and 
        inserting the following new item:
                ``Sec. 7802. Internal Revenue Service Oversight 
                                Board.''.

    (d) Effective <<NOTE: 26 USC 7802 note.>> Date.--
            (1) In general.--The amendments made by this section shall 
        take effect on the date of the enactment of this Act.
            (2) Initial <<NOTE: President. Deadline.>> nominations to 
        internal revenue service oversight board.--The President shall 
        submit the initial nominations under section 7802 of the 
        Internal Revenue Code of 1986, as added by this section, to the 
        Senate not later than 6 months after the date of the enactment 
        of this Act.
            (3) Effect on actions prior to appointment of oversight 
        board.--Nothing in this section shall be construed to invalidate 
        the actions and authority of the Internal Revenue Service prior 
        to the appointment of the members of the Internal Revenue 
        Service Oversight Board.

SEC. 1102. COMMISSIONER OF INTERNAL REVENUE; OTHER OFFICIALS.

    (a) In General.--Section 7803 (relating to other personnel) is 
amended to read as follows:

``SEC. 7803. COMMISSIONER OF INTERNAL REVENUE; OTHER OFFICIALS.

    ``(a) Commissioner of Internal Revenue.--
            ``(1) Appointment.--
                     <<NOTE: President.>> ``(A) In general.--There shall 
                be in the Department of the Treasury a Commissioner of 
                Internal Revenue who shall be appointed by the 
                President, by and with the advice and consent of the 
                Senate, to a 5-year term. Such appointment shall be made 
                from individuals who, among other qualifications, have a 
                demonstrated ability in management.
                    ``(B) Vacancy.--Any individual appointed to fill a 
                vacancy in the position of Commissioner occurring before 
                the expiration of the term for which such individual's 
                predecessor was appointed shall be appointed only for 
                the remainder of that term.
                    ``(C) Removal.--The Commissioner may be removed at 
                the will of the President.
                    ``(D) Reappointment.--The Commissioner may be 
                appointed to more than one 5-year term.
            ``(2) Duties.--The Commissioner shall have such duties and 
        powers as the Secretary may prescribe, including the power to--
                    ``(A) administer, manage, conduct, direct, and 
                supervise the execution and application of the internal 
                revenue laws or related statutes and tax conventions to 
                which the United States is a party; and
                    ``(B) recommend to the President a candidate for 
                appointment as Chief Counsel for the Internal Revenue 
                Service when a vacancy occurs, and recommend to the 
                President the removal of such Chief Counsel.
        If the Secretary determines not to delegate a power specified in 
        subparagraph (A) or (B), such determination may not take effect 
        until 30 days after the Secretary notifies the Committees on 
        Ways and Means, Government Reform and Oversight, and 
        Appropriations of the House of Representatives and the

[[Page 112 STAT. 698]]

        Committees on Finance, Governmental Affairs, and Appropriations 
        of the Senate.
            ``(3) Consultation with board.--The Commissioner shall 
        consult with the Oversight Board on all matters set forth in 
        paragraphs (2) and (3) (other than paragraph (3)(A)) of section 
        7802(d).

    ``(b) Chief <<NOTE: President.>> Counsel for the Internal Revenue 
Service.--
            ``(1) Appointment.--There shall be in the Department of the 
        Treasury a Chief Counsel for the Internal Revenue Service who 
        shall be appointed by the President, by and with the consent of 
        the Senate.
            ``(2) Duties.--The Chief Counsel shall be the chief law 
        officer for the Internal Revenue Service and shall perform such 
        duties as may be prescribed by the Secretary, including the 
        duty--
                    ``(A) to be legal advisor to the Commissioner and 
                the Commissioner's officers and employees;
                    ``(B) to furnish legal opinions for the preparation 
                and review of rulings and memoranda of technical advice;
                    ``(C) to prepare, review, and assist in the 
                preparation of proposed legislation, treaties, 
                regulations, and Executive orders relating to laws which 
                affect the Internal Revenue Service;
                    ``(D) to represent the Commissioner in cases before 
                the Tax Court; and
                    ``(E) to determine which civil actions should be 
                litigated under the laws relating to the Internal 
                Revenue Service and prepare recommendations for the 
                Department of Justice regarding the commencement of such 
                actions.
        If the Secretary determines not to delegate a power specified in 
        subparagraph (A), (B), (C), (D), or (E), such determination may 
        not take effect until 30 days after the Secretary notifies the 
        Committees on Ways and Means, Government Reform and Oversight, 
        and Appropriations of the House of Representatives and the 
        Committees on Finance, Governmental Affairs, and Appropriations 
        of the Senate.
            ``(3) Persons to whom chief counsel reports.--The Chief 
        Counsel shall report directly to the Commissioner of Internal 
        Revenue, except that--
                    ``(A) the Chief Counsel shall report to both the 
                Commissioner and the General Counsel for the Department 
                of the Treasury with respect to--
                          ``(i) legal advice or interpretation of the 
                      tax law not relating solely to tax policy;
                          ``(ii) tax litigation; and
                    ``(B) the Chief Counsel shall report to the General 
                Counsel with respect to legal advice or interpretation 
                of the tax law relating solely to tax policy.
        If there is any disagreement between the Commissioner and the 
        General Counsel with respect to any matter jointly referred to 
        them under subparagraph (A), such matter shall be submitted to 
        the Secretary or Deputy Secretary for resolution.
            ``(4) Chief counsel personnel.--All personnel in the Office 
        of Chief Counsel shall report to the Chief Counsel.

    ``(c) Office of the Taxpayer Advocate.--
            ``(1) Establishment.--

[[Page 112 STAT. 699]]

                    ``(A) In general.--There is established in the 
                Internal Revenue Service an office to be known as the 
                `Office of the Taxpayer Advocate'.
                    ``(B) National taxpayer advocate.--
                          ``(i) In general.--The Office of the Taxpayer 
                      Advocate shall be under the supervision and 
                      direction of an official to be known as the 
                      `National Taxpayer Advocate'. The National 
                      Taxpayer Advocate shall report directly to the 
                      Commissioner of Internal Revenue and shall be 
                      entitled to compensation at the same rate as the 
                      highest rate of basic pay established for the 
                      Senior Executive Service under section 5382 of 
                      title 5, United States Code, or, if the Secretary 
                      of the Treasury so determines, at a rate fixed 
                      under section 9503 of such title.
                          ``(ii) Appointment.--The National Taxpayer 
                      Advocate shall be appointed by the Secretary of 
                      the Treasury after consultation with the 
                      Commissioner of Internal Revenue and the Oversight 
                      Board and without regard to the provisions of 
                      title 5, United States Code, relating to 
                      appointments in the competitive service or the 
                      Senior Executive Service.
                          ``(iii) Qualifications.--An individual 
                      appointed under clause (ii) shall have--
                                    ``(I) a background in customer 
                                service as well as tax law; and
                                    ``(II) experience in representing 
                                individual taxpayers.
                          ``(iv) Restriction on employment.--An 
                      individual may be appointed as the National 
                      Taxpayer Advocate only if such individual was not 
                      an officer or employee of the Internal Revenue 
                      Service during the 2-year period ending with such 
                      appointment and such individual agrees not to 
                      accept any employment with the Internal Revenue 
                      Service for at least 5 years after ceasing to be 
                      the National Taxpayer Advocate. Service as an 
                      officer or employee of the Office of the Taxpayer 
                      Advocate shall not be taken into account in 
                      applying this clause.
            ``(2) Functions of office.--
                    ``(A) In general.--It shall be the function of the 
                Office of the Taxpayer Advocate to--
                          ``(i) assist taxpayers in resolving problems 
                      with the Internal Revenue Service;
                          ``(ii) identify areas in which taxpayers have 
                      problems in dealings with the Internal Revenue 
                      Service;
                          ``(iii) to the extent possible, propose 
                      changes in the administrative practices of the 
                      Internal Revenue Service to mitigate problems 
                      identified under clause (ii); and
                          ``(iv) identify potential legislative changes 
                      which may be appropriate to mitigate such 
                      problems.
                    ``(B) Annual reports.--
                           <<NOTE: Deadline.>> ``(i) Objectives.--Not 
                      later than June 30 of each calendar year, the 
                      National Taxpayer Advocate shall report to the 
                      Committee on Ways and Means of the House of 
                      Representatives and the Committee on

[[Page 112 STAT. 700]]

                      Finance of the Senate on the objectives of the 
                      Office of the Taxpayer Advocate for the fiscal 
                      year beginning in such calendar year. Any such 
                      report shall contain full and substantive 
                      analysis, in addition to statistical information.
                           <<NOTE: Deadline.>> ``(ii) Activities.--Not 
                      later than December 31 of each calendar year, the 
                      National Taxpayer Advocate shall report to the 
                      Committee on Ways and Means of the House of 
                      Representatives and the Committee on Finance of 
                      the Senate on the activities of the Office of the 
                      Taxpayer Advocate during the fiscal year ending 
                      during such calendar year. Any such report shall 
                      contain full and substantive analysis, in addition 
                      to statistical information, and shall--
                                    ``(I) identify the initiatives the 
                                Office of the Taxpayer Advocate has 
                                taken on improving taxpayer services and 
                                Internal Revenue Service responsiveness;
                                    ``(II) contain recommendations 
                                received from individuals with the 
                                authority to issue Taxpayer Assistance 
                                Orders under section 7811;
                                    ``(III) contain a summary of at 
                                least 20 of the most serious problems 
                                encountered by taxpayers, including a 
                                description of the nature of such 
                                problems;
                                    ``(IV) contain an inventory of the 
                                items described in subclauses (I), (II), 
                                and (III) for which action has been 
                                taken and the result of such action;
                                    ``(V) contain an inventory of the 
                                items described in subclauses (I), (II), 
                                and (III) for which action remains to be 
                                completed and the period during which 
                                each item has remained on such 
                                inventory;
                                    ``(VI) contain an inventory of the 
                                items described in subclauses (I), (II), 
                                and (III) for which no action has been 
                                taken, the period during which each item 
                                has remained on such inventory, the 
                                reasons for the inaction, and identify 
                                any Internal Revenue Service official 
                                who is responsible for such inaction;
                                    ``(VII) identify any Taxpayer 
                                Assistance Order which was not honored 
                                by the Internal Revenue Service in a 
                                timely manner, as specified under 
                                section 7811(b);
                                    ``(VIII) contain recommendations for 
                                such administrative and legislative 
                                action as may be appropriate to resolve 
                                problems encountered by taxpayers;
                                    ``(IX) identify areas of the tax law 
                                that impose significant compliance 
                                burdens on taxpayers or the Internal 
                                Revenue Service, including specific 
                                recommendations for remedying these 
                                problems;
                                    ``(X) identify the 10 most litigated 
                                issues for each category of taxpayers, 
                                including recommendations for mitigating 
                                such disputes; and
                                    ``(XI) include such other 
                                information as the National Taxpayer 
                                Advocate may deem advisable.

[[Page 112 STAT. 701]]

                          ``(iii) Report to be submitted directly.--Each 
                      report required under this subparagraph shall be 
                      provided directly to the committees described in 
                      clause (i) without any prior review or comment 
                      from the Commissioner, the Secretary of the 
                      Treasury, the Oversight Board, any other officer 
                      or employee of the Department of the Treasury, or 
                      the Office of Management and Budget.
                          ``(iv) Coordination with report of treasury 
                      inspector general for tax administration.--To the 
                      extent that information required to be reported 
                      under clause (ii) is also required to be reported 
                      under paragraph (1) or (2) of subsection (d) by 
                      the Treasury Inspector General for Tax 
                      Administration, the National Taxpayer Advocate 
                      shall not contain such information in the report 
                      submitted under such clause.
                    ``(C) Other responsibilities.--The National Taxpayer 
                Advocate shall--
                          ``(i) monitor the coverage and geographic 
                      allocation of local offices of taxpayer advocates;
                          ``(ii) develop guidance to be distributed to 
                      all Internal Revenue Service officers and 
                      employees outlining the criteria for referral of 
                      taxpayer inquiries to local offices of taxpayer 
                      advocates;
                          ``(iii) ensure that the local telephone number 
                      for each local office of the taxpayer advocate is 
                      published and available to taxpayers served by the 
                      office; and
                          ``(iv) in conjunction with the Commissioner, 
                      develop career paths for local taxpayer advocates 
                      choosing to make a career in the Office of the 
                      Taxpayer Advocate.
                    ``(D) Personnel actions.--
                          ``(i) In general.--The National Taxpayer 
                      Advocate shall have the responsibility and 
                      authority to--
                                    ``(I) appoint local taxpayer 
                                advocates and make available at least 1 
                                such advocate for each State; and
                                    ``(II) evaluate and take personnel 
                                actions (including dismissal) with 
                                respect to any employee of any local 
                                office of a taxpayer advocate described 
                                in subclause (I).
                          ``(ii) Consultation.--The National Taxpayer 
                      Advocate may consult with the appropriate 
                      supervisory personnel of the Internal Revenue 
                      Service in carrying out the National Taxpayer 
                      Advocate's responsibilities under this 
                      subparagraph.
             <<NOTE: Procedures.>> ``(3) Responsibilities of 
        commissioner.--The Commissioner shall establish procedures 
        requiring a formal response to all recommendations submitted to 
        the Commissioner by the National Taxpayer Advocate within 3 
        months after submission to the Commissioner.
            ``(4) Operation of local offices.--
                    ``(A) In general.--Each local taxpayer advocate--
                          ``(i) shall report to the National Taxpayer 
                      Advocate or delegate thereof;
                          ``(ii) may consult with the appropriate 
                      supervisory personnel of the Internal Revenue 
                      Service regarding

[[Page 112 STAT. 702]]

                      the daily operation of the local office of the 
                      taxpayer advocate;
                          ``(iii) <<NOTE: Notification.>> shall, at the 
                      initial meeting with any taxpayer seeking the 
                      assistance of a local office of the taxpayer 
                      advocate, notify such taxpayer that the taxpayer 
                      advocate offices operate independently of any 
                      other Internal Revenue Service office and report 
                      directly to Congress through the National Taxpayer 
                      Advocate; and
                          ``(iv) may, at the taxpayer advocate's 
                      discretion, not disclose to the Internal Revenue 
                      Service contact with, or information provided by, 
                      such taxpayer.
                    ``(B) Maintenance of independent communications.--
                Each local office of the taxpayer advocate shall 
                maintain a separate phone, facsimile, and other 
                electronic communication access, and a separate post 
                office address.

    ``(d) Additional Duties of the Treasury Inspector General for Tax 
Administration.--
            ``(1) Annual reporting.--The Treasury Inspector General for 
        Tax Administration shall include in one of the semiannual 
        reports under section 5 of the Inspector General Act of 1978--
                    ``(A) an evaluation of the compliance of the 
                Internal Revenue Service with--
                          ``(i) restrictions under section 1204 of the 
                      Internal Revenue Service Restructuring and Reform 
                      Act of 1998 on the use of enforcement statistics 
                      to evaluate Internal Revenue Service employees;
                          ``(ii) restrictions under section 7521 on 
                      directly contacting taxpayers who have indicated 
                      that they prefer their representatives be 
                      contacted;
                          ``(iii) required procedures under section 6320 
                      upon the filing of a notice of a lien;
                          ``(iv) required procedures under subchapter D 
                      of chapter 64 for seizure of property for 
                      collection of taxes, including required procedures 
                      under section 6330 regarding levies; and
                          ``(v) restrictions under section 3707 of the 
                      Internal Revenue Service Restructuring and Reform 
                      Act of 1998 on designation of taxpayers;
                    ``(B) a review and a certification of whether or not 
                the Secretary is complying with the requirements of 
                section 6103(e)(8) to disclose information to an 
                individual filing a joint return on collection activity 
                involving the other individual filing the return;
                    ``(C) information regarding extensions of the 
                statute of limitations for assessment and collection of 
                tax under section 6501 and the provision of notice to 
                taxpayers regarding requests for such extension;
                    ``(D) an evaluation of the adequacy and security of 
                the technology of the Internal Revenue Service;
                    ``(E) any termination or mitigation under section 
                1203 of the Internal Revenue Service Restructuring and 
                Reform Act of 1998;
                    ``(F) information regarding improper denial of 
                requests for information from the Internal Revenue 
                Service identified under paragraph (3)(A); and

[[Page 112 STAT. 703]]

                    ``(G) information regarding any administrative or 
                civil actions with respect to violations of the fair 
                debt collection provisions of section 6304, including--
                          ``(i) a summary of such actions initiated 
                      since the date of the last report; and
                          ``(ii) a summary of any judgments or awards 
                      granted as a result of such actions.
            ``(2) Semiannual reports.--
                    ``(A) In general.--The Treasury Inspector General 
                for Tax Administration shall include in each semiannual 
                report under section 5 of the Inspector General Act of 
                1978--
                          ``(i) the number of taxpayer complaints during 
                      the reporting period;
                          ``(ii) the number of employee misconduct and 
                      taxpayer abuse allegations received by the 
                      Internal Revenue Service or the Inspector General 
                      during the period from taxpayers, Internal Revenue 
                      Service employees, and other sources;
                          ``(iii) a summary of the status of such 
                      complaints and allegations; and
                          ``(iv) a summary of the disposition of such 
                      complaints and allegations, including the outcome 
                      of any Department of Justice action and any monies 
                      paid as a settlement of such complaints and 
                      allegations.
                    ``(B) <<NOTE: Applicability.>> Clauses (iii) and 
                (iv) of subparagraph (A) shall only apply to complaints 
                and allegations of serious employee misconduct.
            ``(3) Other responsibilities.--The Treasury Inspector 
        General for Tax Administration shall--
                    ``(A) conduct periodic audits of a statistically 
                valid sample of the total number of determinations made 
                by the Internal Revenue Service to deny written requests 
                to disclose information to taxpayers on the basis of 
                section 6103 of this title or section 552(b)(7) of title 
                5, United States Code; and
                    ``(B) <<NOTE: Communications and tele-
                communication.>> establish and maintain a toll-free 
                telephone number for taxpayers to use to confidentially 
                register complaints of misconduct by Internal Revenue 
                Service employees and incorporate the telephone number 
                in the statement required by section 6227 of the Omnibus 
                Taxpayer Bill of Rights (Internal Revenue Service 
                Publication No. 1).''.

    (b) Notice of Right To Contact Office Included in Notice of 
Deficiency.--Section 6212(a) (relating to notice of deficiency) is 
amended by adding at the end the following new sentence: ``Such notice 
shall include a notice to the taxpayer of the taxpayer's right to 
contact a local office of the taxpayer advocate and the location and 
phone number of the appropriate office.''.
    (c) Expansion of Authority To Issue Taxpayer Assistance Orders.--
Section 7811(a) (relating to taxpayer assistance orders) is amended to 
read as follows:
    ``(a) Authority To Issue.--
             <<NOTE: Regulations.>> ``(1) In general.--Upon application 
        filed by a taxpayer with the Office of the Taxpayer Advocate (in 
        such form, manner, and at such time as the Secretary shall by 
        regulations prescribe), the National Taxpayer Advocate may issue 
        a Taxpayer Assistance Order if--

[[Page 112 STAT. 704]]

                    ``(A) the National Taxpayer Advocate determines the 
                taxpayer is suffering or about to suffer a significant 
                hardship as a result of the manner in which the internal 
                revenue laws are being administered by the Secretary; or
                    ``(B) the taxpayer meets such other requirements as 
                are set forth in regulations prescribed by the 
                Secretary.
            ``(2) Determination of hardship.--For purposes of 
        paragraph (1), a significant hardship shall include--
                    ``(A) an immediate threat of adverse action;
                    ``(B) a delay of more than 30 days in resolving 
                taxpayer account problems;
                    ``(C) the incurring by the taxpayer of significant 
                costs (including fees for professional representation) 
                if relief is not granted; or
                    ``(D) irreparable injury to, or a long-term adverse 
                impact on, the taxpayer if relief is not granted.
            ``(3) Standard where administrative guidance not 
        followed.--In cases where any Internal Revenue Service employee 
        is not following applicable published administrative guidance 
        (including the Internal Revenue Manual), the National Taxpayer 
        Advocate shall construe the factors taken into account in 
        determining whether to issue a taxpayer assistance order in the 
        manner most favorable to the taxpayer.''.

    (d) Conforming Amendments Relating to National 
Taxpayer Advocate.--
            (1) The following provisions are each amended by striking 
        ``Taxpayer Advocate'' each place it appears and inserting 
        ``National Taxpayer Advocate'':
                    (A) Section 6323( j)(1)(D) (relating to withdrawal 
                of notice in certain circumstances).
                    (B) Section 6343(d)(2)(D) (relating to return of 
                property in certain cases).
                    (C) Section 7811(b)(2)(D) (relating to terms of a 
                Taxpayer Assistance Order).
                    (D) Section 7811(c) (relating to authority to modify 
                or rescind).
                    (E) Section 7811(d)(2) (relating to suspension of 
                running of period of limitation).
                    (F) Section 7811(e) (relating to independent action 
                of Taxpayer Advocate).
                    (G) Section 7811(f ) (relating to Taxpayer 
                Advocate).
            (2) Section 7811(d)(1) (relating to suspension of running of 
        period of limitation) is amended by striking ``Taxpayer 
        Advocate's'' and inserting ``National Taxpayer Advocate's''.
            (3) The headings of subsections (e) and (f ) of section 7811 
        are each amended by striking ``Taxpayer Advocate'' and inserting 
        ``National Taxpayer Advocate''.

    (e) Additional Conforming Amendments.--
            (1) The table of sections for subchapter A of chapter 80 is 
        amended by striking the item relating to section 7803 and 
        inserting the following new item:
                ``Sec. 7803. Commissioner of Internal Revenue; other 
                                officials.''.

            (2) Section 5109 of title 5, United States Code, is amended 
        by striking subsection (b) and redesignating subsection (c) as 
        subsection (b).

[[Page 112 STAT. 705]]

            (3) Section 7611(f )(1) (relating to restrictions on church 
        tax inquiries and examinations) is amended by striking 
        ``Assistant Commissioner for Employee Plans and Exempt 
        Organizations of the Internal Revenue Service'' and inserting 
        ``Secretary''.

     <<NOTE: 26 USC 7803 note.>> (f ) Effective Date.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall take effect on the date of 
        the enactment of this Act.
            (2) Chief counsel.--Section 7803(b)(3) of the Internal 
        Revenue Code of 1986, as added by this section, shall take 
        effect on the date that is 90 days after the date of the 
        enactment of this Act.
            (3) National taxpayer advocate.--Notwithstanding 
        section 7803(c)(1)(B)(iv) of such Code, as added by this 
        section, in appointing the first National Taxpayer Advocate 
        after 
        the date of the enactment of this Act, the Secretary of the 
        Treasury--
                    (A) shall not appoint any individual who was an 
                officer or employee of the Internal Revenue Service at 
                any time during the 2-year period ending on the date of 
                appointment; and
                    (B) need not consult with the Internal Revenue 
                Service Oversight Board if the Oversight Board has not 
                been appointed.
            (4) Current officers.--
                    (A) In the case of an individual serving as 
                Commissioner of Internal Revenue on the date of the 
                enactment of this Act who was appointed to such position 
                before such date, the 5-year term required by section 
                7803(a)(1) of such Code, as added by this section, shall 
                begin as of the date of such appointment.
                    (B) Clauses (ii), (iii), and (iv) of section 
                7803(c)(1)(B) of such Code, as added by this section, 
                shall not apply to the individual serving as Taxpayer 
                Advocate on the date of the enactment of this Act.

SEC. 1103. TREASURY INSPECTOR GENERAL FOR TAX ADMINISTRATION.

    (a) Establishment of Two Inspectors General in the Department of the 
Treasury.--Section 2 of the Inspector General Act of 1978 (5 U.S.C. 
App.) is amended by striking the matter following paragraph (3) and 
inserting the following:
``there is established--
                    ``(A) in each of such establishments an office of 
                Inspector General, subject to subparagraph (B); and
                    ``(B) in the establishment of the Department of the 
                Treasury--
                          ``(i) an Office of Inspector General of the 
                      Department of the Treasury; and
                          ``(ii) an Office of Treasury Inspector General 
                      for Tax Administration.''.

    (b) Amendments to Section 8D of the Inspector General Act of 1978.--
            (1) Limitation on authority of inspector general.--Section 
        8D(a) of the Inspector General Act of 1978 (5 U.S.C.

[[Page 112 STAT. 706]]

        App.) is amended by adding at the end the following new 
        paragraph:
            ``(4) The Secretary of the Treasury may not exercise any 
        power under paragraph (1) or (2) with respect to the Treasury 
        Inspector General for Tax Administration.''.
            (2) Duties of inspector general of the department of the 
        treasury; relationship to the treasury inspector general for tax 
        administration.--Section 8D(b) of such Act is <<NOTE: 5 USC 
        app.>> amended--
                    (A) by inserting ``(1)'' after ``(b)''; and
                    (B) by adding at the end the following new 
                paragraphs:
            ``(2) The Inspector General of the Department of the 
        Treasury shall exercise all duties and responsibilities of an 
        Inspector General for the Department of the Treasury other than 
        the duties and responsibilities exercised by the Treasury 
        Inspector General for Tax Administration.
            ``(3) <<NOTE: Procedures.>> The Secretary of the Treasury 
        shall establish procedures under which the Inspector General of 
        the Department of the Treasury and the Treasury Inspector 
        General for Tax Administration will--
                    ``(A) determine how audits and investigations are 
                allocated in cases of overlapping jurisdiction; and
                    ``(B) provide for coordination, cooperation, and 
                efficiency in the conduct of such audits and 
                investigations.''.
            (3) Access to returns and return information.--
        Section 8D(e) of such Act <<NOTE: 5 USC app.>> is amended--
                    (A) in paragraph (1), by striking ``Inspector 
                General'' and inserting ``Treasury Inspector General for 
                Tax Administration'';
                    (B) in paragraph (2), by striking all beginning with 
                ``(2)'' through subparagraph (B);
                    (C)(i) by redesignating subparagraph (C) of 
                paragraph (2) as paragraph (2) of such subsection; and
                    (ii) in such redesignated paragraph (2), by striking 
                ``Inspector General'' and inserting ``Treasury Inspector 
                General for Tax Administration''; and
                    (D)(i) by redesignating subparagraph (D) of such 
                paragraph as paragraph (3) of such subsection; and
                    (ii) in such redesignated paragraph (3), by striking 
                ``Inspector General'' and inserting ``Treasury Inspector 
                General for Tax Administration''.
            (4) Effect on certain final decisions of the 
        secretary.--Section 8D(f ) of such Act is amended by striking 
        ``Inspector General'' and inserting ``Inspector General of the 
        Department of the Treasury or the Treasury Inspector General for 
        Tax Administration''.
            (5) Repeal of limitation on reports to the attorney 
        general.--Section 8D of such Act is amended by striking 
        subsection (g).
            (6) Transmission of reports.--Section 8D(h) of such Act is 
        amended--
                    (A) by striking ``(h)'' and inserting ``(g)(1)'';
                    (B) by striking ``and the Committees on Government 
                Operations and Ways and Means of the House of 
                Representatives'' and inserting ``and the Committees on 
                Government Reform and Oversight and Ways and Means of 
                the House of Representatives''; and

[[Page 112 STAT. 707]]

                    (C) by adding at the end the following new 
                paragraph:

    ``(2) Any report made by the Treasury Inspector General for Tax 
Administration that is required to be transmitted by the Secretary of 
the Treasury to the appropriate committees or subcommittees of Congress 
under section 5(d) shall also be transmitted, within the 7-day period 
specified under such subsection, to the Internal Revenue Service 
Oversight Board and the Commissioner of Internal Revenue.''.
            (7) Treasury inspector general for tax administration.--
        Section 8D of the Act <<NOTE: 5 USC app.>> is amended by adding 
        at the end the following new subsections:

    ``(h) The Treasury Inspector General for Tax Administration shall 
exercise all duties and responsibilities of an Inspector General of an 
establishment with respect to the Department of the Treasury and the 
Secretary of the Treasury on all matters relating to the Internal 
Revenue Service. The Treasury Inspector General for Tax Administration 
shall have sole authority under this Act to conduct an audit or 
investigation of the Internal Revenue Service Oversight Board and the 
Chief Counsel for the Internal Revenue Service.
    ``(i) In addition to the requirements of the first sentence of 
section 3(a), the Treasury Inspector General for Tax Administration 
should have demonstrated ability to lead a large and complex 
organization.
    ``( j) An individual appointed to the position of Treasury Inspector 
General for Tax Administration, the Assistant Inspector General for 
Auditing of the Office of the Treasury Inspector General for Tax 
Administration under section 3(d)(1), the Assistant Inspector General 
for Investigations of the Office of the Treasury Inspector General for 
Tax Administration under section 3(d)(2), or any position of Deputy 
Inspector General of the Office of the Treasury Inspector General for 
Tax Administration may not be an employee of the Internal Revenue 
Service--
            ``(1) during the 2-year period preceding the date of 
        appointment to such position; or
            ``(2) during the 5-year period following the date such 
        individual ends service in such position.

    ``(k)(1) In addition to the duties and responsibilities exercised by 
an inspector general of an establishment, the Treasury Inspector General 
for Tax Administration--
            ``(A) shall have the duty to enforce criminal provisions 
        under section 7608(b) of the Internal Revenue Code of 1986;
            ``(B) in addition to the functions authorized under section 
        7608(b)(2) of such Code, may carry firearms;
            ``(C) shall be responsible for protecting the Internal 
        Revenue Service against external attempts to corrupt or threaten 
        employees of the Internal Revenue Service, but shall not be 
        responsible for the conducting of background checks and the 
        providing of physical security; and
            ``(D) may designate any employee in the Office of the 
        Treasury Inspector General for Tax Administration to enforce 
        such laws and perform such functions referred to under 
        subparagraphs (A), (B), and (C).

    ``(2)(A) In performing a law enforcement function under paragraph 
(1), the Treasury Inspector General for Tax Administration shall report 
any reasonable grounds to believe there has been a violation of Federal 
criminal law to the Attorney General at

[[Page 112 STAT. 708]]

an appropriate time as determined by the Treasury Inspector General for 
Tax Administration, notwithstanding section 4(d).
    ``(B) In the administration of section 5(d) and subsection (g)(2) of 
this section, the Secretary of the Treasury may transmit the required 
report with respect to the Treasury Inspector General for Tax 
Administration at an appropriate time as determined by the Secretary, if 
the problem, abuse, or deficiency relates to--
            ``(i) the performance of a law enforcement function under 
        paragraph (1); and
            ``(ii) sensitive information concerning matters under 
        subsection (a)(1)(A) through (F).

    ``(3) Nothing in this subsection shall be construed to affect the 
authority of any other person to carry out or enforce any provision 
specified in paragraph (1).
    ``(l)(1) The Commissioner of Internal Revenue or the Internal 
Revenue Service Oversight Board may request, in writing, the Treasury 
Inspector General for Tax Administration to conduct an audit or 
investigation relating to the Internal Revenue Service. If the Treasury 
Inspector General for Tax Administration determines not to conduct such 
audit or investigation, the Inspector General shall timely provide a 
written explanation for such determination to the person making the 
request.
    ``(2)(A) <<NOTE: Reports.>> Any final report of an audit conducted 
by the Treasury Inspector General for Tax Administration shall be timely 
submitted by the Inspector General to the Commissioner of Internal 
Revenue and the Internal Revenue Service Oversight Board.

    ``(B) <<NOTE: Records.>> The Treasury Inspector General for Tax 
Administration shall periodically submit to the Commissioner and Board a 
list of investigations for which a final report has been completed by 
the Inspector General and shall provide a copy of any such report upon 
request of the Commissioner or Board.

    ``(C) <<NOTE: Applicability.>> This paragraph applies regardless of 
whether the applicable audit or investigation is requested under 
paragraph (1).''.

    (c) Transfer of Functions.--
            (1) In general.--Section 9(a)(1) of the Inspector General 
        Act of 1978 (5 U.S.C. App.) is amended in subparagraph (L)--
                    (A) by inserting ``(i)'' after ``(L)'';
                    (B) by inserting ``and'' after the semicolon; and
                    (C) by adding at the end the following new clause:
                          ``(ii) <<NOTE: Effective date.>> of the 
                      Treasury Inspector General for Tax Administration, 
                      effective 180 days after the date of the enactment 
                      of the Internal Revenue Service Restructuring and 
                      Reform Act of 1998, the Office of Chief Inspector 
                      of the Internal Revenue Service;''.
            (2) Termination <<NOTE: Effective date. 5 USC app.>> of 
        office of chief inspector.--Effective upon the transfer of 
        functions under the amendment made by paragraph (1), the Office 
        of Chief Inspector of the Internal Revenue Service is 
        terminated.
            (3) Retention <<NOTE: 5 USC app.>> of certain internal audit 
        personnel.--In making the transfer under the amendment made by 
        paragraph (1), the Commissioner of Internal Revenue shall 
        designate and retain an appropriate number (not in excess of 
        300) of internal audit full-time equivalent employee positions 
        necessary for management relating to the Internal Revenue 
        Service.
            (4) Additional <<NOTE: Effective date. 5 USC 
        app.>> personnel transfers.--Effective 180 days after the date 
        of the enactment of this Act, the Secretary

[[Page 112 STAT. 709]]

        of the Treasury shall transfer 21 full-time equivalent positions 
        from the Office of the Inspector General of the Department of 
        the Treasury to the Office of the Treasury Inspector General for 
        Tax Administration.

    (d) Audits <<NOTE: 31 USC 3521 note.>> and Reports of Agency 
Financial Statements.--Subject to section 3521(g) of title 31, United 
States Code--
            (1) the Inspector General of the Department of the Treasury 
        shall, subject to paragraph (2)--
                    (A) audit each financial statement in accordance 
                with section 3521(e) of such title; and
                    (B) prepare and submit each report required under 
                section 3521(f ) of such title; and
            (2) the Treasury Inspector General for Tax Administration 
        shall--
                    (A) audit that portion of each financial statement 
                referred to under paragraph (1)(A) that relates to 
                custodial and administrative accounts of the Internal 
                Revenue 
                Service; and
                    (B) prepare that portion of each report referred to 
                under paragraph (1)(B) that relates to custodial and 
                administrative accounts of the Internal Revenue Service.

    (e) Technical and Conforming Amendments.--
            (1) Transfer of functions.--Section 8D(b) of the Inspector 
        General Act of 1978 (5 U.S.C. App.) is amended by striking ``and 
        the internal audits and internal investigations performed by the 
        Office of Assistant Commissioner (Inspection) of the Internal 
        Revenue Service''.
            (2) Amendments relating to references to the inspector 
        general of the department of the treasury.--
                    (A) Limitation on authority.--Section 8D(a) of the 
                Inspector General Act of 1978 (5 U.S.C. App.) is 
                amended--
                          (i) in the first sentence of paragraph (1), by 
                      inserting ``of the Department of the Treasury'' 
                      after ``Inspector General'';
                          (ii) in paragraph (2), by inserting ``of the 
                      Department of the Treasury'' after ``prohibit the 
                      Inspector General''; and
                          (iii) in paragraph (3)--
                                    (I) in the first sentence, by 
                                inserting ``of the Department of the 
                                Treasury'' after ``notify the Inspector 
                                General''; and
                                    (II) in the second sentence, by 
                                inserting ``of the Department of the 
                                Treasury'' after ``notice, the Inspector 
                                General''.
                    (B) Duties.--Section 8D(b) of such Act is amended in 
                the second sentence by inserting ``of the Department of 
                the Treasury'' after ``Inspector General''.
                    (C) Audits and investigations.--Section 8D (c) and 
                (d) of such Act are amended by inserting ``of the 
                Department of the Treasury'' after ``Inspector General'' 
                each place it appears.
            (3) References.--The second section 8G of the Inspector 
        General Act of 1978 (relating to rule of construction of special 
        provisions) is amended--
                    (A) by striking ``Sec. 8G'' and inserting ``Sec. 
                8H'';
                    (B) by striking ``or 8E'' and inserting ``8E or 
                8F''; and

[[Page 112 STAT. 710]]

                    (C) by striking ``section 8F(a)'' and inserting 
                ``section 8G(a)''.
            (4) Amendment to internal revenue code of 1986.--Section 
        7608(b)(1) is amended by striking ``or of the Internal Security 
        Division''.

SEC. 1104. OTHER PERSONNEL.

    (a) In General.--Section 7804 (relating to the effect of 
reorganization plans) is amended to read as follows:

``SEC. 7804. OTHER PERSONNEL.

    ``(a) Appointment and Supervision.--Unless otherwise prescribed by 
the Secretary, the Commissioner of Internal Revenue is authorized to 
employ such number of persons as the Commissioner deems proper for the 
administration and enforcement of the internal revenue laws, and the 
Commissioner shall issue all necessary directions, instructions, orders, 
and rules applicable to such persons.
    ``(b) Posts of Duty of Employees in Field Service or Traveling.--
Unless otherwise prescribed by the Secretary--
            ``(1) Designation of post of duty.--The Commissioner shall 
        determine and designate the posts of duty of all such persons 
        engaged in field work or traveling on official business outside 
        of the District of Columbia.
            ``(2) Detail of personnel from field service.--The 
        Commissioner may order any such person engaged in field work to 
        duty in the District of Columbia, for such periods as the 
        Commissioner may prescribe, and to any designated post of duty 
        outside the District of Columbia upon the completion of such 
        duty.

    ``(c) Delinquent Internal Revenue Officers and Employees.--If any 
officer or employee of the Treasury Department acting in connection with 
the internal revenue laws fails to account for and pay over any amount 
of money or property collected or received by him in connection with the 
internal revenue laws, the Secretary shall issue notice and demand to 
such officer or employee for payment of the amount which he failed to 
account for and pay over, and, upon failure to pay the amount demanded 
within the time specified in such notice, the amount so demanded shall 
be deemed imposed upon such officer or employee and assessed upon the 
date of such notice and demand, and the provisions of chapter 64 and all 
other provisions of law relating to the collection of assessed taxes 
shall be applicable in respect of such amount.''.
    (b) Conforming Amendments.--
            (1) Subsection (b) of section 6344 is amended by striking 
        ``section 7803(d)'' and inserting ``section 7804(c)''.
            (2) The table of sections for subchapter A of chapter 80 is 
        amended by striking the item relating to section 7804 and 
        inserting the following new item:
                ``Sec. 7804. Other personnel.''.

    (c) Effective <<NOTE: 26 USC 7804 note.>> Date.--The amendments made 
by this section shall take effect on the date of the enactment of this 
Act.

[[Page 112 STAT. 711]]

SEC. 1105. PROHIBITION ON EXECUTIVE BRANCH INFLUENCE OVER TAXPAYER 
            AUDITS AND OTHER INVESTIGATIONS.

    (a) In General.--Part I of subchapter A of chapter 75 (relating to 
crimes, other offenses, and forfeitures) is amended by adding after 
section 7216 the following new section:

``SEC. 7217. PROHIBITION ON EXECUTIVE BRANCH INFLUENCE OVER TAXPAYER 
            AUDITS AND OTHER INVESTIGATIONS.

    ``(a) Prohibition.--It shall be unlawful for any applicable person 
to request, directly or indirectly, any officer or employee of the 
Internal Revenue Service to conduct or terminate an audit or other 
investigation of any particular taxpayer with respect to the tax 
liability of such taxpayer.
    ``(b) Reporting Requirement.--Any officer or employee of the 
Internal Revenue Service receiving any request prohibited by subsection 
(a) shall report the receipt of such request to the Treasury Inspector 
General for Tax Administration.
    ``(c) Exceptions.--Subsection (a) shall not apply to any written 
request made--
            ``(1) to an applicable person by or on behalf of the 
        taxpayer and forwarded by such applicable person to the Internal 
        Revenue Service;
            ``(2) by an applicable person for disclosure of return or 
        return information under section 6103 if such request is made in 
        accordance with the requirements of such section; or
            ``(3) by the Secretary of the Treasury as a consequence of 
        the implementation of a change in tax policy.

    ``(d) Penalty.--Any person who willfully violates subsection (a) or 
fails to report under subsection (b) shall be punished upon conviction 
by a fine in any amount not exceeding $5,000, or imprisonment of not 
more than 5 years, or both, together with the costs of prosecution.
    ``(e) Applicable Person.--For purposes of this section, the term 
`applicable person' means--
            ``(1) the President, the Vice President, any employee of the 
        executive office of the President, and any employee of the 
        executive office of the Vice President; and
            ``(2) any individual (other than the Attorney General of the 
        United States) serving in a position specified in section 5312 
        of title 5, United States Code.''.

    (b) Clerical Amendment.--The table of sections for part I of 
subchapter A of chapter 75 is amended by adding after the item relating 
to section 7216 the following new item:
                ``Sec. 7217. Prohibition on executive branch influence 
                                over taxpayer audits and other 
                                investigations.''.

    (c) Effective <<NOTE: 26 USC 7217 note.>> Date.--The amendments made 
by this section shall apply to requests made after the date of the 
enactment of this Act.

                   Subtitle C--Personnel Flexibilities

SEC. 1201. IMPROVEMENTS IN PERSONNEL FLEXIBILITIES.

    (a) In General.--Part III of title 5, United States Code, is amended 
by adding at the end the following new subpart:

[[Page 112 STAT. 712]]

                       ``Subpart I--Miscellaneous

 ``CHAPTER 95--PERSONNEL FLEXIBILITIES RELATING TO THE INTERNAL REVENUE 
                                 SERVICE

``Sec.
``9501. Internal Revenue Service personnel flexibilities.
``9502. Pay authority for critical positions.
``9503. Streamlined critical pay authority.
``9504. Recruitment, retention, relocation incentives, and relocation 
           expenses.
``9505. Performance awards for senior executives.
``9506. Limited appointments to career reserved Senior Executive Service 
           positions.
``9507. Streamlined demonstration project authority.
``9508. General workforce performance management system.
``9509. General workforce classification and pay.
``9510. General workforce staffing.

``Sec. 9501. Internal Revenue Service personnel flexibilities

    ``(a) Any flexibilities provided by sections 9502 through 9510 of 
this chapter shall be exercised in a manner consistent with--
            ``(1) chapter 23 (relating to merit system principles and 
        prohibited personnel practices);
            ``(2) provisions relating to preference eligibles;
            ``(3) except as otherwise specifically provided, section 
        5307 (relating to the aggregate limitation on pay);
            ``(4) except as otherwise specifically provided, chapter 71 
        (relating to labor-management relations); and
            ``(5) subject to subsections (b) and (c) of section 1104, as 
        though such authorities were delegated to the Secretary of the 
        Treasury under section 1104(a)(2).

    ``(b) The Secretary of the Treasury shall provide the Office of 
Personnel Management with any information that Office requires in 
carrying out its responsibilities under this section.
    ``(c) Employees within a unit to which a labor organization is 
accorded exclusive recognition under chapter 71 shall not be subject to 
any flexibility provided by sections 9507 through 9510 of this chapter 
unless the exclusive representative and the Internal Revenue Service 
have entered into a written agreement which specifically provides for 
the exercise of that flexibility. Such written agreement may be imposed 
by the Federal Services Impasses Panel under section 7119.

``Sec. 9502. Pay authority for critical positions

    ``(a) When the Secretary of the Treasury seeks a grant of authority 
under section 5377 for critical pay for 1 or more positions at the 
Internal Revenue Service, the Office of Management and Budget may fix 
the rate of basic pay, notwithstanding sections 5377(d)(2) and 5307, at 
any rate up to the salary set in accordance with section 104 of title 3.
    ``(b) Notwithstanding section 5307, no allowance, differential, 
bonus, award, or similar cash payment may be paid to any employee 
receiving critical pay at a rate fixed under subsection (a), in any 
calendar year if, or to the extent that, the employee's total annual 
compensation will exceed the maximum amount of total annual compensation 
payable at the salary set in accordance with section 104 of title 3.

``Sec. 9503. Streamlined critical pay authority

    ``(a) Notwithstanding section 9502, and without regard to the 
provisions of this title governing appointments in the competitive

[[Page 112 STAT. 713]]

service or the Senior Executive Service and chapters 51 and 53 (relating 
to classification and pay rates), the Secretary of the Treasury may, for 
a period of 10 years after the date of enactment of this section, 
establish, fix the compensation of, and appoint individuals to, 
designated critical administrative, technical, and professional 
positions needed to carry out the functions of the Internal Revenue 
Service, if--
            ``(1) the positions--
                    ``(A) require expertise of an extremely high level 
                in an administrative, technical, or professional field; 
                and
                    ``(B) are critical to the Internal Revenue Service's 
                successful accomplishment of an important mission;
            ``(2) exercise of the authority is necessary to recruit or 
        retain an individual exceptionally well qualified for the 
        position;
            ``(3) the number of such positions does not exceed 40 at any 
        one time;
            ``(4) designation of such positions are approved by the 
        Secretary of the Treasury;
            ``(5) the terms of such appointments are limited to no more 
        than 4 years;
            ``(6) appointees to such positions were not Internal Revenue 
        Service employees prior to June 1, 1998;
            ``(7) total annual compensation for any appointee to such 
        positions does not exceed the highest total annual compensation 
        payable at the rate determined under section 104 of title 3; and
            ``(8) all such positions are excluded from the collective 
        bargaining unit.

    ``(b) Individuals appointed under this section shall not be 
considered to be employees for purposes of subchapter II of chapter 75.

``Sec. 9504. Recruitment, retention, relocation incentives, and 
                        relocation expenses

    ``(a) For a period of 10 years after the date of enactment of this 
section and subject to approval by the Office of Personnel Management, 
the Secretary of the Treasury may provide for variations from sections 
5753 and 5754 governing payment of recruitment, relocation, and 
retention incentives.
    ``(b) For a period of 10 years after the date of enactment of this 
section, the Secretary of the Treasury may pay from appropriations made 
to the Internal Revenue Service allowable relocation expenses under 
section 5724a for employees transferred or reemployed and allowable 
travel and transportation expenses under section 5723 for new 
appointees, for any new appointee appointed to a position for which pay 
is fixed under section 9502 or 9503 after June 1, 1998.

``Sec. 9505. Performance awards for senior executives

    ``(a) For a period of 10 years after the date of enactment of this 
section, Internal Revenue Service senior executives who have program 
management responsibility over significant functions of the Internal 
Revenue Service may be paid a performance bonus without regard to the 
limitation in section 5384(b)(2) if the Secretary of the Treasury finds 
such award warranted based on the executive's performance.

[[Page 112 STAT. 714]]

    ``(b) In evaluating an executive's performance for purposes of an 
award under this section, the Secretary of the Treasury shall take into 
account the executive's contributions toward the successful 
accomplishment of goals and objectives established under the Government 
Performance and Results Act of 1993, division E of the Clinger-Cohen Act 
of 1996 (Public Law 104-106; 110 Stat. 679), Revenue Procedure 64-22 (as 
in effect on July 30, 1997), taxpayer service surveys, and other 
performance metrics or plans established in consultation with the 
Internal Revenue Service Oversight Board.
    ``(c) Any award in excess of 20 percent of an executive's rate of 
basic pay shall be approved by the Secretary of the Treasury.
    ``(d) Notwithstanding section 5384(b)(3), the Secretary of the 
Treasury shall determine the aggregate amount of performance awards 
available to be paid during any fiscal year under this section and 
section 5384 to career senior executives in the Internal Revenue 
Service. Such amount may not exceed an amount equal to 5 percent of the 
aggregate amount of basic pay paid to career senior executives in the 
Internal Revenue Service during the preceding fiscal year. The Internal 
Revenue Service shall not be included in the determination under section 
5384(b)(3) of the aggregate amount of performance awards payable to 
career senior executives in the Department of the Treasury other than 
the Internal Revenue Service.
    ``(e) Notwithstanding section 5307, a performance bonus award may 
not be paid to an executive in a calendar year if, or to the extent 
that, the executive's total annual compensation will exceed the maximum 
amount of total annual compensation payable at the rate determined under 
section 104 of title 3.

``Sec. 9506. Limited appointments to career reserved Senior Executive 
                        Service positions

    ``(a) In the application of section 3132, a `career reserved 
position' in the Internal Revenue Service means a position designated 
under section 3132(b) which may be filled only by--
            ``(1) a career appointee; or
            ``(2) a limited emergency appointee or a limited term 
        appointee--
                    ``(A) who, immediately upon entering the career 
                reserved position, was serving under a career or career-
                conditional appointment outside the Senior Executive 
                Service; or
                    ``(B) whose limited emergency or limited term 
                appointment is approved in advance by the Office of 
                Personnel Management.

    ``(b)(1) The number of positions described under subsection (a) 
which are filled by an appointee as described under paragraph (2) of 
such subsection may not exceed 10 percent of the total number of Senior 
Executive Service positions in the Internal Revenue Service.
    ``(2) Notwithstanding section 3132--
            ``(A) the term of an appointee described under subsection 
        (a)(2) may be for any period not to exceed 3 years; and
            ``(B) such an appointee may serve--
                    ``(i) two such terms; or
                    ``(ii) two such terms in addition to any unexpired 
                term applicable at the time of appointment.

[[Page 112 STAT. 715]]

``Sec. 9507. Streamlined demonstration project authority

    ``(a) The exercise of any of the flexibilities under sections 9502 
through 9510 shall not affect the authority of the Secretary of the 
Treasury to implement for the Internal Revenue Service a demonstration 
project subject to chapter 47, as provided in subsection (b).
    ``(b) In applying section 4703 to a demonstration project described 
in section 4701(a)(4) which involves the Internal Revenue Service--
            ``(1) section 4703(b)(1) shall be deemed to read as follows:
            `` `(1) develop a plan for such project which describes its 
        purpose, the employees to be covered, the project itself, its 
        anticipated outcomes, and the method of evaluating the 
        project;';
            ``(2) section 4703(b)(3) shall not apply;
            ``(3) the 180-day notification period in section 4703(b)(4) 
        shall be deemed to be a notification period of 30 days;
            ``(4) section 4703(b)(6) shall be deemed to read as follows:
            `` `(6) provides each House of Congress with the final 
        version of the plan.';
            ``(5) section 4703(c)(1) shall be deemed to read as follows:
            `` `(1) subchapter V of chapter 63 or subpart G of part III 
        of this title;';
            ``(6) the requirements of paragraphs (1)(A) and (2) of 
        section 4703(d) shall not apply; and
            ``(7) notwithstanding section 4703(d)(1)(B), based on an 
        evaluation as provided in section 4703(h), the Office of 
        Personnel Management and the Secretary of the Treasury, except 
        as otherwise provided by this subsection, may waive the 
        termination date of a demonstration project under section 
        4703(d).

    ``(c) <<NOTE: Deadline. Federal Register, publication.>> At least 90 
days before waiving the termination date under subsection (b)(7), the 
Office of Personnel Management shall publish in the Federal Register a 
notice of its intention to waive the termination date and shall inform 
in writing both Houses of Congress of its intention.

``Sec. 9508. General workforce performance management system

    ``(a) In lieu of a performance appraisal system established under 
section 4302, the Secretary of the Treasury shall, within 1 year after 
the date of enactment of this section, establish for the Internal 
Revenue Service a performance management system that--
            ``(1) maintains individual accountability by--
                    ``(A) establishing one or more retention standards 
                for each employee related to the work of the employee 
                and expressed in terms of individual performance, and 
                communicating such retention standards to employees;
                    ``(B) making periodic determinations of whether each 
                employee meets or does not meet the employee's 
                established retention standards; and
                    ``(C) taking actions, in accordance with applicable 
                laws and regulations, with respect to any employee whose 
                performance does not meet established retention 
                standards, including denying any increases in basic pay, 
                promotions, and credit for performance under section 
                3502, and taking one or more of the following actions:
                          ``(i) Reassignment.

[[Page 112 STAT. 716]]

                          ``(ii) An action under chapter 43 or chapter 
                      75 of this title.
                          ``(iii) Any other appropriate action to 
                      resolve the performance problem; and
            ``(2) except as provided under section 1204 of the Internal 
        Revenue Service Restructuring and Reform Act of 1998, 
        strengthens the system's effectiveness by--
                    ``(A) establishing goals or objectives for 
                individual, group, or organizational performance (or any 
                combination thereof ), consistent with the Internal 
                Revenue Service's performance planning procedures, 
                including those established under the Government 
                Performance and Results Act of 1993, division E of the 
                Clinger-Cohen Act of 1996 (Public Law 104-106; 110 Stat. 
                679), Revenue Procedure 64-22 (as in effect on July 30, 
                1997), and taxpayer service surveys, and communicating 
                such goals or objectives to employees;
                    ``(B) using such goals and objectives to make 
                performance distinctions among employees or groups of 
                employees; and
                    ``(C) using performance assessments as a basis for 
                granting employee awards, adjusting an employee's rate 
                of basic pay, and other appropriate personnel actions, 
                in accordance with applicable laws and regulations.

    ``(b)(1) For purposes of subsection (a)(2), the term `performance 
assessment' means a determination of whether or not retention standards 
established under subsection (a)(1)(A) are met, and any additional 
performance determination made on the basis of performance goals and 
objectives established under subsection (a)(2)(A).
    ``(2) For purposes of this title, the term `unacceptable 
performance' with respect to an employee of the Internal Revenue Service 
covered by a performance management system established under this 
section means performance of the employee which fails to meet a 
retention standard established under this section.
    ``(c)(1) The Secretary of the Treasury may establish an awards 
program designed to provide incentives for and recognition of 
organizational, group, and individual achievements by providing for 
granting awards to employees who, as individuals or members of a group, 
contribute to meeting the performance goals and objectives established 
under this chapter by such means as a superior individual or group 
accomplishment, a documented productivity gain, or sustained superior 
performance.
    ``(2) A cash award under subchapter I of chapter 45 may be granted 
to an employee of the Internal Revenue Service without the need for any 
approval under section 4502(b).
    ``(d)(1) In applying sections 4303(b)(1)(A) and 7513(b)(1) to 
employees of the Internal Revenue Service, `30 days' may be deemed to be 
`15 days'.
    ``(2) Notwithstanding the second sentence of section 5335(c), an 
employee of the Internal Revenue Service shall not have a right to 
appeal the denial of a periodic step increase under section 5335 to the 
Merit Systems Protection Board.

``Sec. 9509. General workforce classification and pay

    ``(a) For purposes of this section, the term `broad-banded system' 
means a system for grouping positions for pay, job evaluation, and other 
purposes that is different from the system established

[[Page 112 STAT. 717]]

under chapter 51 and subchapter III of chapter 53 as a result of 
combining grades and related ranges of rates of pay in one or more 
occupational series.
    ``(b)(1)(A) <<NOTE: Regulations.>> The Secretary of the Treasury 
may, subject to criteria to be prescribed by the Office of Personnel 
Management, establish one or more broad-banded systems covering all or 
any portion of the Internal Revenue Service workforce.

    ``(B) With the approval of the Office of Personnel Management, a 
broad-banded system established under this section may either include or 
consist of positions that otherwise would be subject to subchapter IV of 
chapter 53 or section 5376.
    ``(2) The Office of Personnel Management may require the 
Secretary of the Treasury to submit information relating to broad-banded 
systems at the Internal Revenue Service.
    ``(3) Except as otherwise provided under this section, employees 
under a broad-banded system shall continue to be subject to the laws and 
regulations covering employees under the pay system that otherwise would 
apply to such employees.
    ``(4) <<NOTE: Regulations.>> The criteria to be prescribed by the 
Office of Personnel Management shall, at a minimum--
            ``(A) ensure that the structure of any broad-banded system 
        maintains the principle of equal pay for substantially equal 
        work;
            ``(B) establish the minimum and maximum number of grades 
        that may be combined into pay bands;
            ``(C) establish requirements for setting minimum and maximum 
        rates of pay in a pay band;
            ``(D) establish requirements for adjusting the pay of an 
        employee within a pay band;
            ``(E) establish requirements for setting the pay of a 
        supervisory employee whose position is in a pay band or who 
        supervises employees whose positions are in pay bands; and
            ``(F) establish requirements and methodologies for setting 
        the pay of an employee upon conversion to a broad-banded system, 
        initial appointment, change of position or type of appointment 
        (including promotion, demotion, transfer, reassignment, 
        reinstatement, placement in another pay band, or movement to a 
        different geographic location), and movement between a broad-
        banded system and another pay system.

    ``(c) With the approval of the Office of Personnel Management and in 
accordance with a plan for implementation submitted by the Secretary of 
the Treasury, the Secretary may, with respect to Internal Revenue 
Service employees who are covered by a broad-banded system established 
under this section, provide for variations from the provisions of 
subchapter VI of chapter 53.

``Sec. 9510. General workforce staffing

    ``(a)(1) Except as otherwise provided by this section, an employee 
of the Internal Revenue Service may be selected for a permanent 
appointment in the competitive service in the Internal Revenue Service 
through internal competitive promotion procedures if--
            ``(A) the employee has completed, in the competitive 
        service, 2 years of current continuous service under a term 
        appointment or any combination of term appointments;

[[Page 112 STAT. 718]]

            ``(B) such term appointment or appointments were made under 
        competitive procedures prescribed for permanent appointments;
            ``(C) the employee's performance under such term appointment 
        or appointments met established retention standards, or, if not 
        covered by a performance management system established under 
        section 9508, was rated at the fully successful level or higher 
        (or equivalent thereof ); and
            ``(D) the vacancy announcement for the term appointment from 
        which the conversion is made stated that there was a potential 
        for subsequent conversion to a permanent appointment.

    ``(2) An appointment under this section may be made only to a 
position in the same line of work as a position to which the employee 
received a term appointment under competitive procedures.
    ``(b)(1) Notwithstanding subchapter I of chapter 33, the Secretary 
of the Treasury may establish category rating systems for evaluating 
applicants for Internal Revenue Service positions in the competitive 
service under which qualified candidates are divided into two or more 
quality categories on the basis of relative degrees of merit, rather 
than assigned individual numerical ratings.
    ``(2) Each applicant who meets the minimum qualification 
requirements for the position to be filled shall be assigned to an 
appropriate category based on an evaluation of the applicant's 
knowledge, skills, and abilities relative to those needed for successful 
performance in the position to be filled.
    ``(3) Within each quality category established under paragraph (1), 
preference eligibles shall be listed ahead of individuals who are not 
preference eligibles. For other than scientific and professional 
positions at or higher than GS-9 (or equivalent), preference eligibles 
who have a compensable service-connected disability of 10 percent or 
more, and who meet the minimum qualification standards, shall be listed 
in the highest quality category.
    ``(4) An appointing authority may select any applicant from the 
highest quality category or, if fewer than three candidates 
have been assigned to the highest quality category, from a merged 
category consisting of the highest and second highest quality 
categories.
    ``(5) Notwithstanding paragraph (4), the appointing authority may 
not pass over a preference eligible in the same or higher category from 
which selection is made unless the requirements of section 3317(b) or 
3318(b), as applicable, are satisfied.
    ``(c) The Secretary of the Treasury may detail employees among the 
offices of the Internal Revenue Service without regard to the 120-day 
limitation in section 3341(b).
    ``(d) Notwithstanding any other provision of law, the Secretary of 
the Treasury may establish a probationary period under section 3321 of 
up to 3 years for Internal Revenue Service positions if the Secretary of 
the Treasury determines that the nature of the work is such that a 
shorter period is insufficient to demonstrate complete proficiency in 
the position.
    ``(e) Nothing in this section exempts the Secretary of the 
Treasury from--
            ``(1) any employment priority established under direction of 
        the President for the placement of surplus or displaced 
        employees; or

[[Page 112 STAT. 719]]

            ``(2) any obligation under a court order or decree relating 
        to the employment practices of the Internal Revenue Service or 
        the Department of the Treasury.''.

    (b) Clerical Amendment.--The table of sections for part III of title 
5, United States Code, is amended by adding at the end the following new 
items:

                       ``Subpart I--Miscellaneous

``95. Personnel flexibilities relating to the Internal Revenue 
Service..........................................................9501''.

SEC. 1202. VOLUNTARY SEPARATION <<NOTE: 5 USC 5597 note.>> INCENTIVE 
            PAYMENTS.

    (a) Definition.--In this section, the term ``employee'' means an 
employee (as defined by section 2105 of title 5, United States Code) who 
is employed by the Internal Revenue Service serving under an appointment 
without time limitation, and has been currently employed for a 
continuous period of at least 3 years, but does not include--
            (1) a reemployed annuitant under subchapter III of chapter 
        83 or chapter 84 of title 5, United States Code, or another 
        retirement system;
            (2) an employee having a disability on the basis of which 
        such employee is or would be eligible for disability retirement 
        under the applicable retirement system referred to in paragraph 
        (1);
            (3) an employee who is in receipt of a specific notice of 
        involuntary separation for misconduct or unacceptable 
        performance;
            (4) an employee who, upon completing an additional period of 
        service as referred to in section 3(b)(2)(B)(ii) of the Federal 
        Workforce Restructuring Act of 1994 (5 U.S.C. 5597 note), would 
        qualify for a voluntary separation incentive payment under 
        section 3 of such Act;
            (5) an employee who has previously received any voluntary 
        separation incentive payment by the Federal Government under 
        this section or any other authority and has not repaid such 
        payment;
            (6) an employee covered by statutory reemployment rights who 
        is on transfer to another organization; or
            (7) any employee who, during the 24-month period preceding 
        the date of separation, has received a recruitment or relocation 
        bonus under section 5753 of title 5, United States Code, or who, 
        within the 12-month period preceding the date of separation, 
        received a retention allowance under section 5754 of title 5, 
        United States Code.

    (b) Authority To Provide Voluntary Separation Incentive Payments.--
            (1) In general.--The Commissioner of Internal Revenue may 
        pay voluntary separation incentive payments under this section 
        to any employee to the extent necessary to carry out the plan to 
        reorganize the Internal Revenue Service under section 1001.
            (2) Amount and treatment of payments.--A voluntary 
        separation incentive payment--
                    (A) shall be paid in a lump sum after the employee's 
                separation;
                    (B) shall be paid from appropriations or funds 
                available for the payment of the basic pay of the 
                employees;
                    (C) shall be equal to the lesser of--

[[Page 112 STAT. 720]]

                          (i) an amount equal to the amount the employee 
                      would be entitled to receive under section 5595(c) 
                      of title 5, United States Code; or
                          (ii) an amount determined by an agency head 
                      not to exceed $25,000;
                    (D) may not be made except in the case of any 
                qualifying employee who voluntarily separates (whether 
                by retirement or resignation) before January 1, 2003;
                    (E) shall not be a basis for payment, and shall not 
                be included in the computation, of any other type of 
                Government benefit; and
                    (F) shall not be taken into account in determining 
                the amount of any severance pay to which the employee 
                may be entitled under section 5595 of title 5, United 
                States Code, based on any other separation.

    (c) Additional Internal Revenue Service Contributions to the 
Retirement Fund.--
            (1) In general.--In addition to any other payments which it 
        is required to make under subchapter III of chapter 83 of title 
        5, United States Code, the Internal Revenue Service shall remit 
        to the Office of Personnel Management for deposit in the 
        Treasury of the United States to the credit of the Civil Service 
        Retirement and Disability Fund an amount equal to 15 percent of 
        the final basic pay of each employee who is covered under 
        subchapter III of chapter 83 or chapter 84 of title 5, United 
        States Code, to whom a voluntary separation incentive has been 
        paid under this section.
            (2) Definition.--In paragraph (1), the term ``final basic 
        pay'', with respect to an employee, means the total amount of 
        basic pay which would be payable for a year of service by such 
        employee, computed using the employee's final rate of basic pay, 
        and, if last serving on other than a full-time basis, with 
        appropriate adjustment therefor.

    (d) Effect of Subsequent Employment With the Government.--An 
individual who has received a voluntary separation incentive payment 
under this section and accepts any employment for compensation with the 
Government of the United States, or who works for any agency of the 
United States Government through a personal services contract, within 5 
years after the date of the separation on which the payment is based 
shall be required to pay, prior to the individual's first day of 
employment, the entire amount of the incentive payment to the Internal 
Revenue Service.
    (e) Effect on Internal Revenue Service Employment 
Levels.--
            (1) Intended effect.--Voluntary separations under this 
        section are not intended to necessarily reduce the total number 
        of full-time equivalent positions in the Internal Revenue 
        Service.
            (2) Use of voluntary separations.--The Internal Revenue 
        Service may redeploy or use the full-time equivalent positions 
        vacated by voluntary separations under this section to make 
        other positions available to more critical locations or more 
        critical occupations.

SEC. 1203. TERMINATION OF EMPLOYMENT FOR <<NOTE: 26 USC 7804 
            note.>> MISCONDUCT.

    (a) In General.--Subject to subsection (c), the Commissioner of 
Internal Revenue shall terminate the employment of any

[[Page 112 STAT. 721]]

employee of the Internal Revenue Service if there is a final 
administrative or judicial determination that such employee committed 
any act or omission described under subsection (b) in the performance of 
the employee's official duties. Such termination shall be a removal for 
cause on charges of misconduct.
    (b) Acts or Omissions.--The acts or omissions referred to under 
subsection (a) are--
            (1) willful failure to obtain the required approval 
        signatures on documents authorizing the seizure of a taxpayer's 
        home, personal belongings, or business assets;
            (2) providing a false statement under oath with respect to a 
        material matter involving a taxpayer or taxpayer representative;
            (3) with respect to a taxpayer, taxpayer representative, or 
        other employee of the Internal Revenue Service, the violation 
        of--
                    (A) any right under the Constitution of the United 
                States; or
                    (B) any civil right established under--
                          (i) title VI or VII of the Civil Rights Act of 
                      1964;
                          (ii) title IX of the Education Amendments of 
                      1972;
                          (iii) the Age Discrimination in Employment Act 
                      of 1967;
                          (iv) the Age Discrimination Act of 1975;
                          (v) section 501 or 504 of the Rehabilitation 
                      Act of 1973; or
                          (vi) title I of the Americans with 
                      Disabilities Act of 1990;
            (4) falsifying or destroying documents to conceal mistakes 
        made by any employee with respect to a matter involving a 
        taxpayer or taxpayer representative;
            (5) assault or battery on a taxpayer, taxpayer 
        representative, or other employee of the Internal Revenue 
        Service, but only if there is a criminal conviction, or a final 
        judgment by a court in a civil case, with respect to the assault 
        or battery;
            (6) violations of the Internal Revenue Code of 1986, 
        Department of Treasury regulations, or policies of the Internal 
        Revenue Service (including the Internal Revenue Manual) for the 
        purpose of retaliating against, or harassing, a taxpayer, 
        taxpayer representative, or other employee of the Internal 
        Revenue Service;
            (7) willful misuse of the provisions of section 6103 of the 
        Internal Revenue Code of 1986 for the purpose of concealing 
        information from a congressional inquiry;
            (8) willful failure to file any return of tax required under 
        the Internal Revenue Code of 1986 on or before the date 
        prescribed therefor (including any extensions), unless such 
        failure is due to reasonable cause and not to willful neglect;
            (9) willful understatement of Federal tax liability, unless 
        such understatement is due to reasonable cause and not to 
        willful neglect; and
            (10) threatening to audit a taxpayer for the purpose of 
        extracting personal gain or benefit.

    (c) Determination of Commissioner.--
            (1) In general.--The Commissioner of Internal Revenue may 
        take a personnel action other than termination for an act or 
        omission under subsection (a).

[[Page 112 STAT. 722]]

            (2) Discretion.--The exercise of authority under paragraph 
        (1) shall be at the sole discretion of the Commissioner of 
        Internal Revenue and may not be delegated to any other officer. 
        The Commissioner of Internal Revenue, in his sole discretion, 
        may establish a procedure which will be used to determine 
        whether an individual should be referred to the Commissioner of 
        Internal Revenue for a determination by the Commissioner under 
        paragraph (1).
            (3) No appeal.--Any determination of the Commissioner of 
        Internal Revenue under this subsection may not be appealed in 
        any administrative or judicial proceeding.

    (d) Definition.--For purposes of the provisions described in clauses 
(i), (ii), and (iv) of subsection (b)(3)(B), references to a program or 
activity receiving Federal financial assistance or an education program 
or activity receiving Federal financial assistance shall include any 
program or activity conducted by the Internal Revenue Service for a 
taxpayer.

SEC. 1204. <<NOTE: 26 USC 7804 note.>> BASIS FOR EVALUATION OF INTERNAL 
            REVENUE SERVICE EMPLOYEES.

    (a) In General.--The Internal Revenue Service shall not use records 
of tax enforcement results--
            (1) to evaluate employees; or
            (2) to impose or suggest production quotas or goals with 
        respect to such employees.

    (b) Taxpayer Service.--The Internal Revenue Service shall use the 
fair and equitable treatment of taxpayers by employees as one of the 
standards for evaluating employee performance.
    (c) Certification.--Each appropriate supervisor shall certify 
quarterly by letter to the Commissioner of Internal Revenue whether or 
not tax enforcement results are being used in a manner prohibited by 
subsection (a).
    (d) Technical and Conforming Amendment.--Section 6231 of the 
Technical and Miscellaneous Revenue Act of 1988 (Public Law 100-647; 102 
Stat. 3734) <<NOTE: 26 USC 7803 note.>> is repealed.

    (e) Effective <<NOTE: Applicability.>> Date.--This section shall 
apply to evaluations conducted on or after the date of the enactment of 
this Act.

SEC. 1205. EMPLOYEE TRAINING <<NOTE: 26 USC 7804.>> PROGRAM.

    (a) In General.--Not <<NOTE: Deadline.>> later than 180 days after 
the date of the enactment of this Act, the Commissioner of Internal 
Revenue shall implement an employee training program and shall submit an 
employee training plan to the Committee on Finance of the Senate and the 
Committee on Ways and Means of the House of Representatives.

    (b) Contents.--The plan submitted under subsection (a) shall--
            (1) detail a comprehensive employee training program to 
        ensure adequate customer service training;
            (2) detail a schedule for training and the fiscal years 
        during which the training will occur;
            (3) detail the funding of the program and relevant 
        information to demonstrate the priority and commitment of 
        resources to the plan;
            (4) review the organizational design of customer service;
            (5) provide for the implementation of a performance 
        development system; and

[[Page 112 STAT. 723]]

            (6) provide for at least 16 hours of conflict management 
        training during fiscal year 1999 for employees conducting 
        collection activities.

                       TITLE II--ELECTRONIC FILING

SEC. 2001. ELECTRONIC FILING OF TAX AND INFORMATION RETURNS.

     <<NOTE: 26 USC 6011 note.>> (a) In General.--It is the policy of 
Congress that--
            (1) paperless filing should be the preferred and most 
        convenient means of filing Federal tax and information returns;
            (2) it should be the goal of the Internal Revenue Service to 
        have at least 80 percent of all such returns filed 
        electronically by the year 2007; and
            (3) the Internal Revenue Service should cooperate with and 
        encourage the private sector by encouraging competition to 
        increase electronic filing of such returns.

     <<NOTE: 26 USC 6011 note.>> (b) Strategic Plan.--
             <<NOTE: Deadline.>> (1) In general.--Not later than 180 
        days after the date of the enactment of this Act, the Secretary 
        of the Treasury or the Secretary's delegate (hereafter in this 
        section referred to as the ``Secretary'') shall establish a plan 
        to eliminate barriers, provide incentives, and use competitive 
        market forces to increase electronic filing gradually over the 
        next 10 years while maintaining processing times for paper 
        returns at 40 days. To the extent practicable, such plan shall 
        provide that all returns prepared electronically for taxable 
        years beginning after 2001 shall be filed electronically.
            (2) Electronic commerce advisory group.--To ensure that the 
        Secretary receives input from the private sector in the 
        development and implementation of the plan required by paragraph 
        (1), the Secretary shall convene an electronic commerce advisory 
        group to include representatives from the small business 
        community and from the tax practitioner, preparer, and 
        computerized tax processor communities and other representatives 
        from the electronic filing industry.

    (c) Promotion of Electronic Filing and Incentives.--
Section 6011 is amended by redesignating subsection (f ) as subsection 
(g) and by inserting after subsection (e) the following new subsection:
    ``(f ) Promotion of Electronic Filing.--
            ``(1) In general.--The Secretary is authorized to promote 
        the benefits of and encourage the use of electronic tax 
        administration programs, as they become available, through the 
        use of mass communications and other means.
            ``(2) Incentives.--The Secretary may implement procedures to 
        provide for the payment of appropriate incentives for 
        electronically filed returns.''.

     <<NOTE: Deadline. 26 USC 6011 note.>> (d) Annual Reports.--Not 
later than June 30 of each calendar year after 1998, the Chairperson of 
the Internal Revenue Service Oversight Board, the Secretary of the 
Treasury, and the Chairperson of the electronic commerce advisory group 
established under subsection (b)(2) shall report to the Committees on 
Ways and Means, Appropriations, Government Reform and Oversight, and 
Small Business of the House of Representatives and the Committees on 
Finance, Appropriations, Governmental Affairs, and Small Business of the 
Senate on--

[[Page 112 STAT. 724]]

            (1) the progress of the Internal Revenue Service in meeting 
        the goal of receiving electronically 80 percent of tax and 
        information returns by 2007;
            (2) the status of the plan required by subsection (b);
            (3) the legislative changes necessary to assist the Internal 
        Revenue Service in meeting such goal; and
            (4) the effects on small businesses and the self-employed of 
        electronically filing tax and information returns.

SEC. 2002. DUE DATE FOR CERTAIN INFORMATION RETURNS.

    (a) Information Returns Filed Electronically.--Section 6071 
(relating to time for filing returns and other documents) is amended by 
redesignating subsection (b) as subsection (c) and by inserting after 
subsection (a) the following new subsection:
    ``(b) Electronically Filed Information Returns.--Returns made under 
subparts B and C of part III of this subchapter which are filed 
electronically shall be filed on or before March 31 of the year 
following the calendar year to which such returns relate.''.
    (b) Study Relating to Time For Providing Notice to 
Recipients.--
            (1) In general.--The Secretary of the Treasury shall conduct 
        a study evaluating the effect of extending the deadline for 
        providing statements to persons with respect to whom information 
        is required to be furnished under subparts B and C of part III 
        of subchapter A of chapter 61 of the Internal Revenue Code of 
        1986 (other than section 6051 of such Code) from January 31 to 
        February 15 of the year in which the return to which the 
        statement relates is required to be filed.
             <<NOTE: Deadline.>> (2) Report.--Not later than June 30, 
        1999, the Secretary of the Treasury shall submit a report on the 
        study under paragraph (1) to the Committee on Ways and Means of 
        the House of Representatives and the Committee on Finance of the 
        Senate.

     <<NOTE: Applicability. 26 USC 6071 note.>> (c) Effective Date.--The 
amendment made by subsection (a) shall apply to returns required to be 
filed after December 31, 1999.

SEC. 2003. PAPERLESS ELECTRONIC FILING.

    (a) In General.--Section 6061 (relating to signing of returns and 
other documents) is amended--
            (1) by striking ``Except as otherwise provided by'' and 
        inserting the following:

    ``(a) General Rule.--Except as otherwise provided by subsection (b) 
and''; and
            (2) by adding at the end the following new subsection:

    ``(b) Electronic Signatures.--
             <<NOTE: Procedures.>> ``(1) In general.--The Secretary 
        shall develop procedures for the acceptance of signatures in 
        digital or other electronic form. Until such time as such 
        procedures are in place, the Secretary may--
                    ``(A) waive the requirement of a signature for; or
                    ``(B) provide for alternative methods of signing or 
                subscribing,
        a particular type or class of return, declaration, statement, or 
        other document required or permitted to be made or written under 
        internal revenue laws and regulations.

[[Page 112 STAT. 725]]

            ``(2) Treatment of alternative methods.--Notwithstanding any 
        other provision of law, any return, declaration, statement, or 
        other document filed and verified, signed, or subscribed under 
        any method adopted under paragraph (1)(B) shall be treated for 
        all purposes (both civil and criminal, including penalties for 
        perjury) in the same manner as though signed or subscribed.
            ``(3) Published guidance.--The Secretary shall publish 
        guidance as appropriate to define and implement any waiver of 
        the signature requirements or any method adopted under paragraph 
        (1).''.

    (b) Acknowledgment of Electronic Filing.--Section 7502(c) is amended 
to read as follows:
    ``(c) Registered and Certified Mailing; Electronic 
Filing.--
            ``(1) Registered mail.--For purposes of this section, if any 
        return, claim, statement, or other document, or payment, is sent 
        by United States registered mail--
                    ``(A) such registration shall be prima facie 
                evidence that the return, claim, statement, or other 
                document was delivered to the agency, officer, or office 
                to which addressed; and
                    ``(B) the date of registration shall be deemed the 
                postmark date.
             <<NOTE: Regulations.>> ``(2) Certified mail; electronic 
        filing.--The Secretary is authorized to provide by regulations 
        the extent to which the provisions of paragraph (1) with respect 
        to prima facie evidence of delivery and the postmark date shall 
        apply to certified mail and electronic filing.''.

     <<NOTE: 26 USC 6011 note.>> (c) Establishment of Procedures for 
Other Information.--In the case of taxable periods beginning after 
December 31, 1999, the Secretary of the Treasury or the Secretary's 
delegate shall, to the extent practicable, establish procedures to 
accept, in 
electronic form, any other information, statements, elections, or 
schedules, from taxpayers filing returns electronically, so that such 
taxpayers will not be required to file any paper.

     <<NOTE: Procedures. 26 USC 7805 note.>> (d) Internet 
Availability.--In the case of taxable periods beginning after December 
31, 1998, the Secretary of the Treasury or the Secretary's delegate 
shall establish procedures for all tax forms, instructions, and 
publications created in the most recent 5-year period to be made 
available electronically on the Internet in a searchable database at 
approximately the same time such records are available to the public in 
paper form. In addition, in the case of taxable periods beginning after 
December 31, 1998, the Secretary of the Treasury or the Secretary's 
delegate shall, to the extent practicable, establish procedures for 
other taxpayer guidance to be made available electronically on the 
Internet in a searchable database at approximately the same time such 
guidance is available to the public in paper form.

     <<NOTE: 26 USC 6103 note.>> (e) Procedures for Authorizing 
Disclosure Electronically.--The Secretary shall establish procedures for 
any taxpayer to authorize, on an electronically filed return, the 
Secretary to disclose information under section 6103(c) of the Internal 
Revenue Code of 1986 to the preparer of the return.

     <<NOTE: 26 USC 6061 note.>> (f ) Effective Date.--The amendments 
made by this section shall take effect on the date of the enactment of 
this Act.

[[Page 112 STAT. 726]]

SEC. 2004. RETURN-FREE TAX <<NOTE: 26 USC 6012 note.>> SYSTEM.

     <<NOTE: Procedures.>> (a) In General.--The Secretary of the 
Treasury or the Secretary's delegate shall develop procedures for the 
implementation of a return-free tax system under which appropriate 
individuals would be permitted to comply with the Internal Revenue Code 
of 1986 without making the return required under section 6012 of such 
Code for taxable years beginning after 2007.

     <<NOTE: Deadline.>> (b) Report.--Not later than June 30 of each 
calendar year after 1999, the Secretary shall report to the Committee on 
Ways and Means of the House of Representatives and the Committee on 
Finance of the Senate on--
            (1) what additional resources the Internal Revenue Service 
        would need to implement such a system;
            (2) the changes to the Internal Revenue Code of 1986 that 
        could enhance the use of such a system;
            (3) the procedures developed pursuant to subsection (a); and
            (4) the number and classes of taxpayers that would be 
        permitted to use the procedures developed pursuant to subsection 
        (a).

SEC. 2005. ACCESS TO ACCOUNT <<NOTE: Deadlines. 26 USC 6103 
            note.>> INFORMATION.

    (a) In General.--Not <<NOTE: Procedures.>> later than December 31, 
2006, the Secretary of the Treasury or the Secretary's delegate shall 
develop procedures under which a taxpayer filing returns electronically 
(and their designees under section 6103(c) of the Internal Revenue Code 
of 1986) would be able to review the taxpayer's account electronically, 
but only if all necessary safeguards to ensure the privacy of such 
account information are in place.

    (b) Report.--Not later than December 31, 2003, the Secretary of the 
Treasury shall report on the progress the Secretary is making on the 
development of procedures under subsection (a) to the Committee on Ways 
and Means of the House of Representatives and the Committee on Finance 
of the Senate.

TITLE III--TAXPAYER <<NOTE: Taxpayer Bill of Rights 3.>> PROTECTION AND 
RIGHTS

SEC. 3000. SHORT <<NOTE: 26 USC 1 note.>> TITLE.

    This title may be cited as the ``Taxpayer Bill of Rights 3''.

                       Subtitle A--Burden of Proof

SEC. 3001. BURDEN OF PROOF.

    (a) In General.--Chapter 76 (relating to judicial proceedings) is 
amended by adding at the end the following new subchapter:

                     ``Subchapter E--Burden of Proof

                ``Sec. 7491. Burden of proof.

``SEC. 7491. BURDEN OF PROOF.

    ``(a) Burden Shifts Where Taxpayer Produces Credible Evidence.--

[[Page 112 STAT. 727]]

            ``(1) General rule.--If, in any court proceeding, a taxpayer 
        introduces credible evidence with respect to any factual issue 
        relevant to ascertaining the liability of the taxpayer for any 
        tax imposed by subtitle A or B, the Secretary shall have the 
        burden of proof with respect to such issue.
             <<NOTE: Applicability.>> ``(2) Limitations.--Paragraph (1) 
        shall apply with respect to an issue only if--
                    ``(A) the taxpayer has complied with the 
                requirements under this title to substantiate any item;
                    ``(B) the taxpayer has maintained all records 
                required under this title and has cooperated with 
                reasonable requests by the Secretary for witnesses, 
                information, documents, meetings, and interviews; and
                    ``(C) in the case of a partnership, corporation, or 
                trust, the taxpayer is described in section 
                7430(c)(4)(A)(ii).
            ``(3) Coordination.--Paragraph (1) shall not apply to any 
        issue if any other provision of this title provides for a 
        specific burden of proof with respect to such issue.

    ``(b) Use of Statistical Information on Unrelated Taxpayers.--In the 
case of an individual taxpayer, the Secretary shall have the burden of 
proof in any court proceeding with respect to any item of income which 
was reconstructed by the Secretary solely through the use of statistical 
information on unrelated taxpayers.
    ``(c) Penalties.--Notwithstanding any other provision of this title, 
the Secretary shall have the burden of production in any court 
proceeding with respect to the liability of any individual for any 
penalty, addition to tax, or additional amount imposed by this title.''.
    (b) Conforming Amendment.--The table of subchapters for chapter 76 
is amended by adding at the end the following new item:
                ``Subchapter E. Burden of proof.''.

     <<NOTE: Applicability. 26 USC 7491 note.>> (c) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to court proceedings arising in connection with 
        examinations commencing after the date of the enactment of this 
        Act.
            (2) Taxable periods or events after date of enactment.--In 
        any case in which there is no examination, such amendments shall 
        apply to court proceedings arising in connection with taxable 
        periods or events beginning or occurring after such date of 
        enactment.

Subtitle B--Proceedings by <<NOTE: Courts.>> Taxpayers

SEC. 3101. EXPANSION OF AUTHORITY TO AWARD COSTS AND CERTAIN FEES.

    (a) Increase in Attorney's Fees.--
            (1) Increase in hourly amount.--Clause (iii) of section 
        7430(c)(1)(B) (relating to reasonable litigation costs) is 
        amended by striking ``$110'' and inserting ``$125''.
            (2) Award of higher attorney's fees based on complexity of 
        issues.--Clause (iii) of section 7430(c)(1)(B) (relating to the 
        award of costs and certain fees) is amended by inserting

[[Page 112 STAT. 728]]

        ``the difficulty of the issues presented in the case, or the 
        local availability of tax expertise,'' before ``justifies a 
        higher rate''.

    (b) Award of Administrative Costs Incurred After 30-Day Letter.--
Paragraph (2) of section 7430(c) is amended by striking the last 
sentence and inserting the following new flush sentence:
        ``Such term shall only include costs incurred on or after 
        whichever of the following is the earliest: (i) the date of the 
        receipt by the taxpayer of the notice of the decision of the 
        Internal Revenue Service Office of Appeals; (ii) the date of the 
        notice of deficiency; or (iii) the date on which the first 
        letter of proposed deficiency which allows the taxpayer an 
        opportunity for administrative review in the Internal Revenue 
        Service Office of Appeals is sent.''.

    (c) Award of Fees for Certain Additional Services.--
Paragraph (3) of section 7430(c) is amended to read as follows:
            ``(3) Attorneys fees.--
                    ``(A) In general.--For purposes of paragraphs (1) 
                and (2), fees for the services of an individual (whether 
                or not an attorney) who is authorized to practice before 
                the Tax Court or before the Internal Revenue Service 
                shall be treated as fees for the services of an 
                attorney.
                    ``(B) Pro bono services.--The court may award 
                reasonable attorneys fees under subsection (a) in excess 
                of the attorneys fees paid or incurred if such fees are 
                less than the reasonable attorneys fees because an 
                individual is representing the prevailing party for no 
                fee or for a fee which (taking into account all the 
                facts and circumstances) is no more than a nominal 
                fee. <<NOTE: Applicability.>> This subparagraph shall 
                apply only if such award is paid to such individual or 
                such individual's employer.''.

    (d) Determination of Whether Position of United States Is 
Substantially Justified.--Subparagraph (B) of section 7430(c)(4) is 
amended by redesignating clause (iii) as clause (iv) and by inserting 
after clause (ii) the following new clause:
                          ``(iii) Effect of losing on substantially 
                      similar issues.--In determining for purposes of 
                      clause (i) whether the position of the United 
                      States was substantially justified, the court 
                      shall take into account whether the United States 
                      has lost in courts of appeal for other circuits on 
                      substantially similar issues.''.

    (e) Taxpayer Treated as Prevailing if Judgment Is Less Than 
Taxpayer's Offer.--
            (1) In general.--Section 7430(c)(4) (defining prevailing 
        party) is amended by adding at the end the following new 
        subparagraph:
                    ``(E) Special rules where judgment less than 
                taxpayer's offer.--
                          ``(i) In general.--A party to a court 
                      proceeding meeting the requirements of 
                      subparagraph (A)(ii) shall be treated as the 
                      prevailing party if the liability of the taxpayer 
                      pursuant to the judgment in the proceeding 
                      (determined without regard to interest) is equal 
                      to or less than the liability of the taxpayer 
                      which would have been so determined if the United 
                      States had accepted a qualified offer of the party 
                      under subsection (g).

[[Page 112 STAT. 729]]

                          ``(ii) Exceptions.--This subparagraph shall 
                      not apply to--
                                    ``(I) any judgment issued pursuant 
                                to a settlement; or
                                    ``(II) any proceeding in which the 
                                amount of tax liability is not in issue, 
                                including any declaratory judgment 
                                proceeding, any proceeding to enforce or 
                                quash any summons issued pursuant to 
                                this title, and any action to restrain 
                                disclosure under section 6110(f ).
                          ``(iii) 
                      Special <<NOTE: Applicability.>> rules.--If this 
                      subparagraph applies to any court proceeding--
                                    ``(I) the determination under clause 
                                (i) shall be made by reference to the 
                                last qualified offer made with respect 
                                to the tax liability at issue in the 
                                proceeding; and
                                    ``(II) reasonable administrative and 
                                litigation costs shall only include 
                                costs incurred on and after the date of 
                                such offer.
                          ``(iv) Coordination.--This subparagraph shall 
                      not apply to a party which is a prevailing party 
                      under any other provision of this paragraph.''.
            (2) Qualified offer.--Section 7430 is amended by adding at 
        the end the following new subsection:

    ``(g) Qualified Offer.--For purposes of subsection (c)(4)--
            ``(1) In general.--The term `qualified offer' means a 
        written offer which--
                    ``(A) is made by the taxpayer to the United States 
                during the qualified offer period;
                    ``(B) specifies the offered amount of the taxpayer's 
                liability (determined without regard to interest);
                    ``(C) is designated at the time it is made as a 
                qualified offer for purposes of this section; and
                    ``(D) remains open during the period beginning on 
                the date it is made and ending on the earliest of the 
                date the offer is rejected, the date the trial begins, 
                or the 90th day after the date the offer is made.
            ``(2) Qualified offer period.--For purposes of this 
        subsection, the term `qualified offer period' means the period--
                    ``(A) beginning on the date on which the first 
                letter of proposed deficiency which allows the taxpayer 
                an opportunity for administrative review in the Internal 
                Revenue Service Office of Appeals is sent, and
                    ``(B) ending on the date which is 30 days before the 
                date the case is first set for trial.''.

    (f ) Award of Attorneys Fees in Unauthorized Inspection and 
Disclosure Cases.--Section 7431(c) (relating to damages) is amended by 
striking the period at the end of paragraph (2) and inserting ``, 
plus'', and by adding at the end the following new paragraph:
            ``(3) in the case of a plaintiff which is described in 
        section 7430(c)(4)(A)(ii), reasonable attorneys fees, except 
        that if the defendant is the United States, reasonable attorneys 
        fees may be awarded only if the plaintiff is the prevailing 
        party (as determined under section 7430(c)(4)).''.

    (g) Effective Date.--The amendments made 
by <<NOTE: Applicability. 26 USC 7430 note.>> this section shall apply 
to costs incurred (and, in the case of the amendment

[[Page 112 STAT. 730]]

made by subsection (c), services performed) more than 180 days after the 
date of the enactment of this Act.

SEC. 3102. CIVIL DAMAGES FOR COLLECTION ACTIONS.

    (a) Extension to Negligence Actions.--
            (1) In general.--Section 7433 (relating to civil damages for 
        certain unauthorized collection actions) is amended--
                    (A) in subsection (a), by inserting ``, or by reason 
                of negligence,'' after ``recklessly or intentionally''; 
                and
                    (B) in subsection (b)--
                          (i) in the matter preceding paragraph (1), by 
                      inserting ``($100,000, in the case of 
                      negligence)'' after ``$1,000,000''; and
                          (ii) in paragraph (1), by inserting ``or 
                      negligent'' after ``reckless or intentional''.
            (2) Requirement that administrative remedies be exhausted.--
        Paragraph (1) of section 7433(d) is amended to read as follows:
            ``(1) Requirement that administrative remedies be 
        exhausted.--A judgment for damages shall not be awarded under 
        subsection (b) unless the court determines that the plaintiff 
        has exhausted the administrative remedies available to such 
        plaintiff within the Internal Revenue Service.''.

    (b) Damages Allowed in Civil Actions by Persons Other Than 
Taxpayers.--Section 7426 is amended by redesignating subsection (h) as 
subsection (i) and by adding after subsection (g) the following new 
subsection:
    ``(h) Recovery of Damages Permitted in Certain Cases.--
            ``(1) In general.--Notwithstanding subsection (b), if, in 
        any action brought under this section, there is a finding that 
        any officer or employee of the Internal Revenue Service 
        recklessly or intentionally, or by reason of negligence, 
        disregarded any provision of this title the defendant shall be 
        liable to the plaintiff in an amount equal to the lesser of 
        $1,000,000 ($100,000 in the case of negligence) or the sum of--
                    ``(A) actual, direct economic damages sustained by 
                the plaintiff as a proximate result of the reckless or 
                intentional or negligent disregard of any provision of 
                this title by the officer or employee (reduced by any 
                amount of such damages awarded under subsection (b)); 
                and
                    ``(B) the costs of the action.
             <<NOTE: Applicability.>> ``(2) Requirement that 
        administrative remedies be exhausted; mitigation; period.--The 
        rules of section 7433(d) shall apply for purposes of this 
        subsection.
            ``(3) Payment authority.--Claims pursuant to this section 
        shall be payable out of funds appropriated under section 1304 of 
        title 31, United States Code.''.

    (c) Civil Damages for IRS Violations of Bankruptcy 
Procedures.--
            (1) In general.--Section 7433 (relating to civil damages for 
        certain unauthorized collection actions) is amended by adding at 
        the end the following new subsection:

    ``(e) Actions for Violations of Certain Bankruptcy 
Procedures.--
            ``(1) In general.--If, in connection with any collection of 
        Federal tax with respect to a taxpayer, any officer or employee 
        of the Internal Revenue Service willfully violates any provision

[[Page 112 STAT. 731]]

        of section 362 (relating to automatic stay) or 524 (relating to 
        effect of discharge) of title 11, United States Code (or any 
        successor provision), or any regulation promulgated under such 
        provision, such taxpayer may petition the bankruptcy court to 
        recover damages against the United States.
            ``(2) Remedy to be exclusive.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), notwithstanding section 105 of such 
                title 11, such petition shall be the exclusive remedy 
                for recovering damages resulting from such actions.
                    ``(B) Certain other actions permitted.--Subparagraph 
                (A) shall not apply to an action under section 362(h) of 
                such title 11 for a violation of a stay provided by 
                section 362 of such title; except that--
                          ``(i) administrative and litigation costs in 
                      connection with such an action may only be awarded 
                      under section 7430; and
                          ``(ii) administrative costs may be awarded 
                      only if incurred on or after the date that the 
                      bankruptcy petition is filed.''.
            (2) Conforming amendment.--Subsection (b) of section 7433 is 
        amended by inserting ``or petition filed under subsection (e)'' 
        after ``subsection (a)''.

     <<NOTE: Applicability. 26 USC 7426 note.>> (d) Effective Date.--The 
amendments made by this section shall apply to actions of officers or 
employees of the Internal Revenue Service after the date of the 
enactment of this Act.

SEC. 3103. INCREASE IN SIZE OF CASES PERMITTED ON SMALL CASE CALENDAR.

    (a) In General.--Section 7463 (relating to disputes involving 
$10,000 or less) is amended by striking ``$10,000'' each place it 
appears (including the section heading) and inserting ``$50,000''.
    (b) Conforming Amendments.--
            (1) Sections 7436(c)(1) and 7443A(b)(3) are each amended by 
        striking ``$10,000'' and inserting ``$50,000''.
            (2) The table of sections for part II of subchapter C of 
        chapter 76 is amended by striking ``$10,000'' in the item 
        relating to section 7463 and inserting ``$50,000''.

    (c) Effective Date.--The <<NOTE: Applicability. 26 USC 7436 
note.>> amendments made by this section shall apply to proceedings 
commenced after the date of the enactment of this Act.

SEC. 3104. ACTIONS FOR REFUND WITH RESPECT TO CERTAIN ESTATES WHICH HAVE 
            ELECTED THE INSTALLMENT METHOD OF PAYMENT.

    (a) In General.--Section 7422 is amended by redesignating subsection 
( j) as subsection (k) and by inserting after subsection (i) the 
following new subsection:
    ``( j) Special Rule for Actions With Respect to Estates for Which an 
Election Under Section 6166 Is Made.--
            ``(1) In general.--The district courts of the United States 
        and the United States Court of Federal Claims shall not fail to 
        have jurisdiction over any action brought by the representative 
        of an estate to which this subsection applies to determine the 
        correct amount of the estate tax liability of such estate (or 
        for any refund with respect thereto) solely because the full 
        amount of such liability has not been paid by reason of an 
        election under section 6166 with respect to such estate.

[[Page 112 STAT. 732]]

            ``(2) Estates to which subsection applies.--This subsection 
        shall apply to any estate if, as of the date the action is 
        filed--
                    ``(A) no portion of the installments payable under 
                section 6166 have been accelerated;
                    ``(B) all such installments the due date for which 
                is on or before the date the action is filed have been 
                paid;
                    ``(C) there is no case pending in the Tax Court with 
                respect to the tax imposed by section 2001 on the estate 
                and, if a notice of deficiency under section 6212 with 
                respect to such tax has been issued, the time for filing 
                a petition with the Tax Court with respect to such 
                notice has expired; and
                    ``(D) no proceeding for declaratory judgment under 
                section 7479 is pending.
            ``(3) Prohibition on collection of disallowed liability.--If 
        the court redetermines under paragraph (1) the estate tax 
        liability of an estate, no part of such liability which is 
        disallowed by a decision of such court which has become final 
        may be collected by the Secretary, and amounts paid in excess of 
        the installments determined by the court as currently due and 
        payable shall be refunded.''.

    (b) Extension of Time To File Refund Suit.--Section 7479 (relating 
to declaratory judgments relating to eligibility of estate with respect 
to installment payments under section 6166) is amended by adding at the 
end the following new subsection:
    ``(c) Extension of Time To File Refund Suit.--The 2-year period in 
section 6532(a)(1) for filing suit for refund after disallowance of a 
claim shall be suspended during the 90-day period after the mailing of 
the notice referred to in subsection (b)(3) and, if a pleading has been 
filed with the Tax Court under this section, until the decision of the 
Tax Court has become final.''.
    (c) Effective Date.--The <<NOTE: Applicability. 26 USC 7422 
note.>> amendments made by this section shall apply to any claim for 
refund filed after the date of the enactment of this Act.

SEC. 3105. ADMINISTRATIVE APPEAL OF ADVERSE INTERNAL REVENUE SERVICE 
            DETERMINATION OF TAX-EXEMPT STATUS OF BOND ISSUE.

    The Internal Revenue Service shall amend its administrative 
procedures to provide that if, upon examination, the Internal Revenue 
Service proposes to an issuer that interest on previously issued 
obligations of such issuer is not excludable from gross income under 
section 103(a) of the Internal Revenue Code of 1986, the issuer of such 
obligations shall have an administrative appeal of right to a senior 
officer of the Internal Revenue Service Office of Appeals.

SEC. 3106. CIVIL ACTION FOR RELEASE OF ERRONEOUS LIEN.

    (a) Right of Substitution of Value.--Subsection (b) of section 6325 
(relating to release of lien or discharge of property) is amended by 
adding at the end the following new paragraph:
            ``(4) Right of substitution of value.--
                    ``(A) In general.--At the request of the owner of 
                any property subject to any lien imposed by this 
                chapter, the Secretary shall issue a certificate of 
                discharge of such property if such owner--
                          ``(i) deposits with the Secretary an amount of 
                      money equal to the value of the interest of the 
                      United

[[Page 112 STAT. 733]]

                      States (as determined by the Secretary) in the 
                      property; or
                          ``(ii) furnishes a bond acceptable to the 
                      Secretary in a like amount.
                    ``(B) Refund of deposit with interest and release of 
                bond.--The Secretary shall refund the amount so 
                deposited (and shall pay interest at the overpayment 
                rate under section 6621), and shall release such bond, 
                to the extent that the Secretary determines that--
                          ``(i) the unsatisfied liability giving rise to 
                      the lien can be satisfied from a source other than 
                      such property; or
                          ``(ii) the value of the interest of the United 
                      States in the property is less than the 
                      Secretary's prior determination of such value.
                    ``(C) Use of deposit, etc., if action to contest 
                lien not filed.--If no action is filed under section 
                7426(a)(4) within the period prescribed therefor, the 
                Secretary shall, within 60 days after the expiration of 
                such period--
                          ``(i) apply the amount deposited, or collect 
                      on such bond, to the extent necessary to satisfy 
                      the unsatisfied liability secured by the lien; and
                          ``(ii) refund (with interest as described in 
                      subparagraph (B)) any portion of the amount 
                      deposited which is not used to satisfy such 
                      liability.
                    ``(D) Exception.--Subparagraph (A) shall not apply 
                if the owner of the property is the person whose 
                unsatisfied liability gave rise to the lien.''.

    (b) Civil Action To Release Erroneous Lien.--
            (1) In general.--Subsection (a) of section 7426 (relating to 
        civil actions by persons other than taxpayers) is amended by 
        adding at the end the following new paragraph:
            ``(4) Substitution of value.--If a certificate of discharge 
        is issued to any person under section 6325(b)(4) with respect to 
        any property, such person may, within 120 days after the day on 
        which such certificate is issued, bring a civil action against 
        the United States in a district court of the United States for a 
        determination of whether the value of the interest of the United 
        States (if any) in such property is less than the value 
        determined by the Secretary. No other action may be brought by 
        such person for such a determination.''.
            (2) Form of relief.--
                    (A) In general.--Subsection (b) of section 7426 is 
                amended by adding at the end the following new 
                paragraph:
            ``(5) Substitution of value.--If the court determines that 
        the Secretary's determination of the value of the interest of 
        the United States in the property for purposes of section 
        6325(b)(4) exceeds the actual value of such interest, the court 
        shall grant a judgment ordering a refund of the amount 
        deposited, and a release of the bond, to the extent that the 
        aggregate of the amounts thereof exceeds such value determined 
        by the court.''.
                    (B) Interest allowed on refund of deposit.--
                Subsection (g) of section 7426 is amended by striking 
                ``and'' at the end of paragraph (1), by striking the 
                period at the end of paragraph (2) and inserting ``; 
                and'', and by adding at the end the following new 
                paragraph:

[[Page 112 STAT. 734]]

            ``(3) in the case of a judgment pursuant to subsection 
        (b)(5) which orders a refund of any amount, from the date the 
        Secretary received such amount to the date of payment of such 
        judgment.''.
            (3) Suspension of running of statute of limitation.--
        Subsection (f ) of section 6503 is amended to read as follows:

    ``(f ) Wrongful Seizure of or Lien on Property of Third Party.--
            ``(1) Wrongful seizure.--The running of the period under 
        section 6502 shall be suspended for a period equal to the period 
        from the date property (including money) of a third party is 
        wrongfully seized or received by the Secretary to the date the 
        Secretary returns property pursuant to section 6343(b) or the 
        date on which a judgment secured pursuant to section 7426 with 
        respect to such property becomes final, and for 30 days 
        thereafter. The running of such period shall be suspended under 
        this paragraph only with respect to the amount of such 
        assessment equal to the amount of money or the value of specific 
        property returned.
            ``(2) Wrongful lien.--In the case of any assessment for 
        which a lien was made on any property, the running of the period 
        under section 6502 shall be suspended for a period equal to the 
        period beginning on the date any person becomes entitled to a 
        certificate under section 6325(b)(4) with respect to such 
        property and ending on the date which is 30 days after the 
        earlier of--
                    ``(A) the earliest date on which the Secretary no 
                longer holds any amount as a deposit or bond provided 
                under section 6325(b)(4) by reason of such deposit or 
                bond being used to satisfy the unpaid tax or being 
                refunded or released; or
                    ``(B) the date that the judgment secured under 
                section 7426(b)(5) becomes final.
        The running of such period shall be suspended under this 
        paragraph only with respect to the amount of such assessment 
        equal to the value of the interest of the United States in the 
        property plus interest, penalties, additions to the tax, and 
        additional amounts attributable thereto.''.

    (c) Effective Date.--The <<NOTE: 26 USC 6325 note.>> amendments made 
by this section shall take effect on the date of the enactment of this 
Act.

  Subtitle C--Relief for Innocent Spouses and for Taxpayers Unable To 
           Manage Their Financial Affairs Due to Disabilities

SEC. 3201. RELIEF FROM JOINT AND SEVERAL LIABILITY ON JOINT RETURN.

    (a) In General.--Subpart B of part II of subchapter A of chapter 61 
is amended by inserting after section 6014 the following new section:

``SEC. 6015. RELIEF FROM JOINT AND SEVERAL LIABILITY ON JOINT RETURN.

    ``(a) In General.--Notwithstanding section 6013(d)(3)--

[[Page 112 STAT. 735]]

            ``(1) an individual who has made a joint return may elect to 
        seek relief under the procedures prescribed under subsection 
        (b); and
            ``(2) if such individual is eligible to elect the 
        application of subsection (c), such individual may, in addition 
        to any election under paragraph (1), elect to limit such 
        individual's liability for any deficiency with respect to such 
        joint return in the manner prescribed under subsection (c).

Any determination under this section shall be made without regard to 
community property laws.
    ``(b) Procedures For Relief From Liability Applicable to All Joint 
Filers.--
            ``(1) In general.--Under procedures prescribed by the 
        Secretary, if--
                    ``(A) a joint return has been made for a taxable 
                year;
                    ``(B) on such return there is an understatement of 
                tax attributable to erroneous items of one individual 
                filing the joint return;
                    ``(C) the other individual filing the joint return 
                establishes that in signing the return he or she did not 
                know, and had no reason to know, that there was such 
                understatement;
                    ``(D) taking into account all the facts and 
                circumstances, it is inequitable to hold the other 
                individual liable for the deficiency in tax for such 
                taxable year attributable to such understatement; and
                    ``(E) <<NOTE: Deadline.>> the other individual 
                elects (in such form as the Secretary may prescribe) the 
                benefits of this subsection not later than the date 
                which is 2 years after the date the Secretary has begun 
                collection activities with respect to the individual 
                making the election,
        then the other individual shall be relieved of liability for tax 
        (including interest, penalties, and other amounts) for such 
        taxable year to the extent such liability is attributable to 
        such understatement.
            ``(2) Apportionment of relief.--If an individual who, but 
        for paragraph (1)(C), would be relieved of liability under 
        paragraph (1), establishes that in signing the return such 
        individual did not know, and had no reason to know, the extent 
        of such understatement, then such individual shall be relieved 
        of liability for tax (including interest, penalties, and other 
        amounts) for such taxable year to the extent that such liability 
        is attributable to the portion of such understatement of which 
        such individual did not know and had no reason to know.
            ``(3) Understatement.--For purposes of this subsection, the 
        term `understatement' has the meaning given to such term by 
        section 6662(d)(2)(A).

    ``(c) Procedures To Limit Liability for Taxpayers No Longer Married 
or Taxpayers Legally Separated or Not 
Living Together.--
            ``(1) In general.--Except as provided in this subsection, if 
        an individual who has made a joint return for any taxable year 
        elects the application of this subsection, the individual's 
        liability for any deficiency which is assessed with respect to 
        the return shall not exceed the portion of such deficiency 
        properly allocable to the individual under subsection (d).

[[Page 112 STAT. 736]]

            ``(2) Burden of proof.--Except as provided in subparagraph 
        (A)(ii) or (C) of paragraph (3), each individual who elects the 
        application of this subsection shall have the burden of proof 
        with respect to establishing the portion of any deficiency 
        allocable to such individual.
            ``(3) Election.--
                    ``(A) Individuals eligible to make election.--
                          ``(i) In general.--An individual shall only be 
                      eligible to elect the application of this 
                      subsection if--
                                    ``(I) at the time such election is 
                                filed, such individual is no longer 
                                married to, or is legally separated 
                                from, the individual with whom such 
                                individual filed the joint return to 
                                which the election relates; or
                                    ``(II) such individual was not a 
                                member of the same household as the 
                                individual with whom such joint return 
                                was filed at any time during the 12-
                                month period ending on the date such 
                                election is filed.
                          ``(ii) Certain taxpayers ineligible to 
                      elect.--If the Secretary demonstrates that assets 
                      were transferred between individuals filing a 
                      joint return as part of a fraudulent scheme by 
                      such individuals, an election under this 
                      subsection by either individual shall be invalid 
                      (and section 6013(d)(3) shall apply to the joint 
                      return).
                    ``(B) Time for election.--
                An <<NOTE: Deadline.>> election under this subsection 
                for any taxable year shall be made not later than 2 
                years after the date on which the Secretary has begun 
                collection activities with respect to the individual 
                making the election.
                    ``(C) Election not valid with respect to certain 
                deficiencies.--If the Secretary demonstrates that an 
                individual making an election under this subsection had 
                actual knowledge, at the time such individual signed the 
                return, of any item giving rise to a deficiency (or 
                portion thereof) which is not allocable to such 
                individual under subsection (d), such election shall not 
                apply to such deficiency (or portion). This subparagraph 
                shall not apply where the individual with actual 
                knowledge establishes that such individual signed the 
                return under duress.
            ``(4) Liability increased by reason of transfers of property 
        to avoid tax.--
                    ``(A) In general.--Notwithstanding any other 
                provision of this subsection, the portion of the 
                deficiency for which the individual electing the 
                application of this subsection is liable (without regard 
                to this paragraph) shall be increased by the value of 
                any disqualified asset transferred to the individual.
                    ``(B) Disqualified asset.--For purposes of this 
                paragraph--
                          ``(i) In general.--The term `disqualified 
                      asset' means any property or right to property 
                      transferred to an individual making the election 
                      under this subsection with respect to a joint 
                      return by the other

[[Page 112 STAT. 737]]

                       purpose of the transfer was the avoidance of tax 
                      or payment of tax.
                          ``(ii) Presumption.--
                                    ``(I) In general.--For purposes of 
                                clause (i), except as provided in 
                                subclause (II), any transfer which is 
                                made after the date which is 1 year 
                                before the date on which the first 
                                letter of proposed deficiency which 
                                allows the taxpayer an opportunity for 
                                administrative review in the Internal 
                                Revenue Service Office of Appeals is 
                                sent shall be presumed to have as its 
                                principal purpose the avoidance of tax 
                                or payment of tax.
                                    ``(II) Exceptions.--Subclause (I) 
                                shall not apply to any transfer pursuant 
                                to a decree of divorce or separate 
                                maintenance or a written instrument 
                                incident to such a decree or to any 
                                transfer which an individual establishes 
                                did not have as its principal purpose 
                                the avoidance of tax or payment of tax.

    ``(d) Allocation of Deficiency.--For purposes of sub-
section (c)--
            ``(1) In general.--The portion of any deficiency on a joint 
        return allocated to an individual shall be the amount which 
        bears the same ratio to such deficiency as the net amount of 
        items taken into account in computing the deficiency and 
        allocable to the individual under paragraph (3) bears to the net 
        amount of all items taken into account in computing the 
        deficiency.
            ``(2) Separate treatment of certain items.--If a deficiency 
        (or portion thereof) is attributable to--
                    ``(A) the disallowance of a credit; or
                    ``(B) any tax (other than tax imposed by section 1 
                or 55) required to be included with the joint return;
        and such item is allocated to one individual under paragraph 
        (3), such deficiency (or portion) shall be allocated to such 
        individual. Any such item shall not be taken into account under 
        paragraph (1).
            ``(3) Allocation of items giving rise to the deficiency.--
        For purposes of this subsection--
                    ``(A) In general.--Except as provided in paragraphs 
                (4) and (5), any item giving rise to a deficiency on a 
                joint return shall be allocated to individuals filing 
                the return in the same manner as it would have been 
                allocated if the individuals had filed separate returns 
                for the taxable year.
                     <<NOTE: Regulations.>> ``(B) Exception where other 
                spouse benefits.--Under rules prescribed by the 
                Secretary, an item otherwise allocable to an individual 
                under subparagraph (A) shall be allocated to the other 
                individual filing the joint return to the extent the 
                item gave rise to a tax benefit on the joint return to 
                the other individual.
                    ``(C) Exception for fraud.--The Secretary may 
                provide for an allocation of any item in a manner not 
                prescribed by subparagraph (A) if the Secretary 
                establishes that such allocation is appropriate due to 
                fraud of one or both individuals.

[[Page 112 STAT. 738]]

            ``(4) Limitations on separate returns disregarded.--If an 
        item of deduction or credit is disallowed in its entirety solely 
        because a separate return is filed, such disallowance shall be 
        disregarded and the item shall be computed as if a joint return 
        had been filed and then allocated between the spouses 
        appropriately. <<NOTE: Applicability.>> A similar rule shall 
        apply for purposes of section 86.
            ``(5) Child's liability.--If the liability of a child of a 
        taxpayer is included on a joint return, such liability shall be 
        disregarded in computing the separate liability of either spouse 
        and such liability shall be allocated appropriately between the 
        spouses.

    ``(e) Petition for Review by Tax Court.--
            ``(1) In general.--In the case of an individual who elects 
        to have subsection (b) or (c) apply--
                    ``(A) In general.--The individual may petition the 
                Tax Court (and the Tax Court shall have jurisdiction) to 
                determine the appropriate relief available to the 
                individual under this section if such petition is filed 
                during the 90-day period beginning on the date on which 
                the Secretary mails by certified or registered mail a 
                notice to such individual of the Secretary's 
                determination of relief available to the individual. 
                Notwithstanding the preceding sentence, an individual 
                may file such petition at any time after the date which 
                is 6 months after the date such election is filed with 
                the Secretary and before the close of such 90-day 
                period.
                    ``(B) Restrictions applicable to collection of 
                assessment.--
                          ``(i) In general.--Except as otherwise 
                      provided in section 6851 or 6861, no levy or 
                      proceeding in court shall be made, begun, or 
                      prosecuted against the individual making an 
                      election under subsection (b) or (c) for 
                      collection of any assessment to which such 
                      election relates until the expiration of the 90-
                      day period described in subparagraph (A), or, if a 
                      petition has been filed with the Tax Court, until 
                      the decision of the Tax Court has become 
                      final. <<NOTE: Applicability.>> Rules similar to 
                      the rules of section 7485 shall apply with respect 
                      to the collection of such assessment.
                          ``(ii) Authority to enjoin collection 
                      actions.--Notwithstanding the provisions of 
                      section 7421(a), the beginning of such levy or 
                      proceeding during the time the prohibition under 
                      clause (i) is in force may be enjoined by a 
                      proceeding in the proper court, including the Tax 
                      Court. The Tax Court shall have no jurisdiction 
                      under this subparagraph to enjoin any action or 
                      proceeding unless a timely petition has been filed 
                      under subparagraph (A) and then only in respect of 
                      the amount of the assessment to which the election 
                      under subsection (b) or (c) relates.
            ``(2) Suspension of running of period of limitations.--The 
        running of the period of limitations in section 6502 on the 
        collection of the assessment to which the petition under 
        paragraph (1)(A) relates shall be suspended for the period 
        during which the Secretary is prohibited by paragraph (1)(B) 
        from

[[Page 112 STAT. 739]]

        collecting by levy or a proceeding in court and for 60 days 
        thereafter.
            ``(3) Applicable rules.--
                    ``(A) Allowance of credit or refund.--Except as 
                provided in subparagraph (B), notwithstanding any other 
                law or rule of law (other than section 6512(b), 7121, or 
                7122), credit or refund shall be allowed or made to the 
                extent attributable to the application of this section.
                    ``(B) Res judicata.--In the case of any election 
                under subsection (b) or (c), if a decision of the Tax 
                Court in any prior proceeding for the same taxable year 
                has become final, such decision shall be conclusive 
                except with respect to the qualification of the 
                individual for relief which was not an issue in such 
                proceeding. The exception contained in the preceding 
                sentence shall not apply if the Tax Court determines 
                that the individual participated meaningfully in such 
                prior proceeding.
                    ``(C) Limitation on tax court jurisdiction.--If a 
                suit for refund is begun by either individual filing the 
                joint return pursuant to section 6532--
                          ``(i) the Tax Court shall lose jurisdiction of 
                      the individual's action under this section to 
                      whatever extent jurisdiction is acquired by the 
                      district court or the United States Court of 
                      Federal Claims over the taxable years that are the 
                      subject of the suit for refund; and
                          ``(ii) the court acquiring jurisdiction shall 
                      have jurisdiction over the petition filed under 
                      this subsection.
            ``(4) Notice <<NOTE: Regulations.>> to other spouse.--The 
        Tax Court shall establish rules which provide the individual 
        filing a joint return but not making the election under 
        subsection (b) or (c) with adequate notice and an opportunity to 
        become a party to a proceeding under either such subsection.

    ``(f ) Equitable Relief.--Under procedures prescribed by the 
Secretary, if--
            ``(1) taking into account all the facts and circumstances, 
        it is inequitable to hold the individual liable for any unpaid 
        tax or any deficiency (or any portion of either); and
            ``(2) relief is not available to such individual under 
        subsection (b) or (c),

the Secretary may relieve such individual of such liability.
    ``(g) Regulations.--The Secretary shall prescribe such regulations 
as are necessary to carry out the provisions of this section, 
including--
            ``(1) regulations providing methods for allocation of items 
        other than the methods under subsection (d)(3); and
            ``(2) regulations providing the opportunity for an 
        individual to have notice of, and an opportunity to participate 
        in, any administrative proceeding with respect to an election 
        made under subsection (b) or (c) by the other individual filing 
        the joint return.''.

    (b) Equitable Relief for Individuals Not Filing Joint Return.--
Section 66(c) (relating to spouse relieved of liability in certain other 
cases) is amended by adding at the end the following new 
sentence: <<NOTE: Procedures.>> ``Under procedures prescribed by the 
Secretary, if, taking into account all the facts and circumstances, it 
is inequitable

[[Page 112 STAT. 740]]

to hold the individual liable for any unpaid tax or any deficiency (or 
any portion of either) attributable to any item for which relief is not 
available under the preceding sentence, the Secretary may relieve such 
individual of such liability.''.

     <<NOTE: Deadline. 26 USC 6015 note.>> (c) Separate Form for 
Applying for Spousal Relief.--Not later than 180 days after the date of 
the enactment of this Act, the Secretary of the Treasury shall develop a 
separate form with instructions for use by taxpayers in applying for 
relief under section 6015(a) of the Internal Revenue Code of 1986, as 
added by this section.

     <<NOTE: 26 USC 6013 note.>> (d) Separate Notice to Each Filer.--The 
Secretary of the Treasury shall, wherever practicable, send any notice 
relating to a joint return under section 6013 of the Internal Revenue 
Code of 1986 separately to each individual filing the joint return.

    (e) Conforming Amendments.--
            (1) Section 6013 is amended by striking subsection (e).
            (2) Subparagraph (A) of section 6230(c)(5) is amended by 
        striking ``section 6013(e)'' and inserting ``section 6015''.
            (3) Section 7421(a) is amended by inserting ``6015(d),'' 
        after ``sections''.

    (f ) Clerical Amendment.--The table of sections for subpart B of 
part II of subchapter A of chapter 61 is amended by inserting after the 
item relating to section 6014 the following new item:

                ``Sec. 6015. Relief from joint and several liability on 
                                joint return.''.

    (g) Effective <<NOTE: 26 USC 6015 note.>> Dates.--
            (1) In general.--Except <<NOTE: Applicability.>> as provided 
        in paragraph (2), the amendments made by this section shall 
        apply to any liability for tax arising after the date of the 
        enactment of this Act and any liability for tax arising on or 
        before such date but remaining unpaid as of such date.
            (2) 2-year period.--The 2-year period under subsection 
        (b)(1)(E) or (c)(3)(B) of section 6015 of the Internal Revenue 
        Code of 1986 shall not expire before the date which is 2 years 
        after the date of the first collection activity after the date 
        of the enactment of this Act.

SEC. 3202. SUSPENSION OF STATUTE OF LIMITATIONS ON FILING REFUND CLAIMS 
            DURING PERIODS OF DISABILITY.

    (a) In General.--Section 6511 (relating to limitations on credit or 
refund) is amended by redesignating subsection (h) as subsection (i) and 
by inserting after subsection (g) the following new subsection:
    ``(h) Running of Periods of Limitation Suspended While Taxpayer Is 
Unable To Manage Financial Affairs Due to Disability.--
            ``(1) In general.--In the case of an individual, the running 
        of the periods specified in subsections (a), (b), and (c) shall 
        be suspended during any period of such individual's life that 
        such individual is financially disabled.
            ``(2) Financially disabled.--
                    ``(A) In general.--For purposes of paragraph (1), an 
                individual is financially disabled if such individual is 
                unable to manage his financial affairs by reason of a 
                medically determinable physical or mental impairment of 
                the individual which can be expected to result in death 
                or which has lasted or can be expected to last for a 
                continuous period of not less than 12 months. An 
                individual shall not be considered to have such an 
                impairment unless proof

[[Page 112 STAT. 741]]

                of the existence thereof is furnished in such form and 
                manner as the Secretary may require.
                    ``(B) Exception where individual has guardian, 
                etc.--An individual shall not be treated as financially 
                disabled during any period that such individual's spouse 
                or any other person is authorized to act on behalf of 
                such individual in financial matters.''.

     <<NOTE: Applicability. 26 USC 6511 note.>> (b) Effective Date.--The 
amendment made by subsection (a) shall apply to periods of disability 
before, on, or after the date of the enactment of this Act but shall not 
apply to any claim for credit or refund which (without regard to such 
amendment) is barred by the operation of any law or rule of law 
(including res judicata) as of the date of the enactment of this Act.

        Subtitle D--Provisions Relating to Interest and Penalties

SEC. 3301. ELIMINATION OF INTEREST RATE DIFFERENTIAL ON OVERLAPPING 
            PERIODS OF INTEREST ON TAX OVERPAYMENTS AND UNDERPAYMENTS.

    (a) In General.--Section 6621 (relating to determination of rate of 
interest) is amended by adding at the end the following new subsection:
    ``(d) Elimination of Interest on Overlapping Periods of Tax 
Overpayments and Underpayments.--To the extent that, for any period, 
interest is payable under subchapter A and allowable under subchapter B 
on equivalent underpayments and overpayments by the same taxpayer of tax 
imposed by this title, the net rate of interest under this section on 
such amounts shall be zero for such period.''.
    (b) Conforming Amendment.--Subsection (f ) of section 6601 (relating 
to satisfaction by credits) is amended by adding at the end the 
following new sentence: ``The preceding sentence shall not apply to the 
extent that section 6621(d) applies.''.
     <<NOTE: Applicability. 26 USC 6601 note.>> (c) Effective Dates.--
            (1) In general.--Except as provided under paragraph (2), the 
        amendments made by this section shall apply to interest for 
        periods beginning after the date of the enactment of this Act.
            (2) Special rule.--The amendments made by this section shall 
        apply to interest for periods beginning before the date of the 
        enactment of this Act if the taxpayer--
                    (A) reasonably identifies and establishes periods of 
                such tax overpayments and underpayments for which the 
                zero rate applies; and
                    (B) <<NOTE: Deadline.>> not later than December 31, 
                1999, requests the Secretary of the Treasury to apply 
                section 6621(d) of the Internal Revenue Code of 1986, as 
                added by subsection (a), to such periods.

SEC. 3302. INCREASE IN OVERPAYMENT RATE PAYABLE TO TAXPAYERS OTHER THAN 
            CORPORATIONS.

    (a) In General.--Subparagraph (B) of section 6621(a)(1) 
(defining overpayment rate) is amended to read as follows:
                    ``(B) 3 percentage points (2 percentage points in 
                the case of a corporation).''.

[[Page 112 STAT. 742]]

     <<NOTE: Applicability. 26 USC 6621 note.>> (b) Effective Date.--The 
amendment made by this section shall apply to interest for the second 
and succeeding calendar quarters beginning after the date of the 
enactment of this Act.

SEC. 3303. MITIGATION OF PENALTY ON INDIVIDUAL'S FAILURE TO PAY FOR 
            MONTHS DURING PERIOD OF INSTALLMENT AGREEMENT.

    (a) In General.--Section 6651 (relating to failure to file tax 
return or to pay tax) is amended by adding at the end the following new 
subsection:
    ``(h) Limitation on Penalty on Individual's Failure To Pay for 
Months During Period of Installment Agreement.--In the case of an 
individual who files a return of tax on or before the due date for the 
return (including extensions), paragraphs (2) and (3) of subsection (a) 
shall each be applied by substituting `0.25' for `0.5' each place it 
appears for purposes of determining the addition to tax for any month 
during which an installment agreement under section 6159 is in effect 
for the payment of such tax.''.
    (b) Effective Date.--The <<NOTE: Applicability. 26 USC 6651 
note.>> amendment made by this section shall apply for purposes of 
determining additions to the tax for months beginning after December 31, 
1999.

SEC. 3304. MITIGATION OF FAILURE TO DEPOSIT PENALTY.

    (a) Taxpayer May Designate Periods to Which Deposits Apply.--Section 
6656 (relating to underpayment of deposits) is amended by adding at the 
end the following new subsection:
    ``(e) Designation of Periods to Which Deposits Apply.--
            ``(1) In general.--A person may, with respect to any deposit 
        of tax to be reported on such person's return for a specified 
        tax period, designate the period or periods within such 
        specified tax period to which the deposit is to be applied for 
        purposes of this section.
            ``(2) Time for making designation.--A person may make a 
        designation under paragraph (1) only during the 90-day period 
        beginning on the date of a notice that a penalty under 
        subsection (a) has been imposed for the specified tax period to 
        which the deposit relates.''.

    (b) Expansion of Exemption for First-Time Deposits.--
            (1) In general.--Paragraph (2) of section 6656(c) (relating 
        to exemption for first-time depositors of employment taxes) is 
        amended to read as follows:
            ``(2) such failure--
                    ``(A) occurs during the first quarter that such 
                person was required to deposit any employment tax; or
                    ``(B) if such person is required to change the 
                frequency of deposits of any employment tax, relates to 
                the first deposit to which such change applies, and''.

    (c) Periods Apply to Current Liabilities Unless Designated 
Otherwise.--Paragraph (1) of section 6656(e) (as added by subsection (a) 
of this section) is amended to read as follows:
    ``(e) Designation of Periods to Which Deposits Apply.--
            ``(1) In general.--A deposit made under this section shall 
        be applied to the most recent period or periods within the 
        specified tax period to which the deposit relates, unless the 
        person making such deposit designates a different period or 
        periods to which such deposit is to be applied.''.

     <<NOTE: Applicability. 26 USC 6656 note.>> (d) Effective Date.--

[[Page 112 STAT. 743]]

            (1) In general.--The amendments made by this section shall 
        apply to deposits required to be made after the 180th day after 
        the date of the enactment of this Act.
            (2) Application to current liabilities.--The amendment made 
        by subsection (c) shall apply to deposits required to be made 
        after December 31, 2001.

SEC. 3305. SUSPENSION OF INTEREST AND CERTAIN PENALTIES WHERE SECRETARY 
            FAILS TO CONTACT INDIVIDUAL TAXPAYER.

    (a) In General.--Section 6404 (relating to abatements) is amended by 
redesignating subsection (g) as subsection (h) and by inserting after 
subsection (f ) the following new subsection:
    ``(g) Suspension of Interest and Certain Penalties Where Secretary 
Fails To Contact Taxpayer.--
            ``(1) Suspension.--
                    ``(A) In general.--In the case of an individual who 
                files a return of tax imposed by subtitle A for a 
                taxable year on or before the due date for the return 
                (including extensions), if the Secretary does not 
                provide a notice to the taxpayer specifically stating 
                the taxpayer's liability and the basis for the liability 
                before the close of the 1-year period (18-month period 
                in the case of taxable years beginning before January 1, 
                2004) beginning on the later of--
                          ``(i) the date on which the return is filed; 
                      or
                          ``(ii) the due date of the return without 
                      regard to extensions,
                the Secretary shall suspend the imposition of any 
                interest, penalty, addition to tax, or additional amount 
                with respect to any failure relating to the return which 
                is computed by reference to the period of time the 
                failure continues to exist and which is properly 
                allocable to the suspension period.
                    ``(B) Separate application.--This paragraph shall be 
                applied separately with respect to each item or 
                adjustment.
            ``(2) Exceptions.--Paragraph (1) shall not apply to--
                    ``(A) any penalty imposed by section 6651;
                    ``(B) any interest, penalty, addition to tax, or 
                additional amount in a case involving fraud;
                    ``(C) any interest, penalty, addition to tax, or 
                additional amount with respect to any tax liability 
                shown on the return; or
                    ``(D) any criminal penalty.
            ``(3) Suspension period.--For purposes of this subsection, 
        the term `suspension period' means the period--
                    ``(A) beginning on the day after the close of the 1-
                year period (18-month period in the case of taxable 
                years beginning before January 1, 2004) under paragraph 
                (1); and
                    ``(B) ending on the date which is 21 days after the 
                date on which notice described in paragraph (1)(A) is 
                provided by the Secretary.''.

    (b) Effective Date.--The <<NOTE: Applicability. 26 USC 6404 
note.>> amendments made by this section shall apply to taxable years 
ending after the date of the enactment of this Act.

[[Page 112 STAT. 744]]

SEC. 3306. PROCEDURAL REQUIREMENTS FOR IMPOSITION OF 
            PENALTIES AND ADDITIONS TO TAX.

    (a) In General.--Chapter 68 (relating to additions to the tax, 
additional amounts, and assessable penalties) is amended by adding at 
the end the following new subchapter:

                 ``Subchapter C--Procedural Requirements

                ``Sec. 6751. Procedural requirements.

``SEC. 6751. PROCEDURAL REQUIREMENTS.

    ``(a) Computation of Penalty Included in Notice.--The 
Secretary shall include with each notice of penalty under this title 
information with respect to the name of the penalty, the section of this 
title under which the penalty is imposed, and a computation of the 
penalty.
    ``(b) Approval of Assessment.--
            ``(1) In general.--No penalty under this title shall be 
        assessed unless the initial determination of such assessment is 
        personally approved (in writing) by the immediate supervisor of 
        the individual making such determination or such higher level 
        official as the Secretary may designate.
            ``(2) Exceptions.--Paragraph (1) shall not apply to--
                    ``(A) any addition to tax under section 6651, 6654, 
                or 6655; or
                    ``(B) any other penalty automatically calculated 
                through electronic means.

    ``(c) Penalties.--For purposes of this section, the term `penalty' 
includes any addition to tax or any additional amount.''.
    (b) Conforming Amendment.--The table of subchapters for chapter 68 
is amended by adding at the end the following new item:
                ``Subchapter C. Procedural requirements.''.

    (c) Effective Date.--The <<NOTE: Applicability. 26 USC 6751 
note.>> amendments made by this section shall apply to notices issued, 
and penalties assessed, after December 31, 2000.

SEC. 3307. PERSONAL DELIVERY OF NOTICE OF PENALTY UNDER 
            SECTION 6672.

    (a) In General.--Paragraph (1) of section 6672(b) (relating to 
failure to collect and pay over tax, or attempt to evade or defeat tax) 
is amended by inserting ``or in person'' after ``section 6212(b)''.
    (b) Conforming Amendments.--
            (1) Paragraph (2) of section 6672(b) is amended by inserting 
        ``(or, in the case of such a notice delivered in person, such 
        delivery)'' after ``paragraph (1)''.
            (2) Paragraph (3) of section 6672(b) is amended by inserting 
        ``or delivered in person'' after ``mailed'' each place it 
        appears.

    (c) Effective Date.--The <<NOTE: 26 USC 6672 note.>> amendments made 
by this section shall take effect on the date of the enactment of this 
Act.

SEC. 3308. NOTICE OF INTEREST CHARGES.

    (a) In General.--Chapter 67 (relating to interest) is amended by 
adding at the end the following new subchapter:

[[Page 112 STAT. 745]]

                   ``Subchapter D--Notice requirements

                ``Sec. 6631. Notice requirements.

``SEC. 6631. NOTICE REQUIREMENTS.

    ``The Secretary shall include with each notice to an individual 
taxpayer which includes an amount of interest required to be paid by 
such taxpayer under this title information with respect to the section 
of this title under which the interest is imposed and a computation of 
the interest.''.
    (b) Conforming Amendment.--The table of subchapters for chapter 67 
is amended by adding at the end the following new item:
                ``Subchapter D. Notice requirements.''.

    (c) Effective Date.--The <<NOTE: Applicability. 26 USC 6631 
note.>> amendments made by this section shall apply to notices issued 
after December 31, 2000.

SEC. 3309. ABATEMENT OF INTEREST ON UNDERPAYMENTS BY 
            TAXPAYERS IN PRESIDENTIALLY DECLARED DISASTER AREAS.

    (a) In General.--Section 6404 (relating to abatements), as amended 
by section 3305, is amended by redesignating subsection (h) as 
subsection (i) and by inserting after subsection (g) the following new 
subsection:
    ``(h) Abatement of Interest on Underpayments by 
Taxpayers in Presidentially Declared Disaster Areas.--
            ``(1) In general.--If the Secretary extends for any period 
        the time for filing income tax returns under section 6081 and 
        the time for paying income tax with respect to such returns 
        under section 6161 for any taxpayer located in a Presidentially 
        declared disaster area, the Secretary shall abate for such 
        period the assessment of any interest prescribed under section 
        6601 on such income tax.
            ``(2) Presidentially declared disaster area.--For 
        purposes of paragraph (1), the term `Presidentially declared 
        disaster area' means, with respect to any taxpayer, any area 
        which the President has determined warrants assistance by the 
        Federal Government under the Disaster Relief and Emergency 
        Assistance Act.''.

    (b) Effective Date.--The <<NOTE: Applicability. 26 USC 6404 
note.>> amendment made by this section shall apply to disasters declared 
after December 31, 1997, with respect to taxable years beginning after 
December 31, 1997.

    (c) Emergency <<NOTE: 26 USC 6404 note.>> Designation.--
            (1) For the purposes of section 252(e) of the Balanced 
        Budget and Emergency Deficit Control Act, Congress designates 
        the provisions of this section as an emergency requirement.
            (2) The amendments made by subsections (a) and (b) of this 
        section shall only take effect upon the transmittal by the 
        President to the Congress of a message designating the 
        provisions of subsections (a) and (b) as an emergency 
        requirement pursuant to section 252(e) of the Balanced Budget 
        and Emergency Deficit Control Act.

[[Page 112 STAT. 746]]

  Subtitle E--Protections for Taxpayers Subject to Audit or Collection 
                               Activities

                           PART I--DUE PROCESS

SEC. 3401. DUE PROCESS IN INTERNAL REVENUE SERVICE COLLECTION ACTIONS.

    (a) Notice and Opportunity for Hearing Upon Filing of Notice of 
Lien.--Subchapter C of chapter 64 (relating to lien for taxes) is 
amended by inserting before the table of sections the following:

                ``Part I.  Due process for liens.
                ``Part II.  Liens.

                     ``PART I--DUE PROCESS FOR LIENS

                ``Sec. 6320. Notice and opportunity for hearing upon 
                                filing of notice of lien.

``SEC. 6320. NOTICE AND OPPORTUNITY FOR HEARING UPON FILING OF NOTICE OF 
            LIEN.

    ``(a) Requirement of Notice.--
            ``(1) In general.--The Secretary shall notify in writing the 
        person described in section 6321 of the filing of a notice of 
        lien under section 6323.
            ``(2) Time and method for notice.--The notice required under 
        paragraph (1) shall be--
                    ``(A) given in person;
                    ``(B) left at the dwelling or usual place of 
                business of such person; or
                    ``(C) sent by certified or registered mail to such 
                person's last known address,
        not more than 5 business days after the day of the filing of the 
        notice of lien.
            ``(3) Information included with notice.--The notice required 
        under paragraph (1) shall include in simple and nontechnical 
        terms--
                    ``(A) the amount of unpaid tax;
                    ``(B) the right of the person to request a hearing 
                during the 30-day period beginning on the day after the 
                5-day period described in paragraph (2);
                    ``(C) the administrative appeals available to the 
                taxpayer with respect to such lien and the procedures 
                relating to such appeals; and
                    ``(D) the provisions of this title and procedures 
                relating to the release of liens on property.

    ``(b) Right to Fair Hearing.--
            ``(1) In general.--If the person requests a hearing under 
        subsection (a)(3)(B), such hearing shall be held by the Internal 
        Revenue Service Office of Appeals.
            ``(2) One hearing per period.--A person shall be entitled to 
        only one hearing under this section with respect to the taxable 
        period to which the unpaid tax specified in subsection (a)(3)(A) 
        relates.
            ``(3) Impartial officer.--The hearing under this subsection 
        shall be conducted by an officer or employee who has

[[Page 112 STAT. 747]]

        had no prior involvement with respect to the unpaid tax 
        specified in subsection (a)(3)(A) before the first hearing under 
        this section or section 6330. A taxpayer may waive the 
        requirement of this paragraph.
            ``(4) Coordination with section 6330.--To the extent 
        practicable, a hearing under this section shall be held in 
        conjunction with a hearing under section 6330.

    ``(c) Conduct of Hearing; <<NOTE: Applicability.>> Review; 
Suspensions.--For purposes of this section, subsections (c), (d) (other 
than paragraph (2)(B) thereof), and (e) of section 6330 shall apply.

                           ``PART II--LIENS''.

    (b) Notice and Opportunity for Hearing Before Levy.--Subchapter D of 
chapter 64 (relating to seizure of property for collection of taxes) is 
amended by inserting before the table of sections the following:

                ``Part I.  Due process for collections.
                ``Part II.  Levy.

                  ``PART I--DUE PROCESS FOR COLLECTIONS

                ``Sec. 6330. Notice and opportunity for hearing before 
                                levy.

``SEC. 6330. NOTICE AND OPPORTUNITY FOR HEARING BEFORE LEVY.

    ``(a) Requirement of Notice Before Levy.--
            ``(1) In general.--No levy may be made on any property or 
        right to property of any person unless the Secretary has 
        notified such person in writing of their right to a hearing 
        under this section before such levy is made. Such notice shall 
        be required only once for the taxable period to which the unpaid 
        tax specified in paragraph (3)(A) relates.
            ``(2) Time and method for notice.--The notice required under 
        paragraph (1) shall be--
                    ``(A) given in person;
                    ``(B) left at the dwelling or usual place of 
                business of such person; or
                    ``(C) sent by certified or registered mail, return 
                receipt requested, to such person's last known address;
        not less than 30 days before the day of the first levy with 
        respect to the amount of the unpaid tax for the taxable period.
            ``(3) Information included with notice.--The notice required 
        under paragraph (1) shall include in simple and nontechnical 
        terms--
                    ``(A) the amount of unpaid tax;
                    ``(B) the right of the person to request a hearing 
                during the 30-day period under paragraph (2); and
                    ``(C) the proposed action by the Secretary and the 
                rights of the person with respect to such action, 
                including a brief statement which sets forth--
                          ``(i) the provisions of this title relating to 
                      levy and sale of property;
                          ``(ii) the procedures applicable to the levy 
                      and sale of property under this title;
                          ``(iii) the administrative appeals available 
                      to the taxpayer with respect to such levy and sale 
                      and the procedures relating to such appeals;

[[Page 112 STAT. 748]]

                          ``(iv) the alternatives available to taxpayers 
                      which could prevent levy on property (including 
                      installment agreements under section 6159); and
                          ``(v) the provisions of this title and 
                      procedures relating to redemption of property and 
                      release of liens on property.

    ``(b) Right to Fair Hearing.--
            ``(1) In general.--If the person requests a hearing under 
        subsection (a)(3)(B), such hearing shall be held by the Internal 
        Revenue Service Office of Appeals.
            ``(2) One hearing per period.--A person shall be entitled to 
        only one hearing under this section with respect to the taxable 
        period to which the unpaid tax specified in subsection (a)(3)(A) 
        relates.
            ``(3) Impartial officer.--The hearing under this subsection 
        shall be conducted by an officer or employee who has had no 
        prior involvement with respect to the unpaid tax specified in 
        subsection (a)(3)(A) before the first hearing under this section 
        or section 6320. A taxpayer may waive the requirement of this 
        paragraph.

    ``(c) Matters Considered at Hearing.--In the case of any hearing 
conducted under this section--
            ``(1) Requirement of investigation.--The appeals officer 
        shall at the hearing obtain verification from the Secretary that 
        the requirements of any applicable law or administrative 
        procedure have been met.
            ``(2) Issues at hearing.--
                    ``(A) In general.--The person may raise at the 
                hearing any relevant issue relating to the unpaid tax or 
                the proposed levy, including--
                          ``(i) appropriate spousal defenses;
                          ``(ii) challenges to the appropriateness of 
                      collection actions; and
                          ``(iii) offers of collection alternatives, 
                      which may include the posting of a bond, the 
                      substitution of other assets, an installment 
                      agreement, or an offer-in-compromise.
                    ``(B) Underlying liability.--The person may also 
                raise at the hearing challenges to the existence or 
                amount of the underlying tax liability for any tax 
                period if the person did not receive any statutory 
                notice of deficiency for such tax liability or did not 
                otherwise have an opportunity to dispute such tax 
                liability.
            ``(3) Basis for the determination.--The determination by an 
        appeals officer under this subsection shall take into 
        consideration--
                    ``(A) the verification presented under paragraph 
                (1);
                    ``(B) the issues raised under paragraph (2); and
                    ``(C) whether any proposed collection action 
                balances the need for the efficient collection of taxes 
                with the legitimate concern of the person that any 
                collection action be no more intrusive than necessary.
            ``(4) Certain issues precluded.--An issue may not be raised 
        at the hearing if--
                    ``(A) the issue was raised and considered at a 
                previous hearing under section 6320 or in any other 
                previous administrative or judicial proceeding; and

[[Page 112 STAT. 749]]

                    ``(B) the person seeking to raise the issue 
                participated meaningfully in such hearing or proceeding.
        This paragraph shall not apply to any issue with respect to 
        which subsection (d)(2)(B) applies.

    ``(d) Proceeding After Hearing.--
            ``(1) Judicial review of determination.--The person may, 
        within 30 days of a determination under this section, appeal 
        such determination--
                    ``(A) to the Tax Court (and the Tax Court shall have 
                jurisdiction to hear such matter); or
                    ``(B) if the Tax Court does not have jurisdiction of 
                the underlying tax liability, to a district court of the 
                United States.
        If a court determines that the appeal was to an incorrect court, 
        a person shall have 30 days after the court determination to 
        file such appeal with the correct court.
            ``(2) Jurisdiction retained at irs office of appeals.--The 
        Internal Revenue Service Office of Appeals shall retain 
        jurisdiction with respect to any determination made under this 
        section, including subsequent hearings requested by the person 
        who requested the original hearing on issues regarding--
                    ``(A) collection actions taken or proposed with 
                respect to such determination; and
                    ``(B) after the person has exhausted all 
                administrative remedies, a change in circumstances with 
                respect to such person which affects such determination.

    ``(e) Suspension of Collections and Statute of Limitations.--
            ``(1) In general.--Except as provided in paragraph (2), if a 
        hearing is requested under subsection (a)(3)(B), the levy 
        actions which are the subject of the requested hearing and the 
        running of any period of limitations under section 6502 
        (relating to collection after assessment), section 6531 
        (relating to criminal prosecutions), or section 6532 (relating 
        to other suits) shall be suspended for the period during which 
        such hearing, and appeals therein, are pending. In no event 
        shall any such period expire before the 90th day after the day 
        on which there is a final determination in such hearing.
            ``(2) Levy upon appeal.--Paragraph (1) shall not apply to a 
        levy action while an appeal is pending if the underlying tax 
        liability is not at issue in the appeal and the court determines 
        that the Secretary has shown good cause not to suspend the levy.

    ``(f ) Jeopardy and State Refund Collection.--If--
            ``(1) the Secretary has made a finding under the last 
        sentence of section 6331(a) that the collection of tax is in 
        jeopardy; or
            ``(2) the Secretary has served a levy on a State to collect 
        a Federal tax liability from a State tax refund,

this section shall not apply, except that the taxpayer shall be given 
the opportunity for the hearing described in this section within a 
reasonable period of time after the levy.

                           ``PART II--LEVY''.

    (c) Review by Special Trial Judges Allowed.--

[[Page 112 STAT. 750]]

            (1) In general.--Section 7443(b) (relating to proceedings 
        which may be assigned to special trial judges) is amended by 
        striking ``and'' at the end of paragraph (3), by redesignating 
        paragraph (4) as paragraph (5), and by inserting after paragraph 
        (3) the following new paragraph:
            ``(4) any proceeding under section 6320 or 6330, and''.
            (2) Authority to make decisions.--Section 7443(c) (relating 
        to authority to make court decisions) is amended by striking 
        ``or (3)'' and inserting ``(3), or (4)''.

    (d) Effective Date.--The <<NOTE: Applicability. 26 USC 6320 
note.>> amendments made by this section shall apply to collection 
actions initiated after the date which is 180 days after the date of the 
enactment of this Act.

                     PART II--EXAMINATION ACTIVITIES

SEC. 3411. CONFIDENTIALITY PRIVILEGES RELATING TO TAXPAYER 
            COMMUNICATIONS.

    (a) In General.--Chapter 77 (relating to miscellaneous provisions) 
is amended by adding at the end the following new section:

``SEC. 7525. CONFIDENTIALITY PRIVILEGES RELATING TO TAXPAYER 
            COMMUNICATIONS.

    ``(a) Uniform Application to Taxpayer Communications With Federally 
Authorized Practitioners.--
            ``(1) General rule.--With respect to tax advice, the same 
        common law protections of confidentiality which apply to a 
        communication between a taxpayer and an attorney shall also 
        apply to a communication between a taxpayer and any federally 
        authorized tax practitioner to the extent the communication 
        would be considered a privileged communication if it were 
        between a taxpayer and an attorney.
            ``(2) Limitations.--Paragraph (1) may only be asserted in--
                    ``(A) any noncriminal tax matter before the Internal 
                Revenue Service; and
                    ``(B) any noncriminal tax proceeding in Federal 
                court brought by or against the United States.
            ``(3) Definitions.--For purposes of this subsection--
                    ``(A) Federally authorized tax practitioner.--The 
                term `federally authorized tax practitioner' means any 
                individual who is authorized under Federal law to 
                practice before the Internal Revenue Service if such 
                practice is subject to Federal regulation under section 
                330 of title 31, United States Code.
                    ``(B) Tax advice.--The term `tax advice' means 
                advice given by an individual with respect to a matter 
                which is within the scope of the individual's authority 
                to practice described in subparagraph (A).

    ``(b) Section Not To Apply to Communications Regarding Corporate Tax 
Shelters.--The privilege under subsection (a) shall not apply to any 
written communication between a federally authorized tax practitioner 
and a director, shareholder, officer, or employee, agent, or 
representative of a corporation in connection with the promotion of the 
direct or indirect participation of such corporation in any tax shelter 
(as defined in section 6662(d)(2)(C)(iii)).''.

[[Page 112 STAT. 751]]

    (b) Conforming Amendment.--The table of sections for such chapter 77 
is amended by adding at the end the following new item:
                ``Sec. 7525. Confidentiality privileges relating to 
                                taxpayer communications.''.

    (c) Effective Date.--The <<NOTE: Applicability. 26 USC 7525 
note.>> amendments made by this section shall apply to communications 
made on or after the date of the enactment of this Act.

SEC. 3412. LIMITATION ON FINANCIAL STATUS AUDIT TECHNIQUES.

    Section 7602 (relating to examination of books and witnesses) is 
amended by adding at the end the following new subsection:
    ``(d) Limitation on Examination on Unreported Income.--The Secretary 
shall not use financial status or economic reality examination 
techniques to determine the existence of unreported income of any 
taxpayer unless the Secretary has a reasonable indication that there is 
a likelihood of such unreported income.''.

SEC. 3413. SOFTWARE TRADE SECRETS PROTECTION.

    (a) In General.--Subchapter A of chapter 78 (relating to examination 
and inspection) is amended by redesignating section 7612 as section 7613 
and by inserting after 7611 the following new section:

``SEC. 7612. SPECIAL PROCEDURES FOR SUMMONSES FOR COMPUTER SOFTWARE.

    ``(a) General Rule.--For purposes of this title--
            ``(1) except as provided in subsection (b), no summons may 
        be issued under this title, and the Secretary may not begin any 
        action under section 7604 to enforce any summons to produce or 
        analyze any tax-related computer software source code; and
            ``(2) any software and related materials which are provided 
        to the Secretary under this title shall be subject to the 
        safeguards under subsection (c).

    ``(b) Circumstances Under Which Computer Software Source Code May Be 
Provided.--
            ``(1) In general.--Subsection (a)(1) shall not apply to any 
        portion, item, or component of tax-related computer software 
        source code if--
                    ``(A) the Secretary is unable to otherwise 
                reasonably ascertain the correctness of any item on a 
                return from--
                          ``(i) the taxpayer's books, papers, records, 
                      or other data; or
                          ``(ii) the computer software executable code 
                      (and any modifications thereof) to which such 
                      source code relates and any associated data which, 
                      when executed, produces the output to ascertain 
                      the correctness of the item;
                    ``(B) the Secretary identifies with reasonable 
                specificity the portion, item, or component of such 
                source code needed to verify the correctness of such 
                item on the return; and
                    ``(C) the Secretary determines that the need for the 
                portion, item, or component of such source code with 
                respect to such item outweighs the risks of unauthorized 
                disclosure of trade secrets.
            ``(2) Exceptions.--Subsection (a)(1) shall not apply to--

[[Page 112 STAT. 752]]

                    ``(A) any inquiry into any offense connected with 
                the administration or enforcement of the internal 
                revenue laws;
                    ``(B) any tax-related computer software source code 
                acquired or developed by the taxpayer or a related 
                person primarily for internal use by the taxpayer or 
                such person rather than for commercial distribution;
                    ``(C) any communications between the owner of the 
                tax-related computer software source code and the 
                taxpayer or related persons; or
                    ``(D) any tax-related computer software source code 
                which is required to be provided or made available 
                pursuant to any other provision of this title.
            ``(3) Cooperation required.--For purposes of paragraph (1), 
        the Secretary shall be treated as meeting the requirements of 
        subparagraphs (A) and (B) of such paragraph if--
                    ``(A) the Secretary determines that it is not 
                feasible to determine the correctness of an item without 
                access to the computer software executable code and 
                associated data described in paragraph (1)(A)(ii);
                    ``(B) the Secretary makes a formal request to the 
                taxpayer for such code and data and to the owner of the 
                computer software source code for such executable code; 
                and
                    ``(C) such code and data is not provided within 180 
                days of such request.
            ``(4) Right <<NOTE: Courts.>> to contest summons.--In any 
        proceeding brought under section 7604 to enforce a summons 
        issued under the authority of this subsection, the court shall, 
        at the request of any party, hold a hearing to determine whether 
        the applicable requirements of this subsection have been met.

    ``(c) Safeguards To Ensure Protection of Trade Secrets and Other 
Confidential Information.--
            ``(1) Entry of protective order.--In any court proceeding to 
        enforce a summons for any portion of software, the court may 
        receive evidence and issue any order necessary to prevent the 
        disclosure of trade secrets or other confidential information 
        with respect to such software, including requiring that any 
        information be placed under seal to be opened only as directed 
        by the court.
            ``(2) Protection of software.--Notwithstanding any other 
        provision of this section, and in addition to any protections 
        ordered pursuant to paragraph (1), in the case of software that 
        comes into the possession or control of the Secretary in the 
        course of any examination with respect to any taxpayer--
                    ``(A) the software may be used only in connection 
                with the examination of such taxpayer's return, any 
                appeal by the taxpayer to the Internal Revenue Service 
                Office of Appeals, any judicial proceeding (and any 
                appeals therefrom), and any inquiry into any offense 
                connected with the administration or enforcement of the 
                internal revenue laws;
                    ``(B) the Secretary shall provide, in advance, to 
                the taxpayer and the owner of the software a written 
                list of the names of all individuals who will analyze or 
                otherwise have access to the software;
                    ``(C) the software shall be maintained in a secure 
                area or place, and, in the case of computer software 
                source

[[Page 112 STAT. 753]]

                code, shall not be removed from the owner's place of 
                business unless the owner permits, or a court orders, 
                such removal;
                    ``(D) the software may not be copied except as 
                necessary to perform such analysis, and the Secretary 
                shall number all copies made and certify in writing that 
                no other copies have been (or will be) made;
                    ``(E) at the end of the period during which the 
                software may be used under subparagraph (A)--
                          ``(i) the software and all copies thereof 
                      shall be returned to the person from whom they 
                      were obtained and any copies thereof made under 
                      subparagraph (D) on the hard drive of a machine or 
                      other mass storage device shall be permanently 
                      deleted; and
                          ``(ii) the Secretary shall obtain from any 
                      person who analyzes or otherwise had access to 
                      such software a written certification under 
                      penalty of perjury that all copies and related 
                      materials have been returned and that no copies 
                      were made of them;
                    ``(F) the software may not be decompiled or 
                disassembled;
                    ``(G) the Secretary shall provide to the taxpayer 
                and the owner of any interest in such software, as the 
                case may be, a written agreement, between the Secretary 
                and any person who is not an officer or employee of the 
                United States and who will analyze or otherwise have 
                access to such software, which provides that such person 
                agrees not to--
                          ``(i) disclose such software to any person 
                      other than persons to whom such information could 
                      be disclosed for tax administration purposes under 
                      section 6103; or
                          ``(ii) participate for 2 years in the 
                      development of software which is intended for a 
                      similar purpose as the software examined; and
                    ``(H) the software shall be treated as return 
                information for purposes of section 6103.
        For purposes of subparagraph (C), the owner shall make available 
        any necessary equipment or materials for analysis of computer 
        software source code required to be conducted on the owner's 
        premises. The owner of any interest in the software shall be 
        considered a party to any agreement described in subparagraph 
        (G).

    ``(d) Definitions.--For purposes of this section--
            ``(1) Software.--The term `software' includes computer 
        software source code and computer software executable code.
            ``(2) Computer software source code.--The term `computer 
        software source code' means--
                    ``(A) the code written by a programmer using a 
                programming language which is comprehensible to 
                appropriately trained persons and is not capable of 
                directly being used to give instructions to a computer;
                    ``(B) related programmers' notes, design documents, 
                memoranda, and similar documentation; and
                    ``(C) related customer communications.
            ``(3) Computer software executable code.--The term `computer 
        software executable code' means--

[[Page 112 STAT. 754]]

                    ``(A) any object code, machine code, or other code 
                readable by a computer when loaded into its memory and 
                used directly by such computer to execute instructions; 
                and
                    ``(B) any related user manuals.
            ``(4) Owner.--The term `owner' shall, with respect to any 
        software, include the developer of the software.
            ``(5) Related person.--A person shall be treated as related 
        to another person if such persons are related persons under 
        section 267 or 707(b).
            ``(6) Tax-related computer software source code.--The term 
        `tax-related computer software source code' means the computer 
        source code for any computer software program intended for 
        accounting, tax return preparation or compliance, or tax 
        planning.''.

    (b) Unauthorized Disclosure of Software.--Section 7213 (relating to 
unauthorized disclosure of information) is amended by redesignating 
subsection (d) as subsection (e) and by inserting after subsection (c) 
the following new subsection:
    ``(d) Disclosure of Software.--Any person who willfully divulges or 
makes known software (as defined in section 7612(d)(1)) to any person in 
violation of section 7612 shall be guilty of a felony and, upon 
conviction thereof, shall be fined not more than $5,000, or imprisoned 
not more than 5 years, or both, together with the costs of 
prosecution.''.
    (c) Application of Special Procedures for Third-Party Summonses.--
Paragraph (2) of section 7603(b), as amended by section 3416(a), is 
amended by striking ``and'' at the end of subparagraph (H), by striking 
a period at the end of subparagraph (I) and inserting ``, and'', and by 
adding at the end the following new subparagraph:
                    ``(J) any owner or developer of a computer software 
                source code (as defined in section 7612(d)(2)).
        Subparagraph <<NOTE: Applicability.>> (J) shall apply only with 
        respect to a summons requiring the production of the source code 
        referred to in subparagraph (J) or the program and data 
        described in section 7612(b)(1)(A)(ii) to which such source code 
        relates.''.

    (d) Conforming Amendment.--The table of sections for subchapter A of 
chapter 78 is amended by striking the item relating to section 7612 and 
by inserting the following new item:
                ``Sec. 7612. Special procedures for summonses for 
                                computer software.
                ``Sec. 7613. Cross references.''.

    (e) Effective <<NOTE: Applicability. 26 USC 7612 note.>> Date.--
            (1) In general.--The amendments made by this section shall 
        apply to summonses issued, and software acquired, after the date 
        of the enactment of this Act.
            (2) Software protection.--In the case of any software 
        acquired on or before such date of enactment, the requirements 
        of section 7612(a)(2) of the Internal Revenue Code of 1986 (as 
        added by such amendments) shall apply after the 90th day after 
        such date. The preceding sentence shall not apply to the 
        requirement under section 7612(c)(2)(G)(ii) of such Code (as so 
        added).

[[Page 112 STAT. 755]]

SEC. 3414. <<NOTE: 26 USC 6053 note.>> THREAT OF AUDIT PROHIBITED TO 
            COERCE TIP REPORTING ALTERNATIVE COMMITMENT AGREEMENTS.

    The Secretary of the Treasury or the Secretary's delegate shall 
instruct employees of the Internal Revenue Service that they may not 
threaten to audit any taxpayer in an attempt to coerce the taxpayer into 
entering into a Tip Reporting Alternative Commitment Agreement.

SEC. 3415. TAXPAYERS ALLOWED MOTION TO QUASH ALL THIRD-PARTY SUMMONSES.

    (a) In General.--Paragraph (1) of section 7609(a) (relating to 
summonses to which section applies) is amended by striking so much of 
such paragraph as precedes ``notice of the summons'' and inserting the 
following:
            ``(1) In general.--If any summons to which this section 
        applies requires the giving of testimony on or relating to, the 
        production of any portion of records made or kept on or relating 
        to, or the production of any computer software source code (as 
        defined in 7612(d)(2)) with respect to, any person (other than 
        the person summoned) who is identified in the summons, then''.

    (b) Coordination With Other Authority.--Section 7609 (relating to 
special procedures for third-party summonses) is amended by adding at 
the end the following new subsection:
    ``( j) Use of Summons Not Required.--Nothing in this section shall 
be construed to limit the Secretary's ability to obtain information, 
other than by summons, through formal or informal procedures authorized 
by sections 7601 and 7602.''.
    (c) Conforming Amendments.--
            (1) Subsection (a) of section 7609 is amended by striking 
        paragraphs (3) and (4), by redesignating paragraph (5) as 
        paragraph (3), and by striking in paragraph (3) (as so 
        redesignated) ``subsection (c)(2)(B)'' and inserting 
        ``subsection (c)(2)(D)''.
            (2) Subsection (c) of section 7609 is amended to read as 
        follows:

    ``(c) Summons to Which Section Applies.--
            ``(1) In general.--Except as provided in paragraph (2), this 
        section shall apply to any summons issued under paragraph (2) of 
        section 7602(a) or under section 6420(e)(2), 6421(g)(2), 6427( 
        j)(2), or 7612.
            ``(2) Exceptions.--This section shall not apply to any 
        summons--
                    ``(A) served on the person with respect to whose 
                liability the summons is issued, or any officer or 
                employee of such person;
                    ``(B) issued to determine whether or not records of 
                the business transactions or affairs of an identified 
                person have been made or kept;
                    ``(C) issued solely to determine the identity of any 
                person having a numbered account (or similar 
                arrangement) with a bank or other institution described 
                in section 7603(b)(2)(A);
                    ``(D) issued in aid of the collection of--
                          ``(i) an assessment made or judgment rendered 
                      against the person with respect to whose liability 
                      the summons is issued; or

[[Page 112 STAT. 756]]

                          ``(ii) the liability at law or in equity of 
                      any transferee or fiduciary of any person referred 
                      to in clause (i);
                    ``(E)(i) issued by a criminal investigator of the 
                Internal Revenue Service in connection with the 
                investigation of an offense connected with the 
                administration or enforcement of the internal revenue 
                laws; and
                    ``(ii) served on any person who is not a third-party 
                recordkeeper (as defined in section 7603(b)); or
                    ``(F) described in subsection (f ) or (g).
            ``(3) Records.--For purposes of this section, the term 
        `records' includes books, papers, and other data.''.
            (3) Paragraph (2) of section 7609(e) is amended by striking 
        ``third-party recordkeeper's'' and all that follows through 
        ``subsection (f )'' and inserting ``summoned party's response to 
        the summons''.
            (4) Subsection (f ) of section 7609 is amended--
                    (A) by striking ``described in subsection (c)'' and 
                inserting ``described in subsection (c)(1)''; and
                    (B) by inserting ``or testimony'' after ``records'' 
                in paragraph (3).
            (5) Subsection (g) of section 7609 is amended by striking 
        ``In the case of any summons described in subsection (c), the 
        provisions of subsections (a)(1) and (b) shall not apply if '' 
        and inserting ``A summons is described in this subsection if ''.
            (6)(A) Subsection (i) of section 7609 is amended by striking 
        ``Third-Party Recordkeeper and'' in the subsection heading.
            (B) Paragraph (1) of section 7609(i) is amended by striking 
        ``described in subsection (c), the third-party recordkeeper'' 
        and inserting ``to which this section applies for the production 
        of records, the summoned party''.
            (C) Paragraph (2) of section 7609(i) is amended--
                    (i) by striking ``recordkeeper'' in the heading and 
                inserting ``summoned party''; and
                    (ii) by striking ``the third-party recordkeeper'' 
                and inserting ``the summoned party''.
            (D) Paragraph (3) of section 7609(i) is amended to read as 
        follows:
            ``(3) Protection for summoned party who discloses.--Any 
        summoned party, or agent or employee thereof, making a 
        disclosure of records or testimony pursuant to this section in 
        good faith reliance on the certificate of the Secretary or an 
        order of a court requiring production of records or the giving 
        of such testimony shall not be liable to any customer or other 
        person for such disclosure.''.

    (d) Effective Date.--The <<NOTE: Applicability. 26 USC 7609 
note.>> amendments made by this section shall apply to summonses served 
after the date of the enactment of this Act.

SEC. 3416. SERVICE OF SUMMONSES TO THIRD-PARTY RECORDKEEPERS PERMITTED 
            BY MAIL.

    (a) In General.--Section 7603 (relating to service of summons) is 
amended by striking ``A summons issued'' and inserting ``(a) In 
General.--A summons issued'' and by adding at the end the following new 
subsection:
    ``(b) Service by Mail to Third-Party Recordkeepers.--

[[Page 112 STAT. 757]]

            ``(1) In general.--A summons referred to in subsection (a) 
        for the production of books, papers, records, or other data by a 
        third-party recordkeeper may also be served by certified or 
        registered mail to the last known address of such recordkeeper.
            ``(2) Third-party recordkeeper.--For purposes of paragraph 
        (1), the term `third-party recordkeeper' means--
                    ``(A) any mutual savings bank, cooperative bank, 
                domestic building and loan association, or other savings 
                institution chartered and supervised as a savings and 
                loan or similar association under Federal or State law, 
                any bank (as defined in section 581), or any credit 
                union (within the meaning of section 501(c)(14)(A));
                    ``(B) any consumer reporting agency (as defined 
                under section 603(f ) of the Fair Credit Reporting Act 
                (15 U.S.C. 1681a(f )));
                    ``(C) any person extending credit through the use of 
                credit cards or similar devices;
                    ``(D) any broker (as defined in section 3(a)(4) of 
                the Securities Exchange Act of 1934 (15 U.S.C. 
                78c(a)(4)));
                    ``(E) any attorney;
                    ``(F) any accountant;
                    ``(G) any barter exchange (as defined in section 
                6045(c)(3));
                    ``(H) any regulated investment company (as defined 
                in section 851) and any agent of such regulated 
                investment company when acting as an agent thereof, and
                    ``(I) any enrolled agent.''.

    (b) Effective Date.--The <<NOTE: Applicability. 26 USC 7603 
note.>> amendment made by this section shall apply to summonses served 
after the date of the enactment of this Act.

SEC. 3417. NOTICE OF INTERNAL REVENUE SERVICE CONTACT OF THIRD PARTIES.

    (a) In General.--Section 7602 (relating to examination of books and 
witnesses), as amended by section 3412, is amended by redesignating 
subsections (c) and (d) as subsections (d) and (e), respectively, and by 
inserting after subsection (b) the following new subsection:
    ``(c) Notice of Contact of Third Parties.--
            ``(1) General notice.--An officer or employee of the 
        Internal Revenue Service may not contact any person other than 
        the taxpayer with respect to the determination or collection of 
        the tax liability of such taxpayer without providing reasonable 
        notice in advance to the taxpayer that contacts with persons 
        other than the taxpayer may be made.
            ``(2) Notice <<NOTE: Records.>> of specific contacts.--The 
        Secretary shall periodically provide to a taxpayer a record of 
        persons contacted during such period by the Secretary with 
        respect to the determination or collection of the tax liability 
        of such taxpayer. Such record shall also be provided upon 
        request of the taxpayer.
            ``(3) Exceptions.--This subsection shall not apply--
                    ``(A) to any contact which the taxpayer has 
                authorized;
                    ``(B) if the Secretary determines for good cause 
                shown that such notice would jeopardize collection of 
                any tax or such notice may involve reprisal against any 
                person; or

[[Page 112 STAT. 758]]

                    ``(C) with respect to any pending criminal 
                investigation.''.

    (b) Effective Date.--The <<NOTE: Applicability. 26 USC 7602 
note.>> amendments made by subsection (a) shall apply to contacts made 
after the 180th day after the date of the enactment of this Act.

                     PART III--COLLECTION ACTIVITIES

                       Subpart A--Approval Process

SEC. 3421. APPROVAL PROCESS FOR LIENS, LEVIES, AND <<NOTE: 26 USC 6301 
            note.>> SEIZURES.

    (a) In General.--The <<NOTE: Procedures.>> Commissioner of Internal 
Revenue shall develop and implement procedures under which--
            (1) a determination by an employee to file a notice of lien 
        or levy with respect to, or to levy or seize, any property or 
        right to property would, where appropriate, be required to be 
        reviewed by a supervisor of the employee before the action was 
        taken; and
            (2) appropriate disciplinary action would be taken against 
        the employee or supervisor where the procedures under paragraph 
        (1) were not followed.

    (b) Review Process.--The review process under subsection (a)(1) may 
include a certification that the employee has--
            (1) reviewed the taxpayer's information;
            (2) verified that a balance is due; and
            (3) affirmed that the action proposed to be taken is 
        appropriate given the taxpayer's circumstances, considering the 
        amount due and the value of the property or right to property.

    (c) Effective Dates.--
            (1) In general.--Except as provided in paragraph (2), this 
        section shall take effect on the date of the enactment of this 
        Act.
            (2) Automated collection <<NOTE: Applicability.>> system 
        actions.--In the case of any action under an automated 
        collection system, this section shall apply to actions initiated 
        after December 31, 2000.

                       Subpart B--Liens and Levies

SEC. 3431. MODIFICATIONS TO CERTAIN LEVY EXEMPTION AMOUNTS.

    (a) Fuel, Etc.--Section 6334(a)(2) (relating to fuel, provisions, 
furniture, and personal effects) is amended by striking ``$2,500'' and 
inserting ``$6,250''.
    (b) Books, Etc.--Section 6334(a)(3) (relating to books and tools of 
a trade, business, or profession) is amended by striking ``$1,250'' and 
inserting ``$3,125''.
    (c) Conforming Amendment.--Section 6334(g)(1) (relating to inflation 
adjustment) is amended--
            (1) by striking ``1997'' and inserting ``1999''; and
            (2) by striking ``1996'' in subparagraph (B) and inserting 
        ``1998''.

    (d) Effective Date.--The <<NOTE: 26 USC 6334 note.>> amendments made 
by this section shall take effect with respect to levies issued after 
the date of the enactment of this Act.

[[Page 112 STAT. 759]]

SEC. 3432. RELEASE OF LEVY UPON AGREEMENT THAT AMOUNT IS UNCOLLECTIBLE.

    (a) In General.--Section 6343 (relating to authority to release levy 
and return property) is amended by adding at the end the following new 
subsection:
    ``(e) Release of Levy Upon Agreement That Amount is not 
Collectible.--In the case of a levy on the salary or wages payable to or 
received by the taxpayer, upon agreement with the taxpayer that the tax 
is not collectible, the Secretary shall release such levy as soon as 
practicable.''.
     <<NOTE: Applicability. 26 USC 6343 note.>> (b) Effective Date.--The 
amendment made by this section shall apply to levies imposed after 
December 31, 1999.

SEC. 3433. LEVY PROHIBITED DURING PENDENCY OF REFUND PROCEEDINGS.

    (a) In General.--Section 6331 (relating to levy and distraint) is 
amended by redesignating subsection (i) as subsection ( j) and by 
inserting after subsection (h) the following new subsection:
    ``(i) No Levy During Pendency of Proceedings for Refund of Divisible 
Tax.--
            ``(1) In general.--No levy may be made under subsection (a) 
        on the property or rights to property of any person with respect 
        to any unpaid divisible tax during the pendency of any 
        proceeding brought by such person in a proper Federal trial 
        court for the recovery of any portion of such divisible tax 
        which was paid by such person if--
                    ``(A) the decision in such proceeding would be res 
                judicata with respect to such unpaid tax; or
                    ``(B) such person would be collaterally estopped 
                from contesting such unpaid tax by reason of such 
                proceeding.
            ``(2) Divisible tax.--For purposes of paragraph (1), the 
        term `divisible tax' means--
                    ``(A) any tax imposed by subtitle C; and
                    ``(B) the penalty imposed by section 6672 with 
                respect to any such tax.
            ``(3) Exceptions.--
                    ``(A) Certain unpaid taxes.--This subsection shall 
                not apply with respect to any unpaid tax if--
                          ``(i) the taxpayer files a written notice with 
                      the Secretary which waives the restriction imposed 
                      by this subsection on levy with respect to such 
                      tax; or
                          ``(ii) the Secretary finds that the collection 
                      of such tax is in jeopardy.
                    ``(B) Certain levies.--This subsection shall not 
                apply to--
                          ``(i) any levy to carry out an offset under 
                      section 6402; and
                          ``(ii) any levy which was first made before 
                      the date that the applicable proceeding under this 
                      subsection commenced.
            ``(4) Limitation on collection activity; authority to enjoin 
        collection.--
                    ``(A) Limitation on collection.--No proceeding in 
                court for the collection of any unpaid tax to which 
                paragraph (1) applies shall be begun by the Secretary 
                during the pendency of a proceeding under such 
                paragraph. This subparagraph shall not apply to--

[[Page 112 STAT. 760]]

                          ``(i) any counterclaim in a proceeding under 
                      such paragraph; or
                          ``(ii) any proceeding relating to a proceeding 
                      under such paragraph.
                    ``(B) Authority to enjoin.--Notwithstanding section 
                7421(a), a levy or collection proceeding prohibited by 
                this subsection may be enjoined (during the period such 
                prohibition is in force) by the court in which the 
                proceeding under paragraph (1) is brought.
            ``(5) Suspension of statute of limitations on collection.--
        The period of limitations under section 6502 shall be suspended 
        for the period during which the Secretary is prohibited under 
        this subsection from making a levy.
            ``(6) Pendency of proceeding.--For purposes of this 
        subsection, a proceeding is pending beginning on the date such 
        proceeding commences and ending on the date that a final order 
        or judgment from which an appeal may be taken is entered in such 
        proceeding.''.

     <<NOTE: 26 USC 6331 note.>> (b) Effective Date.--The amendment made 
by this section shall apply to unpaid tax attributable to taxable 
periods beginning after December 31, 1998.

SEC. 3434. APPROVAL REQUIRED FOR JEOPARDY AND TERMINATION ASSESSMENTS 
            AND JEOPARDY LEVIES.

    (a) In General.--Paragraph (1) of section 7429(a) (relating to 
review of jeopardy levy or assessment procedures) is amended to read as 
follows:
            ``(1) Administrative review.--
                    ``(A) Prior approval required.--No assessment may be 
                made under section 6851(a), 6852(a), 6861(a), or 6862, 
                and no levy may be made under section 6331(a) less than 
                30 days after notice and demand for payment is made, 
                unless the Chief Counsel for the Internal Revenue 
                Service (or such Counsel's delegate) personally approves 
                (in writing) such assessment or levy.
                    ``(B) Information to taxpayer.--Within 5 days after 
                the day on which such an assessment or levy is made, the 
                Secretary shall provide the taxpayer with a written 
                statement of the information upon which the Secretary 
                relied in making such assessment or levy.''.

     <<NOTE: Applicability. 26 USC 7429 note.>> (b) Effective Date.--The 
amendment made by this section shall apply to taxes assessed and levies 
made after the date of the enactment of this Act.

SEC. 3435. INCREASE IN AMOUNT OF CERTAIN PROPERTY ON WHICH LIEN NOT 
            VALID.

    (a) Certain Property.--
            (1) In general.--Subsection (b) of section 6323 (relating to 
        validity and priority against certain persons) is amended--
                    (A) by striking ``$250'' in paragraph (4) (relating 
                to personal property purchased in casual sale) and 
                inserting ``$1,000''; and
                    (B) by striking ``$1,000'' in paragraph (7) 
                (relating to residential property subject to a 
                mechanic's lien for certain repairs and improvements) 
                and inserting ``$5,000''.
            (2) Inflation adjustment.--Subsection (i) of section 6323 
        (relating to special rules) is amended by adding at the end the 
        following new paragraph:

[[Page 112 STAT. 761]]

            ``(4) Cost-of-living adjustment.--In the case of notices of 
        liens imposed by section 6321 which are filed in any calendar 
        year after 1998, each of the dollar amounts under paragraph (4) 
        or (7) of subsection (b) shall be increased by an amount equal 
        to--
                    ``(A) such dollar amount, multiplied by
                    ``(B) the cost-of-living adjustment determined under 
                section 1(f )(3) for the calendar year, determined by 
                substituting `calendar year 1996' for `calendar year 
                1992' in subparagraph (B) thereof.
        If any amount as adjusted under the preceding sentence is not a 
        multiple of $10, such amount shall be rounded to the nearest 
        multiple of $10.''.

    (b) Expansion of Treatment of Passbook Loans.--Paragraph (10) of 
section 6323(b) is amended--
            (1) by striking ``Passbook loans'' in the heading and 
        inserting ``Deposit-secured loans'';
            (2) by striking ``, evidenced by a passbook,''; and
            (3) by striking all that follows ``secured by such account'' 
        and inserting a period.

     <<NOTE: 26 USC 6323 note.>> (c) Effective Date.--The amendments 
made by this section shall take effect on the date of the enactment of 
this Act.

SEC. 3436. WAIVER OF EARLY WITHDRAWAL TAX FOR INTERNAL REVENUE SERVICE 
            LEVIES ON EMPLOYER-SPONSORED RETIREMENT PLANS OR IRAs.

    (a) In General.--Section 72(t)(2)(A) (relating to subsection not to 
apply to certain distributions) is amended by striking ``or'' at the end 
of clauses (iv) and (v), by striking the period at the end of clause 
(vi) and inserting ``, or'', and by adding at the end the following new 
clause:
                          ``(vii) made on account of a levy under 
                      section 6331 on the qualified retirement plan.''.

     <<NOTE: Applicability. 26 USC 72 note.>> (b) Effective Date.--The 
amendments made by this section shall apply to distributions after 
December 31, 1999.

                           Subpart C--Seizures

SEC. 3441. PROHIBITION OF SALES OF SEIZED PROPERTY AT LESS THAN MINIMUM 
            BID.

    (a) In General.--Section 6335(e)(1)(A)(i) (relating to 
determinations relating to minimum price) is amended by striking ``a 
minimum price for which such property shall be sold'' and inserting ``a 
minimum price below which such property shall not be sold''.
    (b) Reference to Penalty for Violation.--Section 6335(e) is amended 
by adding at the end the following new paragraph:
            ``(4) Cross reference.--
                  ``For provision providing for civil damages for 
                violation of paragraph (1)(A)(i), see section 7433.''.

     <<NOTE: Applicability. 26 USC 6335 note.>> (c) Effective Date.--The 
amendments made by this section shall apply to sales made after the date 
of the enactment of this Act.

SEC. 3442. ACCOUNTING OF SALES OF SEIZED PROPERTY.

    (a) In General.--Section 6340 (relating to records of sale) is 
amended--
            (1) in subsection (a)--

[[Page 112 STAT. 762]]

                    (A) by striking ``real''; and
                    (B) by inserting ``or certificate of sale of 
                personal 
                property'' after ``deed''; and
            (2) by adding at the end the following new subsection:

    ``(c) Accounting to Taxpayer.--The taxpayer with respect to whose 
liability the sale was conducted or who redeemed the property shall be 
furnished--
            ``(1) the record under subsection (a) (other than the names 
        of the purchasers);
            ``(2) the amount from such sale applied to the taxpayer's 
        liability; and
            ``(3) the remaining balance of such liability.''.

     <<NOTE: Applicability. 26 USC 6340 note.>> (b) Effective Date.--The 
amendments made by this section shall apply to seizures occurring after 
the date of the enactment of this Act.

SEC. 3443. <<NOTE: 26 USC 6335 note.>> UNIFORM ASSET DISPOSAL MECHANISM.

    Not <<NOTE: Deadline.>> later than the date which is 2 years after 
the date of the enactment of this Act, the Secretary of the Treasury or 
the Secretary's delegate shall implement a uniform asset disposal 
mechanism for sales under section 6335 of the Internal Revenue Code of 
1986. The mechanism should be designed to remove any participation in 
such sales by revenue officers of the Internal Revenue Service and 
should consider the use of outsourcing.

SEC. 3444. CODIFICATION OF INTERNAL REVENUE SERVICE ADMINISTRATIVE 
            PROCEDURES FOR SEIZURE OF TAXPAYER'S PROPERTY.

    (a) In General.--Section 6331 (relating to levy and distraint), as 
amended by section 3433, is amended by redesignating subsection ( j) as 
subsection (k) and by inserting after subsection (i) the following new 
subsection:
    ``( j) No Levy Before Investigation of Status of Property.--
            ``(1) In general.--For purposes of applying the provisions 
        of this subchapter, no levy may be made on any property or right 
        to property which is to be sold under section 6335 until a 
        thorough investigation of the status of such property has been 
        completed.
            ``(2) Elements in investigation.--For purposes of paragraph 
        (1), an investigation of the status of any property shall 
        include--
                    ``(A) a verification of the taxpayer's liability;
                    ``(B) the completion of an analysis under sub-
                section (f );
                    ``(C) the determination that the equity in such 
                property is sufficient to yield net proceeds from the 
                sale of such property to apply to such liability; and
                    ``(D) a thorough consideration of alternative 
                collection methods.''.

     <<NOTE: 26 USC 6331 note.>> (b) Effective Date.--The amendments 
made by this section shall take effect on the date of the enactment of 
this Act.

SEC. 3445. PROCEDURES FOR SEIZURE OF RESIDENCES AND BUSINESSES.

    (a) In General.--Section 6334(a)(13) (relating to property exempt 
from levy) is amended to read as follows:

[[Page 112 STAT. 763]]

            ``(13) Residences exempt in small deficiency cases and 
        principal residences and certain business assets exempt in 
        absence of certain approval or jeopardy.--
                    ``(A) Residences in small deficiency cases.--If the 
                amount of the levy does not exceed $5,000--
                          ``(i) any real property used as a residence by 
                      the taxpayer; or
                          ``(ii) any real property of the taxpayer 
                      (other than real property which is rented) used by 
                      any other individual as a residence.
                    ``(B) Principal residences and certain business 
                assets.--Except to the extent provided in subsection 
                (e)--
                          ``(i) the principal residence of the taxpayer 
                      (within the meaning of section 121); and
                          ``(ii) tangible personal property or real 
                      property (other than real property which is 
                      rented) used in the trade or business of an 
                      individual taxpayer.''.

    (b) Levy Allowed in Certain Circumstances.--Section 6334(e) is 
amended to read as follows:
    ``(e) Levy Allowed on Principal Residences and Certain Business 
Assets in Certain Circumstances.--
            ``(1) Principal residences.--
                    ``(A) Approval required.--A principal residence 
                shall not be exempt from levy if a judge or magistrate 
                of a district court of the United States approves (in 
                writing) the levy of such residence.
                    ``(B) Jurisdiction.--The district courts of the 
                United States shall have exclusive jurisdiction to 
                approve a levy under subparagraph (A).
            ``(2) Certain business assets.--Property (other than a 
        principal residence) described in subsection (a)(13)(B) shall 
        not be exempt from levy if--
                    ``(A) a district director or assistant district 
                director of the Internal Revenue Service personally 
                approves (in writing) the levy of such property; or
                    ``(B) the Secretary finds that the collection of tax 
                is in jeopardy.
        An official may not approve a levy under subparagraph (A) unless 
        the official determines that the taxpayer's other assets subject 
        to collection are insufficient to pay the amount due, together 
        with expenses of the proceedings.''.

     <<NOTE: 26 USC 6334 note.>> (c) State Fish and Wildlife Permits.--
            (1) In general.--With respect to permits issued by a State 
        and required under State law for the harvest of fish or wildlife 
        in the trade or business of an individual taxpayer, the term 
        ``other assets'' as used in section 6334(e)(2) of the Internal 
        Revenue Code of 1986 shall include future income which may be 
        derived by such taxpayer from the commercial sale of fish or 
        wildlife under such permit.
            (2) Construction.--Paragraph (1) shall not be construed to 
        invalidate or in any way prejudice any assertion that the 
        privilege embodied in permits described in paragraph (1) is not 
        property or a right to property under the Internal Revenue Code 
        of 1986.

     <<NOTE: 26 USC 6334 note.>> (d) Effective Date.--The amendments 
made by this section shall take effect on the date of the enactment of 
this Act.

[[Page 112 STAT. 764]]

  PART IV--PROVISIONS RELATING TO EXAMINATION AND COLLECTION ACTIVITIES

SEC. 3461. PROCEDURES RELATING TO EXTENSIONS OF STATUTE OF LIMITATIONS 
            BY AGREEMENT.

    (a) Authority To Extend 10-Year Collection Period After 
Assessment.--Section 6502(a) (relating to length of period after 
collection) is amended--
            (1) by striking paragraph (2) and inserting:
            ``(2) if--
                    ``(A) there is an installment agreement between the 
                taxpayer and the Secretary, prior to the date which is 
                90 days after the expiration of any period for 
                collection agreed upon in writing by the Secretary and 
                the taxpayer at the time the installment agreement was 
                entered into; or
                    ``(B) there is a release of levy under section 6343 
                after such 10-year period, prior to the expiration of 
                any period for collection agreed upon in writing by the 
                Secretary and the taxpayer before such release.''; and
            (2) by striking the first sentence in the matter following 
        paragraph (2).

    (b) Notice to Taxpayer of Right To Refuse or Limit 
Extension.--Paragraph (4) of section 6501(c) (relating to the period for 
limitations on assessment and collection) is amended--
            (1) by striking ``Where'' and inserting the following:
                    ``(A) In general.--Where''; and
            (2) by adding at the end the following new subparagraph:
                    ``(B) Notice to taxpayer of right to refuse or limit 
                extension.--The Secretary shall notify the taxpayer of 
                the taxpayer's right to refuse to extend the period of 
                limitations, or to limit such extension to particular 
                issues or to a particular period of time, on each 
                occasion when the taxpayer is requested to provide such 
                consent.''.

     <<NOTE: 26 USC 6501 note.>> (c) Effective Date.--
             <<NOTE: Applicability.>> (1) In general.--The amendments 
        made by this section shall apply to requests to extend the 
        period of limitations made after December 31, 1999.
             <<NOTE: Expiration date.>> (2) Prior request.--If, in any 
        request to extend the period of limitations made on or before 
        December 31, 1999, a taxpayer agreed to extend such period 
        beyond the 10-year period referred to in section 6502(a) of the 
        Internal Revenue Code of 1986, such extension shall expire on 
        the latest of--
                    (A) the last day of such 10-year period;
                    (B) December 31, 2002; or
                    (C) in the case of an extension in connection with 
                an installment agreement, the 90th day after the end of 
                the period of such extension.

SEC. 3462. OFFERS-IN-COMPROMISE.

    (a) Standards for Evaluation of Offers-in-Compromise.--Section 7122 
(relating to offers-in-compromise) is amended by 
adding at the end the following new subsection:
     <<NOTE: Guidelines.>> ``(c) Standards for Evaluation of Offers.--
            ``(1) In general.--The Secretary shall prescribe guidelines 
        for officers and employees of the Internal Revenue Service

[[Page 112 STAT. 765]]

        to determine whether an offer-in-compromise is adequate and 
        should be accepted to resolve a dispute.
            ``(2) Allowances for basic living expenses.--
                     <<NOTE: Publication.>> ``(A) In general.--In 
                prescribing guidelines under paragraph (1), the 
                Secretary shall develop and publish schedules of 
                national and local allowances designed to provide that 
                taxpayers entering into a compromise have an adequate 
                means to provide for basic living expenses.
                    ``(B) Use of schedules.--The guidelines shall 
                provide that officers and employees of the Internal 
                Revenue Service shall determine, on the basis of the 
                facts and circumstances of each taxpayer, whether the 
                use of the schedules published under subparagraph (A) is 
                appropriate and shall not use the schedules to the 
                extent such use would result in the taxpayer not having 
                adequate means to provide for basic living expenses.
            ``(3) Special rules relating to treatment of offers.--The 
        guidelines under paragraph (1) shall provide that--
                    ``(A) an officer or employee of the Internal Revenue 
                Service shall not reject an offer-in-compromise from a 
                low-income taxpayer solely on the basis of the amount of 
                the offer; and
                    ``(B) in the case of an offer-in-compromise which 
                relates only to issues of liability of the taxpayer--
                          ``(i) such offer shall not be rejected solely 
                      because the Secretary is unable to locate the 
                      taxpayer's return or return information for 
                      verification of such liability; and
                          ``(ii) the taxpayer shall not be required to 
                      provide a financial statement.''.

    (b) Levy Prohibited While Offer-in-Compromise Pending or Installment 
Agreement Pending or in Effect.--Section 6331 (relating to levy and 
distraint), as amended by sections 3433 and 3444, is amended by 
redesignating subsection (k) as subsection (l) and by inserting after 
subsection ( j) the following new subsection:
    ``(k) No Levy While Certain Offers Pending or Installment Agreement 
Pending or in Effect.--
            ``(1) Offer-in-compromise pending.--No levy may be made 
        under subsection (a) on the property or rights to property of 
        any person with respect to any unpaid tax--
                    ``(A) during the period that an offer-in-compromise 
                by such person under section 7122 of such unpaid tax is 
                pending with the Secretary; and
                    ``(B) if such offer is rejected by the Secretary, 
                during the 30 days thereafter (and, if an appeal of such 
                rejection is filed within such 30 days, during the 
                period that such appeal is pending).
        For purposes of subparagraph (A), an offer is pending beginning 
        on the date the Secretary accepts such offer for processing.
            ``(2) Installment agreements.--No levy may be made under 
        subsection (a) on the property or rights to property of any 
        person with respect to any unpaid tax--
                    ``(A) during the period that an offer by such person 
                for an installment agreement under section 6159 for 
                payment of such unpaid tax is pending with the 
                Secretary;
                    ``(B) if such offer is rejected by the Secretary, 
                during the 30 days thereafter (and, if an appeal of such 
                rejection

[[Page 112 STAT. 766]]

                is filed within such 30 days, during the period that 
                such appeal is pending);
                    ``(C) during the period that such an installment 
                agreement for payment of such unpaid tax is in effect; 
                and
                    ``(D) if such agreement is terminated by the 
                Secretary, during the 30 days thereafter (and, if an 
                appeal of such termination is filed within such 30 days, 
                during the period that such appeal is pending).
            ``(3) Certain rules to apply.--Rules similar to the rules of 
        paragraphs (3), (4), and (5) of subsection (i) shall apply for 
        purposes of this subsection.''.

    (c) Review of Rejections of Offers-in-Compromise and Installment 
Agreements.--
            (1) In general.--Section 7122 (relating to compromises), as 
        amended by subsection (a), is amended by adding at the end the 
        following new subsection:

     <<NOTE: Procedures.>> ``(d) Administrative Review.--The Secretary 
shall establish procedures--
            ``(1) for an independent administrative review of any 
        rejection of a proposed offer-in-compromise or installment 
        agreement made by a taxpayer under this section or section 6159 
        before such rejection is communicated to the taxpayer; and
            ``(2) which allow a taxpayer to appeal any rejection of such 
        offer or agreement to the Internal Revenue Service Office of 
        Appeals.''.
            (2) Conforming amendment.--Section 6159 (relating to 
        installment agreements) is amended by adding at the end the 
        following new subsection:

    ``(d) Cross Reference.--
                  ``For rights to administrative review and appeal, see 
                section 7122(d).''.

     <<NOTE: 26 USC 7122 note.>> (d) Preparation of Statement Relating 
to Offers-in-
Compromise.--The Secretary of the Treasury shall prepare a statement 
which sets forth in simple, nontechnical terms the rights of a taxpayer 
and the obligations of the Internal Revenue Service relating to offers-
in-compromise. Such statement shall--
            (1) advise taxpayers who have entered into a compromise of 
        the advantages of promptly notifying the Internal Revenue 
        Service of any change of address or marital status;
            (2) provide notice to taxpayers that in the case of a 
        compromise terminated due to the actions of one spouse or former 
        spouse, the Internal Revenue Service will, upon application, 
        reinstate such compromise with the spouse or former spouse who 
        remains in compliance with such compromise; and
            (3) provide notice to the taxpayer that the taxpayer may 
        appeal the rejection of an offer-in-compromise to the Internal 
        Revenue Service Office of Appeals.

     <<NOTE: Applicability. 26 USC 6331 note.>> (e) Effective Dates.--
            (1) In general.--The amendments made by this section shall 
        apply to proposed offers-in-compromise and installment 
        agreements submitted after the date of the enactment of this 
        Act.
            (2) Suspension of collection by levy.--The amendment made by 
        subsection (b) shall apply to offers-in-compromise pending on or 
        made after December 31, 1999.

[[Page 112 STAT. 767]]

SEC. 3463. NOTICE OF DEFICIENCY TO SPECIFY DEADLINES FOR 
            FILING TAX COURT PETITION.

     <<NOTE: 26 USC 6212 note.>> (a) In General.--The Secretary of the 
Treasury or the 
Secretary's delegate shall include on each notice of deficiency under 
section 6212 of the Internal Revenue Code of 1986 the date determined by 
such Secretary (or delegate) as the last day on which the taxpayer may 
file a petition with the Tax Court.

    (b) Later Filing Deadlines Specified on Notice of Deficiency To Be 
Binding.--Subsection (a) of section 6213 (relating to restrictions 
applicable to deficiencies; petition to Tax Court) is amended by adding 
at the end the following new sentence: ``Any petition filed with the Tax 
Court on or before the last date specified for filing such petition by 
the Secretary in the notice of deficiency shall be treated as timely 
filed.''.
     <<NOTE: Applicability. 26 USC 6213 note.>> (c) Effective Date.--
Subsection (a) and the amendment made by subsection (b) shall apply to 
notices mailed after December 31, 1998.

SEC. 3464. REFUND OR CREDIT OF OVERPAYMENTS BEFORE FINAL DETERMINATION.

    (a) Tax Court Proceedings.--Subsection (a) of section 6213 is 
amended--
            (1) by striking ``, including the Tax Court.'' and inserting 
        ``, including the Tax Court, and a refund may be ordered by such 
        court of any amount collected within the period during which the 
        Secretary is prohibited from collecting by levy or through a 
        proceeding in court under the provisions of this subsection.''; 
        and
            (2) by striking ``to enjoin any action or proceeding'' and 
        inserting ``to enjoin any action or proceeding or order any 
        refund''.

    (b) Other Proceedings.--Subsection (a) of section 6512 is amended by 
striking the period at the end of paragraph (4) and inserting ``, and'', 
and by inserting after paragraph (4) the following new paragraphs:
            ``(5) As to any amount collected within the period during 
        which the Secretary is prohibited from making the assessment or 
        from collecting by levy or through a proceeding in court under 
        the provisions of section 6213(a); and
            ``(6) As to overpayments the Secretary is authorized to 
        refund or credit pending appeal as provided in subsection 
        (b).''.

    (c) Refund or Credit Pending Appeal.--Paragraph (1) of section 
6512(b) is amended by adding at the end the following new sentence: ``If 
a notice of appeal in respect of the decision of the Tax Court is filed 
under section 7483, the Secretary is authorized to refund or credit the 
overpayment determined by the Tax Court to the extent the overpayment is 
not contested on appeal.''.
     <<NOTE: 26 USC 6213 note.>> (d) Effective Date.--The amendments 
made by this section shall take effect on the date of the enactment of 
this Act.

SEC. 3465. INTERNAL REVENUE SERVICE PROCEDURES RELATING TO APPEALS OF 
            EXAMINATIONS AND COLLECTIONS.

    (a) Dispute Resolution Procedures.--
            (1) In general.--Chapter 74 (relating to closing agreements 
        and compromises) is amended by redesignating section

[[Page 112 STAT. 768]]

        7123 as section 7124 and by inserting after section 7122 the 
        following new section:

``SEC. 7123. APPEALS DISPUTE RESOLUTION PROCEDURES.

    ``(a) Early Referral to Appeals Procedures.--The Secretary shall 
prescribe procedures by which any taxpayer may request early referral of 
1 or more unresolved issues from the examination or collection division 
to the Internal Revenue Service Office of Appeals.
    ``(b) Alternative Dispute Resolution Procedures.--
            ``(1) Mediation.--The Secretary shall prescribe procedures 
        under which a taxpayer or the Internal Revenue Service Office of 
        Appeals may request non-binding mediation on any issue 
        unresolved at the conclusion of--
                    ``(A) appeals procedures; or
                    ``(B) unsuccessful attempts to enter into a closing 
                agreement under section 7121 or a compromise under 
                section 7122.
            ``(2) Arbitration.--The Secretary shall establish a pilot 
        program under which a taxpayer and the Internal Revenue Service 
        Office of Appeals may jointly request binding arbitration on any 
        issue unresolved at the conclusion of--
                    ``(A) appeals procedures; or
                    ``(B) unsuccessful attempts to enter into a closing 
                agreement under section 7121 or a compromise under 
                section 7122.''.
            (2) Conforming amendment.--The table of sections for chapter 
        74 is amended by striking the item relating to section 7123 and 
        inserting the following new items:
                ``Sec. 7123. Appeals dispute resolution procedures.
                ``Sec. 7124. Cross references.''.

    (b) Appeals Officers in Each State.--The Commissioner of Internal 
Revenue shall ensure that an appeals officer is regularly available 
within each State.
    (c) Appeals Videoconferencing Alternative for Rural Areas.--The 
Commissioner of Internal Revenue shall consider the use of the 
videoconferencing of appeals conferences between appeals officers and 
taxpayers seeking appeals in rural or remote areas.

SEC. 3466. APPLICATION OF CERTAIN FAIR DEBT COLLECTION PROCEDURES.

    (a) In General.--Subchapter A of chapter 64 (relating to collection) 
is amended by inserting after section 6303 the following new section:

``SEC. 6304. FAIR TAX COLLECTION PRACTICES.

    ``(a) Communication With the Taxpayer.--Without the prior consent of 
the taxpayer given directly to the Secretary or the express permission 
of a court of competent jurisdiction, the Secretary may not communicate 
with a taxpayer in connection with the collection of any unpaid tax--
            ``(1) at any unusual time or place or a time or place known 
        or which should be known to be inconvenient to the taxpayer;
            ``(2) if the Secretary knows the taxpayer is represented by 
        any person authorized to practice before the Internal Revenue 
        Service with respect to such unpaid tax and has knowledge of, or 
        can readily ascertain, such person's name and address,

[[Page 112 STAT. 769]]

        unless such person fails to respond within a reasonable period 
        of time to a communication from the Secretary or unless such 
        person consents to direct communication with the taxpayer; or
            ``(3) at the taxpayer's place of employment if the Secretary 
        knows or has reason to know that the taxpayer's employer 
        prohibits the taxpayer from receiving such communication.

In the absence of knowledge of circumstances to the contrary, the 
Secretary shall assume that the convenient time for communicating with a 
taxpayer is after 8 a.m. and before 9 p.m., local time at the taxpayer's 
location.
    ``(b) Prohibition of Harassment and Abuse.--The Secretary may not 
engage in any conduct the natural consequence of which is to harass, 
oppress, or abuse any person in connection with the collection of any 
unpaid tax. Without limiting the general application of the foregoing, 
the following conduct is a violation of this subsection:
            ``(1) The use or threat of use of violence or other criminal 
        means to harm the physical person, reputation, or property of 
        any person.
            ``(2) The use of obscene or profane language or language the 
        natural consequence of which is to abuse the hearer or reader.
            ``(3) Causing a telephone to ring or engaging any person in 
        telephone conversation repeatedly or continuously with intent to 
        annoy, abuse, or harass any person at the called number.
            ``(4) Except as provided under rules similar to the rules in 
        section 804 of the Fair Debt Collection Practices Act (15 U.S.C. 
        1692b), the placement of telephone calls without meaningful 
        disclosure of the caller's identity.

    ``(c) Civil Action for Violations of Section.--
                  ``For civil action for violations of this section, see 
                section 7433.''.

    (b) Clerical Amendment.--The table of sections for subchapter A of 
chapter 64 is amended by inserting after the item relating to section 
6303 the following new item:
                ``Sec. 6304. Fair tax collection practices.''.

     <<NOTE: 26 USC 6304 note.>> (c) Effective Date.--The amendments 
made by this section shall take effect on the date of the enactment of 
this Act.

SEC. 3467. GUARANTEED AVAILABILITY OF INSTALLMENT AGREEMENTS.

    (a) In General.--Section 6159 (relating to agreements for payment of 
tax liability in installments) is amended by redesignating subsection 
(c) as subsection (d) and by inserting after subsection (b) the 
following new subsection:
    ``(c) Secretary Required To Enter Into Installment Agreements in 
Certain Cases.--In the case of a liability for tax of an individual 
under subtitle A, the Secretary shall enter into an agreement to accept 
the payment of such tax in installments if, as of the date the 
individual offers to enter into the agreement--
            ``(1) the aggregate amount of such liability (determined 
        without regard to interest, penalties, additions to the tax, and 
        additional amounts) does not exceed $10,000;

[[Page 112 STAT. 770]]

            ``(2) the taxpayer (and, if such liability relates to a 
        joint return, the taxpayer's spouse) has not, during any of the 
        preceding 5 taxable years--
                    ``(A) failed to file any return of tax imposed by 
                sub-
                title A;
                    ``(B) failed to pay any tax required to be shown on 
                any such return; or
                    ``(C) entered into an installment agreement under 
                this section for payment of any tax imposed by subtitle 
                A,
            ``(3) the Secretary determines that the taxpayer is 
        financially unable to pay such liability in full when due (and 
        the taxpayer submits such information as the Secretary may 
        require to make such determination);
            ``(4) the agreement requires full payment of such liability 
        within 3 years; and
            ``(5) the taxpayer agrees to comply with the provisions of 
        this title for the period such agreement is in effect.''.

     <<NOTE: 26 USC 6159 note.>> (b) Effective Date.--The amendment made 
by this section shall take effect on the date of the enactment of this 
Act.

SEC. 3468. <<NOTE: 26 USC 7421 note.>> PROHIBITION ON REQUESTS TO 
            TAXPAYERS TO GIVE UP RIGHTS TO BRING ACTIONS.

    (a) Prohibition.--No officer or employee of the United States may 
request a taxpayer to waive the taxpayer's right to bring a civil action 
against the United States or any officer or employee of the United 
States for any action taken in connection with the internal revenue 
laws.
    (b) Exceptions.--Subsection (a) shall not apply in any case where--
            (1) a taxpayer waives the right described in subsection (a) 
        knowingly and voluntarily; or
            (2) the request by the officer or employee is made in person 
        and the taxpayer's attorney or other federally authorized tax 
        practitioner (within the meaning of section 7525(a)(3)(A) of the 
        Internal Revenue Code of 1986) is present, or the request is 
        made in writing to the taxpayer's attorney or other 
        representative.

                  Subtitle F--Disclosures to Taxpayers

SEC. 3501. <<NOTE: Procedures. 26 USC 7801 note.>> EXPLANATION OF JOINT 
            AND SEVERAL LIABILITY.

     <<NOTE: Deadline.>> (a) In General.--The Secretary of the Treasury 
or the 
Secretary's delegate shall, as soon as practicable, but not later than 
180 days after the date of the enactment of this Act, establish 
procedures to clearly alert married taxpayers of their joint and several 
liabilities on all appropriate publications and instructions.

    (b) Right To Limit Liability.--The procedures under subsection (a) 
shall include requirements that notice of an individual's right to 
relief under section 6015 of the Internal Revenue Code of 1986 shall be 
included in the statement required by section 6227 of the Omnibus 
Taxpayer Bill of Rights (Internal Revenue Service Publication No. 1) and 
in any collection-related notices.

SEC. 3502. <<NOTE: 26 USC 7801 note.>> EXPLANATION OF TAXPAYERS' RIGHTS 
            IN INTERVIEWS WITH THE INTERNAL REVENUE SERVICE.

    The <<NOTE: Deadline.>> Secretary of the Treasury or the Secretary's 
delegate shall, as soon as practicable, but not later than 180 days 
after the date

[[Page 112 STAT. 771]]

of the enactment of this Act, revise the statement required by section 
6227 of the Omnibus Taxpayer Bill of Rights (Internal Revenue Service 
Publication No. 1) to more clearly inform taxpayers of their rights--
            (1) to be represented at interviews with the Internal 
        Revenue Service by any person authorized to practice before the 
        Internal Revenue Service; and
            (2) to suspend an interview pursuant to section 7521(b)(2) 
        of the Internal Revenue Code of 1986.

SEC. 3503. <<NOTE: 26 USC 7801 note.>> DISCLOSURE OF CRITERIA FOR 
            EXAMINATION SELECTION.

     <<NOTE: Deadline.>> (a) In General.--The Secretary of the Treasury 
or the Secretary's delegate shall, as soon as practicable, but not later 
than 180 days after the date of the enactment of this Act, incorporate 
into the statement required by section 6227 of the Omnibus Taxpayer Bill 
of Rights (Internal Revenue Service Publication No. 1) a statement which 
sets forth in simple and nontechnical terms the criteria and procedures 
for selecting taxpayers for examination. Such statement shall not 
include any information the disclosure of which would be detrimental to 
law enforcement, but shall specify the general procedures used by the 
Internal Revenue Service, including whether taxpayers are selected for 
examination on the basis of information available in the media or on the 
basis of information provided to the Internal Revenue Service by 
informants.

    (b) Transmission to Committees of Congress.--The 
Secretary shall transmit drafts of the statement required under 
subsection (a) (or proposed revisions to any such statement) to the 
Committee on Ways and Means of the House of Representatives and the 
Committee on Finance of the Senate on the same day.

SEC. 3504. <<NOTE: 26 USC 6212 note.>> EXPLANATIONS OF APPEALS AND 
            COLLECTION PROCESS.

    The <<NOTE: Deadline.>> Secretary of the Treasury or the Secretary's 
delegate shall, as soon as practicable, but not later than 180 days 
after the date of the enactment of this Act, include with any first 
letter of proposed deficiency which allows the taxpayer an opportunity 
for administrative review in the Internal Revenue Service Office of 
Appeals an explanation of the entire process from examination through 
collection with respect to such proposed deficiency, including the 
assistance available to the taxpayer from the National Taxpayer Advocate 
at various points in the process.

SEC. 3505. EXPLANATION OF REASON FOR REFUND DISALLOWANCE.

    (a) In General.--Section 6402 (relating to authority to make credits 
or refunds) is amended by adding at the end the following new 
subsection:
    ``( j) Explanation of Reason for Refund Disallowance.--In the case 
of a disallowance of a claim for refund, the Secretary shall provide the 
taxpayer with an explanation for such disallowance.''.
     <<NOTE: Applicability. 26 USC 6402 note.>> (b) Effective Date.--The 
amendment made by this section shall apply to disallowances after the 
180th day after the date of the enactment of this Act.

SEC. 3506. <<NOTE: 26 USC 6159 note.>> STATEMENTS REGARDING INSTALLMENT 
            AGREEMENTS.

    The <<NOTE: Deadline.>> Secretary of the Treasury or the Secretary's 
delegate shall, beginning not later than July 1, 2000, provide each 
taxpayer who has an installment agreement in effect under section 6159 
of the Internal Revenue Code of 1986 an annual statement setting forth

[[Page 112 STAT. 772]]

the initial balance at the beginning of the year, the payments made 
during the year, and the remaining balance as of the end of the year.

SEC. 3507. NOTIFICATION OF CHANGE IN TAX MATTERS PARTNER.

     <<NOTE: Deadline.>> (a) In General.--Section 6231(a)(7) (defining 
tax matters partner) is amended by adding at the end the following new 
sentence: ``The Secretary shall, within 30 days of selecting a tax 
matters partner under the preceding sentence, notify all partners 
required to receive notice under section 6223(a) of the name and address 
of the person selected.''.

     <<NOTE: Applicability. 26 USC 6231 note.>> (b) Effective Date.--The 
amendment made by this section shall apply to selections of tax matters 
partners made by the Secretary of the Treasury after the date of the 
enactment of this Act.

SEC. 3508. <<NOTE: 26 USC 7801 note.>> DISCLOSURE TO TAXPAYERS.

    The Secretary of the Treasury or the Secretary's delegate shall 
ensure that any instructions booklet accompanying an individual Federal 
income tax return form (including forms 1040, 1040A, 1040EZ, and any 
similar or successor forms) shall include, in clear language, in 
conspicuous print, and in a conspicuous place, a concise description of 
the conditions under which return information may be disclosed to any 
party outside the Internal Revenue Service, including disclosure to any 
State or agency, body, or commission (or legal representative) thereof.

SEC. 3509. DISCLOSURE OF CHIEF COUNSEL ADVICE.

    (a) In General.--Section 6110(b)(1) (defining written determination) 
is amended by striking ``or technical advice memorandum'' and inserting 
``technical advice memorandum, or Chief Counsel advice''.
    (b) Chief Counsel Advice.--Section 6110 (relating to public 
inspection of written determinations) is amended by redesignating 
subsections (i), ( j), (k), and (l) as subsections ( j), (k), (l), and 
(m), respectively, and by inserting after subsection (h) the following 
new subsection:
    ``(i) Special Rules for Disclosure of Chief Counsel Advice.--
            ``(1) Chief counsel advice defined.--
                    ``(A) In general.--For purposes of this section, the 
                term `Chief Counsel advice' means written advice or 
                instruction, under whatever name or designation, 
                prepared by any national office component of the Office 
                of Chief Counsel which--
                          ``(i) is issued to field or service center 
                      employees of the Service or regional or district 
                      employees of the Office of Chief Counsel; and
                          ``(ii) conveys--
                                    ``(I) any legal interpretation of a 
                                revenue 
                                provision;
                                    ``(II) any Internal Revenue Service 
                                or Office of Chief Counsel position or 
                                policy concerning a revenue provision; 
                                or
                                    ``(III) any legal interpretation of 
                                State law, foreign law, or other Federal 
                                law relating to the assessment or 
                                collection of any liability under a 
                                revenue provision.

[[Page 112 STAT. 773]]

                    ``(B) Revenue provision defined.--For purposes of 
                subparagraph (A), the term `revenue provision' means any 
                existing or former internal revenue law, regulation, 
                revenue ruling, revenue procedure, other published or 
                unpublished guidance, or tax treaty, either in general 
                or as applied to specific taxpayers or groups of 
                specific taxpayers.
            ``(2) Additional documents treated as chief counsel 
        advice.--The Secretary may by regulation provide that this 
        section shall apply to any advice or instruction prepared and 
        issued by the Office of Chief Counsel which is not described in 
        paragraph (1).
            ``(3) Deletions for chief counsel advice.--In the case of 
        Chief Counsel advice open to public inspection pursuant to this 
        section--
                    ``(A) paragraphs (2) through (7) of subsection (c) 
                shall not apply, but
                    ``(B) the Secretary may make deletions of material 
                in accordance with subsections (b) and (c) of section 
                552 of title 5, United States Code, except that in 
                applying subsection (b)(3) of such section, no statutory 
                provision of this title shall be taken into account.
            ``(4) Notice of intention to disclose.--
                    ``(A) Nontaxpayer-specific chief counsel advice.--In 
                the case of Chief Counsel advice which is written 
                without reference to a specific taxpayer or group of 
                specific taxpayers--
                          ``(i) subsection (f )(1) shall not apply; and
                          ``(ii) <<NOTE: Deadline.>> the Secretary 
                      shall, within 60 days after the issuance of the 
                      Chief Counsel advice, complete any deletions 
                      described in subsection (c)(1) or paragraph 
                      (3) <<NOTE: Public information.>> and make the 
                      Chief Counsel advice, as so edited, open for 
                      public inspection.
                    ``(B) Taxpayer-specific <<NOTE: Deadline.>> chief 
                counsel advice.--In the case of Chief Counsel advice 
                which is written with respect to a specific taxpayer or 
                group of specific taxpayers, the Secretary shall, within 
                60 days after the issuance of the Chief Counsel advice, 
                mail the notice required by subsection (f )(1) to each 
                such taxpayer. The notice shall include a copy of the 
                Chief Counsel advice on which is indicated the 
                information that the Secretary proposes to delete 
                pursuant to subsection (c)(1). The Secretary may also 
                delete from the copy of the text of the Chief Counsel 
                advice any of the information described in paragraph 
                (3), and shall delete the names, addresses, and other 
                identifying details of taxpayers other than the person 
                to whom the advice pertains, except that the Secretary 
                shall not delete from the copy of the Chief Counsel 
                advice that is furnished to the taxpayer any information 
                of which that taxpayer was the source.''.

    (c) Conforming Amendments.--
            (1) Section 6110(f )(1) is amended by striking ``The 
        Secretary'' and inserting ``Except as otherwise provided by 
        subsection (i), the Secretary''.
            (2) Paragraphs (1)(B) and (2) of section 6110( j)(1), as 
        redesignated by this section, are amended by striking 
        ``subsection (g)'' each place it appears and inserting 
        ``subsection (g) or (i)(4)(B)''.

[[Page 112 STAT. 774]]

            (3) Section 6110(k)(1)(B), as so redesignated, is amended by 
        striking ``subsection (c)'' and inserting ``subsection (c)(1) or 
        (i)(3)''.

     <<NOTE: 26 USC 6110 note.>> (d) Effective Dates.--
             <<NOTE: Applicability.>> (1) In general.--Except as 
        otherwise provided in this subsection, the amendments made by 
        this section shall apply to any Chief Counsel advice issued more 
        than 90 days after the date of the enactment of this Act.
             <<NOTE: Applicability.>> (2) Transition rules.--The 
        amendments made by this section shall apply to any Chief Counsel 
        advice issued after December 31, 1985, and before the 91st day 
        after the date of the enactment of this Act by the offices of 
        the associate chief counsel for domestic, employee benefits and 
        exempt organizations, and international, except that any such 
        Chief Counsel advice shall be treated as made available on a 
        timely basis if such advice is made available for public 
        inspection not later than the following dates:
                    (A) One year after the date of the enactment of this 
                Act, in the case of all litigation guideline memoranda, 
                service center advice, tax litigation bulletins, 
                criminal tax bulletins, and general litigation 
                bulletins.
                    (B) Eighteen months after such date of enactment, in 
                the case of field service advice and technical 
                assistance to the field issued on or after January 1, 
                1994.
                    (C) Three years after such date of enactment, in the 
                case of field service advice and technical assistance to 
                the field issued on or after January 1, 1992, and before 
                January 1, 1994.
                    (D) Six years after such date of enactment, in the 
                case of any other Chief Counsel advice issued after 
                December 31, 1985.
             <<NOTE: Public information.>> (3) Documents treated as 
        chief counsel advice.--If the Secretary of the Treasury by 
        regulation provides pursuant to section 6110(i)(2) of the 
        Internal Revenue Code of 1986, as added by this section, that 
        any additional advice or instruction issued by the Office of 
        Chief Counsel shall be treated as Chief Counsel advice, such 
        additional advice or instruction shall be made available for 
        public inspection pursuant to section 6110 of such Code, as 
        amended by this section, only in accordance with the effective 
        date set forth in such regulation.
            (4) Chief counsel advice to be available electronically.--
        The Internal Revenue Service shall make any Chief Counsel advice 
        issued more than 90 days after the date of the enactment of this 
        Act and made available for public inspection pursuant to section 
        6110 of such Code, as amended by this section, also available by 
        computer telecommunications within 1 year after issuance.

                 Subtitle G--Low-Income Taxpayer Clinics

SEC. 3601. LOW-INCOME TAXPAYER CLINICS.

    (a) In General.--Chapter 77 (relating to miscellaneous provisions), 
as amended by section 3411, is amended by adding at the end the 
following new section:

[[Page 112 STAT. 775]]

``SEC. 7526. LOW-INCOME TAXPAYER CLINICS.

    ``(a) In General.--The Secretary may, subject to the availability of 
appropriated funds, make grants to provide matching funds for the 
development, expansion, or continuation of qualified low-income taxpayer 
clinics.
    ``(b) Definitions.--For purposes of this section--
            ``(1) Qualified low-income taxpayer clinic.--
                    ``(A) In general.--The term `qualified low-income 
                taxpayer clinic' means a clinic that--
                          ``(i) does not charge more than a nominal fee 
                      for its services (except for reimbursement of 
                      actual costs incurred); and
                          ``(ii)(I) represents low-income taxpayers in 
                      controversies with the Internal Revenue Service; 
                      or
                          ``(II) operates programs to inform individuals 
                      for whom English is a second language about their 
                      rights and responsibilities under this title.
                    ``(B) Representation of low-income taxpayers.--A 
                clinic meets the requirements of subparagraph (A)(ii)(I) 
                if--
                          ``(i) at least 90 percent of the taxpayers 
                      represented by the clinic have incomes which do 
                      not exceed 250 percent of the poverty level, as 
                      determined in accordance with criteria established 
                      by the Director of the Office of Management and 
                      Budget; and
                          ``(ii) the amount in controversy for any 
                      taxable year generally does not exceed the amount 
                      specified in section 7463.
            ``(2) Clinic.--The term `clinic' includes--
                    ``(A) a clinical program at an accredited law, 
                business, or accounting school in which students 
                represent low-income taxpayers in controversies arising 
                under this title; and
                    ``(B) an organization described in section 501(c) 
                and exempt from tax under section 501(a) which satisfies 
                the requirements of paragraph (1) through representation 
                of taxpayers or referral of taxpayers to qualified 
                representatives.
            ``(3) Qualified representative.--The term `qualified 
        representative' means any individual (whether or not an 
        attorney) who is authorized to practice before the Internal 
        Revenue Service or the applicable court.

    ``(c) Special Rules and Limitations.--
            ``(1) Aggregate limitation.--Unless otherwise provided by 
        specific appropriation, the Secretary shall not allocate more 
        than $6,000,000 per year (exclusive of costs of administering 
        the program) to grants under this section.
            ``(2) Limitation on annual grants to a clinic.--The 
        aggregate amount of grants which may be made under this section 
        to a clinic for a year shall not exceed $100,000.
            ``(3) Multi-year grants.--Upon application of a qualified 
        low-income taxpayer clinic, the Secretary is authorized to award 
        a multi-year grant not to exceed 3 years.
            ``(4) Criteria for awards.--In determining whether to make a 
        grant under this section, the Secretary shall consider--

[[Page 112 STAT. 776]]

                    ``(A) the numbers of taxpayers who will be served by 
                the clinic, including the number of taxpayers in the 
                geographical area for whom English is a second language;
                    ``(B) the existence of other low-income taxpayer 
                clinics serving the same population;
                    ``(C) the quality of the program offered by the low-
                income taxpayer clinic, including the qualifications of 
                its administrators and qualified representatives, and 
                its record, if any, in providing service to low-income 
                taxpayers; and
                    ``(D) alternative funding sources available to the 
                clinic, including amounts received from other grants and 
                contributions, and the endowment and resources of the 
                institution sponsoring the clinic.
            ``(5) Requirement of matching funds.--A low-income taxpayer 
        clinic must provide matching funds on a dollar-for-dollar basis 
        for all grants provided under this section. Matching funds may 
        include--
                    ``(A) the salary (including fringe benefits) of 
                individuals performing services for the clinic; and
                    ``(B) the cost of equipment used in the clinic.
        Indirect expenses, including general overhead of the institution 
        sponsoring the clinic, shall not be counted as matching 
        funds.''.

    (b) Clerical Amendment.--The table of sections for chapter 77, as 
amended by section 3411, is amended by adding at the end the following 
new item:
                ``Sec. 7526. Low-income taxpayer clinics.''.

     <<NOTE: 26 USC 7526 note.>> (c) Effective Date.--The amendments 
made by this section shall take effect on the date of the enactment of 
this Act.

                        Subtitle H--Other Matters

SEC. 3701. <<NOTE: 26 USC 7804 note.>> CATALOGING COMPLAINTS.

    In collecting data for the report required under section 1211 of the 
Taxpayer Bill of Rights 2 (Public Law 104-168), the Secretary of the 
Treasury or the Secretary's delegate shall, not later than January 1, 
2000, maintain records of taxpayer complaints of misconduct by Internal 
Revenue Service employees on an individual employee basis.

SEC. 3702. ARCHIVE OF RECORDS OF INTERNAL REVENUE SERVICE.

    (a) In General.--Subsection (l) of section 6103 (relating to 
confidentiality and disclosure of returns and return information) is 
amended by adding at the end the following new paragraph:
            ``(17) Disclosure to national archives and records 
        administration.--The Secretary shall, upon written request from 
        the Archivist of the United States, disclose or authorize the 
        disclosure of returns and return information to officers and 
        employees of the National Archives and Records Administration 
        for purposes of, and only to the extent necessary in, the 
        appraisal of records for destruction or retention. No such 
        officer or employee shall, except to the extent authorized by 
        subsection (f ), (i)(7), or (p), disclose any return or return 
        information disclosed under the preceding sentence to any person 
        other than to the Secretary, or to another officer or employee 
        of the National Archives and Records Administration

[[Page 112 STAT. 777]]

        whose official duties require such disclosure for purposes of 
        such appraisal.''.

    (b) Conforming Amendments.--Section 6103(p) is amended--
            (1) in paragraph (3)(A), by striking ``or (16)'' and 
        inserting ``(16), or (17)'';
            (2) in paragraph (4), by striking ``or (14)'' and inserting 
        ``, (14), or (17)'' in the matter preceding subparagraph (A); 
        and
            (3) in paragraph (4)(F)(ii), by striking ``or (15)'' and 
        inserting ``, (15), or (17)''.

     <<NOTE: Applicability. 26 USC 6103 note.>> (c) Effective Date.--The 
amendments made by this section shall apply to requests made by the 
Archivist of the United States after the date of the enactment of this 
Act.

SEC. 3703. <<NOTE: Regulations. 26 USC 6311 note.>> PAYMENT OF TAXES.

    The Secretary of the Treasury or the Secretary's delegate shall 
establish such rules, regulations, and procedures as are necessary to 
allow payment of taxes by check or money order made payable to the 
United States Treasury.

SEC. 3704. CLARIFICATION OF AUTHORITY OF SECRETARY RELATING TO THE 
            MAKING OF ELECTIONS.

    Subsection (d) of section 7805 is amended by striking ``by 
regulations or forms''.

SEC. 3705. <<NOTE: 26 USC 7801 note.>> INTERNAL REVENUE SERVICE EMPLOYEE 
            CONTACTS.

    (a) Notice.--The Secretary of the Treasury or the Secretary's 
delegate shall provide that--
            (1) any manually generated correspondence received by a 
        taxpayer from the Internal Revenue Service shall include in a 
        prominent manner the name, telephone number, and unique 
        identifying number of an Internal Revenue Service employee the 
        taxpayer may contact with respect to the correspondence;
            (2) any other correspondence or notice received by a 
        taxpayer from the Internal Revenue Service shall include in a 
        prominent manner a telephone number that the taxpayer may 
        contact; and
            (3) an Internal Revenue Service employee shall give a 
        taxpayer during a telephone or personal contact the employee's 
        name and unique identifying number.

     <<NOTE: Procedures.>> (b) Single Contact.--The Secretary of the 
Treasury or the Secretary's delegate shall develop a procedure under 
which, to the extent practicable and if advantageous to the taxpayer, 
one Internal Revenue Service employee shall be assigned to handle a 
taxpayer's matter until it is resolved.

    (c) Telephone Helpline in Spanish.--The Secretary of the Treasury or 
the Secretary's delegate shall provide, in appropriate circumstances, 
that taxpayer questions on telephone helplines of the Internal Revenue 
Service are answered in Spanish.
    (d) Other Telephone Helpline Options.--The Secretary of the Treasury 
or the Secretary's delegate shall provide, in appropriate circumstances, 
on telephone helplines of the Internal Revenue Service an option for any 
taxpayer to talk to an Internal Revenue Service employee during normal 
business hours. The person shall direct phone questions of the taxpayer 
to other Internal Revenue Service personnel who can provide assistance 
to the taxpayer.
    (e) Effective Dates.--

[[Page 112 STAT. 778]]

            (1) In general.--Except as otherwise provided in this 
        subsection, this section shall take effect 60 days after the 
        date of the enactment of this Act.
            (2) Subsection (c).--Subsection (c) shall take effect on 
        January 1, 2000.
            (3) Subsection (d).--Subsection (d) shall take effect on 
        January 1, 2000.
            (4) Unique identifying number.--Any requirement under this 
        section to provide a unique identifying number shall take effect 
        6 months after the date of the enactment of this Act.

SEC. 3706. <<NOTE: 26 USC 7804 note.>> USE OF PSEUDONYMS BY INTERNAL 
            REVENUE SERVICE EMPLOYEES.

    (a) In General.--Any employee of the Internal Revenue Service may 
use a pseudonym only if--
            (1) adequate justification for the use of a pseudonym is 
        provided by the employee, including protection of personal 
        safety; and
            (2) such use is approved by the employee's supervisor before 
        the pseudonym is used.

     <<NOTE: Applicability.>> (b) Effective Date.--Subsection (a) shall 
apply to requests made after the date of the enactment of this Act.

SEC. 3707. <<NOTE: 26 USC 6651 note.>> ILLEGAL TAX PROTESTER 
            DESIGNATION.

    (a) Prohibition.--The officers and employees of the Internal Revenue 
Service--
            (1) shall not designate taxpayers as illegal tax protesters 
        (or any similar designation); and
            (2) in the case of any such designation made on or before 
        the date of the enactment of this Act--
                    (A) shall remove such designation from the 
                individual master file; and
                    (B) shall disregard any such designation not located 
                in the individual master file.

    (b) Designation of Nonfilers Allowed.--An officer or employee of the 
Internal Revenue Service may designate any appropriate taxpayer as a 
nonfiler, but shall remove such designation once the taxpayer has filed 
income tax returns for 2 consecutive taxable years and paid all taxes 
shown on such returns.
    (c) Effective Date.--The provisions of this section shall take 
effect on the date of the enactment of this Act, except that the removal 
of any designation under subsection (a)(2)(A) shall not be required to 
begin before January 1, 1999.

SEC. 3708. PROVISION OF CONFIDENTIAL INFORMATION TO CONGRESS BY 
            WHISTLEBLOWERS.

    (a) In General.--Section 6103(f ) (relating to disclosure to 
committees of Congress) is amended by adding at the end the following 
new paragraph:
            ``(5) Disclosure by whistleblower.--Any person who otherwise 
        has or had access to any return or return information under this 
        section may disclose such return or return 
        information to a committee referred to in paragraph (1) or any 
        individual authorized to receive or inspect information under 
        paragraph (4)(A) if such person believes such return or return 
        information may relate to possible misconduct, 
        maladministration, or taxpayer abuse.''.

[[Page 112 STAT. 779]]

     <<NOTE: 26 USC 6103 note.>> (b) Effective Date.--The amendment made 
by this section shall take effect on the date of the enactment of this 
Act.

SEC. 3709. <<NOTE: 26 USC 7801 note.>> LISTING OF LOCAL INTERNAL REVENUE 
            SERVICE TELEPHONE NUMBERS AND ADDRESSES.

    The Secretary of the Treasury or the Secretary's delegate shall, as 
soon as practicable, provide that the local telephone numbers and 
addresses of Internal Revenue Service offices located in any particular 
area be listed in a telephone book for that area.

SEC. 3710. IDENTIFICATION OF RETURN PREPARERS.

    (a) In General.--The last sentence of section 6109(a) (relating to 
identifying numbers) is amended by striking ``For purposes of this 
subsection'' and inserting ``For purposes of paragraphs (1), (2), and 
(3)''.
     <<NOTE: 26 USC 6109 note.>> (b) Effective Date.--The amendment made 
by this section shall take effect on the date of the enactment of this 
Act.

SEC. 3711. OFFSET OF PAST-DUE, LEGALLY ENFORCEABLE STATE INCOME TAX 
            OBLIGATIONS AGAINST OVERPAYMENTS.

    (a) In General.--Section 6402 (relating to authority to make credits 
or refunds), as amended by section 3505, is amended by redesignating 
subsections (e) through ( j) as subsections (f ) through (k), 
respectively, and by inserting after subsection (d) the following new 
subsection:
    ``(e) Collection of Past-Due, Legally Enforceable State Income Tax 
Obligations.--
             <<NOTE: Notification.>> ``(1) In general.--Upon receiving 
        notice from any State that a named person owes a past-due, 
        legally enforceable State income tax obligation to such State, 
        the Secretary shall, under such conditions as may be prescribed 
        by the Secretary--
                    ``(A) reduce the amount of any overpayment payable 
                to such person by the amount of such State income tax 
                obligation;
                    ``(B) pay the amount by which such overpayment is 
                reduced under subparagraph (A) to such State and notify 
                such State of such person's name, taxpayer 
                identification number, address, and the amount 
                collected; and
                    ``(C) notify the person making such overpayment that 
                the overpayment has been reduced by an amount necessary 
                to satisfy a past-due, legally enforceable State income 
                tax obligation.
        If an offset is made pursuant to a joint return, the notice 
        under subparagraph (B) shall include the names, taxpayer 
        identification numbers, and addresses of each person filing such 
        return.
             <<NOTE: Applicability.>> ``(2) Offset permitted only 
        against residents of state seeking offset.--Paragraph (1) shall 
        apply to an overpayment by any person for a taxable year only if 
        the address shown on the Federal return for such taxable year of 
        the overpayment is an address within the State seeking the 
        offset.
            ``(3) Priorities for offset.--Any overpayment by a person 
        shall be reduced pursuant to this subsection--
                    ``(A) after such overpayment is reduced pursuant 
                to--
                          ``(i) subsection (a) with respect to any 
                      liability for any internal revenue tax on the part 
                      of the person who made the overpayment;

[[Page 112 STAT. 780]]

                          ``(ii) subsection (c) with respect to past-due 
                      support; and
                          ``(iii) subsection (d) with respect to any 
                      past-due, legally enforceable debt owed to a 
                      Federal agency; and
                    ``(B) before such overpayment is credited to the 
                future liability for any Federal internal revenue tax of 
                such person pursuant to subsection (b).
        If the Secretary receives notice from one or more agencies of 
        the State of more than one debt subject to paragraph (1) that is 
        owed by such person to such an agency, any overpayment by such 
        person shall be applied against such debts in the order in which 
        such debts accrued.
            ``(4) Notice; consideration of evidence.--No State may take 
        action under this subsection until such State--
                    ``(A) notifies by certified mail with return receipt 
                the person owing the past-due State income tax liability 
                that the State proposes to take action pursuant to this 
                section;
                    ``(B) gives such person at least 60 days to present 
                evidence that all or part of such liability is not past-
                due or not legally enforceable;
                    ``(C) considers any evidence presented by such 
                person and determines that an amount of such debt is 
                past-due and legally enforceable; and
                    ``(D) satisfies such other conditions as the 
                Secretary may prescribe to ensure that the determination 
                made under subparagraph (C) is valid and that the State 
                has made reasonable efforts to obtain payment of such 
                State income tax obligation.
            ``(5) Past-due, legally enforceable state income tax 
        obligation.--For purposes of this subsection, the term `past-
        due, legally enforceable State income tax obligation' means a 
        debt--
                    ``(A)(i) which resulted from--
                          ``(I) a judgment rendered by a court of 
                      competent jurisdiction which has determined an 
                      amount of State income tax to be due; or
                          ``(II) a determination after an administrative 

                      hearing which has determined an amount of State 
                      income tax to be due; and
                    ``(ii) which is no longer subject to judicial 
                review; or
                    ``(B) which resulted from a State income tax which 
                has been assessed but not collected, the time for 
                redetermination of which has expired, and which has not 
                been delinquent for more than 10 years.
        For purposes of this paragraph, the term `State income tax' 
        includes any local income tax administered by the chief tax 
        administration agency of the State.
            ``(6) Regulations.--The Secretary shall issue regulations 
        prescribing the time and manner in which States must submit 
        notices of past-due, legally enforceable State income tax 
        obligations and the necessary information that must be contained 
        in or accompany such notices. The regulations shall specify the 
        types of State income taxes and the minimum amount of debt to 
        which the reduction procedure established by paragraph (1) may 
        be applied. The regulations may require States to pay a fee to 
        reimburse the Secretary for the cost of applying such procedure. 
        Any fee paid to the Secretary pursuant to

[[Page 112 STAT. 781]]

        the preceding sentence shall be used to reimburse appropriations 
        which bore all or part of the cost of applying such procedure.
            ``(7) Erroneous payment to state.--Any State receiving 
        notice from the Secretary that an erroneous payment has been 
        made to such State under paragraph (1) shall pay promptly to the 
        Secretary, in accordance with such regulations as the Secretary 
        may prescribe, an amount equal to the amount of such erroneous 
        payment (without regard to whether any other amounts payable to 
        such State under such paragraph have been paid to such 
        State).''.

    (b) Disclosure of Certain Information to States Requesting Refund 
Offsets for Past-Due, Legally Enforceable State Income Tax 
Obligations.--
            (1) Paragraph (10) of section 6103(l) is amended by striking 
        ``(c) or (d)'' each place it appears and inserting ``(c), (d), 
        or (e)''.
            (2) The heading for paragraph (10) is amended by striking 
        ``section 6402 (c) or 6402 (d)'' and inserting ``subsection (c), 
        (d), or (e) of section 6402''.

    (c) Conforming Amendments.--
            (1) Subsection (a) of section 6402 is amended by striking 
        ``(c) and (d)'' and inserting ``(c), (d), and (e)''.
            (2) Paragraph (2) of section 6402(d) is amended by striking 
        ``and before such overpayment'' and inserting ``and before such 
        overpayment is reduced pursuant to subsection (e) and before 
        such overpayment''.
            (3) Subsection (f ) of section 6402, as redesignated by 
        subsection (a), is amended--
                    (A) by striking ``(c) or (d)'' and inserting ``(c), 
                (d), or (e)''; and
                    (B) by striking ``Federal agency'' and inserting 
                ``Federal agency or State''.
            (4) Subsection (h) of section 6402, as redesignated by 
        subsection (a), is amended by striking ``subsection (c)'' and 
        inserting ``subsection (c) or (e)''.

     <<NOTE: Applicability. 26 USC 6103 note.>> (d) Effective Date.--The 
amendments made by this section (other than subsection (d)) shall apply 
to refunds payable under section 6402 of the Internal Revenue Code of 
1986 after December 31, 1999.

SEC. 3712. REPORTING REQUIREMENTS IN CONNECTION WITH 
            EDUCATION TAX CREDIT.

    (a) Amounts to be Reported.--Subparagraph (C) of section 6050S(b)(2) 
is amended--
            (1) by redesignating clauses (ii) and (iii) as clauses (iii) 
        and (iv), respectively, and by inserting after clause (i) the 
        following new clause:
                          ``(ii) the amount of any grant received by 
                      such individual for payment of costs of attendance 
                      and processed by the person making such return 
                      during such calendar year,'';
            (2) in clause (iii) (as so redesignated), by inserting ``by 
        the person making such return'' after ``year''; and
            (3) in clause (iv) (as so redesignated), by inserting 
        ``and'' at the end.

    (b) Conforming Amendments.--

[[Page 112 STAT. 782]]

            (1) Paragraph (2) of section 6050S(d) is amended by striking 
        ``aggregate''.
            (2) Subsection (e) of section 6050S is amended by inserting 
        ``(without regard to subsection (g)(2) thereof)'' after 
        ``section 25A''.

     <<NOTE: Applicability. 26 USC 6050S note.>> (c) Effective Date.--
The amendments made by this section shall apply to returns required to 
be filed with respect to taxable years beginning after December 31, 
1998.

                           Subtitle I--Studies

SEC. 3801. <<NOTE: 26 USC 6601 note.>> ADMINISTRATION OF PENALTIES AND 
            INTEREST.

    The Joint Committee on Taxation and the Secretary of the Treasury 
shall each conduct a separate study--
            (1) reviewing the administration and implementation by the 
        Internal Revenue Service of the interest and penalty provisions 
        of the Internal Revenue Code of 1986 (including the penalty 
        reform provisions of the Omnibus Budget Reconciliation Act of 
        1989); and
            (2) making any legislative and administrative 
        recommendations the Committee or the Secretary deems appropriate 
        to simplify penalty or interest administration and reduce 
        taxpayer burden.

Such <<NOTE: Deadline.>> studies shall be submitted to the Committee on 
Ways and Means of the House of Representatives and the Committee on 
Finance of the Senate not later than 1 year after the date of the 
enactment of this Act.

SEC. 3802. <<NOTE: 26 USC 6103 note.>> CONFIDENTIALITY OF TAX RETURN 
            INFORMATION.

    The <<NOTE: Reports. Deadline.>> Joint Committee on Taxation and the 
Secretary of the Treasury shall each conduct a separate study of the 
scope and use of provisions regarding taxpayer confidentiality, and 
shall report the findings of such study, together with such 
recommendations as the Committee or the Secretary deems appropriate, to 
the Congress not later than 18 months after the date of the enactment of 
this Act. Such study shall examine--
            (1) the present protections for taxpayer privacy;
            (2) any need for third parties to use tax return 
        information;
            (3) whether greater levels of voluntary compliance may be 
        achieved by allowing the public to know who is legally required 
        to file tax returns, but does not file tax returns;
            (4) the interrelationship of the taxpayer confidentiality 
        provisions in the Internal Revenue Code of 1986 with such 
        provisions in other Federal law, including section 552a of title 
        5, United States Code (commonly known as the ``Freedom of 
        Information Act'');
            (5) the impact on taxpayer privacy of the sharing of income 
        tax return information for purposes of enforcement of State and 
        local tax laws other than income tax laws, and including the 
        impact on the taxpayer privacy intended to be protected at the 
        Federal, State, and local levels under Public Law 105-35, the 
        Taxpayer Browsing Protection Act of 1997; and
            (6) whether the public interest would be served by greater 
        disclosure of information relating to tax exempt organizations 
        described in section 501 of the Internal Revenue Code of 1986.

[[Page 112 STAT. 783]]

SEC. 3803. <<NOTE: 26 USC 7801 note.>> STUDY OF NONCOMPLIANCE WITH 
            INTERNAL REVENUE LAWS BY TAXPAYERS.

    Not <<NOTE: Deadline.>> later than 1 year after the date of the 
enactment of this Act, the Secretary of the Treasury and the 
Commissioner of Internal Revenue shall jointly conduct a study, in 
consultation with the Joint Committee on Taxation, of the noncompliance 
with internal revenue laws by taxpayers (including willful noncompliance 
and noncompliance due to tax law complexity or other factors) and report 
the findings of such study to Congress.

SEC. 3804. <<NOTE: 26 USC 7623 note.>> STUDY OF PAYMENTS MADE FOR 
            DETECTION OF UNDERPAYMENTS AND FRAUD.

    Not <<NOTE: Deadline. Reports.>> later than 1 year after the date of 
the enactment of this Act, the Secretary of the Treasury shall conduct a 
study and report to Congress on the use of section 7623 of the Internal 
Revenue Code of 1986 including--
            (1) an analysis of the present use of such section and the 
        results of such use; and
            (2) any legislative or administrative recommendations 
        regarding the provisions of such section and its application.

 TITLE IV--CONGRESSIONAL ACCOUNTABILITY FOR THE INTERNAL REVENUE SERVICE

                          Subtitle A--Oversight

SEC. 4001. EXPANSION OF DUTIES OF THE JOINT COMMITTEE ON 
            TAXATION.

    (a) In General.--Section 8021 (relating to the powers of the Joint 
Committee on Taxation) is amended by adding at the end the following new 
subsections:
    ``(e) Investigations.--The Joint Committee shall review all requests 
(other than requests by the chairman or ranking member of a committee or 
subcommittee) for investigations of the Internal Revenue Service by the 
General Accounting Office, and approve such requests when appropriate, 
with a view towards eliminating overlapping investigations, ensuring 
that the General Accounting Office has the capacity to handle the 
investigation, and ensuring that investigations focus on areas of 
primary importance to tax administration.
    ``(f ) Relating to Joint Reviews.--
            ``(1) In general.--The Chief of Staff, and the staff of the 
        Joint Committee, shall provide such assistance as is required 
        for joint reviews described in paragraph (2).
             <<NOTE: Deadline.>> ``(2) Joint reviews.--Before June 1 of 
        each calendar year after 1998 and before 2004, there shall be a 
        joint review of the strategic plans and budget for the Internal 
        Revenue Service and such other matters as the Chairman of the 
        Joint Committee deems appropriate. Such joint review shall be 
        held at the call of the Chairman of the Joint Committee and 
        shall include two members of the majority and one member of the 
        minority from each of the Committees on Finance, Appropriations, 
        and Governmental Affairs of the Senate, and the Committees on

[[Page 112 STAT. 784]]

        Ways and Means, Appropriations, and Government Reform and 
        Oversight of the House of Representatives.''.

     <<NOTE: 26 USC 8021 note.>> (b) Effective Dates.--
            (1) <<NOTE: Applicability.>> Subsection (e) of section 8021 
        of the Internal Revenue Code of 1986, as added by subsection (a) 
        of this section, shall apply to requests made after the date of 
        the enactment of this Act.
            (2) Subsection (f ) of such section shall take effect on the 
        date of the enactment of this Act.

SEC. 4002. COORDINATED OVERSIGHT REPORTS.

    (a) In General.--Paragraph (3) of section 8022 (relating to the 
duties of the Joint Committee on Taxation) is amended to read as 
follows:
            ``(3) Reports.--
                    ``(A) To report, from time to time, to the Committee 
                on Finance and the Committee on Ways and Means, and, in 
                its discretion, to the Senate or House of 
                Representatives, or both, the results of its 
                investigations, together with such recommendations as it 
                may deem advisable.
                    ``(B) Subject to amounts specifically appropriated 
                to carry out this subparagraph, to report, at least once 
                each Congress, to the Committee on Finance and the 
                Committee on Ways and Means on the overall state of the 
                Federal tax system, together with recommendations with 
                respect to possible simplification proposals and other 
                matters relating to the administration of the Federal 
                tax system as it may deem advisable.
                    ``(C) <<NOTE: Deadline.>> To report, for each 
                calendar year after 1998 and before 2004, to the 
                Committees on Finance, Appropriations, and Governmental 
                Affairs of the Senate, and to the Committees on Ways and 
                Means, Appropriations, and Government Reform and 
                Oversight of the House of Representatives, with respect 
                to--
                          ``(i) strategic and business plans for the 
                      Internal Revenue Service;
                          ``(ii) progress of the Internal Revenue 
                      Service in meeting its objectives;
                          ``(iii) the budget for the Internal Revenue 
                      Service and whether it supports its objectives;
                          ``(iv) progress of the Internal Revenue 
                      Service in improving taxpayer service and 
                      compliance;
                          ``(v) progress of the Internal Revenue Service 
                      on technology modernization; and
                          ``(vi) the annual filing season.''.

     <<NOTE: 26 USC 8022 note.>> (b) Effective Date.--The amendment made 
by this section shall take effect on the date of the enactment of this 
Act.

                     Subtitle B--Century Date Change

SEC. 4011. CENTURY DATE CHANGE.

    It is the sense of the Congress that--
            (1) the Internal Revenue Service should place a high 
        priority on resolving the century date change computing 
        problems; and

[[Page 112 STAT. 785]]

            (2) the Internal Revenue Service efforts to resolve the 
        century date change computing problems should be funded fully to 
        provide for certain resolution of such problems.

                     Subtitle C--Tax Law Complexity

SEC. 4021. ROLE OF THE INTERNAL REVENUE SERVICE.

    It is the sense of the Congress that the Internal Revenue Service 
should provide Congress with an independent view of tax administration, 
and that during the legislative process, the tax writing committees of 
Congress should hear from front-line technical experts at the Internal 
Revenue Service with respect to the administrability of pending 
amendments to the Internal Revenue Code of 1986.

SEC. 4022. TAX LAW COMPLEXITY ANALYSIS.

    (a) Commissioner <<NOTE: 26 USC 7801 note.>> Study.--
            (1) In general.--The Commissioner of Internal Revenue shall 
        conduct each year after 1998 an analysis of the sources of 
        complexity in administration of the Federal tax laws. Such 
        analysis may include an analysis of--
                    (A) questions frequently asked by taxpayers with 
                respect to return filing;
                    (B) common errors made by taxpayers in filling out 
                their returns;
                    (C) areas of law which frequently result in 
                disagreements between taxpayers and the Internal Revenue 

                Service;
                    (D) major areas of law in which there is no (or 
                incomplete) published guidance or in which the law is 
                uncertain;
                    (E) areas in which revenue officers make frequent 
                errors interpreting or applying the law;
                    (F) the impact of recent legislation on complexity; 
                and
                    (G) forms supplied by the Internal Revenue Service, 
                including the time it takes for taxpayers to complete 
                and review forms, the number of taxpayers who use each 
                form, and how recent legislation has affected the time 
                it takes to complete and review forms.
             <<NOTE: Deadline.>> (2) Report.--The Commissioner shall not 
        later than March 1 of each year report the results of the 
        analysis conducted under paragraph (1) for the preceding year to 
        the Committee on Ways and Means of the House of Representatives 
        and the Committee on Finance of the Senate. The report shall 
        include any recommendations--
                    (A) for reducing the complexity of the 
                administration of Federal tax laws; and
                    (B) for repeal or modification of any provision the 
                Commissioner believes adds undue and unnecessary 
                complexity to the administration of the Federal tax 
                laws.

     <<NOTE: 26 USC 8022 note.>> (b) Analysis to Accompany Certain 
Legislation.--
            (1) In general.--The Joint Committee on Taxation, in 
        consultation with the Internal Revenue Service and the 
        Department of the Treasury, shall include a tax complexity 
        analysis in each report for legislation, or provide such 
        analysis to members of the committee reporting the legislation 
        as soon as practicable after the report is filed, if--

[[Page 112 STAT. 786]]

                    (A) such legislation is reported by the Committee on 
                Finance in the Senate, the Committee on Ways and Means 
                of the House of Representatives, or any committee of 
                conference; and
                    (B) such legislation includes a provision which 
                would directly or indirectly amend the Internal Revenue 
                Code of 1986 and which has widespread applicability to 
                individuals or small businesses.
            (2) Tax complexity analysis.--For purposes of this 
        subsection, the term ``tax complexity analysis'' means, with 
        respect to any legislation, a report on the complexity and 
        administrative difficulties of each provision described in 
        paragraph (1)(B) which--
                    (A) includes--
                          (i) an estimate of the number of taxpayers 
                      affected by the provision; and
                          (ii) if applicable, the income level of 
                      taxpayers affected by the provision; and
                    (B) should include (if determinable)--
                          (i) the extent to which tax forms supplied by 
                      the Internal Revenue Service would require 
                      revision and whether any new forms would be 
                      required;
                          (ii) the extent to which taxpayers would be 
                      required to keep additional records;
                          (iii) the estimated cost to taxpayers to 
                      comply with the provision;
                          (iv) the extent to which enactment of the 
                      provision would require the Internal Revenue 
                      Service to develop or modify regulatory guidance;
                          (v) the extent to which the provision may 
                      result in disagreements between taxpayers and the 
                      Internal Revenue Service; and
                          (vi) any expected impact on the Internal 
                      Revenue Service from the provision (including the 
                      impact on internal training, revision of the 
                      Internal Revenue Manual, reprogramming of 
                      computers, and the extent to which the Internal 
                      Revenue Service would be required to divert or 
                      redirect resources in response to the provision).
            (3) Legislation subject to point of order in house of 
        representatives.--
                    (A) Legislation reported by committee on ways and 
                means.--Clause 2(l) of rule XI of the Rules of the House 
                of Representatives is amended by adding at the end the 
                following new subparagraph:

    ``(8) The report of the Committee on Ways and Means on any bill or 
joint resolution containing any provision amending the Internal Revenue 
Code of 1986 shall include a Tax Complexity Analysis prepared by the 
Joint Committee on Taxation in accordance with section 4022(b) of the 
Internal Revenue Service Restructuring and Reform Act of 1998 unless the 
Committee on Ways and Means causes to have such Analysis printed in the 
Congressional Record prior to the consideration of the bill or joint 
resolution.''.
                    (B) Conference reports.--Rule XXVIII of the Rules of 
                the House of Representatives is amended by adding at the 
                end the following new clause:

[[Page 112 STAT. 787]]

    ``7. It shall not be in order to consider the report of a committee 
of conference which contains any provision amending the Internal Revenue 
Code of 1986 unless--
            ``(a) the accompanying joint explanatory statement contains 
        a Tax Complexity Analysis prepared by the Joint Committee on 
        Taxation in accordance with section 4022(b) of the Internal 
        Revenue Service Restructuring and Reform Act of 1998; or
            ``(b) such Analysis is printed in the Congressional Record 
        prior to the consideration of the report.''.
                    (C) Rules of house of representatives.--This 
                paragraph is enacted by the House of Representatives--
                          (i) as an exercise of the rulemaking power of 
                      the House of Representatives, and as such it is 
                      deemed a part of the Rules of the House, and it 
                      supersedes other rules only to the extent that it 
                      is inconsistent therewith; and
                          (ii) with full recognition of the 
                      constitutional right of the House to change its 
                      rules at any time, in the same manner and to the 
                      same extent as in the case of any other rule of 
                      the House.
             <<NOTE: Applicability.>> (4) Effective date.--This 
        subsection shall apply to legislation considered on and after 
        January 1, 1999.

                     TITLE V--ADDITIONAL PROVISIONS

SEC. 5001. LOWER CAPITAL GAINS RATES TO APPLY TO PROPERTY HELD MORE THAN 
            1 YEAR.

    (a) General Rule.--
            (1) Paragraph (5) of section 1(h) is amended to read as 
        follows:
            ``(5) 28-percent rate gain.--For purposes of this 
        subsection, the term `28-percent rate gain' means the excess (if 
        any) of--
                    ``(A) the sum of--
                          ``(i) collectibles gain; and
                          ``(ii) section 1202 gain, over
                    ``(B) the sum of--
                          ``(i) collectibles loss;
                          ``(ii) the net short-term capital loss; and
                          ``(iii) the amount of long-term capital loss 
                      carried under section 1212(b)(1)(B) to the taxable 
                      year.''.
            (2) Subparagraph (A) of section 1(h)(6) is amended by 
        striking ``18 months'' and inserting ``1 year''.
            (3) Clauses (i) and (ii) of section 1(h)(7)(A) are amended 
        to read as follows:
                          ``(i) the amount of long-term capital gain 
                      (not otherwise treated as ordinary income) which 
                      would be treated as ordinary income if section 
                      1250(b)(1) included all depreciation and the 
                      applicable percentage under section 1250(a) were 
                      100 percent, over
                          ``(ii) the excess (if any) of--
                                    ``(I) the amount described in 
                                paragraph (5)(B); over
                                    ``(II) the amount described in 
                                paragraph (5)(A).''.

[[Page 112 STAT. 788]]

            (4) So much of paragraph (13) of section 1(h) as precedes 
        subparagraph (C) is amended to read as follows:
            ``(13) Special rules.--
                    ``(A) Determination of 28-percent rate gain.--In 
                applying paragraph (5)--
                          ``(i) the amount determined under subparagraph 
                      (A) of paragraph (5) shall include long-term 
                      capital gain (not otherwise described in such 
                      subparagraph)--
                                    ``(I) which is properly taken into 
                                account for the portion of the taxable 
                                year before May 7, 1997; or
                                    ``(II) from property held not more 
                                than 18 months which is properly taken 
                                into account for the portion of the 
                                taxable year after July 28, 1997, and 
                                before January 1, 1998;
                          ``(ii) the amount determined under 
                      subparagraph (B) of paragraph (5) shall include 
                      long-term capital loss (not otherwise described in 
                      such subparagraph)--
                                    ``(I) which is properly taken into 
                                account for the portion of the taxable 
                                year before May 7, 1997; or
                                    ``(II) from property held not more 
                                than 18 months which is properly taken 
                                into account for the portion of the 
                                taxable year after July 28, 1997, and 
                                before January 1, 1998; and
                           <<NOTE: Applicability.>> ``(iii) subparagraph 
                      (B) of paragraph (5) (as in effect immediately 
                      before the enactment of this clause) shall apply 
                      to amounts properly taken into account before 
                      January 1, 1998.
                    ``(B) Determination of unrecaptured section 1250 
                gain.--The amount determined under paragraph (7)(A) 
                shall not include gain--
                          ``(i) which is properly taken into account for 
                      the portion of the taxable year before May 7, 
                      1997; or
                          ``(ii) from property held not more than 18 
                      months which is properly taken into account for 
                      the portion of the taxable year after July 28, 
                      1997, and before January 1, 1998.''.
            (5) Paragraphs (11) and (12) of section 1223, and section 
        1235(a), are each amended by striking ``18 months'' each place 
        it appears and inserting ``1 year''.

     <<NOTE: 26 USC 1 note.>> (b) Effective Dates.--
             <<NOTE: Applicability.>> (1) In general.--Except as 
        provided in paragraph (2), the amendments made by this section 
        shall apply to taxable years ending after December 31, 1997.
            (2) Subsection (a)(5).--The amendments made by subsection 
        (a)(5) shall take effect on January 1, 1998.

SEC. 5002. CLARIFICATION OF EXCLUSION OF MEALS FOR CERTAIN EMPLOYEES.

    (a) In General.--Subsection (b) of section 119 (relating to meals or 
lodging furnished for the convenience of the employer) is amended by 
adding at the end the following new paragraph:
            ``(4) Meals furnished to employees on business premises 
        where meals of most employees are otherwise excludable.--All 
        meals furnished on the business premises of an employer to such 
        employer's employees shall be treated

[[Page 112 STAT. 789]]

        as furnished for the convenience of the employer if, without 
        regard to this paragraph, more than half of the employees to 
        whom such meals are furnished on such premises are furnished 
        such meals for the convenience of the employer.''.

     <<NOTE: Applicability. 26 USC 119 note.>> (b) Effective Date.--The 
amendment made by subsection (a) shall apply to taxable years beginning 
before, on, or after the date of the enactment of this Act.

SEC. 5003. CLARIFICATION OF DESIGNATION OF NORMAL TRADE 
            RELATIONS.

     <<NOTE: 19 USC 2481 note.>> (a) Findings and Policy.--
            (1) Findings.--The Congress makes the following findings:
                    (A) Since the 18th century, the principle of 
                nondiscrimination among countries with which the United 
                States has trade relations, commonly referred to as 
                ``most-favored-nation'' treatment, has been a 
                cornerstone of United States trade policy.
                    (B) Although the principle remains firmly in place 
                as a fundamental concept in United States trade 
                relations, the term ``most-favored-nation'' is a 
                misnomer which has led to public misunderstanding.
                    (C) It is neither the purpose nor the effect of the 
                most-favored-nation principle to treat any country as 
                ``most favored''. To the contrary, the principle 
                reflects the intention to confer on a country the same 
                trade benefits that are conferred on any other country, 
                that is, the intention not to discriminate among trading 
                partners.
                    (D) The term ``normal trade relations'' is a more 
                accurate description of the principle of 
                nondiscrimination as it applies to the tariffs 
                applicable generally to imports from United States 
                trading partners, that is, the general rates of duty set 
                forth in column 1 of the Harmonized Tariff Schedule of 
                the United States.
            (2) Policy.--It is the sense of the Congress that--
                    (A) the language used in United States laws, 
                treaties, agreements, executive orders, directives, and 
                regulations should more clearly and accurately reflect 
                the underlying principles of United States trade policy; 
                and
                    (B) accordingly, the term ``normal trade relations'' 
                should, where appropriate, be substituted for the term 
                ``most-favored-nation''.

    (b) Change in Terminology.--
            (1) Trade expansion act of 1962.--The heading for section 
        251 of the Trade Expansion Act of 1962 (19 U.S.C. 1881) is 
        amended to read as follows: ``normal trade relations''.
            (2) Trade act of 1974.--(A) Section 402 of the Trade Act of 
        1974 (19 U.S.C. 2432) is amended by striking ``(most-favored-
        nation treatment)'' each place it appears and inserting 
        ``(normal trade relations)''.
            (B) Section 601(9) of the Trade Act of 1974 (19 U.S.C. 
        2481(9)) is amended by striking ``most-favored-nation 
        treatment'' and inserting ``trade treatment based on normal 
        trade relations (known under international law as most-favored-
        nation treatment)''.
            (3) CFTA.--Section 302(a)(3)(C) of the United States Canada 
        Free-Trade Agreement Implementation Act of 1988 (19 U.S.C. 2112 
        note) is amended by striking ``the most-favored-

[[Page 112 STAT. 790]]

        nation rate of duty'' each place it appears and inserting ``the 
        general subcolumn of the column 1 rate of duty set forth in the 
        Harmonized Tariff Schedule of the United States''.
            (4) NAFTA.--Section 202(n) of the North American Free Trade 
        Agreement Implementation Act (19 U.S.C. 3332(n)) is amended by 
        striking ``most-favored-nation''.
            (5) Uruguay round agreements act.--Section 135(a)(2) of the 
        Uruguay Round Agreements Act (19 U.S.C. 3555(a)(2)) is amended 
        by striking ``most-favored-nation'' and inserting ``normal trade 
        relations''.
            (6) SEED act.--Section 2(c)(11) of the Support for East 
        European Democracy (SEED) Act of 1989 (22 U.S.C. 5401(c)(11)) is 
        amended--
                    (A) by striking ``(commonly referred to as `most 
                favored nation status')''; and
                    (B) by striking ``Most favored nation trade status'' 
                in the heading and inserting ``Normal trade relations''.
            (7) United States-Hong Kong Policy Act of 1992.--Section 
        103(4) of the United States-Hong Kong Policy Act of 1992 (22 
        U.S.C. 5713(4)) is amended by striking ``(commonly referred to 
        as `most-favored-nation status')''.

     <<NOTE: 19 USC 2481 note.>> (c) Savings Provisions.--Nothing in 
this section shall affect the meaning of any provision of law, Executive 
order, Presidential proclamation, rule, regulation, delegation of 
authority, other document, or treaty or other international agreement of 
the United States relating to the principle of ``most-favored-nation'' 
(or ``most favored nation'') treatment. Any Executive order, 
Presidential proclamation, rule, regulation, delegation of authority, 
other document, or treaty or other international agreement of the United 
States that has been issued, made, granted, or allowed to become 
effective and that is in effect on the effective date of this Act, or 
was to become effective on or after the effective date of this Act, 
shall continue in effect according to its terms until modified, 
terminated, superseded, set aside, or revoked in accordance with law.

      TITLE VI--TECHNICAL <<NOTE: Tax Technical Corrections Act of 
1998.>> CORRECTIONS

SEC. 6001. SHORT TITLE; COORDINATION WITH OTHER TITLES.

     <<NOTE: 26 USC 1 note.>> (a) Short Title.--This title may be cited 
as the ``Tax Technical Corrections Act of 1998''.

     <<NOTE: 26 USC 1 note.>> (b) Coordination With Other Titles.--For 
purposes of applying the amendments made by any title of this Act other 
than this title, the provisions of this title shall be treated as having 
been enacted immediately before the provisions of such other titles.

SEC. 6002. DEFINITIONS.

    For purposes of this title--
            (1) 1986 code.--The term ``1986 Code'' means the Internal 
        Revenue Code of 1986.
            (2) 1997 act.--The term ``1997 Act'' means the Taxpayer 
        Relief Act of 1997.

SEC. 6003. AMENDMENTS RELATED TO TITLE I OF 1997 ACT.

    (a) Amendments Related to Section 101(a) of 1997 Act.--
            (1) Subsection (d) of section 24 of the 1986 Code is 
        amended--

[[Page 112 STAT. 791]]

                    (A) by striking paragraphs (3) and (4);
                    (B) by redesignating paragraph (5) as paragraph (3); 
                and
                    (C) by striking paragraphs (1) and (2) and inserting 
                the following new paragraphs:
            ``(1) In general.--In the case of a taxpayer with three or 
        more qualifying children for any taxable year, the aggregate 
        credits allowed under subpart C shall be increased by the lesser 
        of--
                    ``(A) the credit which would be allowed under this 
                section without regard to this subsection and the 
                limitation under section 26(a); or
                    ``(B) the amount by which the aggregate amount of 
                credits allowed by this subpart (without regard to this 
                subsection) would increase if the limitation imposed by 
                section 26(a) were increased by the excess (if any) of--
                          ``(i) the taxpayer's Social Security taxes for 
                      the taxable year, over
                          ``(ii) the credit allowed under section 32 
                      (determined without regard to subsection (n)) for 
                      the taxable year.
        The amount of the credit allowed under this subsection shall not 
        be treated as a credit allowed under this subpart and shall 
        reduce the amount of credit otherwise allowable under subsection 
        (a) without regard to section 26(a).
            ``(2) Reduction of credit to taxpayer subject to alternative 
        minimum tax.--The credit determined under this subsection for 
        the taxable year shall be reduced by the excess (if any) of--
                    ``(A) the amount of tax imposed by section 55 
                (relating to alternative minimum tax) with respect to 
                such taxpayer for such taxable year, over
                    ``(B) the amount of the reduction under section 
                32(h) with respect to such taxpayer for such taxable 
                year.''.
            (2) Paragraph (3) of section 24(d) of the 1986 Code (as 
        redesignated by paragraph (1)) is amended by striking 
        ``paragraph (3)'' and inserting ``paragraph (1)''.

    (b) Amendments Related to Section 101(b) of 1997 Act.--
            (1) The subsection (m) of section 32 of the 1986 Code added 
        by section 101(b) of the 1997 Act is amended to read as follows:

    ``(n) Supplemental Child Credit.--
            ``(1) In general.--In the case of a taxpayer with respect to 
        whom a credit is allowed under section 24(a) for the taxable 
        year, the credit otherwise allowable under this section shall be 
        increased by the lesser of--
                    ``(A) the excess of--
                          ``(i) the credits allowed under subpart A 
                      (determined after the application of section 26 
                      and without regard to this subsection), over
                          ``(ii) the credits which would be allowed 
                      under subpart A after the application of section 
                      26, determined without regard to section 24 and 
                      this subsection; or
                    ``(B) the excess of--

[[Page 112 STAT. 792]]

                          ``(i) the sum of the credits allowed under 
                      this part (determined without regard to sections 
                      31, 33, and 34 and this subsection), over
                          ``(ii) the sum of the regular tax and the 
                      Social Security taxes (as defined in section 
                      24(d)).
        The credit determined under this subsection shall be allowed 
        without regard to any other provision of this section, including 
        subsection (d).
            ``(2) Coordination with other credits.--The amount of the 
        credit under this subsection shall reduce the amount of the 
        credits otherwise allowable under subpart A for the taxable year 
        (determined after the application of section 26), but the amount 
        of the credit under this subsection (and such reduction) shall 
        not be taken into account in determining the amount of any other 
        credit allowable under this part.''.

SEC. 6004. AMENDMENTS RELATED TO TITLE II OF 1997 ACT.

    (a) Amendments Related to Section 201 of 1997 Act.--
            (1) The item relating to section 25A in the table of 
        sections for subpart A of part IV of subchapter A of chapter 1 
        of the 1986 Code is amended to read as follows:
                ``Sec. 25A. Hope and Lifetime Learning credits.''.

            (2) Subsection (a) of section 6050S of the 1986 Code is 
        amended to read as follows:

    ``(a) In General.--Any person--
            ``(1) which is an eligible educational institution--
                    ``(A) which receives payments for qualified tuition 
                and related expenses with respect to any individual for 
                any calendar year; or
                    ``(B) which makes reimbursements or refunds (or 
                similar amounts) to any individual of qualified tuition 
                and related expenses;
            ``(2) which is engaged in a trade or business of making 
        payments to any individual under an insurance arrangement as 
        reimbursements or refunds (or similar amounts) of qualified 
        tuition and related expenses; or
            ``(3) except as provided in regulations, which is engaged in 
        a trade or business and, in the course of which, receives from 
        any individual interest aggregating $600 or more for any 
        calendar year on one or more qualified education loans,

shall make the return described in subsection (b) with respect to the 
individual at such time as the Secretary may by regulations 
prescribe.''.
            (3) Subparagraph <<NOTE: 26 USC 6724.>> (A) of section 
        201(c)(2) of the 1997 Act is amended to read as follows:
                    ``(A) Subparagraph (B) of section 6724(d)(1) 
                (relating to definitions) is amended by redesignating 
                clauses (x) through (xv) as clauses (xi) through (xvi), 
                respectively, and by inserting after clause (ix) the 
                following new clause:
                          `` `(x) section 6050S (relating to returns 
                      relating to payments for qualified tuition and 
                      related expenses),' ''.

    (b) Amendments Related to Section 202 of 1997 Act.--
            (1) Paragraph (1) of section 221(e) of the 1986 Code is 
        amended by inserting ``by the taxpayer solely'' after 
        ``incurred'' the first place it appears.

[[Page 112 STAT. 793]]

                    (2) Subsection (d) of section 221 of the 1986 Code 
                is amended by adding at the end the following new 
                sentence: ``Such 60 months shall be determined in the 
                manner prescribed by the Secretary in the case of 
                multiple loans which are refinanced by, or serviced as, 
                a single loan and in the case of loans incurred before 
                the date of the enactment of this section.''.

    (c) Amendments Related to Section 211 of 1997 Act.--
            (1) Paragraph (3) of section 135(c) of the 1986 Code is 
        amended to read as follows:
            ``(3) Eligible educational institution.--The term `eligible 
        educational institution' has the meaning given such term by 
        section 529(e)(5).''.
            (2) Subparagraph (A) of section 529(c)(3) of the 1986 Code 
        is amended by striking ``section 72(b)'' and inserting ``section 
        72''.
            (3) Paragraph (2) of section 529(e) of the 1986 Code is 
        amended to read as follows:
            ``(2) Member of family.--The term `member of the family' 
        means, with respect to any designated beneficiary--
                    ``(A) the spouse of such beneficiary;
                    ``(B) an individual who bears a relationship to such 
                beneficiary which is described in paragraphs (1) through 
                (8) of section 152(a); and
                    ``(C) the spouse of any individual described in 
                subparagraph (B).''.

    (d) Amendments Related to Section 213 of 1997 Act.--
            (1) Section 530(b)(1) of the 1986 Code (defining education 
        individual retirement account) is amended by inserting ``an 
        individual who is'' before ``the designated beneficiary'' in the 
        material preceding subparagraph (A).
            (2)(A) Section 530(b)(1)(E) of the 1986 Code (defining 
        education individual retirement account) is amended to read as 
        follows:
                    ``(E) Except as provided in subsection (d)(7), any 
                balance to the credit of the designated beneficiary on 
                the date on which the beneficiary attains age 30 shall 
                be distributed within 30 days after such date to the 
                beneficiary or, if the beneficiary dies before attaining 
                age 30, shall be distributed within 30 days after the 
                date of death of such beneficiary.''.
            (B) Paragraph (7) of section 530(d) of the 1986 Code is 
        amended by inserting at the end the following new sentence: ``In 
        applying the preceding sentence, members of the family (as so 
        defined) of the designated beneficiary shall be treated in the 
        same manner as the spouse under such paragraph (8).''.
            (C) Subsection (d) of section 530 of the 1986 Code is 
        amended by adding at the end the following new paragraph:
            ``(8) Deemed distribution on required distribution date.--In 
        any case in which a distribution is required under subsection 
        (b)(1)(E), any balance to the credit of a designated beneficiary 
        as of the close of the 30-day period referred to in such 
        subsection for making such distribution shall be deemed 
        distributed at the close of such period.''.
            (3)(A) Paragraph (1) of section 530(d) of the 1986 Code is 
        amended by striking ``section 72(b)'' and inserting ``section 
        72''.

[[Page 112 STAT. 794]]

            (B) Subsection (e) of section 72 of the 1986 Code is amended 
        by inserting after paragraph (8) the following new paragraph:
             <<NOTE: Applicability.>> ``(9) Extension of paragraph 
        (2)(b) to qualified state tuition programs and educational 
        individual retirement accounts.--Notwithstanding any other 
        provision of this subsection, paragraph (2)(B) shall apply to 
        amounts received under a qualified State tuition program (as 
        defined in section 529(b)) or under an education individual 
        retirement account (as defined in section 530(b)). The rule of 
        paragraph (8)(B) shall apply for purposes of this paragraph.''.
            (4) Paragraph (2) of section 135(d) of the 1986 Code is 
        amended to read as follows:
            ``(2) Coordination with other higher education benefits.--
        The amount of the qualified higher education expenses otherwise 
        taken into account under subsection (a) with respect to the 
        education of an individual shall be reduced (before the 
        application of subsection (b)) by--
                    ``(A) the amount of such expenses which are taken 
                into account in determining the credit allowable to the 
                taxpayer or any other person under section 25A with 
                respect to such expenses; and
                    ``(B) the amount of such expenses which are taken 
                into account in determining the exclusion under section 
                530(d)(2).''.
            (5) Section 530(d)(2) of the 1986 Code (relating to 
        distributions for qualified higher education expenses) is 
        amended by adding at the end the following new subparagraph:
                    ``(D) Disallowance of excluded amounts as credit or 
                deduction.--No deduction or credit shall be allowed to 
                the taxpayer under any other section of this chapter for 
                any qualified education expenses to the extent taken 
                into account in determining the amount of the exclusion 
                under this paragraph.''.
            (6) Section 530(d)(4)(B) of the 1986 Code (relating to 
        exceptions) 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 new 
        clause:
                          ``(iv) an amount which is includible in gross 
                      income solely because the taxpayer elected under 
                      paragraph (2)(C) to waive the application of 
                      paragraph (2) for the taxable year.''.
            (7) So much of section 530(d)(4)(C) of the 1986 Code as 
        precedes clause (ii) thereof is amended to read as follows:
                    ``(C) Contributions returned before due date of 
                return.--Subparagraph (A) shall not apply to the 
                distribution of any contribution made during a taxable 
                year on behalf of the designated beneficiary if--
                          ``(i) such distribution is made on or before 
                      the day prescribed by law (including extensions of 
                      time) for filing the beneficiary's return of tax 
                      for the taxable year or, if the beneficiary is not 
                      required to file such a return, the 15th day of 
                      the 4th month of the taxable year following the 
                      taxable year; and''.
            (8)(A) Paragraph (5) of section 530(d) of the 1986 Code is 
        amended by striking the first sentence and inserting the 
        following new sentence: ``Paragraph (1) shall not apply to any

[[Page 112 STAT. 795]]

        amount paid or distributed from an education individual 
        retirement account to the extent that the amount received is 
        paid, not later than the 60th day after the date of such payment 
        or distribution, into another education individual retirement 
        account for the benefit of the same beneficiary or a member of 
        the family (within the meaning of section 529(e)(2)) of such 
        beneficiary who has not attained age 30 as of such date.''.
            (B) Paragraph (6) of section 530(d) of the 1986 Code is 
        amended by inserting before the period ``and has not attained 
        age 30 as of the date of such change''.
            (9) Subparagraph (C) of section 135(c)(2) of the 1986 Code 
        is amended--
                    (A) by inserting ``and education individual 
                retirement accounts'' in the heading after ``program''; 
                and
                    (B) by striking ``section 529(c)(3)(A)'' and 
                inserting 
                ``section 72''.
            (10)(A) Paragraph (1) of section 4973(e) of the 1986 Code is 
        amended to read as follows:
            ``(1) In general.--In the case of education individual 
        retirement accounts maintained for the benefit of any one 
        beneficiary, the term `excess contributions' means the sum of--
                    ``(A) the amount by which the amount contributed for 
                the taxable year to such accounts exceeds $500 (or, if 
                less, the sum of the maximum amounts permitted to be 
                contributed under section 530(c) by the contributors to 
                such accounts for such year);
                    ``(B) if any amount is contributed (other than a 
                contribution described in section 530(b)(2)(B)) during 
                such year to a qualified State tuition program for the 
                benefit of such beneficiary, any amount contributed to 
                such accounts for such taxable year; and
                    ``(C) the amount determined under this subsection 
                for the preceding taxable year, reduced by the sum of--
                          ``(i) the distributions out of the accounts 
                      for the taxable year (other than rollover 
                      distributions); and
                          ``(ii) the excess (if any) of the maximum 
                      amount which may be contributed to the accounts 
                      for the taxable year over the amount contributed 
                      to the accounts for the taxable year.''.
            (B) Paragraph (2) of section 4973(e) of the 1986 Code is 
        amended by striking subparagraph (B) and by redesignating 
        subparagraph (C) as subparagraph (B).

    (e) Amendments Related to Section 224 of 1997 Act.--
            (1) Clauses (vi) and (vii) of section 170(e)(6)(B) of the 
        1986 Code are each amended by striking ``entity's'' and 
        inserting ``donee's''.
            (2) Clause (iv) of section 170(e)(6)(B) of the 1986 Code is 
        amended by striking ``organization or entity'' and inserting 
        ``donee''.
            (3) Subclause (I) of section 170(e)(6)(C)(ii) of the 1986 
        Code is amended by striking ``an entity'' and inserting ``a 
        donee''.
            (4) Section 170(e)(6)(F) of the 1986 Code (relating to 
        termination) is amended by striking ``1999'' and inserting 
        ``2000''.

    (f ) Amendments Related to Section 225 of 1997 Act.--
            (1) The last sentence of section 108(f )(2) of the 1986 Code 
        is amended to read as follows:

[[Page 112 STAT. 796]]

        ``The term `student loan' includes any loan made by an 
        educational organization described in section 170(b)(1)(A)(ii) 
        or by an organization exempt from tax under section 501(a) to 
        refinance a loan to an individual to assist the individual in 
        attending any such educational organization but only if the 
        refinancing loan is pursuant to a program of the refinancing 
        organization which is designed as described in subparagraph 
        (D)(ii).''.
            (2) Section 108(f )(3) of the 1986 Code is amended by 
        striking ``(or by an organization described in paragraph (2)(E) 
        from funds provided by an organization described in paragraph 
        (2)(D))''.

    (g) Amendments Related to Section 226 of 1997 Act.--
             <<NOTE: 26 USC 1397D, 1397F.>> (1) Section 226(a) of the 
        1997 Act is amended by striking ``section 1397E'' and inserting 
        ``section 1397D''.
            (2) Section 1397E(d)(4)(B) of the 1986 Code is amended by 
        striking ``local education agency as defined'' and inserting 
        ``local educational agency as defined''.
            (3) Section 1397E is amended by adding at the end the 
        following new subsection:

    ``(h) Credit Treated as Allowed Under Part IV of Subchapter A.--For 
purposes of subtitle F, the credit allowed by this section shall be 
treated as a credit allowable under part IV of subchapter A of this 
chapter.''.
            (4) Subsection (g) of section 1397E of the 1986 Code is 
        amended by inserting ``(determined without regard to subsection 
        (c))'' after ``section''.
            (5) Subparagraph (D) of section 42( j)(4) of the 1986 Code 
        is amended by striking ``subpart A, B, D, or G of this part'' 
        and inserting ``this chapter''.
            (6) Paragraph (4) of section 49(b) of the 1986 Code is 
        amended by striking ``subpart A, B, D, or G'' and inserting 
        ``this chapter''.
            (7) Subparagraph (C) of section 50(a)(5) of the 1986 Code is 
        amended by striking ``subpart A, B, D, or G'' and inserting 
        ``this chapter''.

SEC. 6005. AMENDMENTS RELATED TO TITLE III OF 1997 ACT.

    (a) Amendments Related to Section 301 of 1997 Act.--
            (1) Section 219(g) of the 1986 Code is amended--
                    (A) by inserting ``or the individual's spouse'' 
                after ``individual'' in paragraph (1); and
                    (B) by striking paragraph (7) and inserting:
            ``(7) Special rule for spouses who are not active 
        participants.--If this subsection applies to an individual for 
        any taxable year solely because their spouse is an active 
        participant, then, in applying this subsection to the individual 
        (but not their spouse)--
                    ``(A) the applicable dollar amount under paragraph 
                (3)(B)(i) shall be $150,000; and
                    ``(B) the amount applicable under paragraph 
                (2)(A)(ii) shall be $10,000.''.
            (2) Paragraph <<NOTE: 26 USC 219.>> (2) of section 301(a) of 
        the 1997 Act is amended by inserting ``after `$10,000' '' before 
        the period.

    (b) Amendments Related to Section 302 of 1997 Act.--
            (1) Section 408A(c)(3)(A) of the 1986 Code is amended by 
        striking ``shall be reduced'' and inserting ``shall not exceed

[[Page 112 STAT. 797]]

        an amount equal to the amount determined under paragraph (2)(A) 
        for such taxable year, reduced''.
            (2) Section 408A(c)(3) of the 1986 Code (relating to limits 
        based on modified adjusted gross income) is amended--
                    (A) by inserting ``or a married individual filing a 
                separate return'' after ``joint return'' in subparagraph 
                (A)(ii),
                    (B) in subparagraph (B)--
                          (i) by inserting ``, for the taxable year of 
                      the distribution to which such contribution 
                      relates'' after ``if ''; and
                          (ii) by striking ``for such taxable year'' in 
                      clause (i), and
                    (C) by striking ``and the deduction under section 
                219 shall be taken into account'' in subparagraph 
                (C)(i).
            (3)(A) Section 408A(d)(2) of the 1986 Code (defining 
        qualified distribution) is amended by striking subparagraph (B) 
        and inserting the following new subparagraph:
                    ``(B) Distributions within nonexclusion period.--A 
                payment or distribution from a Roth IRA shall not be 
                treated as a qualified distribution under subparagraph 
                (A) if such payment or distribution is made within the 
                5-taxable year period beginning with the first taxable 
                year for which the individual made a contribution to a 
                Roth IRA (or such individual's spouse made a 
                contribution to a Roth IRA) established for such 
                individual.''.
            (B) Section 408A(d)(2) of the 1986 Code is amended by adding 
        at the end the following new subparagraph:
                    ``(C) Distributions of excess contributions and 
                earnings.--The term `qualified distribution' shall not 
                include any distribution of any contribution described 
                in section 408(d)(4) and any net income allocable to the 
                contribution.''.
            (4) Section 408A(d)(3) of the 1986 Code (relating to 
        rollovers from IRAs other than Roth IRAs) is amended--
                    (A) by striking clause (iii) of subparagraph (A) and 
                inserting:
                          ``(iii) unless the taxpayer elects not to have 
                      this clause apply for any taxable year, any amount 
                      required to be included in gross income for such 
                      taxable year by reason of this paragraph for any 
                      distribution before January 1, 1999, shall be so 
                      included ratably over the 4-taxable year period 
                      beginning with such taxable year.
                Any election under clause (iii) for any distributions 
                during a taxable year may not be changed after the due 
                date for such taxable year.''; and
                    (B) by adding at the end the following new 
                subparagraph:
                    ``(F) Special rules for contributions to which 
                4-year averaging applies.--In the case of a qualified 
                rollover contribution to a Roth IRA of a distribution to 
                which subparagraph (A)(iii) applied, the following rules 
                shall apply:
                          ``(i) Acceleration of inclusion.--
                                    ``(I) In general.--The amount 
                                required to be included in gross income 
                                for each of the first 3

[[Page 112 STAT. 798]]

                                taxable years in the 4-year period under 
                                subparagraph (A)(iii) shall be increased 
                                by the aggregate distributions from Roth 
                                IRAs for such taxable year which are 
                                allocable under paragraph (4) to the 
                                portion of such qualified rollover 
                                contribution required to be included in 
                                gross income under subparagraph (A)(i).
                                    ``(II) Limitation on aggregate 
                                amount included.--The amount required to 
                                be included in gross income for any 
                                taxable year under subparagraph (A)(iii) 
                                shall not exceed the aggregate amount 
                                required to be included in gross income 
                                under subparagraph (A)(iii) for all 
                                taxable years in the 4-year period 
                                (without regard to subclause (I)) 
                                reduced by amounts included for all 
                                preceding taxable years.
                          ``(ii) Death of distributee.--
                                    ``(I) In general.--If the individual 
                                required to include amounts in gross 
                                income under such subparagraph dies 
                                before all of such amounts are included, 
                                all remaining amounts shall be included 
                                in gross income for the taxable year 
                                which includes the date of death.
                                    ``(II) Special rule for surviving 
                                spouse.--If the spouse of the individual 
                                described in subclause (I) acquires the 
                                individual's entire interest in any Roth 
                                IRA to which such qualified rollover 
                                contribution is properly allocable, the 
                                spouse may elect to treat the remaining 
                                amounts described in subclause (I) as 
                                includible in the spouse's gross income 
                                in the taxable years of the spouse 
                                ending with or within the taxable years 
                                of such individual in which such amounts 
                                would otherwise have been includible. 
                                Any such election may not be made or 
                                changed after the due date for the 
                                spouse's taxable year which includes the 
                                date of death.
                    ``(G) Special rule for applying section 72.--
                          ``(i) In general.--If--
                                    ``(I) any portion of a distribution 
                                from a Roth IRA is properly allocable to 
                                a qualified rollover contribution 
                                described in this paragraph; and
                                    ``(II) such distribution is made 
                                within the 5-taxable year period 
                                beginning with the taxable year in which 
                                such contribution was made,
                      then section 72(t) shall be applied as if such 
                      portion were includible in gross income.
                          ``(ii) Limitation.--Clause (i) shall apply 
                      only to the extent of the amount of the qualified 
                      rollover contribution includible in gross income 
                      under subparagraph (A)(i).''.
            (5)(A) Section 408A(d)(4) of the 1986 Code is amended to 
        read as follows:
            ``(4) Aggregation and ordering rules.--
                    ``(A) Aggregation rules.--Section 408(d)(2) shall be 
                applied separately with respect to Roth IRAs and other 
                individual retirement plans.

[[Page 112 STAT. 799]]

                    ``(B) Ordering rules.--For purposes of applying this 
                section and section 72 to any distribution from a Roth 
                IRA, such distribution shall be treated as made--
                          ``(i) from contributions to the extent that 
                      the amount of such distribution, when added to all 
                      previous distributions from the Roth IRA, does not 
                      exceed the aggregate contributions to the Roth 
                      IRA; and
                          ``(ii) from such contributions in the 
                      following order:
                                    ``(I) Contributions other than 
                                qualified rollover contributions to 
                                which paragraph (3) applies.
                                    ``(II) Qualified rollover 
                                contributions to which paragraph (3) 
                                applies on a first-in, first-out basis.
                Any distribution allocated to a qualified rollover 
                contribution under clause (ii)(II) shall be allocated 
                first to the portion of such contribution required to be 
                included in gross income.''.
            (B) Section 408A(d)(1) of the 1986 Code is amended to read 
        as follows:
            ``(1) Exclusion.--Any qualified distribution from a Roth IRA 
        shall not be includible in gross income.''.
            (6)(A) Section 408A(d) of the 1986 Code (relating to 
        distribution rules) is amended by adding at the end the 
        following new paragraph:
            ``(6) Taxpayer may make adjustments before due date.--
                    ``(A) In general.--Except as provided by the 
                Secretary, if, on or before the due date for any taxable 
                year, a taxpayer transfers in a trustee-to-trustee 
                transfer any contribution to an individual retirement 
                plan made during such taxable year from such plan to any 
                other individual retirement plan, then, for purposes of 
                this chapter, such contribution shall be treated as 
                having been made to the transferee plan (and not the 
                transferor plan).
                    ``(B) Special rules.--
                          ``(i) Transfer of earnings.--Subparagraph (A) 
                      shall not apply to the transfer of any 
                      contribution unless such transfer is accompanied 
                      by any net income allocable to such contribution.
                          ``(ii) No deduction.--Subparagraph (A) shall 
                      apply to the transfer of any contribution only to 
                      the extent no deduction was allowed with respect 
                      to the contribution to the transferor plan.''.
            (B) Section 408A(d)(3) of the 1986 Code, as amended by this 
        subsection, is amended by striking subparagraph (D) and by 
        redesignating subparagraphs (E), (F), and (G) as subparagraphs 
        (D), (E), and (F), respectively.
            (7) Section 408A(d) of the 1986 Code, as amended by 
        paragraph (6), is amended by adding at the end the following new 
        paragraph:
            ``(7) Due date.--For purposes of this subsection, the due 
        date for any taxable year is the date prescribed by law 
        (including extensions of time) for filing the taxpayer's return 
        for such taxable year.''.
            (8)(A) Section 4973(f ) of the 1986 Code is amended--
                    (i) by striking ``such accounts'' in paragraph 
                (1)(A) and inserting ``Roth IRAs''; and

[[Page 112 STAT. 800]]

                    (ii) by striking ``to the accounts'' in paragraph 
                (2)(B) and inserting ``by the individual to all 
                individual retirement plans''.
            (B) Section 4973(b) of the 1986 Code is amended--
                    (i) by inserting ``a contribution to a Roth IRA or'' 
                after ``other than'' in paragraph (1)(A); and
                    (ii) by inserting ``(including the amount 
                contributed to a Roth IRA)'' after ``annuities'' in 
                paragraph (2)(C).
             <<NOTE: 26 USC 4973.>> (C) Section 302(b) of the 1997 Act 
        is amended by striking ``Section 4973(b)'' and inserting 
        ``Section 4973''.
            (9) Section 408A of the 1986 Code is amended by adding at 
        the end the following new subsection:

    ``(f ) Individual Retirement Plan.--For purposes of this 
section--
            ``(1) a simplified employee pension or a simple retirement 
        account may not be designated as a Roth IRA; and
            ``(2) contributions to any such pension or account shall not 
        be taken into account for purposes of subsection (c)(2)(B).''.

    (c) Amendments Related to Section 303 of 1997 Act.--
            (1) Section 72(t)(8)(E) of the 1986 Code is amended--
                    (A) by striking ``120 days'' and inserting ``120th 
                day''; and
                    (B) by striking ``60 days'' and inserting ``60th 
                day''.
            (2)(A) Section 402(c)(4) of the 1986 Code is amended by 
        striking ``and'' at the end of subparagraph (A), by striking the 
        period at the end of subparagraph (B) and inserting ``, and'', 
        by inserting at the end the following new subparagraph:
                    ``(C) any hardship distribution described in section 
                401(k)(2)(B)(i)(IV).''.
            (B) Section 403(b)(8)(B) of the 1986 Code is amended by 
        inserting ``(including paragraph (4)(C) thereof)'' after 
        ``section 402(c)''.
            (C) <<NOTE: Applicability. 26 USC 402 note.>> The amendments 
        made by this paragraph shall apply to distributions after 
        December 31, 1998.

    (d) Amendments Related to Section 311 of 1997 Act.--
            (1) Subsection (h) of section 1 of the 1986 Code (relating 
        to maximum capital gains rate) is amended to read as follows:

    ``(h) Maximum Capital Gains Rate.--
            ``(1) In general.--If a taxpayer has a net capital gain for 
        any taxable year, the tax imposed by this section for such 
        taxable year shall not exceed the sum of--
                    ``(A) a tax computed at the rates and in the same 
                manner as if this subsection had not been enacted on the 
                greater of--
                          ``(i) taxable income reduced by the net 
                      capital 
                      gain; or
                          ``(ii) the lesser of--
                                    ``(I) the amount of taxable income 
                                taxed at a rate below 28 percent; or
                                    ``(II) taxable income reduced by the 
                                adjusted net capital 
                                gain;
                    ``(B) 10 percent of so much of the adjusted net 
                capital gain (or, if less, taxable income) as does not 
                exceed the excess (if any) of--

[[Page 112 STAT. 801]]

                          ``(i) the amount of taxable income which would 
                      (without regard to this paragraph) be taxed at a 
                      rate below 28 percent, over
                          ``(ii) the taxable income reduced by the 
                      adjusted net capital gain;
                    ``(C) 20 percent of the adjusted net capital gain 
                (or, if less, taxable income) in excess of the amount on 
                which a tax is determined under subparagraph (B);
                    ``(D) 25 percent of the excess (if any) of--
                          ``(i) the unrecaptured section 1250 gain (or, 
                      if less, the net capital gain), over
                          ``(ii) the excess (if any) of--
                                    ``(I) the sum of the amount on which 
                                tax is determined under subparagraph (A) 
                                plus the net capital gain, over
                                    ``(II) taxable income; and
                    ``(E) 28 percent of the amount of taxable income in 
                excess of the sum of the amounts on which tax is 
                determined under the preceding subparagraphs of this 
                paragraph.
            ``(2) Reduced capital gain rates for qualified 5-year 
        gain.--
                    ``(A) Reduction in 10-percent rate.--In the case of 
                any taxable year beginning after December 31, 2000, the 
                rate under paragraph (1)(B) shall be 8 percent with 
                respect to so much of the amount to which the 10-percent 
                rate would otherwise apply as does not exceed qualified 
                5-year gain, and 10 percent with respect to the 
                remainder of such amount.
                    ``(B) Reduction in 20-percent rate.--The rate under 
                paragraph (1)(C) shall be 18 percent with respect to so 
                much of the amount to which the 20-percent rate would 
                otherwise apply as does not exceed the lesser of--
                          ``(i) the excess of qualified 5-year gain over 
                      the amount of such gain taken into account under 
                      subparagraph (A) of this paragraph; or
                          ``(ii) the amount of qualified 5-year gain 
                      (determined by taking into account only property 
                      the holding period for which begins after December 
                      31, 2000),
                and 20 percent with respect to the remainder of such 
                amount. For purposes of determining under the preceding 
                sentence whether the holding period of property begins 
                after December 31, 2000, the holding period of property 
                acquired pursuant to the exercise of an option (or other 
                right or obligation to acquire property) shall include 
                the period such option (or other right or obligation) 
                was held.
            ``(3) Net capital gain taken into account as investment 
        income.--For purposes of this subsection, the net capital gain 
        for any taxable year shall be reduced (but not below zero) by 
        the amount which the taxpayer takes into account as investment 
        income under section 163(d)(4)(B)(iii).
            ``(4) Adjusted net capital gain.--For purposes of this 
        subsection, the term `adjusted net capital gain' means net 
        capital gain reduced (but not below zero) by the sum of--
                    ``(A) unrecaptured section 1250 gain; and
                    ``(B) 28-percent rate gain.

[[Page 112 STAT. 802]]

            ``(5) 28-percent rate gain.--For purposes of this 
        subsection--
                    ``(A) In general.--The term `28-percent rate gain' 
                means the excess (if any) of--
                          ``(i) the sum of--
                                    ``(I) the aggregate long-term 
                                capital gain from property held for more 
                                than 1 year but not more than 18 months;
                                    ``(II) collectibles gain; and
                                    ``(III) section 1202 gain, over
                          ``(ii) the sum of--
                                    ``(I) the aggregate long-term 
                                capital loss (not described in subclause 
                                (IV)) from property referred to in 
                                clause (i)(I);
                                    ``(II) collectibles loss;
                                    ``(III) the net short-term capital 
                                loss; and
                                    ``(IV) the amount of long-term 
                                capital loss carried under section 
                                1212(b)(1)(B) to the taxable year.
                     <<NOTE: Applicability.>> ``(B) Special rules.--
                          ``(i) Short sale gains and holding periods.--
                      Rules similar to the rules of section 1233(b) 
                      shall apply where the substantially identical 
                      property has been held more than 1 year but not 
                      more than 18 months; except that, for purposes of 
                      such rules--
                                    ``(I) section 1233(b)(1) shall be 
                                applied by substituting `18 months' for 
                                `1 year' each place it appears; and
                                    ``(II) the holding period of such 
                                property shall be treated as being 1 
                                year on the day before the earlier of 
                                the date of the closing of the short 
                                sale or the date such property is 
                                disposed of.
                          ``(ii) Long-term losses.--Section 1233(d) 
                      shall be applied separately by substituting `18 
                      months' for `1 year' each place it appears.
                          ``(iii) Options.--A rule similar to the rule 
                      of section 1092(f ) shall apply where the stock 
                      was held for more than 18 months.
                          ``(iv) Section 1256 contracts.--Amounts 
                      treated as long-term capital gain or loss under 
                      section 1256(a)(3) shall be treated as 
                      attributable to property held for more than 18 
                      months.
            ``(6) Collectibles gain and loss.--For purposes of this 
        subsection--
                    ``(A) In general.--The terms `collectibles gain' and 
                `collectibles loss' mean gain or loss (respectively) 
                from the sale or exchange of a collectible (as defined 
                in section 408(m) without regard to paragraph (3) 
                thereof) which is a capital asset held for more than 18 
                months but only to the extent such gain is taken into 
                account in computing gross income and such loss is taken 
                into account in computing taxable income.
                    ``(B) Partnerships, etc.--For purposes of 
                subparagraph (A), any gain from the sale of an interest 
                in a partnership, S corporation, or trust which is 
                attributable to unrealized appreciation in the value of 
                collectibles shall be treated as gain from the sale or 
                exchange of a collectible.

[[Page 112 STAT. 803]]

                Rules <<NOTE: Applicability.>> similar to the rules of 
                section 751 shall apply for purposes of the preceding 
                sentence.
            ``(7) Unrecaptured section 1250 gain.--For purposes of this 
        subsection--
                    ``(A) In general.--The term `unrecaptured section 
                1250 gain' means the excess (if any) of--
                          ``(i) the amount of long-term capital gain 
                      (not 
                      otherwise treated as ordinary income) which would 
                      be treated as ordinary income if--
                                    ``(I) section 1250(b)(1) included 
                                all depreciation and the applicable 
                                percentage under section 1250(a) were 
                                100 percent, and
                                    ``(II) only gain from property held 
                                for more than 18 months were taken into 
                                account, over
                          ``(ii) the excess (if any) of--
                                    ``(I) the amount described in 
                                paragraph (5)(A)(ii), over
                                    ``(II) the amount described in 
                                paragraph (5)(A)(i).
                    ``(B) Limitation with respect to section 1231 
                property.--The amount described in subparagraph (A)(i) 
                from sales, exchanges, and conversions described in 
                section 1231(a)(3)(A) for any taxable year shall not 
                exceed the net section 1231 gain (as defined in section 
                1231(c)(3)) for such year.
            ``(8) Section 1202 gain.--For purposes of this subsection, 
        the term `section 1202 gain' means an amount equal to the gain 
        excluded from gross income under section 1202(a).
            ``(9) Qualified 5-year gain.--For purposes of this 
        subsection, the term `qualified 5-year gain' means the aggregate 
        long-term capital gain from property held for more than 5 years. 
        The determination under the preceding sentence shall be made 
        without regard to collectibles gain, gain described in paragraph 
        (7)(A)(i), and section 1202 gain.
            ``(10) Coordination with recapture of net ordinary losses 
        under section 1231.--If any amount is treated as ordinary income 
        under section 1231(c), such amount shall be allocated among the 
        separate categories of net section 1231 gain (as defined in 
        section 1231(c)(3)) in such manner as the Secretary may by forms 
        or regulations prescribe.
            ``(11) Regulations.--The Secretary may prescribe such 
        regulations as are appropriate (including regulations requiring 
        reporting) to apply this subsection in the case of sales and 
        exchanges by pass-thru entities and of interests in such 
        entities.
            ``(12) Pass-thru entity defined.--For purposes of this 
        subsection, the term `pass-thru entity' means--
                    ``(A) a regulated investment company;
                    ``(B) a real estate investment trust;
                    ``(C) an S corporation;
                    ``(D) a partnership;
                    ``(E) an estate or trust;
                    ``(F) a common trust fund;
                    ``(G) a foreign investment company which is 
                described in section 1246(b)(1) and for which an 
                election is in effect under section 1247; and
                    ``(H) a qualified electing fund (as defined in 
                section 1295).

[[Page 112 STAT. 804]]

            ``(13) Special rules for periods during 1997.--
                    ``(A) Determination of 28-percent rate gain.--In 
                applying paragraph (5)--
                          ``(i) the amount determined under subclause 
                      (I) of paragraph (5)(A)(i) shall include long-term 
                      capital gain (not otherwise described in paragraph 
                      (5)(A)(i)) which is properly taken into account 
                      for the portion of the taxable year before May 7, 
                      1997;
                          ``(ii) the amounts determined under subclause 
                      (I) of paragraph (5)(A)(ii) shall include long-
                      term capital loss (not otherwise described in 
                      paragraph (5)(A)(ii)) which is properly taken into 
                      account for the portion of the taxable year before 
                      May 7, 1997; and
                          ``(iii) <<NOTE: Applicability.>> clauses 
                      (i)(I) and (ii)(I) of paragraph (5)(A) shall be 
                      applied by not taking into account any gain and 
                      loss on property held for more than 1 year but not 
                      more than 18 months which is properly taken into 
                      account for the portion of the taxable year after 
                      May 6, 1997, and before July 29, 1997.
                    ``(B) Other special rules.--
                          ``(i) Determination of unrecaptured section 
                      1250 gain not to include pre-may 7, 1997 gain.--
                      The amount determined under paragraph (7)(A)(i) 
                      shall not include gain properly taken into account 
                      for the portion of the taxable year before May 7, 
                      1997.
                           <<NOTE: Applicability.>> ``(ii) Other 
                      transitional rules for 18-month holding period.--
                      Paragraphs (6)(A) and (7)(A)(i)(II) shall be 
                      applied by substituting `1 year' for `18 months' 
                      with respect to gain properly taken into account 
                      for the portion of the taxable year after May 6, 
                      1997, and before July 29, 1997.
                     <<NOTE: Applicability.>> ``(C) Special rules for 
                pass-thru entities.--In applying this paragraph with 
                respect to any pass-thru entity, the determination of 
                when gains and loss are properly taken into account 
                shall be made at the entity level.''.
            (2) Paragraph (3) of section 55(b) of the 1986 Code is 
        amended to read as follows:
            ``(3) Maximum rate of tax on net capital gain of 
        noncorporate taxpayers.--The amount determined under the first 
        sentence of paragraph (1)(A)(i) shall not exceed the sum of--
                    ``(A) the amount determined under such first 
                sentence computed at the rates and in the same manner as 
                if this paragraph had not been enacted on the taxable 
                excess reduced by the lesser of--
                          ``(i) the net capital gain; or
                          ``(ii) the sum of--
                                    ``(I) the adjusted net capital gain, 
                                plus
                                    ``(II) the unrecaptured section 1250 
                                gain, plus
                    ``(B) 10 percent of so much of the adjusted net 
                capital gain (or, if less, taxable excess) as does not 
                exceed the amount on which a tax is determined under 
                section 1(h)(1)(B), plus
                    ``(C) 20 percent of the adjusted net capital gain 
                (or, if less, taxable excess) in excess of the amount on 
                which tax is determined under subparagraph (B), plus

[[Page 112 STAT. 805]]

                    ``(D) 25 percent of the amount of taxable excess in 
                excess of the sum of the amounts on which tax is 
                determined under the preceding subparagraphs of this 
                paragraph.
        In <<NOTE: Applicability.>> the case of taxable years beginning 
        after December 31, 2000, rules similar to the rules of section 
        1(h)(2) shall apply for purposes of subparagraphs (B) and (C). 
        Terms used in this paragraph which are also used in section 1(h) 
        shall have the respective meanings given such terms by section 
        1(h) but computed with the adjustments under this part.''.
             <<NOTE: Applicability.>> (3) Section 57(a)(7) of the 1986 
        Code is amended by adding at the end the following new sentence: 
        ``In the case of stock the holding period of which begins after 
        December 31, 2000 (determined with the application of the last 
        sentence of section 1(h)(2)(B)), the preceding sentence shall be 
        applied by substituting `28 percent' for `42 percent'.''.
            (4) Paragraphs (11) and (12) of section 1223, and section 
        1235(a), of the 1986 Code are each amended by striking ``1 
        year'' each place it appears and inserting ``18 months''.

    (e) Amendments Related to Section 312 of 1997 Act.--
            (1) Paragraph (2) of section 121(b) of the 1986 Code is 
        amended to read as follows:
            ``(2) Special rules for joint returns.--In the case of a 
        husband and wife who make a joint return for the taxable year of 
        the sale or exchange of the property--
                    ``(A) <<NOTE: Applicability.>> $500,000 Limitation 
                for certain joint returns.--Paragraph (1) shall be 
                applied by substituting `$500,000' for `$250,000' if--
                          ``(i) either spouse meets the ownership 
                      requirements of subsection (a) with respect to 
                      such property;
                          ``(ii) both spouses meet the use requirements 
                      of subsection (a) with respect to such property; 
                      and
                          ``(iii) neither spouse is ineligible for the 
                      benefits of subsection (a) with respect to such 
                      property by reason of paragraph (3).
                    ``(B) Other joint returns.--If such spouses do not 
                meet the requirements of subparagraph (A), the 
                limitation under paragraph (1) shall be the sum of the 
                limitations under paragraph (1) to which each spouse 
                would be entitled if such spouses had not been married. 
                For purposes of the preceding sentence, each spouse 
                shall be treated as owning the property during the 
                period that either spouse owned the property.''.
            (2) Section 121(c)(1) of the 1986 Code is amended to read as 
        follows:
            ``(1) In general.--In the case of a sale or exchange to 
        which this subsection applies, the ownership and use 
        requirements of subsection (a), and subsection (b)(3), shall not 
        apply; but the dollar limitation under paragraph (1) or (2) of 
        subsection (b), whichever is applicable, shall be equal to--
                    ``(A) the amount which bears the same ratio to such 
                limitation (determined without regard to this paragraph) 
                as
                    ``(B)(i) the shorter of--
                          ``(I) the aggregate periods, during the 5-year 
                      period ending on the date of such sale or 
                      exchange, such

[[Page 112 STAT. 806]]

                      property has been owned and used by the taxpayer 
                      as the taxpayer's principal residence; or
                          ``(II) the period after the date of the most 
                      recent prior sale or exchange by the taxpayer to 
                      which subsection (a) applied and before the date 
                      of such sale or exchange, bears to
                    ``(ii) 2 years.''.
            (3) Section <<NOTE: 26 USC 121 note.>> 312(d)(2) of the 1997 
        Act (relating to sales before date of the enactment) is amended 
        by inserting ``on or'' before ``before'' each place it appears 
        in the text and heading.

    (f ) Amendments Related to Section 313 of 1997 Act.--
            (1) Subsection (a) of section 1045 of such Code is amended--
                    (A) by striking ``an individual'' and inserting ``a 
                taxpayer other than a corporation''; and
                    (B) by striking ``such individual'' and inserting 
                ``such taxpayer''.
            (2) Subsection (b) of section 1045 of the 1986 Code is 
        amended by adding at the end the following new paragraph:
            ``(5) Certain rules to apply.--Rules similar to the rules of 
        subsections (f ), (g), (h), (i), ( j), and (k) of section 1202 
        shall apply.''.

SEC. 6006. AMENDMENT RELATED TO TITLE IV OF 1997 ACT.

    (a) Amendment Related to Section 401 of 1997 Act.--Paragraph (1) of 
section 55(e) of the 1986 Code is amended to read as follows:
            ``(1) In general.--
                    ``(A) $7,500,000 gross receipts test.--The tentative 
                minimum tax of a corporation shall be zero for any 
                taxable year if the corporation's average annual gross 
                receipts for all 3-taxable-year periods ending before 
                such taxable year does not exceed $7,500,000. For 
                purposes of the preceding sentence, only taxable years 
                beginning after December 31, 1993, shall be taken into 
                account.
                     <<NOTE: Applicability.>> ``(B) $5,000,000 gross 
                receipts test for first 3-year period.--Subparagraph (A) 
                shall be applied by substituting `$5,000,000' for 
                `$7,500,000' for the first 3-taxable-year period (or 
                portion thereof) of the corporation which is taken into 
                account under subparagraph (A).
                    ``(C) First taxable year corporation in existence.--
                If such taxable year is the first taxable year that such 
                corporation is in existence, the tentative minimum tax 
                of such corporation for such year shall be zero.
                     <<NOTE: Applicability.>> ``(D) Special rules.--For 
                purposes of this paragraph, the rules of paragraphs (2) 
                and (3) of section 448(c) shall apply.''.

    (b) Amendment Related to Section 402 of 1997 Act.--
Subsection (c) of section 168 of the 1986 Code is amended--
            (1) by striking paragraph (2), and
            (2) by striking the portion of such subsection preceding the 
        table in paragraph (1) and inserting the following:

    ``(c) Applicable Recovery Period.--For purposes of this section, the 
applicable recovery period shall be determined in accordance with the 
following table:''.

SEC. 6007. AMENDMENTS RELATED TO TITLE V OF 1997 ACT.

    (a) Amendments Related to Section 501 of 1997 Act.--

[[Page 112 STAT. 807]]

            (1) Subsection (c) of section 2631 of the 1986 Code is 
        amended to read as follows:

    ``(c) Inflation Adjustment.--
            ``(1) In general.--In the case of any calendar year after 
        1998, the $1,000,000 amount contained in subsection (a) shall be 
        increased by an amount equal to--
                    ``(A) $1,000,000, multiplied by
                    ``(B) the cost-of-living adjustment determined under 
                section 1(f )(3) for such calendar year by substituting 
                `calendar year 1997' for `calendar year 1992' in 
                subparagraph (B) thereof.
        If any amount as adjusted under the preceding sentence is not a 
        multiple of $10,000, such amount shall be rounded to the next 
        lowest multiple of $10,000.
             <<NOTE: Applicability.>> ``(2) Allocation of increase.--Any 
        increase under paragraph (1) for any calendar year shall apply 
        only to generation-skipping transfers made during or after such 
        calendar year; except that no such increase for calendar years 
        after the calendar year in which the transferor dies shall apply 
        to transfers by such transferor.''.
             <<NOTE: 26 USC 2001 note.>> (2) Subsection (f ) of section 
        501 of the 1997 Act is amended by inserting ``(other than the 
        amendment made by subsection (d))'' after ``this section''.

    (b) Amendments Related to Section 502 of 1997 Act.--
            (1)(A) Section 2033A of the 1986 Code is hereby moved to the 
        end of part IV of subchapter A of chapter 11 of the 1986 Code 
        and redesignated as section 2057.
            (B) So much of such section 2057 (as so redesignated) as 
        precedes subsection (b) thereof is amended to read as follows:

``SEC. 2057. FAMILY-OWNED BUSINESS INTERESTS.

    ``(a) General Rule.--
            ``(1) Allowance of deduction.--For purposes of the tax 
        imposed by section 2001, in the case of an estate of a decedent 
        to which this section applies, the value of the taxable estate 
        shall be determined by deducting from the value of the gross 
        estate the adjusted value of the qualified family-owned business 
        interests of the decedent which are described in subsection 
        (b)(2).
            ``(2) Maximum deduction.--The deduction allowed by this 
        section shall not exceed $675,000.
            ``(3) Coordination with unified credit.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), if this section applies to an estate, 
                the applicable exclusion amount under section 2010 shall 
                be $625,000.
                    ``(B) Increase in unified credit if deduction is 
                less than $675,000.--If the deduction allowed by this 
                section is less than $675,000, the amount of the 
                applicable exclusion amount under section 2010 shall be 
                increased (but not above the amount which would apply to 
                the estate without regard to this section) by the excess 
                of $675,000 over the amount of the deduction allowed.''.
            (C) Subparagraph (A) of section 2057(b)(2) of the 1986 Code 
        (as so redesignated) is amended by striking ``(without regard to 
        this section)''.

[[Page 112 STAT. 808]]

            (D) Subsection (c) of section 2057 of the 1986 Code (as so 
        redesignated) is amended by striking ``(determined without 
        regard to this section)''.
            (E) The table of sections for part III of subchapter A of 
        chapter 11 of the 1986 Code is amended by striking the item 
        relating to section 2033A.
            (F) The table of sections for part IV of such subchapter is 
        amended by adding at the end the following new item:
                ``Sec. 2057. Family-owned business interests.''.

            (2) Section 2057(b)(3) of the 1986 Code (as so redesignated) 
        is amended to read as follows:
            ``(3) Includible gifts of interests.--The amount of the 
        gifts of qualified family-owned business interests determined 
        under this paragraph is the sum of--
                    ``(A) the amount of such gifts from the decedent to 
                members of the decedent's family taken into account 
                under section 2001(b)(1)(B), plus
                    ``(B) the amount of such gifts otherwise excluded 
                under section 2503(b),
        to the extent such interests are continuously held by members of 
        such family (other than the decedent's spouse) between the date 
        of the gift and the date of the decedent's death.''.
            (3)(A) Section 2057(e)(2)(C) of the 1986 Code (as so 
        redesignated) is amended by striking ``(as defined in section 
        543(a))'' and inserting ``(as defined in section 543(a) without 
        regard to paragraph (2)(B) thereof) if such trade or business 
        were a corporation''.
            (B) Clause (ii) of section 2057(e)(2)(D) of the 1986 Code 
        (as so redesignated) is amended by striking ``income of which is 
        described in section 543(a) or'' and inserting ``personal 
        holding company income (as defined in subparagraph (C)) or 
        income described''.
            (C) Paragraph (2) of section 2057(e) of the 1986 Code (as so 
        redesignated) is amended by adding at the end the following new 
        flush sentence:
        ``In the case of a lease of property on a net cash basis by the 
        decedent to a member of the decedent's family, income from such 
        lease shall not be treated as personal holding company income 
        for purposes of subparagraph (C), and such property shall not be 
        treated as an asset described in subparagraph (D)(ii), if such 
        income and property would not be so treated if the lessor had 
        engaged directly in the activities engaged in by the lessee with 
        respect to such property.''.
            (4) Paragraph (2) of section 2057(f ) of the 1986 Code (as 
        so redesignated) is amended--
                    (A) by striking ``(as determined under rules similar 
                to the rules of section 2032A(c)(2)(B))''; and
                    (B) by adding at the end the following new 
                subparagraph:
                    ``(C) Adjusted tax difference.--For purposes of 
                subparagraph (A)--
                          ``(i) In general.--The adjusted tax difference 
                      attributable to a qualified family-owned business 
                      interest is the amount which bears the same ratio 
                      to the adjusted tax difference with respect to the 
                      estate (determined under clause (ii)) as the value 
                      of such

[[Page 112 STAT. 809]]

                      interest bears to the value of all qualified 
                      family-owned business interests described in 
                      subsection (b)(2).
                          ``(ii) Adjusted tax difference with respect to 
                      the estate.--For purposes of clause (i), the term 
                      `adjusted tax difference with respect to the 
                      estate' means the excess of what would have been 
                      the estate tax liability but for the election 
                      under this section over the estate tax liability. 
                      For purposes of this clause, the term `estate tax 
                      liability' means the tax imposed by section 2001 
                      reduced by the credits allowable against such 
                      tax.''.
            (5)(A) Paragraph (1) of section 2057(e) of the 1986 Code (as 
        so redesignated) is amended by adding at the end the following 
        new flush sentence:
        ``For purposes of the preceding sentence, a decedent shall be 
        treated as engaged in a trade or business if any member of the 
        decedent's family is engaged in such trade or business.''.
            (B) Subsection (f ) of section 2057 of the 1986 Code (as so 
        redesignated) is amended by adding at the end the following new 
        paragraph:
            ``(3) Use in trade or business by family members.--A 
        qualified heir shall not be treated as disposing of an interest 
        described in subsection (e)(1)(A) by reason of ceasing to be 
        engaged in a trade or business so long as the property to which 
        such interest relates is used in a trade or business by any 
        member of such individual's family.''.
            (6) Paragraph (1) of section 2057(g) of the 1986 Code (as so 
        redesignated) is amended by striking ``or (M)''.
            (7) Paragraph (3) of section 2057(i) of the 1986 Code (as so 
        redesignated) is amended by redesignating subparagraphs (L), 
        (M), and (N) as subparagraphs (N), (O), and (P), respectively, 
        and by inserting after subparagraph (K) the following new 
        subparagraphs:
                    ``(L) Section 2032A(g) (relating to application to 
                interests in partnerships, corporations, and trusts).
                    ``(M) Subsections (h) and (i) of section 2032A.''.

    (c) Amendments Related to Section 503 of the 1997 Act.--
            (1) Clause (iii) of section 6166(b)(7)(A) of the 1986 Code 
        is amended to read as follows:
                          ``(iii) for purposes of applying section 6601( 
                      j), the 2-percent portion (as defined in such 
                      section) shall be treated as being zero.''.
            (2) Clause (iii) of section 6166(b)(8)(A) of the 1986 Code 
        is amended to read as follows:
                          ``(iii) 2-percent interest rate not to 
                      apply.--For purposes of applying section 6601( j), 
                      the 2-percent portion (as defined in such section) 
                      shall be treated as being zero.''.

    (d) Amendment Related to Section 505 of the 1997 Act.--Paragraphs 
(1) and (2) of section 7479(a) of the 1986 Code are each amended by 
striking ``an estate,'' and inserting ``an estate (or with respect to 
any property included therein),''.
    (e) Amendments Related to Section 506 of the 1997 Act.--
            (1) Paragraph <<NOTE: 26 USC 2001 note.>> (1) of section 
        506(e) of the 1997 Act is 
        amended by striking ``and (c)'' and inserting ``, (c), and 
        (d)''.
            (2)(A) Paragraph (9) of section 6501(c) of the 1986 Code is 
        amended by striking the last sentence.

[[Page 112 STAT. 810]]

            (B) Subsection (f ) of section 2001 of the 1986 Code is 
        amended to read as follows:

    ``(f ) Valuation of Gifts.--
            ``(1) In general--If the time has expired under section 6501 
        within which a tax may be assessed under chapter 12 (or under 
        corresponding provisions of prior laws) on--
                    ``(A) the transfer of property by gift made during a 
                preceding calendar period (as defined in section 
                2502(b)); or
                    ``(B) an increase in taxable gifts required under 
                section 2701(d),
        the value thereof shall, for purposes of computing the tax under 
        this chapter, be the value as finally determined for purposes of 
        chapter 12.
            ``(2) Final determination.--For purposes of paragraph (1), a 
        value shall be treated as finally determined for purposes of 
        chapter 12 if--
                    ``(A) the value is shown on a return under such 
                chapter and such value is not contested by the Secretary 
                before the expiration of the time referred to in 
                paragraph (1) with respect to such return;
                    ``(B) in a case not described in subparagraph (A), 
                the value is specified by the Secretary and such value 
                is not timely contested by the taxpayer; or
                    ``(C) the value is determined by a court or pursuant 
                to a settlement agreement with the Secretary.''.
            (B) Subsection (c) of section 2504 of the 1986 Code is 
        amended to read as follows:

    ``(c) Valuation of Gifts.--If the time has expired under section 
6501 within which a tax may be assessed under this chapter 12 (or under 
corresponding provisions of prior laws) on--
            ``(1) the transfer of property by gift made during a 
        preceding calendar period (as defined in section 2502(b)); or
            ``(2) an increase in taxable gifts required under section 
        2701(d),

the value thereof shall, for purposes of computing the tax under this 
chapter, be the value as finally determined (within the meaning of 
section 2001(f )(2)) for purposes of this chapter.''.
    (f ) Amendments Related to Section 507 of 1997 Act.--
            (1) Paragraph (3) of section 1(g) of the 1986 Code is 
        amended by striking subparagraph (C) and by redesignating 
        subparagraph (D) as subparagraph (C).
            (2) Section 641 of the 1986 Code is amended by striking 
        subsection (c) and by redesignating subsection (d) as subsection 
        (c).
            (3) Paragraph (4) of section 1361(e) of the 1986 Code is 
        amended by striking ``section 641(d)'' and inserting ``section 
        641(c)''.
            (4) Subparagraph (A) of section 6103(e)(1) of the 1986 Code 
        is amended by striking clause (ii) and by redesignating clauses 
        (iii) and (iv) as clauses (ii) and (iii), respectively.

    (g) Amendments Related to Section 508 of 1997 Act.--
            (1) Subsection (c) of section 2031 of the 1986 Code is 
        amended by redesignating paragraph (9) as paragraph (10) and by 
        inserting after paragraph (8) the following new paragraph:

[[Page 112 STAT. 811]]

            ``(9) Treatment of easements granted after death.--In any 
        case in which the qualified conservation easement is granted 
        after the date of the decedent's death and on or before the due 
        date (including extensions) for filing the return of tax imposed 
        by section 2001, the deduction under section 2055(f ) with 
        respect to such easement shall be allowed to the estate but only 
        if no charitable deduction is allowed under chapter 1 to any 
        person with respect to the grant of such easement.''.
            (2) The first sentence of paragraph (6) of section 2031(c) 
        of the 1986 Code is amended by striking all that follows ``shall 
        be made'' and inserting ``on or before the due date (including 
        extensions) for filing the return of tax imposed by section 2001 
        and shall be made on such return.''.

SEC. 6008. AMENDMENTS RELATED TO TITLE VII OF 1997 ACT.

    (a) Amendment Related to Section 1400 of 1986 Code.--Section 
1400(b)(2)(B) of the 1986 Code is amended by inserting ``as determined 
on the basis of the 1990 census'' after ``percent''.
    (b) Amendment Related to Section 1400A of 1986 Code.--Subsection (a) 
of section 1400A of the 1986 Code is amended by inserting before the 
period ``and section 1394(b)(3)(B)(iii) shall be applied without regard 
to the employee residency requirement''.
    (c) Amendments Related to Section 1400B of 1986 Code.--
            (1) Section 1400B(b) of the 1986 Code is amended by 
        inserting after paragraph (4) the following new paragraph:
            ``(5) Treatment of dc zone termination.--The termination of 
        the designation of the DC Zone shall be disregarded for purposes 
        of determining whether any property is a DC Zone asset.''.
            (2) Paragraph (6) of section 1400B(b) of the 1986 Code is 
        amended by striking ``(4)(A)(ii)'' and inserting ``(4)(A)(i) or 
        (ii)''.
            (3) Section 1400B(c) of the 1986 Code is amended by 
        striking ``entity which is an''.
            (4) Section 1400B(d)(2) of the 1986 Code is amended by 
        inserting ``as determined on the basis of the 1990 census'' 
        after ``percent''.

    (d) Amendments Related to Section 1400C of 1986 Code.--
            (1) Paragraph (1) of section 1400C(b) of the 1986 Code is 
        amended by inserting ``and subsection (d)'' after ``this 
        subsection''.
            (2) Paragraph (1) of section 1400C(c) of the 1986 Code is 
        amended to read as follows:
            ``(1) In general.--The term `first-time homebuyer' means any 
        individual if such individual (and if married, such individual's 
        spouse) had no present ownership interest in a principal 
        residence in the District of Columbia during the 1-year period 
        ending on the date of the purchase of the principal residence to 
        which this section applies.''.
            (3) Subparagraph (B) of section 1400C(e)(2) of the 1986 Code 
        is amended by inserting before the period ``on the date the 
        taxpayer first occupies such residence''.
            (4) Paragraph (3) of section 1400C(e) of the 1986 Code is 
        amended by striking all that follows ``principal residence'' and 
        inserting ``on the date such residence is purchased.''.

[[Page 112 STAT. 812]]

            (5) Subsection (i) of section 1400C of the 1986 Code is 
        amended to read as follows:

    ``(i) Application of Section.--This section shall apply to 
property purchased after August 4, 1997, and before January 1, 2001.''.
            (6) Subsection (c) of section 23 of the 1986 Code is amended 
        by inserting ``and section 1400C'' after ``other than this 
        section''.
            (7) Subparagraph (C) of section 25(e)(1) of the 1986 Code is 
        amended by striking ``section 23'' and inserting ``sections 23 
        and 1400C''.

SEC. 6009. AMENDMENTS RELATED TO TITLE IX OF 1997 ACT.

    (a) Amendment Related to Section 908 of 1997 Act.--
Paragraph (6) of section 5041(b) of the 1986 Code is amended by 
inserting ``which is a still wine'' after ``hard cider''.
    (b) Amendment Related to Section 964 of 1997 Act.--
            (1) In general.--Subparagraph (C) of section 7704(g)(3) of 
        the 1986 Code is amended by striking the period at the end and 
        inserting ``and shall be paid by the 
        partnership. <<NOTE: Applicability.>> Section 6655 shall be 
        applied to such partnership with respect to such tax in the same 
        manner as if the partnership were a corporation, such tax were 
        imposed by section 11, and references in such section to taxable 
        income were references to the gross income referred to in 
        subparagraph (A).''.
             <<NOTE: Applicability. 26 USC 7704 note.>> (2) Effective 
        date.--The second sentence of section 7704(g)(3)(C) of the 1986 
        Code (as added by paragraph (1)) shall apply to taxable years 
        beginning after the date of the enactment of this Act.

    (c) Amendment Related to Section 971 of 1997 Act.--Clause (ii) of 
section 280F(a)(1)(C) is amended by striking ``subparagraph (A)'' and 
inserting ``subparagraphs (A) and (B)''.
    (d) Amendment Related to Section 976 of 1997 Act.--Section 
6103(d)(5) of the 1986 Code is amended by striking ``section 967 of the 
Taxpayer Relief Act of 1997.'' and inserting ``section 976 of the 
Taxpayer Relief Act of 1997. Subsections (a)(2) and (p)(4) and sections 
7213 and 7213A shall not apply with respect to disclosures or 
inspections made pursuant to this paragraph.''.
    (e) Amendment Related to Section 977 of 1997 Act.--Paragraph (2) of 
section 977(e) of the 1997 <<NOTE: 26 USC 172 note.>> Act is amended to 
read as follows:
            ``(2) Non-amtrak state.--The term `non-Amtrak State' means 
        any State which is not receiving intercity passenger rail 
        service from the Corporation as of the date of the enactment of 
        this Act.''.

SEC. 6010. AMENDMENTS RELATED TO TITLE X OF 1997 ACT.

    (a) Amendments Related to Section 1001 of 1997 Act.--
            (1) Paragraph (2) of section 1259(b) of the 1986 Code is 
        amended--
                    (A) by striking ``debt'' each place it appears in 
                clauses (i), (ii), and (iii) of subparagraph (A) and 
                inserting ``position'';
                    (B) by striking ``and'' at the end of subparagraph 
                (A); and
                    (C) by redesignating subparagraph (B) as 
                subparagraph (C) and by inserting after subparagraph (A) 
                the following new subparagraph:

[[Page 112 STAT. 813]]

                    ``(B) any hedge with respect to a position described 
                in subparagraph (A), and''.
            (2) Section 1259(d)(1) of the 1986 Code is amended by 
        inserting ``(including cash)'' after ``property''.
            (3) Subparagraph (D) of section 475(f )(1) of the 1986 Code 
        is amended by adding at the end the following new sentence: 
        ``Subsection (d)(3) shall not apply under the preceding sentence 
        for purposes of applying sections 1402 and 7704.''.
            (4) Subparagraph (C) of section 1001(d)(3) of the 1997 
        Act <<NOTE: 26 USC 475 note.>> is amended by striking ``within 
        the 30-day period beginning on'' and inserting ``before the 
        close of the 30th day after''.

    (b) Amendment Related to Section 1011 of 1997 Act.--Paragraph (1) of 
section 1059(g) of the 1986 Code is amended by striking ``and in the 
case of stock held by pass-thru entities'' and inserting ``, in the case 
of stock held by pass-thru entities, and in the case of consolidated 
groups''.
    (c) Amendments Related to Section 1012 of 1997 Act.--
            (1) Paragraph (1) of section 1012(d) of the 1997 
        Act <<NOTE: 26 USC 351 note.>> is amended by striking ``1997, 
        pursuant'' and inserting ``1997; except that the amendment made 
        by subsection (a) shall apply to such distributions only if 
        pursuant''.
            (2) Subparagraph (A) of section 355(e)(3) of the 1986 Code 
        is amended--
                    (A) by striking ``shall not be treated as described 
                in'' and inserting ``shall not be taken into account in 
                applying''; and
                    (B) by striking clause (iv) and inserting the 
                following new clause:
                          ``(iv) The acquisition of stock in the 
                      distributing corporation or any controlled 
                      corporation to the extent that the percentage of 
                      stock owned directly or indirectly in such 
                      corporation by each person owning stock in such 
                      corporation immediately before the acquisition 
                      does not decrease.''.
            (3)(A) Subsection (c) of section 351 of the 1986 Code is 
        amended to read as follows:

    ``(c) Special Rules Where Distribution to Shareholders.--
            ``(1) In general.--In determining control for purposes of 
        this section, the fact that any corporate transferor distributes 
        part or all of the stock in the corporation which it receives in 
        the exchange to its shareholders shall not be taken into 
        account.
            ``(2) Special rule for section 355.--If the requirements of 
        section 355 (or so much of section 356 as relates to section 
        355) are met with respect to a distribution described in 
        paragraph (1), then, solely for purposes of determining the tax 
        treatment of the transfers of property to the controlled 
        corporation by the distributing corporation, the fact that the 
        shareholders of the distributing corporation dispose of part or 
        all of the distributed stock shall not be taken into account in 
        determining control for purposes of this section.''.
            (B) Clause (ii) of section 368(a)(2)(H) of the 1986 Code is 
        amended to read as follows:
                          ``(ii) in the case of a transaction with 
                      respect to which the requirements of section 355 
                      (or so much of section 356 as relates to section 
                      355) are met, the

[[Page 112 STAT. 814]]

                      fact that the shareholders of the distributing 
                      corporation dispose of part or all of the 
                      distributed stock shall not be taken into 
                      account.''.

    (d) Amendments Related to Section 1013 of 1997 Act.--
            (1) Paragraph (5) of section 304(b) of the 1986 Code is 
        amended by striking subparagraph (B) and by redesignating 
        subparagraph (C) as subparagraph (B).
            (2) Subsection (b) of section 304 of the 1986 Code is 
        amended by adding at the end the following new paragraph:
             <<NOTE: Regulations.>> ``(6) Avoidance of multiple 
        inclusions, etc.--In the case of any acquisition to which 
        subsection (a) applies in which the acquiring corporation or the 
        issuing corporation is a foreign corporation, the Secretary 
        shall prescribe such regulations as are appropriate in order to 
        eliminate a multiple inclusion of any item in income by reason 
        of this subpart and to provide appropriate basis adjustments 
        (including modifications to the application of sections 959 and 
        961).''.

    (e) Amendments Related to Section 1014 of 1997 Act.--
            (1) Paragraph (1) of section 351(g) of the 1986 Code is 
        amended by adding ``and'' at the end of subparagraph (A) and by 
        striking subparagraphs (B) and (C) and inserting the following 
        new subparagraph:
                    ``(B) if (and only if) the transferor receives stock 
                other than nonqualified preferred stock--
                          ``(i) subsection (b) shall apply to such 
                      transferor; and
                          ``(ii) such nonqualified preferred stock shall 
                      be treated as other property for purposes of 
                      applying subsection (b).''.
            (2) Clause (ii) of section 354(a)(2)(C) of 1986 Code is 
        amended by adding at the end the following new subclause:
                                    ``(III) Extension of statute of 
                                limitations.--The statutory period for 
                                the assessment of any deficiency 
                                attributable to a corporation failing to 
                                be a family-owned corporation shall not 
                                expire before the expiration of 3 years 
                                after the date the Secretary is notified 
                                by the corporation (in such manner as 
                                the Secretary may prescribe) of such 
                                failure, and such deficiency may be 
                                assessed before the expiration of such 
                                3-year period notwithstanding the 
                                provisions of any other law or rule of 
                                law which would otherwise prevent such 
                                assessment.''.

    (f ) Amendment Related to Section 1024 of 1997 Act.--Section 
6331(h)(1) of the 1986 Code is amended by striking ``The effect of a 
levy'' and inserting ``If the Secretary approves a levy under this 
subsection, the effect of such levy''.
    (g) Amendments Related to Section 1031 of 1997 Act.--
            (1) Subsection (l) of section 4041 of the 1986 Code is 
        amended by striking ``subsection (e) or (f )'' and inserting 
        ``subsection (f ) or (g)''.
            (2) Subsection (b) of section 9502 of the 1986 Code is 
        amended by moving the sentence added at the end of paragraph (1) 
        to the end of such subsection.
            (3) Subsection (c) of section 6421 of the 1986 Code is 
        amended--
                    (A) by striking ``(2)(A)'' and inserting ``(2)''; 
                and

[[Page 112 STAT. 815]]

                    (B) by adding at the end the following sentence: 
                ``Subsection (a) shall not apply to gasoline to which 
                this subsection applies.''.

    (h) Amendments Related to Section 1032 of 1997 Act.--
            (1) Section 1032(a) of the 1997 Act <<NOTE: 26 USC 
        4083.>> is amended by striking ``Subsection (a) of section 
        4083'' and inserting ``Paragraph (1) of section 4083(a)''.
             <<NOTE: 26 USC 7232.>> (2) Section 1032(e)(12)(A) of the 
        1997 Act shall be applied as if ``gasoline, diesel fuel,'' were 
        the material proposed to be stricken.
            (3) Paragraph (1) of section 4082(d) of the 1986 Code is 
        amended to read as follows:
             <<NOTE: Regulations.>> ``(1) Aviation-grade kerosene.--
        Subsection (a)(2) shall not apply to aviation-grade kerosene (as 
        determined under regulations prescribed by the Secretary) which 
        the Secretary determines is destined for use as a fuel in an 
        aircraft.''.
            (4) Paragraph (3) of section 4082(d) of the 1986 Code is 
        amended by striking ``a removal, entry, or sale of kerosene to'' 
        and inserting ``kerosene received by''.
            (5) Paragraph (1) of section 4101(e) of the 1986 Code is 
        amended by striking ``dyed diesel fuel and kerosene'' and 
        inserting ``such fuel in a dyed form''.

    (i) Amendment Related to Section 1034 of 1997 Act.--Paragraph (3) of 
section 4251(d) of the 1986 Code is amended by striking ``other similar 
arrangement'' and inserting ``any other similar arrangement''.
    ( j) Amendments Related to Section 1041 of 1997 Act.--
            (1) Subparagraph (A) of section 512(b)(13) of the 1986 Code 
        is amended by inserting ``or accrues'' after ``receives''.
            (2) Subclause (I) of section 512(b)(13)(B)(i) of the 1986 
        Code is amended by striking ``(as defined in section 
        513A(a)(5)(A))''.
            (3) Paragraph (2) of section 1041(b) of the 1997 
        Act <<NOTE: 26 USC 512 note.>> is amended to read as follows:
            ``(2) Binding contracts.--The amendments made by this 
        section shall not apply to any amount received or accrued during 
        the first 2 taxable years beginning on or after the date of the 
        enactment of this Act if such amount is received or accrued 
        pursuant to a written binding contract in effect on June 8, 
        1997, and at all times thereafter before such amount is received 
        or accrued. The preceding sentence shall not apply to any amount 
        which would (but for the exercise of an option to accelerate 
        payment of such amount) be received or accrued after such 2 
        taxable years.''.

    (k) Amendments Related to Section 1053 of 1997 Act.--
            (1) Section 853 of the 1986 Code is amended by redesignating 
        subsection (e) as subsection (f ) and by inserting after 
        subsection (d) the following new subsection:

    ``(e) Treatment of Taxes Not Allowed as a Credit Under Section 
901(k).--This section shall not apply to any tax with respect to which 
the regulated investment company is not allowed a credit under section 
901 by reason of section 901(k).''.
            (2) Subsection (c) of section 853 of the 1986 Code is 
        amended by striking the last sentence.
            (3) Subparagraph (A) of section 901(k)(4) of the 1986 Code 
        is amended by striking ``securities business'' and inserting 
        ``business as a securities dealer''.

[[Page 112 STAT. 816]]

    (l) Amendment Related to Section 1055 of 1997 Act.--Section 
6611(g)(1) of the 1986 Code is amended by striking ``(e), and (h)'' and 
inserting ``and (e)''.
    (m) Amendment Related to Section 1061 of 1997 Act.--Subsection (c) 
of section 751 of the 1986 Code is amended by striking ``731'' each 
place it appears and inserting ``731, 732,''.
    (n) Amendment Related to Section 1083 of 1997 Act.--Section 
1083(a)(2) of the 1997 Act <<NOTE: 26 USC 39.>> is amended--
            (1) by striking ``21'' and inserting ``20''; and
            (2) by striking ``22'' and inserting ``21''.

    (o) Amendments Related to Section 1084 of 1997 Act.--
            (1) Paragraph (3) of section 264(a) of the 1986 Code is 
        amended by striking ``subsection (c)'' and inserting 
        ``subsection (d)''.
            (2) Paragraph (4) of section 264(a) of the 1986 Code is 
        amended by striking ``subsection (d)'' and inserting 
        ``subsection (e)''.
            (3)(A) Paragraph (4) of section 264(f ) of the 1986 Code is 
        amended by adding at the end the following new subparagraph:
                    ``(E) Master contracts.--If coverage for each 
                insured under a master contract is treated as a separate 
                contract for purposes of sections 817(h), 7702, and 
                7702A, coverage for each such insured shall be treated 
                as a separate contract for purposes of subparagraph (A). 
                For purposes of the preceding sentence, the term `master 
                contract' shall not include any group life insurance 
                contract (as defined in section 848(e)(2)).''.
            (B) The second sentence of section 1084(d) of the 1997 
        Act <<NOTE: 26 USC 101 note.>> is amended by striking ``but'' 
        and all that follows and inserting ``except that, in the case of 
        a master contract (within the meaning of section 264(f )(4)(E) 
        of the Internal Revenue Code of 1986), the addition of covered 
        lives shall be treated as a new contract only with respect to 
        such additional covered lives.''.
            (4)(A) Clause (iv) of section 264(f )(5)(A) of the 1986 Code 
        is amended by striking the second sentence.
            (B) Subparagraph (B) of section 6724(d)(1) of the 1986 Code 
        is amended by striking ``or'' at the end of clause (xv), by 
        striking the period at the end of clause (xvi) and inserting ``; 
        or'', and by adding at the end the following new clause:
                          ``(xvii) section 264(f )(5)(A)(iv) (relating 
                      to reporting with respect to certain life 
                      insurance and annuity contracts).''.
            (C) Paragraph (2) of section 6724(d) of the 1986 Code is 
        amended by striking ``or'' at the end of subparagraph (Y), by 
        striking the period at the end of subparagraph (Z) and inserting 
        ``or'', and by adding at the end the following new subparagraph:
                    ``(AA) section 264(f )(5)(A)(iv) (relating to 
                reporting with respect to certain life insurance and 
                annuity contracts).''.
            (5) Subparagraph (A) of section 264(f )(8) of the 1986 Code 
        is amended by striking ``subsection (d)(5)(B)'' and inserting 
        ``subsection (e)(5)(B)''.

    (p) Amendments Related to Section 1085 of 1997 Act.--
            (1) Paragraph (5) of section 32(c) of the 1986 Code is 
        amended--

[[Page 112 STAT. 817]]

                    (A) by inserting before the period at the end of 
                subparagraph (A) ``and increased by the amounts 
                described in subparagraph (C)'';
                    (B) by adding ``or'' at the end of clause (iii) of 
                subparagraph (B); and
                    (C) by striking all that follows subclause (II) of 
                subparagraph (B)(iv) and inserting the following:
                                    ``(III) other trades or businesses.
                      For purposes of clause (iv), there shall not be 
                      taken into account items which are attributable to 
                      a trade or business which consists of the 
                      performance of services by the taxpayer as an 
                      employee.
                    ``(C) Certain amounts included.--An amount is 
                described in this subparagraph if it is--
                          ``(i) interest received or accrued during the 
                      taxable year which is exempt from tax imposed by 
                      this chapter; or
                          ``(ii) amounts received as a pension or 
                      annuity, and any distributions or payments 
                      received from an individual retirement plan, by 
                      the taxpayer during the taxable year to the extent 
                      not included in gross income.
                Clause (ii) shall not include any amount which is not 
                includible in gross income by reason of a trustee-to-
                trustee transfer or a rollover distribution.''.
            (2) Clause (v) of section 32(c)(2)(B) of the 1986 Code is 
        amended by inserting ``shall be taken into account'' before ``, 
        but only''.
            (3) The text of paragraph (3) of section 1085(a) of the 1997 
        Act <<NOTE: 26 USC 6213.>> is amended to read as follows: 
        ``Paragraph (2) of section 6213(g) (relating to the definition 
        of mathematical or clerical errors) is amended by striking 
        ``and'' at the end of subparagraph (I), by striking the period 
        at the end of subparagraph (J) and inserting ``, and'', and by 
        inserting after subparagraph (J) the following new subparagraph:
                    ``(K) an omission of information required by section 
                32(k)(2) (relating to taxpayers making improper prior 
                claims of earned income credit).''.

    (q) Amendment Related to Section 1088 of 1997 Act.--Section 
1088(b)(2)(C) of the 1997 Act <<NOTE: 26 USC 453C note.>> is amended by 
inserting ``more than 1 year'' before ``after''.

    (r) Amendment Related to Section 1089 of 1997 Act.--Paragraphs 
(1)(C) and (2)(C) of section 664(d) of the 1986 Code are each amended by 
adding ``, and'' at the end.

SEC. 6011. AMENDMENTS RELATED TO TITLE XI OF 1997 ACT.

    (a) Amendment Related to Section 1103 of 1997 Act.--Paragraph (3) of 
section 59(a) added by section 1103 of the 1997 Act is redesignated as 
paragraph (4).
    (b) Amendments Related to Section 1121 of 1997 Act.--
            (1) Subsection (e) of section 1297 of the 1986 Code is 
        amended by adding at the end the following new paragraph:
            ``(4) Treatment of holders of options.--Paragraph (1) shall 
        not apply to stock treated as owned by a person by reason of 
        section 1298(a)(4) (relating to the treatment of a person that 
        has an option to acquire stock as owning such stock) unless such 
        person establishes that such stock is owned (within the meaning 
        of section 958(a)) by a United States

[[Page 112 STAT. 818]]

        shareholder (as defined in section 951(b)) who is not exempt 
        from tax under this chapter.''.
            (2) Section 1298(a)(2)(B) of the 1986 Code is amended by 
        adding at the end the following new sentence: ``Section 1297(e) 
        shall not apply in determining whether a corporation is a 
        passive foreign investment company for purposes of this 
        subparagraph.''.

    (c) Amendments Related to Section 1122 of 1997 Act.--
            (1) Section 672(f )(3)(B) of the 1986 Code is amended by 
        striking ``section 1296'' and inserting ``section 1297''.
            (2) Paragraph (1) of section 1291(d) of the 1986 Code is 
        amended by adding at the end the following new sentence: ``In 
        the case of stock which is marked to market under section 475 or 
        any other provision of this chapter, this section shall not 
        apply, except that rules similar to the rules of section 1296( 
        j) shall apply.''.
            (3) Subsection (d) of section 1296 of the 1986 Code is 
        amended by adding at the end the following new sentence: ``In 
        the case of a regulated investment company which elected to mark 
        to market the stock held by such company as of the last day of 
        the taxable year preceding such company's first taxable year for 
        which such company elects the application of this section, the 
        amount referred to in paragraph (1) shall include amounts 
        included in gross income under such mark to market with respect 
        to such stock for prior taxable years.''.

    (d) Amendment Related to Section 1123 of 1997 Act.--Subsection (e) 
of section 1297 of the 1986 Code added by section 1123 of the 1997 Act 
is redesignated as subsection (f ).
    (e) Amendments Related to Section 1131 of 1997 Act.--
            (1) Section 991 of the 1986 Code is amended by striking 
        ``except for the tax imposed by chapter 5''.
            (2) Section 6013 of the 1986 Code is amended by striking 
        ``chapters 1 and 5'' each place it appears in paragraphs (1)(A) 
        and (5) of subsection (g) and in subsection (h)(1) and inserting 
        ``chapter 1''.

    (f ) Amendment Related to Section 1142 of 1997 Act.--
            (1) Paragraph (2) of section 6038(a) of the 1986 Code is 
        amended by striking ``by regulations''.
            (2) Paragraph (3) of section 6038(a) of the 1986 Code is 
        amended by striking ``such information'' and all that follows 
        through the period and inserting ``the Secretary has prescribed 
        the furnishing of such information on or before the first day of 
        such annual accounting period.''.
            (3) Paragraph (4) of section 6038(e) of the 1986 Code is 
        amended by striking ``corporation'' and inserting ``foreign 
        business entity'' each place it appears.

    (g) Amendment Related to Section 1144 of 1997 Act.--Paragraphs (1) 
and (2) of section 1144(c) of the 1997 Act <<NOTE: 26 USC 6038B.>> are 
each amended by striking ``6038B(b)'' and inserting ``6038B(c) (as 
redesignated by subsection (b))''.

SEC. 6012. AMENDMENTS RELATED TO TITLE XII OF 1997 ACT.

    (a) Amendment Related to Section 1204 of 1997 Act.--The last 
sentence of section 162(a) of the 1986 Code is amended by striking 
``investigate'' and all that follows and inserting ``investigate or 
prosecute, or provide support services for the investigation or 
prosecution of, a Federal crime.''.

[[Page 112 STAT. 819]]

    (b) Amendments Related to Section 1205 of 1997 Act.--
            (1) Section 6311(e)(1) of the 1986 Code is amended by 
        striking ``section 6103(k)(8)'' and inserting ``section 
        6103(k)(9)''.
            (2) Paragraph (8) of section 6103(k) of the 1986 Code (as 
        added by section 1205(c)(1) of the 1997 Act) is redesignated as 
        paragraph (9).
            (3) Subsection (g) of section 7431 of the 1986 Code added by 
        section 1205 of the 1997 Act is redesignated as subsection (h) 
        and is amended by striking ``(8)'' in the heading and inserting 
        ``(9)''.
             <<NOTE: 26 USC 6103.>> (4) Section 1205(c)(3) of the 1997 
        Act shall be applied as if it read as follows:
            ``(3) Section 6103(p)(3)(A), as amended by section 
        1026(b)(1)(A) of the 1997 Act, is amended by striking ``or (8)'' 
        and inserting ``(8), or (9)''.
            (5) Section 1213(b) of the 1997 Act <<NOTE: 26 USC 
        6724.>> is amended by striking ``section 6724(d)(1)(A)'' and 
        inserting ``section 6724(d)(1)''.

    (c) Amendment Related to Section 1221 of 1997 Act.--Paragraph (2) of 
section 774(d) of the 1986 Code is amended by inserting before the 
period ``or 857(b)(3)(D)''.
    (d) Amendment Related to Section 1223 of 1997 Act.--Subsection (c) 
of section 6724 of the 1986 Code is amended by inserting before the 
period ``(more than 100 information returns in the case of a partnership 
having more than 100 partners)''.
    (e) Amendment Related to Section 1226 of 1997 Act.--Section 1226 of 
the 1997 Act <<NOTE: 26 USC 6011 note.>> is amended by striking ``ending 
on or'' and inserting ``beginning''.

    (f ) Amendment Related to Section 1231 of 1997 Act.--Subsection (c) 
of section 6211 of the 1986 Code is amended--
            (1) by striking ``Subchapter C'' in the heading and 
        inserting ``Subchapters C and D''; and
            (2) by striking ``subchapter C'' in the text and inserting 
        ``subchapters C and D''.

    (g) Amendment Related to Section 1256 of 1997 Act.--Subparagraph (A) 
of section 857(d)(3) of the 1986 Code is amended by striking ``earliest 
accumulated earnings and profits (other than earnings and profits to 
which subsection (a)(2)(A) applies)'' and inserting ``earliest earnings 
and profits accumulated in any taxable year to which the provisions of 
this part did not apply''.
    (h) Amendment Related to Section 1285 of 1997 Act.--Section 7430(b) 
of the 1986 Code is amended by redesignating paragraph (5) as paragraph 
(4).

SEC. 6013. AMENDMENTS RELATED TO TITLE XIII OF 1997 ACT.

    (a) Amendments Related to Section 1305 of 1997 Act.--
            (1) Section 646 of the 1986 Code is redesignated as section 
        645.
            (2) The item relating to section 646 in the table of 
        sections for subpart A of part I of subchapter J of chapter 1 of 
        the 1986 Code is amended by striking ``Sec. 646'' and inserting 
        ``Sec. 645''.
            (3) Paragraph (1) of section 2652(b) of the 1986 Code is 
        amended by striking ``section 646'' and inserting ``section 
        645''.
            (4)(A) Paragraph (1) of section 2652(b) of the 1986 Code is 
        amended by striking the second sentence.
            (B) Subsection (b) of section 2654 of the 1986 Code is 
        amended by adding at the end the following new sentence:

[[Page 112 STAT. 820]]

        ``For purposes of this subsection, a trust shall be treated as 
        part of an estate during any period that the trust is so treated 
        under section 645.''.

    (b) Amendments Related to Section 1309 of 1997 Act.--
            (1) Subsection (b) of section 685 of the 1986 Code is 
        amended by adding at the end the following new flush sentence:

``A trust shall not fail to be treated as meeting the requirement of 
paragraph (6) by reason of the death of an individual but only during 
the 60-day period beginning on the date of such death.''.
            (2) Subsection (f ) of section 685 of the 1986 Code is 
        amended by inserting before the period at the end ``and of 
        trusts terminated during the year''.

SEC. 6014. AMENDMENTS RELATED TO TITLE XIV OF 1997 ACT.

    (a) Amendments Related to Section 1421 of 1997 Act.--
            (1) Paragraph (1) of section 5054(a) of the 1986 Code is 
        amended--
                    (A) by inserting ``, or imported into the United 
                States and transferred to a brewery free of tax under 
                section 5418,'' after ``produced in the United States'' 
                in the text; and
                    (B) by inserting ``; certain imported beer'' after 
                ``produced in the united states'' in the heading.
            (2) Paragraph (2) of section 5054(a) of the 1986 Code is 
        amended by inserting ``and not transferred to a brewery free of 
        tax under section 5418'' after ``United States''.
            (3) Section 5056 of the 1986 Code is amended by striking 
        ``produced in the United States'' each place it appears and 
        inserting ``removed for consumption or sale''.

    (b) Amendments Related to Section 1422 of 1997 Act.--
            (1) Paragraph (2) of section 5043(a) of the 1986 Code is 
        amended by inserting ``which are not transferred to a bonded 
        wine cellar free of tax under section 5364'' after ``foreign 
        wines''.
            (2) Subsection (a) of section 5044 of the 1986 Code is 
        amended by striking ``produced in the United States'' and 
        inserting ``removed from a bonded wine cellar''.
            (3) Section 5364 of the 1986 Code is amended by striking 
        ``Wine imported or brought into'' and inserting ``Natural wine 
        (as defined in section 5381) imported or brought into''.

    (c) Amendment Related to Section 1434 of 1997 Act.--Paragraph (2) of 
section 4052(f ) of the 1986 Code is amended by striking ``this 
section'' and inserting ``such section''.
    (d) Amendment Related to Section 1436 of 1997 Act.--Paragraph (2) of 
section 4091(a) of the 1986 Code is amended by inserting ``or on which 
tax has been credited or refunded'' after ``such paragraph''.
    (e) Amendment Related to Section 1453 of 1997 Act.--Subparagraph (D) 
of section 7430(c)(4) of the 1986 Code is amended by striking 
``subparagraph (A)(iii)'' and inserting ``subparagraph (A)(ii)''.

SEC. 6015. AMENDMENTS RELATED TO TITLE XV OF 1997 ACT.

    (a) Amendment Related to Section 1501 of 1997 Act.--Paragraph (8) of 
section 408(p) of the 1986 Code added by section 1501(b) of the 1997 Act 
is redesignated as paragraph (9).
    (b) Amendment Related to Section 1505 of 1997 Act.--Section 
1505(d)(2) of the 1997 Act <<NOTE: 26 USC 401 note.>> is amended by 
striking ``(b)(12)'' and inserting ``(b)(12)(A)(i)''.

[[Page 112 STAT. 821]]

    (c) Amendments Related to Section 1529 of 1997 Act.--
            (1) Section 1529(a) of the 1997 Act <<NOTE: 26 USC 
        1529.>> is amended to read as follows:

    ``(a) General Rule.--Amounts to which this section applies which are 
received by an individual (or the survivors of the individual) as a 
result of hypertension or heart disease of the individual shall be 
excludable from gross income under section 104(a)(1) of the Internal 
Revenue Code of 1986.''.
            (2) Section 1529(b)(1)(B) of the 1997 Act is amended to read 
        as follows:
                    ``(B) under--
                          ``(i) a State law (as amended on May 19, 1992) 
                      which irrebuttably presumed that heart disease and 
                      hypertension are work-related illnesses but only 
                      for employees hired before July 1, 1992; or
                          ``(ii) any other statute, ordinance, labor 
                      agreement, or similar provision as a disability 
                      pension payment or in the nature of a disability 
                      pension payment attributable to employment as a 
                      police officer or fireman, but only if the 
                      individual is referred to in the State law 
                      described in clause (i); and''.

    (d) Amendment Related to Section 1530 of 1997 Act.--Subparagraph (C) 
of section 404(a)(9) of the 1986 Code (as added by section 1530 of the 
1997 Act) is redesignated as subparagraph (D) and is amended by striking 
``A qualified'' and inserting ``Qualified gratuitous transfers.--A 
qualified''.
    (e) Amendment Related to Section 1531 of 1997 Act.--Subsection (f ) 
of section 9811 of the 1986 Code (as added by section 1531 of the 1997 
Act) is redesignated as subsection (e).

SEC. 6016. AMENDMENTS RELATED TO TITLE XVI OF 1997 ACT.

    (a) Amendments Related to Section 1601(d) of 1997 Act.--
            (1) Amendments related to section 1601(d)(1)--
                    (A) Section 408(p)(2)(D)(i) of the 1986 Code is 
                amended by striking ``or (B)'' in the last sentence.
                    (B) Section 408(p) of the 1986 Code is amended by 
                adding at the end the following new paragraph:
            ``(10) Special rules for acquisitions, dispositions, and 
        similar transactions.--
                    ``(A) In general.--An employer which fails to meet 
                any applicable requirement by reason of an acquisition, 
                disposition, or similar transaction shall not be treated 
                as failing to meet such requirement during the 
                transition period if--
                          ``(i) the employer satisfies requirements 
                      similar to the requirements of section 
                      410(b)(6)(C)(i)(II); and
                          ``(ii) the qualified salary reduction 
                      arrangement maintained by the employer would 
                      satisfy the requirements of this subsection after 
                      the transaction if the employer which maintained 
                      the arrangement before the transaction had 
                      remained a separate employer.
                    ``(B) Applicable requirement.--For purposes of this 
                paragraph, the term `applicable requirement' means--
                          ``(i) the requirement under paragraph 
                      (2)(A)(i) that an employer be an eligible 
                      employer;
                          ``(ii) the requirement under paragraph (2)(D) 
                      that an arrangement be the only plan of an 
                      employer; and

[[Page 112 STAT. 822]]

                          ``(iii) the participation requirements under 
                      paragraph (4).
                    ``(C) Transition period.--For purposes of this 
                paragraph, the term `transition period' means the period 
                beginning on the date of any transaction described in 
                subparagraph (A) and ending on the last day of the 
                second calendar year following the calendar year in 
                which such transaction occurs.''.
                    (C) Section 408(p)(2) of the 1986 Code is amended--
                          (i) by striking ``the preceding sentence shall 
                      apply only in accordance with rules similar to the 
                      rules of section 410(b)(6)(C)(i)'' in the last 
                      sentence of subparagraph (C)(i)(II) and inserting 
                      ``the preceding sentence shall not apply''; and
                          (ii) by striking clause (iii) of subparagraph 
                      (D).
            (2) Amendment to section 1601 (d)(4).--Section 1601(d)(4)(A) 
        of the 1997 Act <<NOTE: 26 USC 403 note.>> is amended--
                    (A) by striking ``Section 403(b)(11)'' and inserting 
                ``Paragraphs (7)(A)(ii) and (11) of section 403(b)''; 
                and
                    (B) by striking ``403(b)(1)'' in clause (ii) and 
                inserting ``403(b)(10)''.

    (b) Amendment Related to Section 1601(f )(4) of 1997 Act.--
Subsection (d) of section 6427 of the 1986 Code is amended--
            (1) by striking ``Helicopters'' in the heading and inserting 
        ``Other Aircraft Uses''; and
            (2) by inserting ``or a fixed-wing aircraft'' after 
        ``helicopter''.

SEC. 6017. AMENDMENT RELATED TO TRANSPORTATION EQUITY ACT FOR THE 21ST 
            CENTURY.

    (a) In General.--Subparagraph (B) of section 6427(i)(2) of the 1986 
Code is amended to read as follows:
                    ``(B) Time for filing claim.--No claim filed under 
                this paragraph shall be allowed unless filed during the 
                first quarter following the last quarter included in the 
                claim.''.

     <<NOTE: 26 USC 6427 note.>> (b) Effective Date.--The amendment made 
by subsection (a) shall take effect as if included in the amendments 
made by section 9009 of the Transportation Equity Act for the 21st 
Century.

SEC. 6018. AMENDMENTS RELATED TO SMALL BUSINESS JOB PROTECTION ACT OF 
            1996.

    (a) Amendment Related to Section 1116.--Subparagraph (C) of section 
1116(b)(2) of the Small Business Job Protection Act of 1996 <<NOTE: 110 
Stat. 1764.>> is amended by striking ``chapter 68'' and inserting 
``chapter 61''.

    (b) Amendment Related to Section 1421.--Section 408(d)(7) of the 
1986 Code is amended--
            (1) by inserting ``or 402(k)'' after ``section 402(h)'' in 
        subparagraph (B) thereof; and
            (2) by inserting ``or simple retirement accounts'' after 
        ``pensions'' in the heading thereof.

    (c) Amendment Related to Section 1431.--Subparagraph (E) of section 
1431(c)(1) of the Small Business Job Protection Act of 1996 <<NOTE: 26 
USC 414.>> is amended to read as follows:
            ``(E) Section 414(q)(5), as redesignated by subparagraph 
        (A), is amended by striking `under paragraph (4) or the number 
        of officers taken into account under paragraph (5)' ''.

[[Page 112 STAT. 823]]

    (d) Amendment Related to Section 1604.--Paragraph (3) of section 
1604(b) of such Act <<NOTE: 26 USC 167 note.>> is amended--
            (1) by striking ``such Code'' and inserting ``the Internal 
        Revenue Code of 1986''; and
            (2) by striking ``such date of enactment'' and inserting 
        ``the date of the enactment of this Act''.

    (e) Amendment Related to Section 1609.--Paragraph (1) of section 
1609(h) of such Act <<NOTE: 26 USC 4091 note.>> is amended by striking 
``paragraph (3)(A)(i)'' and inserting ``paragraph (3)(A)''.

    (f ) Amendments Related to Section  1807.--
            (1) Subparagraph (A) of section 23(b)(2) of the 1986 Code 
        (relating to income limitation on credit for adoption expenses) 
        is amended by inserting ``(determined without regard to 
        subsection (c))'' after ``for any taxable year''.
            (2) Paragraph (3) of section 1807(c) of the Small Business 
        Job Protection Act of 1996 <<NOTE: 26 USC 219.>> is amended by 
        striking ``Clause (i)'' and inserting ``Clause (ii)''.

     <<NOTE: 26 USC 679.>> (g) Amendment Related to Section 1903.--
Subsection (b) of section 1903 of such Act shall be applied as if ``or'' 
in the material proposed to be stricken were capitalized.

     <<NOTE: 26 USC 23 note.>> (h) Effective Date.--The amendments made 
by this section shall take effect as if included in the provisions of 
the Small Business Job Protection Act of 1996 to which they relate.

SEC. 6019. AMENDMENTS RELATED TO TAXPAYER BILL OF RIGHTS 2.

    (a) In General.--Subsection (b) of section 6104 of the 1986 Code is 
amended by adding at the end the following new sentence: ``In the case 
of an organization described in section 501(d), this subsection shall 
not apply to copies referred to in section 6031(b) with respect to such 
organization.''.
    (b) Public Inspection.--Subparagraph (C) of section 6104(e)(1) of 
the 1986 Code is amended by adding at the end the following new 
sentence: ``In the case of an organization described in section 501(d), 
subparagraph (A) shall not require the disclosure of the copies referred 
to in section 6031(b) with respect to such organization.''.
    (c) Disclosure to Authorized Representatives of the 
Taxpayer.--Paragraph (6) of section 6103(e) of the 1986 Code is amended 
by striking ``or (5)'' and inserting ``(5), (8), or (9)''.
     <<NOTE: 26 USC 6103 note.>> (d) Effective Date.--The amendments 
made by this section shall take effect on the date of the enactment of 
this Act.

SEC. 6020. AMENDMENT RELATED TO OMNIBUS BUDGET RECONCILIATION ACT OF 
            1993.

    (a) In General.--Section 196(c) of the 1986 Code is amended by 
striking ``and'' at the end of paragraph (6), by striking the period at 
the end of paragraph (7), and insert ``, and'', and by adding at the end 
the following new paragraph:
            ``(8) the employer Social Security credit determined under 
        section 45B(a).''.

     <<NOTE: 26 USC 196 note.>> (b) Effective Date.--The amendment made 
by this section shall take effect as if included in the amendments made 
by section 13443 of the Revenue Reconciliation Act of 1993.

SEC. 6021. AMENDMENT RELATED TO REVENUE RECONCILIATION ACT OF 1990.

    (a) Identification Requirement for Individuals Eligible for Earned 
Income Credit.--Subparagraph (F) of section 32(c)(1)

[[Page 112 STAT. 824]]

of the 1986 Code is amended by striking ``The term `eligible individual' 
does not include any individual who does not include on the return of 
tax for the taxable year--'' and inserting ``No credit shall be allowed 
under this section to an eligible individual who does not include on the 
return of tax for the taxable year--''.
    (b) Identification Requirement for Qualifying Children Under Earned 
Income Credit.--
            (1) In general.--Clause (i) of section 32(c)(3)(D) of the 
        1986 Code is amended to read as follows:
                          ``(i) In general.--A qualifying child shall 
                      not be taken into account under subsection (b) 
                      unless the taxpayer includes the name, age, and 
                      TIN of the qualifying child on the return of tax 
                      for the taxable year.''.
            (2) Individuals who do not include tin, etc., of any 
        qualifying child.--Paragraph (1) of section 32(c) of the 1986 
        Code is amended by adding at the end the following new 
        subparagraph:
                    ``(G) Individuals who do not include tin, etc., of 
                any qualifying child.--No credit shall be allowed under 
                this section to any eligible individual who has one or 
                more qualifying children if no qualifying child of such 
                individual is taken into account under subsection (b) by 
                reason of paragraph (3)(D).''.
            (3) Conforming amendment.--Subparagraph (A) of section 
        32(c)(3) is amended by inserting ``and'' at the end of clause 
        (ii), by striking ``, and'' at the end of clause (iii) and 
        inserting a period, and by striking clause (iv).

     <<NOTE: 26 USC 32 note.>> (c) Effective Dates.--
            (1) Eligible individuals.--The amendment made by subsection 
        (a) shall take effect as if included in the amendments made by 
        section 451 of the Personal Responsibility and Work Opportunity 
        Reconciliation Act of 1996.
            (2) Qualifying children.--The amendments made by subsection 
        (b) shall take effect as if included in the amendments made by 
        section 11111 of Revenue Reconciliation Act of 1990.

SEC. 6022. AMENDMENT RELATED TO TAX REFORM ACT OF 1986.

    (a) In General.--Section 6401(b)(1) of the 1986 Code is 
amended by striking ``and D'' and inserting ``D, and G''.
     <<NOTE: 26 USC 6401 note.>> (b) Effective Date.--The amendment made 
by subsection (a) shall take effect as if included in the amendments 
made by section 701(b) of the Tax Reform Act of 1986.

SEC. 6023. MISCELLANEOUS CLERICAL AND DEADWOOD CHANGES.

            (1) The heading for subparagraph (B) of section 45A(b)(1) of 
        the 1986 Code is amended by striking ``targeted jobs credit'' 
        and inserting ``work opportunity credit''.
            (2) The subsection heading for section 59(b) of the 1986 
        Code is amended by striking ``Section 936 Credit'' and inserting 
        ``Credits Under Section 30A or 936''.
            (3) Subsection (n) of section 72 of the 1986 Code is amended 
        by inserting ``(as in effect on the day before the date of the 
        enactment of the Small Business Job Protection Act of 1996)'' 
        after ``section 101(b)(2)(D)''.
            (4) Subparagraph (A) of section 72(t)(3) of the 1986 Code is 
        amended by striking ``(A)(v),'' and inserting ``(A)(v)''.

[[Page 112 STAT. 825]]

            (5) Clause (ii) of section 142(f )(3)(A) of the 1986 Code is 
        amended by striking ``1997, ('' and inserting ``1997 (''.
            (6) The last sentence of paragraph (3) of section 501(n) of 
        the 1986 Code is amended by striking ``subparagraph (C)(ii)'' 
        and inserting ``subparagraph (E)(ii)''.
            (7) Subsection (o) of section 501 of the 1986 Code is 
        amended by striking ``section 1853(e)'' and inserting ``section 
        1855(d)''.
            (8) The heading for subclause (II) of section 
        512(b)(17)(B)(ii) of the 1986 Code is amended by striking 
        ``Rule'' and inserting ``rule''.
            (9) Clause (ii) of section 543(d)(5)(A) of the 1986 Code is 
        amended by striking ``section 563(c)'' and inserting ``section 
        563(d)''.
            (10) Subparagraph (B) of section 871(f )(2) of the 1986 Code 
        is amended by striking ``(19 U.S.C. 2462)'' and inserting ``19 
        U.S.C. 2461 et seq.)''.
            (11) Paragraph (2) of section 1017(a) of the 1986 Code is 
        amended by striking ``(b)(2)(D)'' and inserting ``(b)(2)(E)''.
            (12) Subparagraph (D) of section 1250(d)(4) of the 1986 Code 
        is amended by striking ``the last sentence of section 1033(b)'' 
        and inserting ``section 1033(b)(2)''.
            (13) Paragraph (5) of section 3121(a) of the 1986 Code is 
        amended--
                    (A) by striking the semicolon at the end of 
                subparagraph (F) and inserting a comma;
                    (B) by striking ``or'' at the end of subparagraph 
                (G); and
                    (C) by striking the period at the end of 
                subparagraph (I) and inserting a semicolon.
            (14) Paragraph (19) of section 3401(a) of the 1986 Code is 
        amended by inserting ``for'' before ``any benefit provided to''.
            (15) Paragraph (21) of section 3401(a) of the 1986 Code is 
        amended by inserting ``for'' before ``any payment made''.
            (16) Sections 4092(b) and 6427(q)(2) of the 1986 Code are 
        each amended by striking ``section 4041(c)(4)'' and inserting 
        ``section 4041(c)(2)''.
            (17) Sections 4221(c) and 4222(d) of the 1986 Code are each 
        amended by striking ``4053(a)(6)'' and inserting ``4053(6)''.
            (18)(A) The heading of section 4973 of the 1986 Code is 
        amended to read as follows:

``SEC. 4973. TAX ON EXCESS CONTRIBUTIONS TO CERTAIN TAX-FAVORED ACCOUNTS 
            AND ANNUITIES.''.

            (B) The item relating to section 4973 in the table of 
        sections for chapter 43 of the 1986 Code is amended to read as 
        follows:
                ``Sec. 4973. Tax on excess contributions to certain tax-
                                favored accounts and annuities.''.

            (19) Section 4975 of the 1986 Code is amended--
                    (A) in subsection (c)(3) by striking ``exempt for 
                the tax'' and inserting ``exempt from the tax''; and
                    (B) in subsection (i) by striking ``Secretary of 
                Treasury'' and inserting ``Secretary of the Treasury''.
            (20) Paragraph (1) of section 6039(a) of the 1986 Code is 
        amended by inserting ``to any person'' after ``transfers''.

[[Page 112 STAT. 826]]

            (21) Subparagraph (A) of section 6050R(b)(2) of the 1986 
        Code is amended by striking the semicolon at the end thereof and 
        inserting a comma.
            (22) Subparagraph (A) of section 6103(h)(4) of the 1986 Code 
        is amended by inserting ``if '' before ``the taxpayer is a party 
        to''.
            (23) Paragraph (5) of section 6416(b) of the 1986 Code is 
        amended by striking ``section 4216(e)(1)'' each place it appears 
        and inserting ``section 4216(d)(1)''.
            (24)(A) Section 6421 of the 1986 Code is amended by 
        redesignating subsections ( j) and (k) as subsections (i) and ( 
        j), respectively.
            (B) Subsection (b) of section 34 of the 1986 Code is amended 
        by striking ``section 6421( j)'' and inserting ``section 
        6421(i)''.
            (C) Subsections (a) and (b) of section 6421 of the 1986 Code 
        are each amended by striking ``subsection ( j)'' and inserting 
        ``subsection (i)''.
            (25) Paragraph (3) of section 6427(f ) of the 1986 Code is 
        amended by striking ``, (e),''.
            (26)(A) Section 6427 of the 1986 Code, as amended by 
        paragraph (16), is amended by redesignating subsections (n), 
        (p), (q), and (r) as subsections (m), (n), (o), and (p), 
        respectively.
            (B) Paragraphs (1) and (2)(A) of section 6427(i) of the 1986 
        Code are each amended by striking ``(q)'' and inserting ``(o)''.
            (27) Subsection (m) of section 6501 of the 1986 Code is 
        amended by striking ``election under'' and all that follows 
        through ``(or any'' and inserting ``election under section 
        30(d)(4), 40(f ), 43, 45B, 45C(d)(4), or 51( j) (or any''.
            (28) The paragraph heading of paragraph (2) of section 
        7702B(e) of the 1986 Code is amended by inserting ``section'' 
        after ``Application of''.
            (29) Paragraph (3) of section 7434(b) of the 1986 Code is 
        amended by striking ``attorneys fees'' and inserting 
        ``attorneys' fees''.
            (30) Subparagraph (B) of section 7872(f )(2) of the 1986 
        Code is amended by striking ``foregone'' and inserting 
        ``forgone''.
            (31) Subsection (e) of section 9502 of the 1986 Code is 
        amended to read as follows:

    ``(e) Certain Taxes on Alcohol Mixtures To Remain in General Fund.--
For purposes of this section, the amounts which would (but for this 
subsection) be required to be appropriated 
under subparagraphs (A), (C), and (D) of subsection (b)(1) shall be 
reduced by--
            ``(1) 0.6 cent per gallon in the case of taxes imposed on 
        any mixture at least 10 percent of which is alcohol (as defined 
        in section 4081(c)(3)) if any portion of such alcohol is 
        ethanol; and
            ``(2) 0.67 cent per gallon in the case of fuel used in 
        producing a mixture described in paragraph (1).''.
             <<NOTE: Effective date. 26 USC 34 note.>> (32) The 
        amendments made by this section shall take effect on the date of 
        the enactment of this Act.

SEC. 6024. <<NOTE: 26 USC 1 note.>> EFFECTIVE DATE.

    Except as otherwise provided in this title, the amendments made by 
this title shall take effect as if included in the provisions of the 
Taxpayer Relief Act of 1997 to which they relate.

[[Page 112 STAT. 827]]

                      TITLE VII--REVENUE PROVISIONS

SEC. 7001. CLARIFICATION OF DEDUCTION FOR DEFERRED COMPENSATION.

    (a) In General.--Section 404(a) (relating to deduction for 
contributions of an employer to an employee's trust or annuity plan and 
compensation under a deferred-payment plan) is amended by adding at the 
end the following new paragraph:
            ``(11) Determinations relating to deferred compensation.--
        For purposes of determining under this section--
                    ``(A) whether compensation of an employee is 
                deferred compensation; and
                    ``(B) when deferred compensation is paid,
        no amount shall be treated as received by the employee, or paid, 
        until it is actually received by the employee.''.

     <<NOTE: 26 USC 404 note.>> (b) Effective Date.--
             <<NOTE: Applicability.>> (1) In general.--The amendment 
        made by subsection (a) shall apply to taxable years ending after 
        the date of the enactment of this Act.
            (2) Change in method of accounting.--In the case of any 
        taxpayer required by the amendment made by subsection (a) to 
        change its method of accounting for its first taxable year 
        ending after the date of the enactment of this Act--
                    (A) such change shall be treated as initiated by the 
                taxpayer,
                    (B) such change shall be treated as made with the 
                consent of the Secretary of the Treasury; and
                    (C) the net amount of the adjustments required to be 
                taken into account by the taxpayer under section 481 of 
                the Internal Revenue Code of 1986 shall be taken into 
                account ratably over the 3-taxable year period beginning 
                with such first taxable year.

SEC. 7002. <<NOTE: 26 USC 269B note.>> TERMINATION OF EXCEPTION FOR 
            CERTAIN REAL ESTATE INVESTMENT TRUSTS FROM THE TREATMENT OF 
            STAPLED ENTITIES.

     <<NOTE: Applicability.>> (a) In General.--Notwithstanding paragraph 
(3) of section 136(c) of the Tax Reform Act of 1984 (relating to stapled 
stock; stapled entities), the REIT gross income provisions shall be 
applied by treating the activities and gross income of members of the 
stapled REIT group properly allocable to any nonqualified real property 
interest held by the exempt REIT or any stapled entity which is a member 
of such group (or treated under subsection (c) as held by such REIT or 
stapled entity) as the activities and gross income of the exempt REIT in 
the same manner as if the exempt REIT and such group were one entity.

    (b) Nonqualified Real Property Interest.--For purposes of this 
section--
            (1) In general.--The term ``nonqualified real property 
        interest'' means, with respect to any exempt REIT, any interest 
        in real property acquired after March 26, 1998, by the exempt 
        REIT or any stapled entity.
            (2) Exception for binding contracts, etc.--Such term shall 
        not include any interest in real property acquired after March 
        26, 1998, by the exempt REIT or any stapled entity if--

[[Page 112 STAT. 828]]

                    (A) the acquisition is pursuant to a written 
                agreement (including a put option, buy-sell agreement, 
                and an agreement relating to a third party default) 
                which was binding on such date and at all times 
                thereafter on such REIT or stapled entity; or
                    (B) the acquisition is described on or before such 
                date in a public announcement or in a filing with the 
                Securities and Exchange Commission.
            (3) Improvements and leases.--
                    (A) In general.--Except as otherwise provided in 
                this paragraph, the term ``nonqualified real property 
                interest'' shall not include--
                          (i) any improvement to land owned or leased by 
                      the exempt REIT or any member of the stapled REIT 
                      group; and
                          (ii) any repair to, or improvement of, any 
                      improvement owned or leased by the exempt REIT or 
                      any member of the stapled REIT group,
                if such ownership or leasehold interest is a qualified 
                real property interest.
                    (B) Leases.--The term ``nonqualified real property 
                interest'' shall not include--
                          (i) any lease of a qualified real property 
                      interest if such lease is not otherwise such an 
                      interest; or
                          (ii) any renewal of a lease which is a 
                      qualified real property interest,
                but only if the rent on any lease referred to in clause 
                (i) or any renewal referred to in clause (ii) does not 
                exceed an arm's length rate.
                    (C) Termination where change in use.--
                          (i) In general.--Subparagraph (A) shall not 
                      apply to any improvement placed in service after 
                      December 31, 1999, which is part of a change in 
                      the use of the property to which such improvement 
                      relates unless the cost of such improvement does 
                      not exceed 200 percent of--
                                    (I) the cost of such property; or
                                    (II) if such property is substituted 
                                basis property (as defined in section 
                                7701(a)(42) of the Internal Revenue Code 
                                of 1986), the fair market value of the 
                                property at the time of acquisition.
                          (ii) Binding contracts.--For purposes of 
                      clause (i), an improvement shall be treated as 
                      placed in service before January 1, 2000, if such 
                      improvement is placed in service before January 1, 
                      2004, pursuant to a binding contract in effect on 
                      December 31, 1999, and at all times thereafter.
            (4) Exception for permitted transfers, etc.--The term 
        ``nonqualified real property interest'' shall not include any 
        interest in real property acquired solely as a result of a 
        direct or indirect contribution, distribution, or other transfer 
        of such interest from the exempt REIT or any member of the 
        stapled REIT group to such REIT or any such member, but only to 
        the extent the aggregate of the interests of the exempt REIT and 
        all stapled entities in such interest in real property 
        (determined in accordance with subsection (c)(1)) is not 
        increased by reason of the transfer.

[[Page 112 STAT. 829]]

            (5) Treatment of entities which are not stapled, etc. on 
        march 26, 1998.--Notwithstanding any other provision of this 
        section, all interests in real property held by an exempt REIT 
        or any stapled entity with respect to such REIT (or treated 
        under subsection (c) as held by such REIT or stapled entity) 
        shall be treated as nonqualified real property interests 
        unless--
                    (A) such stapled entity was a stapled entity with 
                respect to such REIT as of March 26, 1998, and at all 
                times thereafter; and
                    (B) as of March 26, 1998, and at all times 
                thereafter, such REIT was a real estate investment 
                trust.
            (6) Qualified real property interest.--The term ``qualified 
        real property interest'' means any interest in real property 
        other than a nonqualified real property interest.

    (c) Treatment of Property Held by 10-Percent Sub-
sidiaries.--For purposes of this section--
            (1) In general.--Any exempt REIT and any stapled entity 
        shall be treated as holding their proportionate shares of each 
        interest in real property held by any 10-percent subsidiary 
        entity of the exempt REIT or stapled entity, as the case may be.
            (2) Property held by 10-percent subsidiaries treated as 
        nonqualified.--
                    (A) In general.--Except as provided in subparagraph 
                (B), any interest in real property held by a 10-percent 
                subsidiary entity of an exempt REIT or stapled entity 
                shall be treated as a nonqualified real property 
                interest.
                    (B) Exception for interests in real property held on 
                march 26, 1998, etc.--In the case of an entity which was 
                a 10-percent subsidiary entity of an exempt REIT or 
                stapled entity on March 26, 1998, and at all times 
                thereafter, an interest in real property held by such 
                subsidiary entity shall be treated as a qualified real 
                property interest if such interest would be so treated 
                if held or acquired directly by the exempt REIT or the 
                stapled entity.
            (3) Reduction in qualified real property interests if 
        increase in ownership of subsidiary.--If, after March 26, 1998, 
        an exempt REIT or stapled entity increases its ownership 
        interest in a subsidiary entity to which paragraph (2)(B) 
        applies above its ownership interest in such subsidiary entity 
        as of such date, the additional portion of each interest in real 
        property which is treated as held by the exempt REIT or stapled 
        entity by reason of such increased ownership shall be treated as 
        a nonqualified real property interest.
            (4) Special rules for determining ownership.--For 
        purposes of this subsection--
                    (A) percentage ownership of an entity shall be 
                determined in accordance with subsection (e)(4);
                    (B) interests in the entity which are acquired by an 
                exempt REIT or a member of the stapled REIT group in any 
                acquisition described in an agreement, announcement, or 
                filing described in subsection (b)(2) shall be treated 
                as acquired on March 26, 1998; and
                    (C) except as provided in guidance prescribed by the 
                Secretary, any change in proportionate ownership which 
                is attributable solely to fluctuations in the relative 
                fair

[[Page 112 STAT. 830]]

                market values of different classes of stock shall not be 
                taken into account.
            (5) Treatment of 60-percent partnerships.--
                    (A) In general.--If, as of March 26, 1998--
                          (i) an exempt REIT or stapled entity held 
                      directly or indirectly at least 60 percent of the 
                      capital or profits interest in a partnership; and
                          (ii) 90 percent or more of the capital 
                      interests and 90 percent or more of the profits 
                      interests in such partnership (other than 
                      interests held directly or indirectly by the 
                      exempt REIT or stapled entity) are, or will be, 
                      redeemable or exchangeable for consideration the 
                      amount of which is determined by reference to the 
                      value of shares of stock in the exempt REIT or 
                      stapled entity (or both),
                paragraph (3) shall not apply to such partnership, and 
                such REIT or entity shall be treated for all purposes of 
                this section as holding all of the capital and profits 
                interests in such partnership.
                    (B) Limitation to one partnership.--If, as of 
                January 1, 1999, more than one partnership owned by any 
                exempt REIT or stapled entity meets the requirements of 
                subparagraph (A), only the largest such partnership on 
                such date (determined by aggregate asset bases) shall be 
                treated as meeting such requirements.
                    (C) Mirror entity.--For purposes of subparagraph 
                (A), an interest in a partnership formed after March 26, 
                1998, shall be treated as held by an exempt REIT or 
                stapled entity on March 26, 1998, if such partnership is 
                formed to mirror the stapling of an exempt REIT and a 
                stapled entity in connection with an acquisition agreed 
                to or announced on or before March 26, 1998.

    (d) Treatment of Property Secured by Mortgage Held by Exempt REIT or 
Member of Stapled REIT Group.--
            (1) In general.--In the case of any nonqualified obligation 
        held by an exempt REIT or any member of the stapled REIT group, 
        the REIT gross income provisions shall be applied by treating 
        the exempt REIT as having impermissible tenant 
        service income equal to--
                    (A) the interest income from such obligation which 
                is properly allocable to the property described in 
                paragraph (2); and
                    (B) the income of any member of the stapled REIT 
                group from services described in paragraph (2) with 
                respect to such property.
        If the income referred to in subparagraph (A) or (B) is of a 10-
        percent subsidiary entity, only the portion of such income which 
        is properly allocable to the exempt REIT's or the stapled 
        entity's interest in the subsidiary entity shall be taken into 
        account.
            (2) Nonqualified obligation.--Except as otherwise provided 
        in this subsection, the term ``nonqualified obligation'' means 
        any obligation secured by a mortgage on an interest in real 
        property if the income of any member of the stapled REIT group 
        for services furnished with respect to such property

[[Page 112 STAT. 831]]

        would be impermissible tenant service income were such property 
        held by the exempt REIT and such services furnished by the 
        exempt REIT.
            (3) Exception for certain market rate obligations.--Such 
        term shall not include any obligation--
                    (A) payments under which would be treated as 
                interest if received by a REIT; and
                    (B) the rate of interest on which does not exceed an 
                arm's length rate.
            (4) Exception for existing obligations.--Such term shall not 
        include any obligation--
                    (A) which is secured on March 26, 1998, by an 
                interest in real property; and
                    (B) which is held on such date by the exempt REIT or 
                any entity which is a member of the stapled REIT group 
                on such date and at all times thereafter,
        but only so long as such obligation is secured by such interest, 
        and the interest payable on such obligation is not changed to a 
        rate which exceeds an arm's length rate unless such change is 
        pursuant to the terms of the obligation in effect on March 26, 
        1998. The preceding sentence shall not cease to apply by reason 
        of the refinancing of the obligation if (immediately after the 
        refinancing) the principal amount of the obligation resulting 
        from the refinancing does not exceed the principal amount of the 
        refinanced obligation (immediately before the refinancing) and 
        the interest payable on such refinanced obligation does not 
        exceed an arm's length rate.
             <<NOTE: Applicability.>> (5) Treatment of entities which 
        are not stapled, etc. on march 26, 1998.--A rule similar to the 
        rule of subsection (b)(5) shall apply for purposes of this 
        subsection.
             <<NOTE: Applicability.>> (6) Increase in amount of 
        nonqualified obligations if increase in ownership of 
        subsidiary.--A rule similar to the rule of subsection (c)(3) 
        shall apply for purposes of this subsection.
            (7) Coordination with subsection (a).--This subsection shall 
        not apply to the portion of any interest in real property that 
        the exempt REIT or stapled entity holds or is treated as holding 
        under this section without regard to this subsection.

    (e) Definitions.--For purposes of this section--
            (1) REIT gross income provisions.--The term ``REIT gross 
        income provisions'' means--
                    (A) paragraphs (2), (3), and (6) of section 856(c) 
                of the Internal Revenue Code of 1986; and
                    (B) section 857(b)(5) of such Code.
            (2) Exempt reit.--The term ``exempt REIT'' means a real 
        estate investment trust to which section 269B of the Internal 
        Revenue Code of 1986 does not apply by reason of paragraph (3) 
        of section 136(c) of the Tax Reform Act of 1984.
            (3) Stapled reit group.--The term ``stapled REIT group'' 
        means, with respect to an exempt REIT, the group consisting of--
                    (A) all entities which are stapled entities with 
                respect to the exempt REIT; and
                    (B) all entities which are 10-percent subsidiary 
                entities of the exempt REIT or any such stapled entity.
            (4) 10-percent subsidiary entity.--

[[Page 112 STAT. 832]]

                    (A) In general.--The term ``10-percent subsidiary 
                entity'' means, with respect to any exempt REIT or 
                stapled entity, any entity in which the exempt REIT or 
                stapled entity (as the case may be) directly or 
                indirectly holds at least a 10-percent interest.
                    (B) Exception for certain c corporation subsidiaries 
                of reits.--A corporation which would, but for this 
                subparagraph, be treated as a 10-percent subsidiary of 
                an exempt REIT shall not be so treated if such 
                corporation is taxable under section 11 of the Internal 
                Revenue Code of 1986.
                    (C) 10-percent interest.--The term ``10-percent 
                interest'' means--
                          (i) in the case of an interest in a 
                      corporation, ownership of 10 percent (by vote or 
                      value) of the stock in such corporation;
                          (ii) in the case of an interest in a 
                      partnership, ownership of 10 percent of the 
                      capital or profits interest in the partnership; 
                      and
                          (iii) in any other case, ownership of 10 
                      percent of the beneficial interests in the entity.
            (5) Other definitions.--Terms used in this section which are 
        used in section 269B or section 856 of such Code shall have the 
        respective meanings given such terms by such section.

    (f ) Guidance.--The Secretary may prescribe such guidance as may be 
necessary or appropriate to carry out the purposes of this section, 
including guidance to prevent the avoidance of such purposes and to 
prevent the double counting of income.
     <<NOTE: Applicability.>> (g) Effective Date.--This section shall 
apply to taxable years ending after March 26, 1998.

SEC. 7003. CERTAIN CUSTOMER RECEIVABLES INELIGIBLE FOR MARK TO MARKET 
            TREATMENT.

    (a) Certain Receivables Not Eligible for Mark to Market.--Section 
475(c) (relating to definitions) is amended by adding at the end the 
following new paragraph:
            ``(4) Special rules for certain receivables.--
                    ``(A) In general.--Paragraph (2)(C) shall not 
                include any nonfinancial customer paper.
                    ``(B) Nonfinancial customer paper.--For purposes of 
                subparagraph (A), the term `nonfinancial customer paper' 
                means any receivable which--
                          ``(i) is a note, bond, debenture, or other 
                      evidence of indebtedness;
                          ``(ii) arises out of the sale of nonfinancial 
                      goods or services by a person the principal 
                      activity of which is the selling or providing of 
                      nonfinancial goods or services; and
                          ``(iii) is held by such person (or a person 
                      who bears a relationship to such person described 
                      in section 267(b) or 707(b)) at all times since 
                      issue.''.

    (b) Regulations.--Section 475(g) is amended by striking ``and'' at 
the end of paragraph (1), by striking the period at the end of paragraph 
(2) and inserting ``, and'', and by adding at the end the following new 
paragraph:
            ``(3) to prevent the use by taxpayers of subsection (c)(4) 
        to avoid the application of this section to a receivable that

[[Page 112 STAT. 833]]

        is inventory in the hands of the taxpayer (or a person who bears 
        a relationship to the taxpayer described in sections 267(b) of 
        707(b)).''.

     <<NOTE: 26 USC 475 note.>> (c) Effective Date.--
             <<NOTE: Applicability.>> (1) In general.--The amendments 
        made by this section shall apply to taxable years ending after 
        the date of the enactment of this Act.
            (2) Change in method of accounting.--In the case of any 
        taxpayer required by the amendments made by this section to 
        change its method of accounting for its first taxable year 
        ending after the date of the enactment of this Act--
                    (A) such change shall be treated as initiated by the 
                taxpayer;
                    (B) such change shall be treated as made with the 
                consent of the Secretary of the Treasury; and
                    (C) the net amount of the adjustments required to be 
                taken into account by the taxpayer under section 481 of 
                the Internal Revenue Code of 1986 shall be taken into 
                account ratably over the 4-taxable-year period beginning 
                with such first taxable year.

SEC. 7004. MODIFICATION OF AGI LIMIT FOR CONVERSIONS TO ROTH IRAs.

    (a) In General.--Section 408A(c)(3)(C)(i) (relating to limits based 
on modified adjusted gross income) is amended to read as follows:
                          ``(i) adjusted gross income shall be 
                      determined in the same manner as under section 
                      219(g)(3), except that--
                                    ``(I) any amount included in gross 
                                income under subsection (d)(3) shall not 
                                be taken into account; and
                                    ``(II) any amount included in gross 
                                income by reason of a required 
                                distribution under a provision described 
                                in paragraph (5) shall not be taken into 
                                account for purposes of subparagraph 
                                (B)(i).''.

     <<NOTE: Applicability. 26 USC 408A note.>> (b) Effective Date.--The 
amendment made by this section shall apply to taxable years beginning 
after December 31, 2004.

TITLE VIII--IDENTIFICATION OF LIMITED TAX BENEFITS SUBJECT TO LINE ITEM 
                                  VETO

SEC. 8001. IDENTIFICATION OF LIMITED TAX BENEFITS SUBJECT TO LINE ITEM 
            VETO.

    Section 1021(a)(3) of the Congressional Budget and Impoundment 
Control Act of 1974 shall only apply to--
            (1) section 3105 (relating to administrative appeal of 
        adverse IRS determination of tax-exempt status of bond issue); 
        and
            (2) section 3445(c) (relating to State fish and wildlife 
        permits).

[[Page 112 STAT. 834]]

          TITLE <<NOTE: TEA 21 Restoration Act. Grants. Inter- 
     governmental relations. Loans.>> IX--TECHNICAL CORRECTIONS TO 
TRANSPORTATION EQUITY ACT FOR THE 21ST CENTURY

SEC. 9001. <<NOTE: 23 USC 101 note.>> SHORT TITLE.

    This title may be cited as the ``TEA 21 Restoration Act''.

SEC. 9002. AUTHORIZATION AND PROGRAM SUBTITLE.

    (a) Authorization of Appropriations.--Section 1101(a) of the 
Transportation Equity Act for the 21st Century <<NOTE: Ante, p. 
111.>> is amended--
            (1) in paragraph (13)--
                    (A) by striking ``$1,025,695,000'' and inserting 
                ``$1,029,583,500'';
                    (B) by striking ``$1,398,675,000'' and inserting 
                ``$1,403,977,500'';
                    (C) by striking ``$1,678,410,000'' the first place 
                it appears and inserting ``$1,684,773,000'';
                    (D) by striking ``$1,678,410,000'' the second place 
                it appears and inserting ``$1,684,773,000'';
                    (E) by striking ``$1,771,655,000'' the first place 
                it appears and inserting ``$1,778,371,500''; and
                    (F) by striking ``$1,771,655,000'' the second place 
                it appears and inserting ``$1,778,371,500''; and
            (2) in paragraph (14)--
                    (A) by striking ``1998'' and inserting ``1999''; and
                    (B) by inserting before ``$5,000,000'' the 
                following: ``$10,000,000 for fiscal year 1998 and''.

    (b) Obligation Limitations.--
            (1) General limitation.--Section 1102(a) of such 
        Act <<NOTE: Ante, p. 115.>> is amended--
                    (A) in paragraph (2) by striking ``$25,431,000,000'' 
                and inserting ``$25,511,000,000'';
                    (B) in paragraph (3) by striking ``$26,155,000,000'' 
                and inserting ``$26,245,000,000'';
                    (C) in paragraph (4) by striking ``$26,651,000,000'' 
                and inserting ``$26,761,000,000'';
                    (D) in paragraph (5) by striking ``$27,235,000,000'' 
                and inserting ``$27,355,000,000''; and
                    (E) in paragraph (6) by striking ``$27,681,000,000'' 
                and inserting ``$27,811,000,000''.
            (2) Transportation research programs.--Section 1102(e) of 
        such Act is amended--
                    (A) by striking ``3'' and inserting ``5'';
                    (B) by striking ``VI'' and inserting ``V''; and
                    (C) by inserting before the period at the end the 
                following: ``; except that obligation authority made 
                available for such programs under such limitations shall 
                remain available for a period of 3 fiscal years''.
            (3) Redistribution of certain authorized funds.--
        Section 1102(f ) of such Act is amended by striking ``(other 
        than the program under section 160 of title 23, United States 
        Code)''.

    (c) Apportionments.--Section 1103 of such Act <<NOTE: Ante, p. 
118.>> is amended--
            (1) in subsection (l) by adding at the end the following:

[[Page 112 STAT. 835]]

            ``(5) Section 150 of such title, and the item relating to 
        such section in the analysis for chapter 1 of such title, are 
        repealed.'';
            (2) in subsection (n) by inserting ``of title 23, United 
        States Code'' after ``206''; and
            (3) by adding at the end the following:

    ``(o) Technical Adjustments.--Section 104 of title 23, United States 
Code, is amended--
            ``(1) in subsection (a)(1) (as amended by subsection (a) of 
        this section) by striking `under section 103';
            ``(2) in subsection (b) (as amended by subsection (b) of 
        this section)--
                    ``(A) in paragraph (1)(A) by striking `1999 through 
                2003' and inserting `1998 through 2002'; and
                    ``(B) in paragraph (4)(B)(i) by striking `on lanes 
                on Interstate System' and all that follows through `in 
                each State' and inserting `on Interstate System routes 
                open to traffic in each State'; and
            ``(3) in subsection (e)(2) (as added by subsection (d)(6) of 
        this section) by striking `104, 144, or 157' and inserting `104, 
        105, or 144'.''.

    (d) Minimum Guarantee.--Section 1104 of such Act <<NOTE: Ante, p. 
127.>> is amended by adding at the end the following:

    ``(c) Technical Adjustments.--Section 105 of title 23, United States 
Code (as amended by subsection (a) of this section), is 
amended--
            ``(1) in subsection (a) by adding at the end the following: 
        `The minimum amount allocated to a State under this section for 
        a fiscal year shall be $1,000,000.';
            ``(2) in subsection (c)(1) by striking `50 percent of';
            ``(3) in subsection (c)(1)(A) by inserting `(other than 
        metropolitan planning, minimum guarantee, high priority 
        projects, Appalachian development highway system, and 
        recreational trails programs)' after `subsection (a)';
            ``(4) in subsection (c)(1)(B) by striking `all States' and 
        inserting `each State';
            ``(5) in subsection (c)(2)--
                    ``(A) by striking `apportion' and inserting 
                `administer'; and
                    ``(B) by striking `apportioned' and inserting 
                `administered'; and
            ``(6) in subsection (f )--
                    ``(A) by inserting `percentage' before `return' each 
                place it appears;
                    ``(B) in paragraph (2) by striking `for the 
                preceding fiscal year was equal to or less than' and 
                inserting `in the table in subsection (b) was equal to'; 
                and
                    ``(C) in paragraph (3)--
                          ``(i) by inserting `proportionately' before 
                      `adjust';
                          ``(ii) by striking `set forth'; and
                          ``(iii) by striking `do not exceed' and 
                      inserting `is equal to'.''.

    (e) Revenue Aligned Budget Authority.--Section 1105 of such 
Act <<NOTE: Ante, p. 130.>> is amended by adding at the end the 
following:

    ``(c) Technical Corrections.--Section 110 of such title (as amended 
by subsection (a)) is amended--
            ``(1) by striking subsection (a) and inserting the 
        following:

[[Page 112 STAT. 836]]

    `(a) In General.--
            `(1) Allocation.--On October 15 of fiscal year 2000 and each 
        fiscal year thereafter, the Secretary shall allocate for such 
        fiscal year an amount of funds equal to the amount determined 
        pursuant to section 251(b)(1)(B)(ii)(I)(cc) of the Balanced 
        Budget and Emergency Deficit Control Act of 1985 (2 U.S.C 
        901(b)(2)(B)(ii)(I)(cc)) if the amount determined pursuant to 
        such section for such fiscal year is greater than zero.
            `(2) Reduction.--If the amount determined pursuant to 
        section 251(b)(1)(B)(ii)(I)(cc) of the Balanced Budget and 
        Emergency Deficit Control Act of 1985 (2 U.S.C 
        901(b)(2)(B)(ii)(I)(cc)) for fiscal year 2000 or any fiscal year 
        thereafter is less than zero, the Secretary on October 1 of the 
        succeeding fiscal year shall reduce proportionately the amount 
        of sums authorized to be appropriated from the Highway Trust 
        Fund (other than the Mass Transit Account) to carry out each of 
        the Federal-aid highway and highway safety construction programs 
        (other than emergency relief) by an aggregate amount equal to 
        the amount determined pursuant to such section.';
            ``(2) in subsections (b)(2) and (b)(4) by striking 
        `subsection (a)' and inserting `subsection (a)(1)'; and
            ``(3) in subsection (c) by striking `Maintenance program, 
        the' and inserting `and'.''.

    (f ) Interstate Maintenance Program.--Section 1107 of such 
Act <<NOTE: Ante, p. 137.>> is amended by adding at the end the 
following:

    ``(d) Technical Amendments.--Section 119 of such title (as amended 
by subsection (a)) is amended--
            ``(1) in subsection (b)--
                    ``(A) by striking `104(b)(5)(B)' and inserting 
                `104(b)(4)'; and
                    ``(B) by striking `104(b)(5)(A)' each place it 
                appears and inserting `104(b)(5)(A) (as in effect on the 
                date before the date of enactment of the Transportation 
                Equity Act for the 21st Century)'; and
            ``(2) in subsection (c) by striking `104(b)(5)(B)' each 
        place it appears and inserting `104(b)(4)'.''.

    (g) Congestion Mitigation and Air Quality Improvement Program.--
Section 1110(d)(2) of such Act <<NOTE: Ante, p. 142.>> is amended--
            (1) by striking ``149(c)'' and inserting ``149(e)''; and
            (2) by striking ``that reduce'' and inserting ``reduce''.

    (h) Highway Use Tax Evasion Projects.--Section 1114 of such 
Act <<NOTE: Ante, p. 152.>> is amended by adding at the end the 
following:

    ``(c) Technical Adjustments.--Section 143 of title 23, United States 
Code (as amended by subsection (a) of this section), is 
amended--
            ``(1) in subsection (c)(1) by striking `April 1' and 
        inserting `August 1';
            ``(2) in subsection (c)(3) by inserting `priority' after 
        `Funding'; and
            ``(3) in subsection (c)(3) by inserting `and prior to 
        funding any other activity under this section,' after 
        `2003,'.''.

    (i) Federal Lands Highways Program.--Section 1115 of the 
Transportation Equity Act for the 21st Century <<NOTE: Ante, p. 
154.>> is amended by adding at the end the following:

    ``(f ) Conforming Amendments.--
            ``(1) Federal share.--Subsections ( j) and (k) of section 
        120 of title 23, United States Code (as added by subsection

[[Page 112 STAT. 837]]

        (a) of this section), are redesignated as subsections (k) and 
        (l), respectively.
            ``(2) Reservation of funds.--Section 202(d)(4)(B) of such 
        title (as added by subsection (b)(4) of this section) is amended 
        by striking `to, apply sodium acetate/formate de-icer to,' and 
        inserting `, sodium acetate/formate, or other environmentally 
        acceptable, minimally corrosive anti-icing and de-icing 
        compositions'.
            ``(3) Elimination of duplicative provision.--Section 144(g) 
        of such title is amended by striking paragraph (4).''.

    ( j) Woodrow Wilson Memorial Bridge Correction.--Section 1116 of 
such Act <<NOTE: Ante, p. 158.>> is amended by adding at the end the 
following:

    ``(e) Technical Correction.--Sections 404(5) and 407(c)(2)(C)(iii) 
of such Act (as amended by subsections (a)(2) and (b)(2), respectively) 
are amended by striking `the record of decision' each place it appears 
and inserting `a record of decision'.''.
    (k) Technical Correction.--Section 1117 of such Act <<NOTE: Ante, p. 
160.>> is amended in subsections (a) and (b) by striking ``section 102'' 
each place it appears and inserting ``section 1101(a)(6)''.

SEC. 9003. RESTORATIONS TO GENERAL PROVISIONS SUBTITLE.

    (a) In General.--Subtitle B of title I of the Transportation Equity 
Act for the 21st Century <<NOTE: Ante, p. 164.>> is amended by adding at 
the end the following:

``SEC. 1224. NATIONAL HISTORIC COVERED BRIDGE PRESERVATION.

    ``(a) Historic Covered Bridge Defined.--In this section, the term 
`historic covered bridge' means a covered bridge that is listed or 
eligible for listing on the National Register of Historic Places.
    ``(b) Historic Covered Bridge Preservation.--Subject to the 
availability of appropriations under subsection (d), the Secretary 
shall--
            ``(1) collect and disseminate information concerning 
        historic covered bridges;
            ``(2) foster educational programs relating to the history 
        and construction techniques of historic covered bridges;
            ``(3) conduct research on the history of historic covered 
        bridges; and
            ``(4) conduct research, and study techniques, on protecting 
        historic covered bridges from rot, fire, natural disasters, or 
        weight-related damage.

    ``(c) Direct Federal Assistance.--
            ``(1) In general.--Subject to the availability of 
        appropriations, the Secretary shall make a grant to a State that 
        submits an application to the Secretary that demonstrates a need 
        for assistance in carrying out 1 or more historic covered bridge 
        projects described in paragraph (2).
            ``(2) Types of project.--A grant under paragraph (1) may be 
        made for a project--
                    ``(A) to rehabilitate or repair a historic covered 
                bridge; and
                    ``(B) to preserve a historic covered bridge, 
                including through--
                          ``(i) installation of a fire protection 
                      system, including a fireproofing or fire detection 
                      system and sprinklers;
                          ``(ii) installation of a system to prevent 
                      vandalism and arson; or

[[Page 112 STAT. 838]]

                          ``(iii) relocation of a bridge to a 
                      preservation site.
            ``(3) Authenticity.--A grant under paragraph (1) may be made 
        for a project only if--
                    ``(A) to the maximum extent practicable, the 
                project--
                          ``(i) is carried out in the most historically 
                      appropriate manner; and
                          ``(ii) preserves the existing structure of the 
                      historic covered bridge; and
                    ``(B) the project provides for the replacement of 
                wooden components with wooden components, unless the use 
                of wood is impracticable for safety reasons.
            ``(4) Federal share.--The Federal share of the cost of a 
        project carried out with a grant under this subsection shall be 
        80 percent.

    ``(d) Funding.--There is authorized to be appropriated to carry out 
this section $10,000,000 for each of fiscal years 1999 through 2003. 
Such funds shall remain available until expended.

``SEC. 1225. <<NOTE: District of Columbia.>> SUBSTITUTE PROJECT.

    ``(a) Approval of Project.--Notwithstanding any other provision of 
law, upon the request of the Mayor of the District of Columbia, the 
Secretary may approve substitute highway and transit projects under 
section 103(e)(4) of title 23, United States Code (as in effect on the 
day before the date of enactment of this Act), in lieu of construction 
of the Barney Circle Freeway project in the District of Columbia, as 
identified in the 1991 Interstate Cost Estimate.
    ``(b) Eligibility for Federal Assistance.--Upon approval of any 
substitute project or projects under subsection (a)--
            ``(1) the cost of construction of the Barney Circle Freeway 
        Modification project shall not be eligible for funds authorized 
        under section 108(b) of the Federal-Aid Highway Act of 1956; and
            ``(2) substitute projects approved pursuant to this section 
        shall be funded from interstate construction funds apportioned 
        or allocated to the District of Columbia that are not expended 
        and not subject to lapse on the date of enactment of this Act.

    ``(c) Federal Share.--The Federal share payable on account of a 
project or activity approved under this section shall be 85 percent of 
the cost thereof; except that the exception set forth in section 
120(b)(2) of title 23, United States Code, shall apply.
    ``(d) Limitation on Eligibility.--Any substitute project approved 
pursuant to subsection (a) (for which the Secretary finds that 
sufficient Federal funds are available) must be under contract for 
construction, or construction must have commenced, before the last day 
of the 4-year period beginning on the date of enactment of this Act. If 
the substitute project is not under contract for construction, or 
construction has not commenced, by such last day, the Secretary shall 
withdraw approval of the substitute project.

``SEC. 1226. FISCAL, ADMINISTRATIVE, AND OTHER AMENDMENTS.

    ``(a) Advanced Construction.--Section 115 of title 23, United States 
Code, is amended--
            ``(1) in subsection (b)--
                    ``(A) by moving the text of paragraph (1) (including 
                subparagraphs (A) and (B)) 2 ems to the left;

[[Page 112 STAT. 839]]

                    ``(B) by striking `Projects' and all that follows 
                through `When a State' and inserting `Projects.--When a 
                State';
                    ``(C) by striking paragraphs (2) and (3);
                    ``(D) by striking `(A) prior' and inserting `(1) 
                prior'; and
                    ``(E) by striking `(B) the project' and inserting 
                `(2) the project';
            ``(2) by striking subsection (c); and
            ``(3) by redesignating subsection (d) as subsection (c).

    ``(b) Availability of Funds.--Section 118 of such title is amended--
            ``(1) in the subsection heading of subsection (b) by 
        striking `; Discretionary Projects'; and
            ``(2) by striking subsection (e) and inserting the 
        following:

    `(e) Effect of Release of Funds.--Any Federal-aid highway funds 
released by the final payment on a project, or by the modification of 
the project agreement, shall be credited to the same program funding 
category previously apportioned to the State and shall be immediately 
available for expenditure.'.''.
    ``(c) Advances to States.--Section 124 of such title is 
amended--
            ``(1) by striking `(a)' the first place it appears; and
            ``(2) by striking subsection (b).

    ``(d) Diversion.--Section 126 of such title, and the item relating 
to such section in the analysis for chapter 1 of such title, are 
repealed.''.
    (b) Conforming Amendment.--The table of contents contained in 
section 1(b) of such Act is amended by inserting after the item relating 
to section 1222 the following:

``Sec. 1223. Transportation assistance for Olympic cities.
``Sec. 1224. National historic covered bridge preservation.
``Sec. 1225. Substitute project.
``Sec. 1226. Fiscal, administrative, and other amendments.''.

    (c) Metropolitan Planning Technical Adjustment.--Section 1203 of 
such Act <<NOTE: Ante, p. 170.>> is amended by adding at the end the 
following:

    ``(o) Technical Adjustment.--Section 134(h)(5)(A) of title 23, 
United States Code (as amended by subsection (h) of this section), is 
amended by striking `for implementation'.''.

    (d) Amendments to Prior Surface Transportation Laws.--Section 1211 
of such Act <<NOTE: Ante, p. 188.>> is amended--
            (1) in subsection (i)(3)(E) by striking ``subparagraph (D)'' 
        and inserting ``subparagraph (C)'';
            (2) in subsection (i) by adding at the end the following:
            ``(4) Technical amendments.--Section 1105(e)(5)(B)(i) of 
        such Act (as amended by paragraph (3) of this subsection) is 
        amended--
                    ``(A) by striking `subsection (c)(18)(B)(i)' and 
                inserting `subsection (c)(18)(D)(i)';
                    ``(B) by striking `subsection (c)(18)(B)(ii)' and 
                inserting `subsection (c)(18)(D)(ii)'; and
                    ``(C) by adding at the end the following: `The 
                portion of the route referred to in subsection (c)(36) 
                is designated as Interstate Route I-86.'.'';
            (3) by striking subsection ( j);
            (4) in subsection (k)--
                    (A) by striking ``along'' in paragraph (1) and 
                inserting ``from''; and

[[Page 112 STAT. 840]]

                    (B) by adding at the end the following:
            ``(4) Texas state highway 99.--Texas State Highway 99 (also 
        known as `Grand Parkway') shall be considered as one option in 
        the I-69 route studies performed by the Texas Department of 
        Transportation for the designation of I-69 Bypass in Houston, 
        Texas.''; and
            (5) by redesignating subsections (g) through (i) and (k) 
        through (n) as subsections (f ) through (h) and (i) through (l), 
        respectively.

    (e) Miscellaneous.--Section 1212 of such Act <<NOTE: Ante, p. 
193.>> is amended--
            (1) in the second sentence of subsection (q)(1) by striking 
        ``advance curriculum'' and inserting ``advanced curriculum'';
            (2) in subsection (r)--
                    (A) by redesignating paragraph (2) as paragraph (3); 
                and
                    (B) by inserting after paragraph (1) the following:
            ``(2) Authorization of appropriations.--There are authorized 
        to be appropriated from the Highway Trust Fund (other than the 
        Mass Transit Account) to carry out paragraph (1) $2,000,000 for 
        fiscal year 1999 and $2,500,000 for fiscal year 2000.'';
            (3) in subsection (s)--
                    (A) by redesignating paragraph (2) as paragraph (3); 
                and
                    (B) by inserting after paragraph (1) the following:
            ``(2) Authorization of appropriations.--There is authorized 
        to be appropriated from the Highway Trust Fund (other than the 
        Mass Transit Account) to carry out paragraph (1) $23,000,000 for 
        fiscal year 1999.'';
            (4) in subsection (u)--
                    (A) by inserting ``the Secretary shall approve, 
                and'' before ``the Commonwealth'';
                    (B) by inserting a comma after ``with''; and
                    (C) by inserting ``(as redefined by this Act)'' 
                after ``80''; and
            (5) by redesignating subsections (k) through (z) as 
        subsections (e) through (t), respectively.

    (f ) Puerto Rico Highway Program.--Section 1214(r) of the 
Transportation Equity Act for the 21st Century <<NOTE: Ante, p. 
204.>> is amended by adding at the end the following:
            ``(3) Treatment of funds.--Amounts made available to carry 
        out this subsection for a fiscal year shall be administered as 
        follows:
                    ``(A) For purposes of this subsection, such amounts 
                shall be treated as being apportioned to Puerto Rico 
                under sections 104(b), 144, and 206 of title 23, United 
                States Code, for each program funded under such sections 
                in an amount determined by multiplying--
                          ``(i) the aggregate of such amounts for the 
                      fiscal year; by
                          ``(ii) the ratio that--
                                    ``(I) the amount of funds 
                                apportioned to Puerto Rico for each such 
                                program for fiscal year 1997; bears to
                                    ``(II) the total amount of funds 
                                apportioned to Puerto Rico for all such 
                                programs for fiscal year 1997.

[[Page 112 STAT. 841]]

                    ``(B) The amounts treated as being apportioned to 
                Puerto Rico under each section referred to in 
                subparagraph (A) shall be deemed to be required to be 
                apportioned to Puerto Rico under such section for 
                purposes of the imposition of any penalty provisions in 
                titles 23 and 49, United States Code.
                    ``(C) Subject to subparagraph (B), nothing in this 
                subsection shall be construed as affecting any 
                allocation under section 105 of title 23, United States 
                Code, and any apportionment under sections 104 and 144 
                of such title.''.

    (g) Designated Transportation Enhancement Activities.--Section 1215 
of such Act-- <<NOTE: Ante, p. 209.>> 
            (1) is amended in each of subsections (d), (e), (f ), 
        and (g)--
                    (A) by redesignating paragraph (2) as paragraph (3); 
                and
                    (B) by inserting after paragraph (1) the following:
            ``(2) Authorization of appropriations.--There are authorized 
        to be appropriated from the Highway Trust Fund (other than the 
        Mass Transit Account) to carry out paragraph (1) the amounts 
        specified in such paragraph for the fiscal years specified in 
        such paragraph.''; and
            (2) in subsection (d)(1) by inserting ``on Route 50'' after 
        ``measures''.

    (h) Eligibility.--Section 1217 of such Act <<NOTE: Ante, p. 
214.>> is amended--
            (1) in subsection (d) by striking ``104(b)(4)'' and 
        inserting ``104(b)(5)(A)'';
            (2) in subsection (i) by striking ``120(l)(1)'' and 
        inserting ``120( j)(1)''; and
            (3) in subsection ( j) by adding at the end the following: 
        ``$3,000,000 of the amounts made available for item 164 of the 
        table contained in section 1602 shall be made available on 
        October 1, 1998, to the Pennsylvania Turnpike Commission to 
        carry out this subsection.''.

    (i) Magnetic Levitation Transportation Technology Deployment 
Program.--Section 1218 of such Act <<NOTE: Ante, p. 216.>> is amended by 
adding at the end the following:

    ``(c) Technical Amendments.--Section 322 of title 23, United States 
Code (as added by subsection (a) of this section), is 
amended--
            ``(1) in subsection (a)(3) by striking `or under 50 miles 
        per hour';
            ``(2) in subsection (d)--
                    ``(A) in paragraph (1) by striking `or low-speed'; 
                and
                    ``(B) in paragraph (2)--
                          ``(i) in subparagraph (A) by striking 
                      `(h)(1)(A)' and inserting `(h)(1)'; and
                          ``(ii) in subparagraph (B) by striking 
                      `(h)(4)' and inserting `(h)(3)';
            ``(3) in subsection (h)(1)(B)(i) by inserting `(other than 
        subsection (i))' after `this section'; and
            ``(4) by adding at the end the following:

    `(i) Low-Speed Project.--
            `(1) In general.--Notwithstanding any other provision of 
        this section, of the funds made available by subsection 
        (h)(1)(A) to carry out this section, $5,000,000 shall be made 
        available

[[Page 112 STAT. 842]]

        to the Secretary to make grants for the research and development 
        of low-speed superconductivity magnetic levitation technology 
        for public transportation purposes in urban areas to demonstrate 
        energy efficiency, congestion mitigation, and safety benefits.
            `(2) Noncontract authority authorization of 
        appropriations.--
                    `(A) In general.--There are authorized to be 
                appropriated from the Highway Trust Fund (other than the 
                Mass Transit Account) to carry out this subsection such 
                sums as are necessary for each of fiscal years 2000 
                through 2003.
                    `(B) Availability.--Notwithstanding section 118(a), 
                funds made available under subparagraph (A)--
                          `(i) shall not be available in advance of an 
                      annual appropriation; and
                          `(ii) shall remain available until 
                      expended.'.''.

    ( j) Transportation Assistance for Olympic Cities.--Section 1223(f ) 
of such Act <<NOTE: Ante, p. 224.>> is amended by inserting before the 
period at the end the following: ``or Special Olympics International''.

SEC. 9004. RESTORATIONS TO PROGRAM STREAMLINING AND FLEXIBILITY 
            SUBTITLE.

    (a) In General.--Subtitle C of title I of the Transportation Equity 
Act for the 21st Century <<NOTE: Ante, p. 225.>> is amended by adding at 
the end the following:

``SEC. 1311. DISCRETIONARY GRANT SELECTION CRITERIA AND 
            PROCESS.

    ``(a) Establishment of Criteria.--The Secretary shall establish 
criteria for all discretionary programs funded from the Highway Trust 
Fund (other than the Mass Transit Account). To the extent practicable, 
such criteria shall conform to the Executive Order No. 12893 (relating 
to infrastructure investment).
    ``(b) Selection Process.--
             <<NOTE: Publication.>> ``(1) Limitation on acceptance of 
        applications.--Before accepting applications for grants under 
        any discretionary program for which funds are authorized to be 
        appropriated from the Highway Trust Fund (other than the Mass 
        Transit Account) by this Act (including the amendments made by 
        this Act), the Secretary shall publish the criteria established 
        under subsection (a). Such publication shall identify all 
        statutory criteria and any criteria established by regulation 
        that will apply to the program.
             <<NOTE: Records.>> ``(2) Explanation.--Not less often than 
        quarterly, the Secretary shall submit to the Committee on 
        Environment and Public Works of the Senate and the Committee on 
        Transportation and Infrastructure of the House of 
        Representatives a list of the projects selected under 
        discretionary programs funded from the Highway Trust Fund (other 
        than the Mass Transit Account) and an explanation of how the 
        projects were selected based on the criteria established under 
        subsection (a).

     <<NOTE: Applicability.>> ``(c) Minimum Covered Programs.--At a 
minimum, the criteria established under subsection (a) and the selection 
process established by subsection (b) shall apply to the following 
programs:
            ``(1) The intelligent transportation system deployment 
        program under title V.

[[Page 112 STAT. 843]]

            ``(2) The national corridor planning and development 
        program.
            ``(3) The coordinated border infrastructure and safety 
        program.
            ``(4) The construction of ferry boats and ferry terminal 
        facilities.
            ``(5) The national scenic byways program.
            ``(6) The Interstate discretionary program.
            ``(7) The discretionary bridge program.''.

    (b) Conforming Amendments.--The table of contents contained in 
section 1(b) of such Act <<NOTE: Ante, p. 107.>> is amended--
            (1) by striking the following:

``Sec. 1309. Major investment study integration.''.

            and inserting the following:

``Sec. 1308. Major investment study integration.'';

            and
            (2) by inserting after the item relating to section 1310 the 
        following:

``Sec. 1311. Discretionary grant selection criteria and process.''.

    (c) Review Process.--Section 1309 of the Transportation Equity Act 
for the 21st Century <<NOTE: Ante, p. 232.>> is amended--
            (1) in subsection (a)(1) by inserting after ``highway 
        construction'' the following: ``and mass transit'';
            (2) in subsection (d) by inserting after ``Code,'' the 
        following: ``or chapter 53 of title 49, United States Code,''; 
        and
            (3) in subsection (e)(1)--
                    (A) by inserting ``or recipient'' after ``a State'';
                    (B) by inserting after ``provide funds'' the 
                following: ``for a highway project''; and
                    (C) by inserting after ``Code,'' the following: ``or 
                for a mass transit project made available under chapter 
                53 of title 49, United States Code,''.

SEC. 9005. RESTORATIONS TO SAFETY SUBTITLE.

    (a) In General.--Subtitle D of title I of the Transportation Equity 
Act for the 21st Century <<NOTE: Ante, p. 235.>> is amended by adding at 
the end the following:

``SEC. 1405. OPEN CONTAINER LAWS.

    ``(a) Establishment.--Chapter 1 of title 23, United States Code, is 
amended by inserting after section 153 the following:

`Sec. 154. Open container requirements

    `(a) Definitions.--In this section, the following definitions apply:
            `(1) Alcoholic beverage.--The term ``alcoholic beverage'' 
        has the meaning given the term in section 158(c).
            `(2) Motor vehicle.--The term ``motor vehicle'' means a 
        vehicle driven or drawn by mechanical power and manufactured 
        primarily for use on public highways, but does not include a 
        vehicle operated exclusively on a rail or rails.
            `(3) Open alcoholic beverage container.--The term ``open 
        alcoholic beverage container'' means any bottle, can, or other 
        receptacle--
                    `(A) that contains any amount of alcoholic beverage; 
                and

[[Page 112 STAT. 844]]

                    `(B)(i) that is open or has a broken seal; or
                    `(ii) the contents of which are partially removed.
             <<NOTE: Regulation.>> `(4) Passenger area.--The term 
        ``passenger area'' shall have the meaning given the term by the 
        Secretary by regulation.

    `(b) Open Container Laws.--
            `(1) In general.--For the purposes of this section, each 
        State shall have in effect a law that prohibits the possession 
        of any open alcoholic beverage container, or the consumption of 
        any alcoholic beverage, in the passenger area of any motor 
        vehicle (including possession or consumption by the driver of 
        the vehicle) located on a public highway, or the right-of-way of 
        a public highway, in the State.
            `(2) Motor vehicles designed to transport many passengers.--
        For the purposes of this section, if a State has in effect a law 
        that makes unlawful the possession of any open alcoholic 
        beverage container by the driver (but not by a passenger)--
                    `(A) in the passenger area of a motor vehicle 
                designed, maintained, or used primarily for the 
                transportation of persons for compensation; or
                    `(B) in the living quarters of a house coach or 
                house trailer,
        the State shall be deemed to have in effect a law described in 
        this subsection with respect to such a motor vehicle for each 
        fiscal year during which the law is in effect.

    `(c) Transfer of Funds.--
             <<NOTE: Effective dates.>> `(1) Fiscal years 2001 and 
        2002.--On October 1, 2000, and October 1, 2001, if a State has 
        not enacted or is not enforcing an open container law described 
        in subsection (b), the Secretary shall transfer an amount equal 
        to 1\1/2\ percent of the funds apportioned to the State on that 
        date under each of paragraphs (1), (3), and (4) of section 
        104(b) to the apportionment of the State under section 402--
                    `(A) to be used for alcohol-impaired driving 
                countermeasures; or
                    `(B) to be directed to State and local law 
                enforcement agencies for enforcement of laws prohibiting 
                driving while intoxicated or driving under the influence 
                and other related laws (including regulations), 
                including the purchase of equipment, the training of 
                officers, and the use of additional personnel for 
                specific alcohol-impaired driving countermeasures, 
                dedicated to enforcement of the laws (including 
                regulations).
             <<NOTE: Effective date.>> `(2) Fiscal year 2003 and fiscal 
        years thereafter.--On October 1, 2002, and each October 1 
        thereafter, if a State has not enacted or is not enforcing an 
        open container law described in subsection (b), the Secretary 
        shall transfer an amount equal to 3 percent of the funds 
        apportioned to the State on that date under each of paragraphs 
        (1), (3), and (4) of section 104(b) to the apportionment of the 
        State under section 402 to be used or directed as described in 
        subparagraph (A) or (B) of paragraph (1).
            `(3) Use for hazard elimination program.--A State may elect 
        to use all or a portion of the funds transferred under paragraph 
        (1) or (2) for activities eligible under section 152.

[[Page 112 STAT. 845]]

            `(4) Federal share.--The Federal share of the cost of a 
        project carried out with funds transferred under paragraph (1) 
        or (2), or used under paragraph (3), shall be 100 percent.
            `(5) Derivation of amount to be transferred.--The amount to 
        be transferred under paragraph (1) or (2) may be derived from 
        one or more of the following:
                    `(A) The apportionment of the State under section 
                104(b)(1).
                    `(B) The apportionment of the State under section 
                104(b)(3).
                    `(C) The apportionment of the State under section 
                104(b)(4).
            `(6) Transfer of obligation authority.--
                    `(A) In general.--If the Secretary transfers under 
                this subsection any funds to the apportionment of a 
                State under section 402 for a fiscal year, the Secretary 
                shall transfer an amount, determined under subparagraph 
                (B), of obligation authority distributed for the fiscal 
                year to the State for Federal-aid highways and highway 
                safety construction programs for carrying out projects 
                under section 402.
                    `(B) Amount.--The amount of obligation authority 
                referred to in subparagraph (A) shall be determined by 
                multiplying--
                          `(i) the amount of funds transferred under 
                      subparagraph (A) to the apportionment of the State 
                      under section 402 for the fiscal year, by
                          `(ii) the ratio that--
                                    `(I) the amount of obligation 
                                authority 
                                distributed for the fiscal year to the 
                                State for Federal-aid highways and 
                                highway safety construction programs, 
                                bears to
                                    `(II) the total of the sums 
                                apportioned to the State for Federal-aid 
                                highways and highway safety construction 
                                programs (excluding sums not subject to 
                                any obligation limitation) for the 
                                fiscal year.
            `(7) Limitation on applicability of obligation 
        limitation.--Notwithstanding any other provision of law, no 
        limitation on the total of obligations for highway safety 
        programs under section 402 shall apply to funds transferred 
        under this subsection to the apportionment of a State under such 
        section.'.

    ``(b) Conforming Amendment.--The analysis for chapter 1 of such 
title is amended by inserting after the item relating to section 153 the 
following:

`154. Open container requirements.'.

``SEC. 1406. MINIMUM PENALTIES FOR REPEAT OFFENDERS FOR DRIVING WHILE 
            INTOXICATED OR DRIVING UNDER THE INFLUENCE.

    ``(a) In General.--Chapter 1 of title 23, United States Code, is 
amended by adding at the end the following:

`Sec. 164. Minimum penalties for repeat offenders for driving while 
                        intoxicated or driving under the influence

    `(a) Definitions.--In this section, the following definitions apply:

[[Page 112 STAT. 846]]

            `(1) Alcohol concentration.--The term ``alcohol 
        concentration'' means grams of alcohol per 100 milliliters of 
        blood or grams of alcohol per 210 liters of breath.
            `(2) Driving while intoxicated; driving under the 
        influence.--The terms ``driving while intoxicated'' and 
        ``driving under the influence'' mean driving or being in actual 
        physical control of a motor vehicle while having an alcohol 
        concentration above the permitted limit as established by each 
        State.
            `(3) License suspension.--The term ``license suspension'' 
        means the suspension of all driving privileges.
            `(4) Motor vehicle.--The term ``motor vehicle'' means a 
        vehicle driven or drawn by mechanical power and manufactured 
        primarily for use on public highways, but does not include a 
        vehicle operated solely on a rail line or a commercial vehicle.
            `(5) Repeat intoxicated driver law.--The term ``repeat 
        intoxicated driver law'' means a State law that provides, as a 
        minimum penalty, that an individual convicted of a second or 
        subsequent offense for driving while intoxicated or driving 
        under the influence after a previous conviction for that offense 
        shall--
                    `(A) receive a driver's license suspension for not 
                less than 1 year;
                    `(B) be subject to the impoundment or immobilization 
                of each of the individual's motor vehicles or the 
                installation of an ignition interlock system on each of 
                the motor vehicles;
                    `(C) receive an assessment of the individual's 
                degree of abuse of alcohol and treatment as appropriate; 
                and
                    `(D) receive--
                          `(i) in the case of the second offense--
                                    `(I) an assignment of not less than 
                                30 days of community service; or
                                    `(II) not less than 5 days of 
                                imprisonment; and
                          `(ii) in the case of the third or subsequent 
                      offense--
                                    `(I) an assignment of not less than 
                                60 days of community service; or
                                    `(II) not less than 10 days of 
                                imprisonment.

    `(b) Transfer of Funds.--
             <<NOTE: Effective dates.>> `(1) Fiscal years 2001 and 
        2002.--On October 1, 2000, and October 1, 2001, if a State has 
        not enacted or is not enforcing a repeat intoxicated driver law, 
        the Secretary shall transfer an amount equal to 1\1/2\ percent 
        of the funds apportioned to the State on that date under each of 
        paragraphs (1), (3), and (4) of section 104(b) to the 
        apportionment of the State under section 402--
                    `(A) to be used for alcohol-impaired driving 
                countermeasures; or
                    `(B) to be directed to State and local law 
                enforcement agencies for enforcement of laws prohibiting 
                driving while intoxicated or driving under the influence 
                and other related laws (including regulations), 
                including the purchase of equipment, the training of 
                officers, and the use of additional personnel for 
                specific alcohol-impaired driving countermeasures, 
                dedicated to enforcement of the laws (including 
                regulations).

[[Page 112 STAT. 847]]

             <<NOTE: Effective date.>> `(2) Fiscal year 2003 and fiscal 
        years thereafter.--On October 1, 2002, and each October 1 
        thereafter, if a State has not enacted or is not enforcing a 
        repeat intoxicated driver law, the Secretary shall transfer an 
        amount equal to 3 percent of the funds apportioned to the State 
        on that date under each of paragraphs (1), (3), and (4) of 
        section 104(b) to the apportionment of the State under section 
        402 to be used or directed as described in subparagraph (A) or 
        (B) of paragraph (1).
            `(3) Use for hazard elimination program.--A State may elect 
        to use all or a portion of the funds transferred under paragraph 
        (1) or (2) for activities eligible under section 152.
            `(4) Federal share.--The Federal share of the cost of a 
        project carried out with funds transferred under paragraph (1) 
        or (2), or used under paragraph (3), shall be 100 percent.
            `(5) Derivation of amount to be transferred.--The amount to 
        be transferred under paragraph (1) or (2) may be derived from 
        one or more of the following:
                    `(A) The apportionment of the State under section 
                104(b)(1).
                    `(B) The apportionment of the State under section 
                104(b)(3).
                    `(C) The apportionment of the State under section 
                104(b)(4).
            `(6) Transfer of obligation authority.--
                    `(A) In general.--If the Secretary transfers under 
                this subsection any funds to the apportionment of a 
                State under section 402 for a fiscal year, the Secretary 
                shall transfer an amount, determined under subparagraph 
                (B), of obligation authority distributed for the fiscal 
                year to the State for Federal-aid highways and highway 
                safety construction programs for carrying out projects 
                under section 402.
                    `(B) Amount.--The amount of obligation authority 
                referred to in subparagraph (A) shall be determined by 
                multiplying--
                          `(i) the amount of funds transferred under 
                      subparagraph (A) to the apportionment of the State 
                      under section 402 for the fiscal year, by
                          `(ii) the ratio that--
                                    `(I) the amount of obligation 
                                authority 
                                distributed for the fiscal year to the 
                                State for Federal-aid highways and 
                                highway safety construction programs, 
                                bears to
                                    `(II) the total of the sums 
                                apportioned to the State for Federal-aid 
                                highways and highway safety construction 
                                programs (excluding sums not subject to 
                                any obligation limitation) for the 
                                fiscal year.
            `(7) Limitation on applicability of obligation 
        limitation.--Notwithstanding any other provision of law, no 
        limitation on the total of obligations for highway safety 
        programs under section 402 shall apply to funds transferred 
        under this subsection to the apportionment of a State under such 
        section.'.

[[Page 112 STAT. 848]]

    ``(b) Conforming Amendment.--The analysis for chapter 1 of such 
title is amended by adding at the end the following:

`164. Minimum penalties for repeat offenders for driving while 
           intoxicated or driving under the influence.'.''.

    (b) Conforming Amendment.--The table of contents contained in 
section 1(b) of such Act <<NOTE: Ante, p. 107.>> is amended by inserting 
after the item relating to section 1403 the following:

``Sec. 1404. Safety incentives to prevent operation of motor vehicles by 
           intoxicated persons.
``Sec. 1405. Open container laws.
``Sec. 1406. Minimum penalties for repeat offenders for driving while 
           intoxicated or driving under the influence.''.

    (c) Roadside Safety Technologies.--Section 1402(a)(2) of such 
Act <<NOTE: Ante, p. 236.>> is amended by striking ``directive'' and 
inserting ``redirective''.

SEC. 9006. ELIMINATION OF DUPLICATE PROVISIONS.

    (a) San Mateo County, California.--Section 1113 of the 
Transportation Equity Act for the 21st Century <<NOTE: Ante, p. 
151.>> is amended--
            (1) by striking subsection (c); and
            (2) by redesignating subsection (d) as subsection (c).

    (b) Value Pricing Pilot Program.--Section 1216(a) of such 
Act <<NOTE: Ante, p. 211.>> is amended by adding at the end the 
following:
            ``(8) Conforming amendments.--
                    ``(A) Section 1012(b)(6) of such Act (as amended by 
                paragraph (5) of this subsection) is amended by striking 
                `146(c)' and inserting `102(a)'.
                    ``(B) Section 1012(b)(8) of such Act (as added by 
                paragraph (7) of this subsection) is amended--
                          ``(i) in subparagraph (C) by striking `under 
                      this subsection' and inserting `to carry out this 
                      subsection';
                          ``(ii) in subparagraph (D)--
                                    ``(I) by striking `under this 
                                paragraph' and inserting `to carry out 
                                this subsection'; and
                                    ``(II) by striking `by this 
                                paragraph' and inserting `to carry out 
                                this subsection';
                          ``(iii) by striking subparagraph (A); and
                          ``(iv) by redesignating subparagraphs (B), 
                      (C), and (D) as subparagraphs (A), (B), and (C), 
                      respectively.''.

    (c) National Defense Highways Outside the United States.--Section 
1214(e) of such Act <<NOTE: Ante, p. 204.>> is amended to read as 
follows:

    ``(e) Minnesota Transportation History Network.--
            ``(1) In general.--The Secretary shall award a grant to the 
        Minnesota Historical Society for the establishment of the 
        Minnesota Transportation History Network to include major 
        exhibits, interpretive programs at national historic landmark 
        sites, and outreach programs with county and local historical 
        organizations.
            ``(2) Coordination.--In carrying out subsection (a), the 
        Secretary shall coordinate with officials of the Minnesota 
        Historical Society.
            ``(3) Authorization of appropriations.--There is authorized 
        to be appropriated out of the Highway Trust Fund (other than the 
        Mass Transit Account) $1,000,000 for each of fiscal years 1998 
        through 2003 to carry out this subsection.
            ``(4) Applicability of title 23.--Funds authorized by this 
        subsection shall be available for obligation in the same manner

[[Page 112 STAT. 849]]

        as if such funds were apportioned under chapter 1 of title 23, 
        United States Code; except that such funds shall remain 
        available until expended.''.

    (d) Entrance Paving at Ninigret National Wildlife 
Refuge.--Section 1214(i) of such Act <<NOTE: Ante, p. 204.>> is amended 
by striking ``$750,000'' each place it appears and inserting 
``$75,000''.

SEC. 9007. HIGHWAY FINANCE.

    (a) In General.--Section 1503 of the Transportation Equity Act for 
the 21st Century <<NOTE: Ante, p. 241.>> is amended by adding at the end 
the following:

    ``(c) Technical Amendments.--Section 188 of title 23, United States 
Code (as added by subsection (a) of this section), is 
amended--
            ``(1) in subsection (a)(2) by striking `1998' and inserting 
        `1999'; and
            ``(2) in subsection (c)--
                    ``(A) by striking `1998' and inserting `1999'; and
                    ``(B) by striking the table and inserting the 
                following:

                                                          Maximum amount
`Fiscal year:                                             of credit:    
  1999...................................................$1,600,000,000 
  2000...................................................$1,800,000,000 
  2001...................................................$2,200,000,000 
  2002...................................................$2,400,000,000 
  2003..............................................$2,600,000,000.'.''.

    (b) Conforming Amendments.--The table of contents contained in 
section 1(b) of the Transportation Equity Act for the 21st 
Century <<NOTE: Ante, p. 107.>> is amended--
            (1) in the item relating to section 1119 by striking ``and 
        safety''; and
            (2) by striking the items relating to subtitle E of title I 
        and inserting the following:

                          ``Subtitle E--Finance

    ``Chapter 1--Transportation Infrastructure Finance and Innovation

``Sec. 1501. Short title.
``Sec. 1502. Findings.
``Sec. 1503. Establishment of program.
``Sec. 1504. Duties of the Secretary.

          ``Chapter 2--State Infrastructure Bank Pilot Program

``Sec. 1511. State infrastructure bank pilot program.''.

SEC. 9008. HIGH PRIORITY PROJECTS TECHNICAL CORRECTIONS.

    The table contained in section 1602 of the Transportation Equity Act 
for the 21st Century <<NOTE: Ante, p. 256.>> is amended--
            (1) in item 1 by striking ``1.275'' and inserting ``1.7'';
            (2) in item 82 by striking ``30.675'' and inserting 
        ``32.4'';
            (3) in item 107 by striking ``1.125'' and inserting 
        ``1.44'';
            (4) in item 121 by striking ``10.5'' and inserting ``5.0'';
            (5) in item 140 by inserting ``-VFHS Center'' after 
        ``Park'';
            (6) in item 151 by striking ``5.666'' and inserting 
        ``8.666'';
            (7) in item 164--
                    (A) by inserting ``, and $3,000,000 for the period 
                of fiscal years 1998 and 1999 shall be made available to 
                carry out section 1217( j)'' after ``Pennsylvania''; and
                    (B) by striking ``25'' and inserting ``24.78'';
            (8) by striking item 166 and inserting the following:
      

[[Page 112 STAT. 850]]



``166 Michigan                    Improve Tenth Street,         1.8'';
    .                              Port Huron............
------------------------------------------------------------------------

            (9) by striking item 242 and inserting the following:
      

``242 Minnesota                   Construct Third Street        1.0'';
    .                              North, CSAH 81, Waite
                                   Park and St. Cloud....
------------------------------------------------------------------------

            (10) by striking item 250 and inserting the following:
      

 ``250. Indiana                    Reconstruct Old             1.35'';
                                    Merridan Corridor
                                    from Pennsylvania
                                    Avenue to Gilford
                                    Road.................
------------------------------------------------------------------------

            (11) in item 255 by striking ``2.25'' and inserting ``3.0'';
            (12) in item 263 by striking ``Upgrade Highway 99 between 
        State Highway 70 and Lincoln Road, Sutter County'' and inserting 
        ``Upgrade Highway 99, Sutter County'';
            (13) in item 288 by striking ``3.75'' and inserting ``5.0'';
            (14) in item 290 by striking ``3.5'' and inserting ``3.0'';
            (15) in item 345 by striking ``8'' and inserting ``19.4'';
            (16) in item 418 by striking ``2'' and inserting ``2.5'';
            (17) in item 421 by striking ``11'' and inserting ``6'';
            (18) in item 508 by striking ``1.8'' and inserting ``2.4'';
            (19) by striking item 525 and inserting the following:
      

``525 Alaska                      Construct Bradfield             1'';
    .                              Canal Road............
------------------------------------------------------------------------

            (20) in item 540 by striking ``1.5'' and inserting ``2.0'';
            (21) in item 576 by striking ``0.52275'' and inserting 
        ``0.69275'';
            (22) in item 588 by striking ``2.5'' and inserting ``3.0'';
            (23) in item 591 by striking ``10'' and inserting ``5'';
            (24) in item 635 by striking ``1.875'' and inserting 
        ``2.15'';
            (25) in item 669 by striking ``3'' and inserting ``3.5'';
            (26) in item 702 by striking ``10.5'' and inserting ``10'';
            (27) in item 746 by inserting ``, and for the purchase of 
        the Block House in Scott County, Virginia'' after ``Forest'';
            (28) in item 755 by striking ``1.125'' and inserting 
        ``1.5'';
            (29) in item 769 by striking ``Construct new I-95 
        interchange with Highway 99W, Tehama County'' and inserting 
        ``Construct new I-5 interchange with Highway 99W, Tehama 
        County'';
            (30) in item 770 by striking ``1.35'' and inserting ``1.0'';
            (31) in item 789 by striking ``2.0625'' and inserting 
        ``1.0'';
            (32) in item 803 by striking ``Tomahark'' and inserting 
        ``Tomahawk'';
            (33) in item 836 by striking ``Construct'' and all that 
        follows through ``for'' and inserting ``To the National Park 
        Service for construction of the'';
            (34) in item 854 by striking ``0.75'' and inserting ``1'';
            (35) in item 863 by striking ``9'' and inserting ``4.75'';
            (36) in item 887 by striking ``0.75'' and inserting 
        ``3.21'';
            (37) in item 891 by striking ``19.5'' and inserting 
        ``25.0'';
            (38) in item 902 by striking ``10.5'' and inserting 
        ``14.0'';
            (39) by striking item 1065 and inserting the following:
      

[[Page 112 STAT. 851]]



``1065. Texas                      Construct a 4-lane             5'';
                                    divided highway on
                                    Artcraft Road from I-
                                    10 to Route 375 in El
                                    Paso.................
------------------------------------------------------------------------

            (40) in item 1192 by striking ``24.97725'' and inserting 
        ``24.55725'';
            (41) in item 1200 by striking ``Upgrade (all weather) on 
        U.S. 2, U.S. 41, and M 35'' and inserting ``Upgrade (all 
        weather) on Delta County's reroute of U.S. 2, U.S. 41, and M 
        35'';
            (42) in item 1245 by striking ``3'' and inserting ``3.5'';
            (43) in item 1271 by striking ``Spur'' and all that follows 
        through ``U.S. 59'' and inserting ``rail-grade separations 
        (Rosenberg Bypass) at U.S. 59(S)'';
            (44) in item 1278 by striking ``28.18'' and inserting 
        ``22.0'';
            (45) in item 1288 by inserting ``30'' after ``U.S.'';
            (46) in item 1338 by striking ``5.5'' and inserting ``3.5'';
            (47) in item 1383 by striking ``0.525'' and inserting 
        ``0.35'';
            (48) in item 1395 by striking ``Construct'' and all that 
        follows through ``Road'' and inserting ``Upgrade Route 219 
        between Meyersdale and Somerset'';
            (49) in item 1468 by striking ``Reconstruct'' and all that 
        follows through ``U.S. 23'' and inserting ``Conduct engineering 
        and design and improve I-94 in Calhoun and Jackson 
        Counties'';
            (50) in item 1474--
                    (A) by striking ``in Euclid'' and inserting ``and 
                London Road in Cleveland''; and
                    (B) by striking ``3.75'' and inserting ``8.0'';
            (51) in item 1535 by striking ``Stanford'' and inserting 
        ``Stamford'';
            (52) in item 1538 by striking ``and Winchester'' and 
        inserting ``, Winchester, and Torrington'';
            (53) by striking item 1546 and inserting the following:
      

``1546. Michigan                   Construct Bridge-to-       0.450'';
                                    Bay bike path, St.
                                    Clair County.........
------------------------------------------------------------------------

            (54) by striking item 1549 and inserting the following:
      

``1549. New York                   Center for Advanced          0.6'';
                                    Simulation and
                                    Technology at Dowling
                                    College..............
------------------------------------------------------------------------

            (55) in item 1663 by striking ``26.5'' and inserting 
        ``27.5'';
            (56) in item 1703 by striking ``I-80'' and inserting 
        ``I-180'';
            (57) in item 1726 by striking ``I-179'' and inserting 
        ``I-79'';
            (58) by striking item 1770 and inserting the following:
      

``1770. Virginia                   Operate and conduct        6.025'';
                                    research on the
                                    `Smart Road' in
                                    Blacksburg...........
------------------------------------------------------------------------

            (59) in item 1810 by striking ``Construct Rio Rancho 
        Highway'' and inserting ``Northwest Albuquerque/Rio Rancho high 
        priority roads'';

[[Page 112 STAT. 852]]

            (60) in item 1815 by striking ``High'' and all that follows 
        through ``projects'' and inserting ``Highway and bridge projects 
        that Delaware provides for by law'';
            (61) in item 1844 by striking ``Prepare'' and inserting 
        ``Repair'';
            (62) by striking item 1850 and inserting the following:
      

``1850. Missouri                   Resurface and maintain         5'';
                                    roads located in
                                    Missouri State parks.
------------------------------------------------------------------------

            (63) in item 661 by striking ``SR 800'' and inserting 
        ``SR 78'';
            (64) in item 1704 by inserting ``, Pittsburgh,'' after 
        ``Road'';
            (65) in item 1710 by inserting ``, Bethlehem'' after 
        ``site''; and
            (66) in item 1626 by striking ``1'' and inserting ``2''.

SEC. 9009. FEDERAL TRANSIT ADMINISTRATION PROGRAMS.

    (a) Definitions.--Section 3003 of the Federal Transit Act of 
1998 <<NOTE: Ante, p. 338.>> is amended--
            (1) by inserting ``(a) In General.--'' before ``Section 
        5302''; and
            (2) by adding at the end the following:

    ``(b) Conforming Amendments.--Section 5302 (as amended by subsection 
(a) of this section) is amended in subsection (a)(1)(G)(i) by striking 
`daycare and' and inserting `daycare or '.''.
    (b) Metropolitan Planning.--Section 3004 of the Federal Transit Act 
of 1998 <<NOTE: Ante, p. 341.>> is amended--
            (1) in subsection (b)--
                    (A) in paragraph (1) by striking subparagraph (A) 
                and inserting the following:
                    ``(A) by striking `general local government 
                representing ' and inserting `general purpose local 
                government that together represent'; and'';
                    (B) in paragraph (3) by striking ``and'' at the end;
                    (C) in paragraph (4) by striking subparagraph (A) 
                and inserting the following:
                    ``(A) by striking `general local government 
                representing ' and inserting `general purpose local 
                government that together represent'; and'';
                    (D) by redesignating paragraph (4) as paragraph (5); 
                and
                    (E) by inserting after paragraph (3) the following:
            ``(4) in paragraph (4)(A) by striking `(3)' and inserting 
        `(5)'; and'';
            (2) in subsection (d) by striking the closing quotation 
        marks and the final period at the end and inserting the 
        following:
            ``(5) Coordination.--If a project is located within the 
        boundaries of more than one metropolitan planning organization, 
        the metropolitan planning organizations shall coordinate plans 
        regarding the project.
            ``(6) Lake tahoe region.--
                    ``(A) Definition.--In this paragraph, the term `Lake 
                Tahoe region' has the meaning given the term `region' in 
                subdivision (a) of article II of the Tahoe Regional 
                Planning Compact, as set forth in the first section of 
                Public Law 96-551 (94 Stat. 3234).

[[Page 112 STAT. 853]]

                    ``(B) Transportation planning process.--The 
                Secretary shall--
                          ``(i) establish with the Federal land 
                      management agencies that have jurisdiction over 
                      land in the Lake Tahoe region a transportation 
                      planning process for the region; and
                          ``(ii) coordinate the transportation planning 
                      process with the planning process required of 
                      State and local governments under this chapter and 
                      sections 134 and 135 of title 23, United States 
                      Code.
                     <<NOTE: California. Nevada.>> ``(C) Interstate 
                compact.--
                          ``(i) In general.--Subject to clause (ii) and 
                      notwithstanding subsection (b), to carry out the 
                      transportation planning process required by this 
                      section, the consent of Congress is granted to the 
                      States of California and Nevada to designate a 
                      metropolitan planning organization for the Lake 
                      Tahoe region, by agreement between the Governors 
                      of the States of California and Nevada and units 
                      of general purpose local government that together 
                      represent at least 75 percent of the affected 
                      population (including the central city or cities 
                      (as defined by the Bureau of the Census)), or in 
                      accordance with procedures established by 
                      applicable State or local law.
                          ``(ii) Involvement of federal land management 
                      agencies.--
                                    ``(I) Representation.--The policy 
                                board of a metropolitan planning 
                                organization designated under clause (i) 
                                shall include a representative of each 
                                Federal land management agency that has 
                                jurisdiction over land in the Lake Tahoe 
                                region.
                                    ``(II) Funding.--In addition to 
                                funds made available to the metropolitan 
                                planning organization under other 
                                provisions of this chapter and under 
                                title 23, not more than 1 percent of the 
                                funds allocated under section 202 of 
                                title 23 may be used to carry out the 
                                transportation planning process for the 
                                Lake Tahoe region under this 
                                subparagraph.
                    ``(D) Activities.--Highway projects included in 
                transportation plans developed under this paragraph--
                          ``(i) shall be selected for funding in a 
                      manner that facilitates the participation of the 
                      Federal land management agencies that have 
                      jurisdiction over land in the Lake Tahoe region; 
                      and
                          ``(ii) may, in accordance with chapter 2 of 
                      title 23, be funded using funds allocated under 
                      section 202 of title 23, United States Code.''; 
                      and
            (3) by adding at the end the following:

    ``(f ) Technical Adjustments.--Section 5303(f ) is amended--
            ``(1) in paragraph (1) (as amended by subsection (e)(1) of 
        this subsection)--
                    ``(A) in subparagraph (C) by striking `and' at the 
                end;
                    ``(B) in subparagraph (D) by striking the period at 
                the end and inserting `; and'; and
                    ``(C) by adding at the end the following:

[[Page 112 STAT. 854]]

            `(E) the financial plan may include, for illustrative 
        purposes, additional projects that would be included in the 
        adopted long-range plan if reasonable additional resources 
        beyond those identified in the financial plan were available, 
        except that, for the purpose of developing the long-range plan, 
        the metropolitan planning organization and the State shall 
        cooperatively develop estimates of funds that will be available 
        to support plan implementation.'; and
            ``(2) by adding at the end the following:

    `(6) Selection of projects from illustrative list.--Notwithstanding 
paragraph (1)(E), a State or metropolitan planning organization shall 
not be required to select any project from the illustrative list of 
additional projects included in the financial plan under paragraph 
(1)(B).'.''.
    (c) Metropolitan Transportation Improvement Program.--Section 3005 
of the Federal Transit Act of 1998 <<NOTE: Ante, p. 345.>> is amended--
            (1) in the section heading by inserting ``metropolitan'' 
        before ``transportation''; and
            (2) by adding at the end the following:

    ``(d) Technical Adjustments.--Section 5304 is amended--
            ``(1) in subsection (a) (as amended by subsection (a) of 
        this section)--
                    ``(A) by striking `In cooperation with' and 
                inserting the following:
            `(1) In general.--In cooperation with'; and
                    ``(B) by adding at the end the following:
            `(2) Funding estimate.--For the purpose of developing the 
        transportation improvement program, the metropolitan planning 
        organization, public transit agency, and the State shall 
        cooperatively develop estimates of funds that are reasonably 
        expected to be available to support program implementation.';
            ``(2) in subsection (b)(2)--
                    ``(A) in subparagraph (B) by striking `and' at the 
                end; and
                    ``(B) in subparagraph (C) (as added by subsection 
                (b) of this section) by striking `strategies which may 
                include' and inserting the following: `strategies; and
                    `(D) may include'; and
            ``(3) in subsection (c) by striking paragraph (4) (as 
        amended by subsection (c) of this section) and inserting the 
        following:
            `(4) Selection of projects from illustrative list.--
                    `(A) In general.--Notwithstanding subsection 
                (b)(2)(D), a State or metropolitan planning organization 
                shall not be required to select any project from the 
                illustrative list of additional projects included in the 
                financial plan under subsection (b)(2)(D).
                    `(B) Action by secretary.--Action by the Secretary 
                shall be required for a State or metropolitan planning 
                organization to select any project from the illustrative 
                list of additional projects included in the plan under 
                subsection (b)(2) for inclusion in an approved 
                transportation improvement plan.'.''.

    (d) Transportation Management Areas.--Section 3006(d) of the Federal 
Transit Act of 1998 <<NOTE: Ante, p. 346.>> is amended to read as 
follows:

    ``(d) Project Selection.--Section 5305(d)(1) is amended to read as 
follows: `(1)(A) All federally funded projects carried out

[[Page 112 STAT. 855]]

within the boundaries of a transportation management area under title 23 
(excluding projects carried out on the National Highway System and 
projects carried out under the bridge and interstate maintenance 
program) or under this chapter shall be selected from the approved 
transportation improvement program by the metropolitan planning 
organization designated for the area in consultation with the State and 
any affected public transit operator.
    `(B) Projects carried out within the boundaries of a transportation 
management area on the National Highway System and projects carried out 
within such boundaries under the bridge program or the interstate 
maintenance program shall be selected from the approved transportation 
improvement program by the State in cooperation with the metropolitan 
planning organization designated for the area.'.''.
    (e) Urbanized Area Formula Grants.--Section 3007 of the Federal 
Transit Act of 1998 <<NOTE: Ante, p. 347.>> is amended by adding at the 
end the following:

    ``(h) Technical Adjustments.--
            ``(1) General authority.--Section 5307(b) (as amended by 
        subsection (c)(1)(B) of this section) is amended by adding at 
        the end the following: `The Secretary may make grants under this 
        section from funds made available for fiscal year 1998 to 
        finance the operating costs of equipment and facilities for use 
        in mass transportation in an urbanized area with a population of 
        at least 200,000.'.
            ``(2) Report.--Section 5307(k)(3) (as amended by subsection 
        (f ) of this section) is amended by inserting `preceding' before 
        `fiscal year'.''.

    (f ) Clean Fuels Formula Grant Program.--Section 3008 of the Federal 
Transit Act of 1998 <<NOTE: Ante, p. 348.>> is amended by adding at the 
end the following:

    ``(c) Technical Adjustments.--Section 5308(e)(2) (as added by 
subsection (a) of this section) is amended by striking `$50,000,000' and 
inserting `35 percent'.''.
    (g) Capital Investment Grants and Loans.--Section 3009 of the 
Federal Transit Act of 1998 <<NOTE: Ante, p. 352.>> is amended by adding 
at the end the following:

    ``(k) Technical Adjustments.--
            ``(1) Criteria.--Section 5309(e) (as amended by subsection 
        (e) of this section) is amended--
                    ``(A) in paragraph (3)(C) by striking `urban' and 
                inserting `suburban';
                    ``(B) in the second sentence of paragraph (6) by 
                striking `or not' and all that follows through `, based' 
                and inserting `or ``not recommended'', based'; and
                    ``(C) in the last sentence of paragraph (6) by 
                inserting `of the' before `criteria established'.
            ``(2) Letters of intent and full funding grant agreements.--
        Section 5309(g) (as amended by subsection (f ) of this section) 
        is amended in paragraph (4) by striking `5338(a)' and all that 
        follows through `2003' and inserting `5338(b) of this title for 
        new fixed guideway systems and extensions to existing fixed 
        guideway systems and the amount appropriated under section 
        5338(h)(5) or an amount equivalent to the last 2 fiscal years of 
        funding authorized under section 5338(b) for new fixed guideway 
        systems and extensions to existing fixed guideway systems'.

[[Page 112 STAT. 856]]

            ``(3) Allocating amounts.--Section 5309(m) (as amended by 
        subsection (g) of this section) is amended--
                    ``(A) in paragraph (1) by inserting `(b)' after 
                `5338';
                    ``(B) by striking paragraph (2) and inserting the 
                following:
            `(2) New fixed guideway grants.--
                    `(A) Limitation on amounts available for activities 
                other than final design and construction.--Not more than 
                8 percent of the amounts made available in each fiscal 
                year by paragraph (1)(B) shall be available for 
                activities other than final design and construction.
                    `(B) Funding for ferry boat systems.--
                          `(i) Amounts under (1)(b).--Of the amounts 
                      made available under paragraph (1)(B), $10,400,000 
                      shall be available in each of fiscal years 1999 
                      through 2003 for capital projects in Alaska or 
                      Hawaii, for new fixed guideway systems and 
                      extensions to existing fixed guideway systems that 
                      are ferry boats or ferry terminal facilities, or 
                      that are approaches to ferry terminal facilities.
                          `(ii) Amounts under 5338(h)(5).--Of the 
                      amounts appropriated under section 5338(h)(5), 
                      $3,600,000 shall be available in each of fiscal 
                      years 1999 through 2003 for capital projects in 
                      Alaska or Hawaii, for new fixed guideway systems 
                      and extensions to existing fixed guideway systems 
                      that are ferry boats or ferry terminal facilities, 
                      or that are approaches to ferry terminal 
                      facilities.';
                    ``(C) by redesignating paragraph (4) as paragraph 
                (3)(C);
                    ``(D) in paragraph (3) by adding at the end the 
                following:
                    `(D) Other than urbanized areas.--Of amounts made 
                available by paragraph (1)(C), not less than 5.5 percent 
                shall be available in each fiscal year for other than 
                urbanized areas.';
                    ``(E) by striking paragraph (5); and
                    ``(F) by inserting after paragraph (3) the 
                following:
            `(4) Eligibility for assistance for multiple projects.--A 
        person applying for or receiving assistance for a project 
        described in subparagraph (A), (B), or (C) of paragraph (1) may 
        receive assistance for a project described in any other of such 
        subparagraphs.'.''.

    (h) References to Full Funding Grant Agreements.--
Section 3009(h)(3) of the Federal Transit Act of 1998 <<NOTE: Ante, p. 
352.>> is amended--
            (1) by striking ``and'' at the end of subparagraph (A)(ii);
            (2) by striking the period at the end of subparagraph (B) 
        and inserting a semicolon; and
            (3) by adding at the end the following:
                    ``(C) in section 5328(a)(4) by striking `section 
                5309(m)(2) of this title' and inserting `5309(o)(1)'; 
                and
                    ``(D) in section 5309(n)(2) by striking `in a way' 
                and inserting `in a manner'.''.

    (i) Dollar Value of Mobility Improvements.--Section 3010(b)(2) of 
the Federal Transit Act of 1998 <<NOTE: Ante, p. 357.>> is amended by 
striking ``Secretary'' and inserting ``Comptroller General''.

[[Page 112 STAT. 857]]

    ( j) Intelligent Transportation System Applications.--
Section 3012 of the Federal Transit Act of 1998 <<NOTE: Ante, p. 
358.>> is amended by moving paragraph (3) of subsection (a) to the end 
of subsection (b) and by redesignating such paragraph (3) as paragraph 
(4).

    (k) Advanced Technology Pilot Project.--Section 3015 of the Federal 
Transit Act of 1998 <<NOTE: Ante, p. 359.>> is amended--
            (1) in subsection (c)(2) by adding at the end the following: 
        ``Financial assistance made available under this subsection and 
        projects assisted with the assistance shall be subject to 
        section 5333(a) of title 49, United States Code.''; and
            (2) by adding at the end the following:

    ``(d) Training and Curriculum Development.--
            ``(1) In general.--Any funds made available by section 
        5338(e)(2)(C)(iii) of title 49, United States Code, shall be 
        available in equal amounts for transportation research, 
        training, and curriculum development at institutions identified 
        in subparagraphs (E) and (F) of section 5505( j)(3) of such 
        title.
            ``(2) Special rule.--If the institutions identified in 
        paragraph (1) are selected pursuant to 5505(i)(3)(B) of such 
        title in fiscal year 2002 or 2003, the funds made available to 
        carry out this subsection shall be available to those 
        institutions to carry out the activities required pursuant to 
        section 5505(i)(3)(B) of such title for that fiscal year.''.

    (l) National Transit Institute.--Section 3017(a) of the 
Federal Transit Act of 1998 <<NOTE: Ante, p. 361.>> is amended to read 
as follows:

    ``(a) In General.--Section 5315 is amended--
            ``(1) in the section heading by striking `mass 
        transportation' and inserting `transit';
            ``(2) in subsection (a)--
                    ``(A) by striking `mass transportation' in the first 
                sentence and inserting `transit';
                    ``(B) in paragraph (5) by inserting `and 
                architectural design' before the semicolon at the end;
                    ``(C) in paragraph (7) by striking `carrying out' 
                and inserting `delivering';
                    ``(D) in paragraph (11) by inserting `, construction 
                management, insurance, and risk management' before the 
                semicolon at the end;
                    ``(E) in paragraph (13) by striking `and' at the 
                end;
                    ``(F) in paragraph (14) by striking the period at 
                the end and inserting a semicolon; and
                    ``(G) by adding at the end the following:
            `(15) innovative finance; and
            `(16) workplace safety.'.''.

    (m) Pilot Program.--Section 3021(a) of the Federal Transit Act of 
1998 <<NOTE: Ante, p. 363.>> is amended by inserting ``single-State'' 
before ``pilot program''.

    (n) Architectural, Engineering, and Design Contracts.--Section 3022 
of the Federal Transit Act of 1998 <<NOTE: Ante, p. 363.>> is amended by 
adding at the end the following:

    ``(b) Conforming Amendment.--Section 5325(b) (as redesignated by 
subsection (a)(2) of this section) is amended--
            ``(1) by inserting `or requirement' after `A contract'; and
            ``(2) by inserting before the last sentence the following: 
        `When awarding such contracts, recipients of assistance under 
        this chapter shall maximize efficiencies of administration by 
        accepting nondisputed audits conducted by other governmental

[[Page 112 STAT. 858]]

        agencies, as provided in subparagraphs (C) through (F) of 
        section 112(b)(2) of title 23, United States Code.'.''.

    (o) Conforming Amendment.--Section 3027 of the Federal Transit Act 
of 1998 <<NOTE: Ante, p. 366.>> is amended--
            (1) in subsection (c) by striking ``600,000'' each place it 
        appears and inserting ``900,000''; and
            (2) by adding at the end the following:

    ``(d) Conforming Amendment.--The item relating to section 5336 in 
the table of sections for chapter 53 is amended by striking `block 
grants' and inserting `formula grants'.''.
    (p) Apportionment for Fixed Guideway Modernization.--Section 3028 of 
the Federal Transit Act of 1998 <<NOTE: Ante, p. 366.>> is amended by 
adding at the end the following:

    ``(c) Conforming Amendments.--Section 5337(a) (as amended by 
subsection (a) of this section) is amended--
            ``(1) in paragraph (2)(B) by striking `(e)' and inserting 
        `(e)(1)';
            ``(2) in paragraph (3)(D)--
                    ``(A) by striking `(ii)'; and
                    ``(B) by striking `(e)' and inserting `(e)(1)';
            ``(3) in paragraph (4) by striking `(e)' and inserting 
        `(e)(1)';
            ``(4) in paragraph (5)(A) by striking `(e)' and inserting 
        `(e)(2)';
            ``(5) in paragraph (5)(B) by striking `(e)' and inserting 
        `(e)(2)';
            ``(6) in paragraph (6) by striking `(e)' each place it 
        appears and inserting `(e)(2)'; and
            ``(7) in paragraph (7) by striking `(e)' each place it 
        appears and inserting `(e)(2)'.''.

    (q) Authorizations.--Section 3029 of the Federal Transit Act of 
1998 <<NOTE: Ante, p. 368.>> is amended by adding at the end the 
following:

    ``(c) Technical Adjustments.--Section 5338 (as amended by subsection 
(a) of this section) is amended--
            ``(1) in subsection (c)(2)(A)(i) by striking `$43,200,000' 
        and inserting `$42,200,000';
            ``(2) in subsection (c)(2)(A)(ii) by striking `$46,400,000' 
        and inserting `$48,400,000';
            ``(3) in subsection (c)(2)(A)(iii) by striking `$51,200,000' 
        and inserting `$50,200,000';
            ``(4) in subsection (c)(2)(A)(iv) by striking `$52,800,000' 
        and inserting `$53,800,000';
            ``(5) in subsection (c)(2)(A)(v) by striking `$57,600,000' 
        and inserting `$58,600,000';
            ``(6) in subsection (d)(2)(C)(iii) by inserting before the 
        semicolon `, including not more than $1,000,000 shall be 
        available to carry out section 5315(a)(16)';
            ``(7) in subsection (e)--
                    ``(A) by striking `5317(b)' each place it appears 
                and inserting `5505';
                    ``(B) in paragraph (1) by striking `There are' and 
                inserting `Subject to paragraph (2)(C), there are';
                    ``(C) in paragraph (2)--
                          ``(i) in subparagraph (A) by striking `There 
                      shall' and inserting `Subject to subparagraph (C), 
                      there shall';
                          ``(ii) in subparagraph (B) by striking `In 
                      addition' and inserting `Subject to subparagraph 
                      (C), in addition'; and

[[Page 112 STAT. 859]]

                          ``(iii) by adding at the end the following:
                    `(C) Funding of centers.--
                          `(i) Of the amounts made available under 
                      subparagraph (A) and paragraph (1) for each fiscal 
                      year--
                                    `(I) $2,000,000 shall be available 
                                for the center identified in section 
                                5505( j)(4)(A); and
                                    `(II) $2,000,000 shall be available 
                                for the center identified in section 
                                5505( j)(4)(F).
                          `(ii) For each of fiscal years 1998 through 
                      2001, of the amounts made available under this 
                      paragraph and paragraph (1)--
                                    `(I) $400,000 shall be available 
                                from amounts made available under 
                                subparagraph (A) of this paragraph and 
                                under paragraph (1) for each of the 
                                centers identified in subparagraphs (E) 
                                and (F) of section 5505( j)(3); and
                                    `(II) $350,000 shall be available 
                                from amounts made available under 
                                subparagraph (B) of this paragraph and 
                                under paragraph (1) for each of the 
                                centers identified in subparagraphs (E) 
                                and (F) of section 5505( j)(3).
                          `(iii) Any amounts made available under this 
                      paragraph or paragraph (1) for any fiscal year 
                      that remain after distribution under clauses (i) 
                      and (ii), shall be available for the purposes 
                      identified in section 3015(d) of the Federal 
                      Transit Act of 1998.'; and
                    ``(D) by adding at the end the following:
            `(3) Special rule.--Nothing in this subsection shall be 
        construed to limit the transportation research conducted by the 
        centers funded by this section.';
            ``(8) in subsection (g)(2) by striking `(c)(2)(B),' and all 
        that follows through `(f )(2)(B),' and inserting `(c)(1), 
        (c)(2)(B), (d)(1), (d)(2)(B), (e)(1), (e)(2)(B), (f )(1), (f 
        )(2)(B),';
            ``(9) in subsection (h) by inserting `under the 
        Transportation Discretionary Spending Guarantee for the Mass 
        Transit Category' after `through (f )'; and
            ``(10) in subsection (h)(5) by striking subparagraphs (A) 
        through (E) and inserting the following:
                    `(A) for fiscal year 1999 $400,000,000;
                    `(B) for fiscal year 2000 $410,000,000;
                    `(C) for fiscal year 2001 $420,000,000;
                    `(D) for fiscal year 2002 $430,000,000; and
                    `(E) for fiscal year 2003 $430,000,000;'.''.

    (r) Projects for Fixed Guideway Systems.--Section 3030 of the 
Federal Transit Act of 1998 <<NOTE: Ante, p. 373.>> is amended--
            (1) in subsection (a)--
                    (A) in paragraph (8) by inserting ``North-'' before 
                ``South'';
                    (B) in paragraph (42) by striking ``Maryland'' and 
                inserting ``Baltimore'';
                    (C) in paragraph (103) by striking ``busway'' and 
                inserting ``Boulevard transitway'';
                    (D) in paragraph (106) by inserting ``CTA'' before 
                ``Douglas'';
                    (E) by striking paragraph (108) and inserting the 
                following:
            ``(108) Greater Albuquerque Mass Transit Project.''; and

[[Page 112 STAT. 860]]

                    (F) by adding at the end the following:
            ``(109) Hartford City Light Rail Connection to Central 
        Business District.
            ``(110) Providence-Boston Commuter Rail.
            ``(111) New York-St. George's Ferry Intermodal Terminal.
            ``(112) New York-Midtown West Ferry Terminal.
            ``(113) Pinellas County-Mobility Initiative Project.
            ``(114) Atlanta-MARTA Extension (S. De Kalb-Lindbergh).'';
            (2) in subsection (b)--
                    (A) by striking paragraph (2) and inserting the 
                following:
            ``(2) Sioux City-Light Rail.'';
                    (B) by striking paragraph (40) and inserting the 
                following:
            ``(40) Santa Fe-El Dorado Rail Link.'';
                    (C) by striking paragraph (44) and inserting the 
                following:
            ``(44) Albuquerque-High Capacity Corridor.'';
                    (D) by striking paragraph (53) and inserting the 
                following:
            ``(53) San Jacinto-Branch Line (Riverside County).''; and
                    (E) by adding at the end the following:
            ``(69) Chicago-Northwest Rail Transit Corridor.
            ``(70) Vermont-Burlington-Essex Commuter Rail.''; and
            (3) in subsection (c)--
                    (A) in paragraph (1)(A)--
                          (i) in the matter preceding clause (i) by 
                      inserting ``(even if the project is not listed in 
                      subsection (a) or (b))'' before the colon;
                          (ii) by striking clause (ii) and inserting the 

                      following:
                          ``(ii) San Diego Mission Valley and Mid-Coast 
                      Corridor, $325,000,000.'';
                          (iii) by striking clause (v) and inserting the 

                      following:
                          ``(v) Hartford City Light Rail Connection to 
                      Central Business District, $33,000,000.'';
                          (iv) by striking clause (xxiii) and inserting 
                      the following:
                          ``(xxiii) Kansas City--I-35 Commuter Rail, 
                      $30,000,000.'';
                          (v) in clause (xxxii) by striking ``Whitehall 
                      Ferry Terminal'' and inserting ``Staten Island 
                      Ferry-Whitehall Intermodal Terminal'';
                          (vi) by striking clause (xxxv) and inserting 
                      the following:
                          ``(xxxv) New York-Midtown West Ferry Terminal, 
                      $16,300,000.'';
                          (vii) in clause (xxxix) by striking 
                      ``Allegheny County'' and inserting ``Pittsburgh'';
                          (viii) by striking clause (xvi) and inserting 
                      the following:
                          ``(xvi) Northeast Indianapolis Corridor, 
                      $10,000,000.'';
                          (ix) by striking clause (xxix) and inserting 
                      the following:

[[Page 112 STAT. 861]]

                          ``(xxix) Greater Albuquerque Mass Transit 
                      Project, $90,000,000.'';
                          (x) by striking clause (xliii) and inserting 
                      the 
                      following:
                          ``(xliii) Providence-Boston Commuter Rail, 
                      $10,000,000.''; and
                          (xi) by striking clause (li) and inserting the 

                      following:
                          ``(li) Dallas-Ft. Worth RAILTRAN (Phase-II), 
                      $12,000,000.'';
                    (B) by striking the heading for subsection (c)(2) 
                and inserting ``Additional amounts''; and
                    (C) in paragraph (3) by inserting after the first 
                sentence the following: ``The project shall also be 
                exempted from all requirements relating to criteria for 
                grants and loans for fixed guideway systems under 
                section 5309(e) of such title and from regulations 
                required under that section.''.

    (s) New Jersey Urban Core Project.--Section 3030(e) of the Federal 
Transit Act of 1998 <<NOTE: Ante, p. 373.>> is amended by adding at the 
end the following:
            ``(4) Technical adjustment.--Section 3031(d) of the 
        Intermodal Surface Transportation Efficiency Act of 1991 (as 
        amended by paragraph (3)(B) of this subsection) is amended--
                    ``(A) by striking `of the West Shore Line' and 
                inserting `or the West Shore Line'; and
                    ``(B) by striking `directly connected to' and all 
                that follows through `Newark International Airport' the 
                first place it appears.''.

    (t) Baltimore-Washington Transportation Improvements.--Section 3030 
of the Federal Transit Act of 1998 is amended by adding at the end the 
following:
    ``(h) Technical Adjustment.--Section 3035(nn) of the Intermodal 
Surface Transportation Efficiency Act of 1991 (105 Stat. 2134) (as 
amended by subsection (g)(1)(C) of this section) is amended by inserting 
after `expenditure of' the following: `section 5309 funds to the 
aggregate expenditure of'.''.
    (u) Bus Projects.--Section 3031 of the Federal Transit Act of 
1998 <<NOTE: Ante, p. 381.>> is amended--
            (1) in the table contained in subsection (a)--
                    (A) by striking item 64;
                    (B) in item 69 by striking ``Rensslear'' each place 
                it appears and inserting ``Rensselaer'';
                    (C) in item 103 by striking ``facilities and''; and
                    (D) by striking item 150;
            (2) by striking the heading for subsection (b) and inserting 
        ``Additional Amounts'';
            (3) in subsection (b) by inserting after ``2000'' the first 
        place it appears ``with funds made available under section 
        5338(h)(6) of such title''; and
            (4) in item 2 of the table contained in subsection (b) by 
        striking ``Rensslear'' each place it appears and inserting 
        ``Rensselaer''.

    (v) Contracting Out Study.--Section 3032 of the Federal Transit Act 
of 1998 <<NOTE: Ante, p. 385.>> is amended--
            (1) in subsection (a) by striking ``3'' and inserting ``6'';

[[Page 112 STAT. 862]]

            (2) in subsection (d) by striking ``the Mass Transit Account 
        of the Highway Trust Fund'' and inserting ``funds made available 
        under section 5338(f )(2) of title 49, United States Code,'';
            (3) in subsection (d) by striking ``1998'' and inserting 
        ``1999''; and
            (4) in subsection (e) by striking ``subsection (c)'' and 
        inserting ``subsection (d)''.

    (w) Job Access and Reverse Commute Grants.--Section 3037 of the 
Federal Transit Act of 1998 <<NOTE: Ante, p. 387.>> is amended--
            (1) in subsection (b)(4)(A)--
                    (A) by inserting ``designated recipients under 
                section 5307(a)(2) of title 49, United States Code,'' 
                after ``from among''; and
                    (B) by inserting a comma after ``and agencies'';
            (2) in subsection (b)(4)(B)--
                    (A) by striking ``at least'' and inserting ``less 
                than'';
                    (B) by inserting ``designated recipients under 
                section 5307(a)(2) of title 49, United States Code,'' 
                after ``from among''; and
                    (C) by inserting ``and agencies,'' after 
                ``authorities'';
            (3) in subsection (f )(2)--
                    (A) by striking ``(including bicycling)''; and
                    (B) by inserting ``(including bicycling)'' after 
                ``additional services'';
            (4) in subsection (h)(2)(B) by striking ``403(a)(5)(C)(ii)'' 
        and inserting ``403(a)(5)(C)(vi)'';
            (5) in the heading for subsection (l)(1)(C) by striking 
        ``from the general fund'';
            (6) in subsection (l)(1)(C) by inserting ``under the 
        Transportation Discretionary Spending Guarantee for the Mass 
        Transit Category'' after ``(B)''; and
            (7) in subsection (l)(3)(B) by striking ``at least'' and 
        inserting ``less than''.

    (x) Rural Transportation Accessibility Incentive 
Program.--Section 3038 of the Federal Transit Act of 1998 <<NOTE: Ante, 
p. 392.>> is amended--
            (1) in subsection (a)(1)(A) by inserting before the 
        semicolon ``or connecting 1 or more rural communities with an 
        urban area not in close proximity'';
            (2) in subsection (g)(1)--
                    (A) by inserting ``over-the-road buses used 
                substantially or exclusively in'' after ``operators of 
                ''; and
                    (B) by inserting at the end the following:
        ``Such sums shall remain available until expended.''; and
            (3) in subsection (g)(2)--
                    (A) by striking ``each of ''; and
                    (B) by adding at the end the following: ``Such sums 
                shall remain available until expended.''.

    (y) Study of Transit Needs in National Parks and Related Public 
Lands.--Section 3039(b) of the <<NOTE: Ante, p. 393.>> Federal Transit 
Act of 1998 is amended--
            (1) in paragraph (1) by striking ``in order to carry'' and 
        inserting ``assist in carrying''; and
            (2) by adding at the end the following:
            ``(3) Definition.--For purposes of this subsection, the term 
        `Federal land management agencies' means the National Park

[[Page 112 STAT. 863]]

        Service, the United States Fish and Wildlife Service, and the 
        Bureau of Land Management.''.

    (z) Obligation Ceiling.--Section 3040 of the Federal Transit Act of 
1998 <<NOTE: Ante, p. 394.>> is amended--
            (1) by striking paragraph (2) and inserting the following:
            ``(2) $5,797,000,000 in fiscal year 2000;''; and
            (2) in paragraph (4) by striking ``$6,746,000,000'' and 
        inserting ``$6,747,000,000''.

SEC. 9010. MOTOR CARRIER SAFETY TECHNICAL CORRECTION.

    Section 4011 of the Transportation Equity Act for the 21st 
Century <<NOTE: Ante, p. 394.>> is amended by adding at the end the 
following:

    ``(h) Technical Amendments.--Section 31314 (as amended by subsection 
(g) of this section) is amended--
            ``(1) in subsections (a) and (b) by striking `(3), and (5)' 
        each place it appears and inserting `(3), and (4)'; and
            ``(2) by striking subsection (d).''.

SEC. 9011. RESTORATIONS TO RESEARCH TITLE.

    (a) University Transportation Research Funding.--Section 
5001(a)(7) <<NOTE: Ante, p. 419.>> of the Transportation Equity Act for 
the 21st Century is amended--
            (1) by striking ``$31,150,000'' each place it appears and 
        inserting ``$25,650,000'';
            (2) by striking ``$32,750,000'' each place it appears and 
        inserting ``$27,250,000''; and
            (3) by striking ``$32,000,000'' each place it appears and 
        inserting ``$26,500,000''.

    (b) Obligation Ceiling.--Section 5002 of such Act <<NOTE: Ante, p. 
421.>> is amended by striking ``$403,150,000'' and all that follows 
through ``$468,000,000'' and inserting ``$397,650,000 for fiscal year 
1998, $403,650,000 for fiscal year 1999, $422,450,000 for fiscal year 
2000, $437,250,000 for fiscal year 2001, $447,500,000 for fiscal year 
2002, and $462,500,000''.

    (c) Use of Funds for ITS.--Section 5210 of the Transportation Equity 
Act for the 21st Century <<NOTE: Ante, p. 461.>> is amended by adding at 
the end the following:

    ``(d) Use of Innovative Financing.--
            ``(1) In general.--The Secretary may use up to 25 percent of 
        the funds made available to carry out this subtitle to make 
        available loans, lines of credit, and loan guarantees for 
        projects that are eligible for assistance under this subtitle 
        and that have significant intelligent transportation system 
        elements.
            ``(2) Consistency with other law.--Credit assistance 
        described in paragraph (1) shall be made available in a manner 
        consistent with the Transportation Infrastructure Finance and 
        Innovation Act of 1998.''.

    (d) University Transportation Research.--Section 5110 of such 
Act <<NOTE: Ante, p. 441.>> is amended by adding at the end the 
following:

    ``(d) Technical Adjustments.--Section 5505 of title 49, United 
States Code (as added by subsection (a) of this section), is 
amended--
            ``(1) in subsection (g)(2) by striking `section 5506,' and 
        inserting `section 508 of title 23, United States Code,';
            ``(2) in subsection (i)--
                    ``(A) by inserting `Subject to section 5338(e):' 
                after `(i) Number and Amount of Grants.--'; and

[[Page 112 STAT. 864]]

                    ``(B) by striking `institutions' each place it 
                appears and inserting `institutions or groups of 
                institutions'; and
            ``(3) in subsection ( j)(4)(B) by striking `on behalf of' 
        and all that follows before the period and inserting `on behalf 
        of a consortium which may also include West Virginia University 
        Institute of Technology, the College of West Virginia, and 
        Bluefield State College'.''.

    (e) Technical Corrections.--Section 5115 of such Act <<NOTE: Ante, 
p. 446.>> is amended--
            (1) in subsection (a) by striking ``Director'' and inserting 
        ``Director of the Bureau of Transportation Statistics'';
            (2) in subsection (b) by striking ``Bureau'' and inserting 
        ``Bureau of Transportation Statistics,''; and
            (3) in subsection (c) by striking ``paragraph (1)'' and 
        inserting ``subsection (a)''.

    (f ) Corrections to Certain Oklahoma Projects.--Section 5116 of such 
Act <<NOTE: Ante, p. 446.>> is amended--
            (1) in subsection (e)(2) by striking ``$1,000,000 for fiscal 
        year 1999, $1,000,000 for fiscal year 2000, and $500,000 for 
        fiscal year 2001'' and inserting ``$1,000,000 for fiscal year 
        1999, $1,000,000 for fiscal year 2000, $1,000,000 for fiscal 
        year 2001, and $500,000 for fiscal year 2002''; and
            (2) in subsection (f )(2) by striking ``$1,000,000 for 
        fiscal year 1999, $1,000,000 for fiscal year 2000, $1,000,000 
        for fiscal year 2001, and $500,000 for fiscal year 2002'' and 
        inserting ``$1,000,000 for fiscal year 1999, $1,000,000 for 
        fiscal year 2000, and $500,000 for fiscal year 2001''.

    (g) Intelligent Transportation Infrastructure Reference.--Section 
5117(b)(3)(B)(ii) of such Act <<NOTE: Ante, p. 448.>> is amended by 
striking ``local departments of transportation'' and inserting ``the 
Department of Transportation''.

    (h) Fundamental Properties of Asphalts and Modified Asphalts.--
Section 5117(b)(5)(B) of such Act is amended--
            (1) by striking ``1999'' and inserting ``1998''; and
            (2) by striking ``$3,000,000 per fiscal year'' and inserting 
        ``$1,000,000 for fiscal year 1998 and $3,000,000 for each of 
        fiscal years 1999 through 2003''.

SEC. 9012. AUTOMOBILE SAFETY AND INFORMATION.

    (a) Reference.--Section 7104 of the Transportation Equity Act for 
the 21st Century <<NOTE: Ante, p. 466.>> is amended by adding at the end 
the following:

    ``(c) Conforming Amendment.--Section 30105(a) of title 49, United 
States Code (as amended by subsection (a) of this section), is amended 
by inserting after `Secretary' the following: `for the National Highway 
Traffic Safety Administration'.''.
    (b) Clean Vessel Act Funding.--Section 7403 <<NOTE: Ante, p. 
485.>> of such Act is amended--
            (1) by inserting ``(a) In General.--'' before ``Section 
        4(b)''; and
            (2) by adding at the end the following:

    ``(b) Technical Amendment.--Section 4(b)(3)(B) of the 1950 Act (as 
amended by subsection (a) of this section) is amended by striking 
`6404(d)' and inserting `7404(d)'.''.
    (c) Boating Infrastructure.--Section 7404(b) of such 
Act <<NOTE: Ante, p. 486.>> is amended by striking ``6402'' and 
inserting ``7402''.

[[Page 112 STAT. 865]]

SEC. 9013. TECHNICAL CORRECTIONS REGARDING SUBTITLE A OF TITLE VIII.

    (a) Amendment to Offsetting Adjustment for Discretionary Spending 
Limit.--Section 8101(b) of the Transportation Equity Act for the 21st 
Century <<NOTE: Ante, p. 488.>> is amended--
            (1) in paragraph (1) by striking ``$25,173,000,000'' and 
        inserting ``$25,144,000,000''; and
            (2) in paragraph (2) by striking ``$26,045,000,000'' and 
        inserting ``$26,009,000,000''.

    (b) Amendments for Highway Category.--Section 8101 of the 
Transportation Equity Act for the 21st Century is amended by adding at 
the end the following:
    ``(f ) Technical Amendments.--Section 250(c)(4)(C) of the 
Balanced Budget and Emergency Deficit Control Act of 1985 (as amended by 
subsection (c) of this Act) is amended--
            ``(1) by striking `Century and' and inserting `Century or';
            ``(2) by striking `as amended by this section,' and 
        inserting `as amended by the Transportation Equity Act for the 
        21st Century,'; and
            ``(3) by adding at the end the following new flush sentence:
        `Such term also refers to the Washington Metropolitan Transit 
        Authority account (69-1128-0-1-401) only for fiscal year 1999 
        only for appropriations provided pursuant to authorizations 
        contained in section 14 of Public Law 96-184 and Public Law 101-
        551.'.''.

    (c) Technical Amendment.--Section 8102 of the Transportation Equity 
Act for the 21st Century <<NOTE: Ante, p. 492.>> is amended by inserting 
before the period at the end the following: ``or from section 1102 of 
this Act''.

SEC. 9014. CORRECTIONS TO VETERANS SUBTITLE.

    (a) Tobacco-Related Illnesses in Veterans.--Section 8202 of the 
Transportation Equity Act for the 21st Century <<NOTE: Ante, p. 
492.>> is amended to read as follows (and the amendments made by that 
section as originally enacted shall be treated for all purposes as not 
having been made):

``SEC. 8202. TREATMENT OF TOBACCO-RELATED ILLNESSES OF 
            VETERANS.

    ``(a) In General.--(1) Chapter 11 of title 38, United States Code, 
is amended by inserting after section 1102 the following new section:

`Sec. 1103. Special provisions relating to claims based upon effects of 
                        tobacco products

    `(a) Notwithstanding any other provision of law, a veteran's 
disability or death shall not be considered to have resulted from 
personal injury suffered or disease contracted in the line of duty in 
the active military, naval, or air service for purposes of this title on 
the basis that it resulted from injury or disease attributable to the 
use of tobacco products by the veteran during the veteran's service.
    `(b) Nothing in subsection (a) shall be construed as precluding the 
establishment of service connection for disability or death from a 
disease or injury which is otherwise shown to have been incurred or 
aggravated in active military, naval, or air service or which became 
manifest to the requisite degree of disability during any

[[Page 112 STAT. 866]]

applicable presumptive period specified in section 1112 or 1116 of this 
title.'.
    ``(2) The table of sections at the beginning of such chapter is 
amended by inserting after the item relating to section 1102 the 
following new item:

`1103. Special provisions relating to claims based upon effects of 
           tobacco products.'.

     <<NOTE: Applicability.>> ``(b) Effective Date.--Section 1103 of 
title 38, United States Code, as added by subsection (a), shall apply 
with respect to claims received by the Secretary of Veterans Affairs 
after the date of the enactment of this Act.''.

    (b) GI Bill Educational Assistance for Survivors and Dependents of 
Veterans.--Subtitle B of title VIII of the Transportation Equity Act for 
the 21st Century <<NOTE: Ante, p. 492.>> is amended by adding at the end 
the following new section:

``SEC. 8210. TWENTY PERCENT INCREASE IN RATES OF SURVIVORS AND 
            DEPENDENTS EDUCATIONAL ASSISTANCE.

    ``(a) Survivors and Dependents Educational Assistance.--Section 3532 
of title 38, United States Code, is amended--
            ``(1) in subsection (a)(1)--
                    ``(A) by striking out `$404' and inserting in lieu 
                thereof `$485';
                    ``(B) by striking out `$304' and inserting in lieu 
                thereof `$365'; and
                    ``(C) by striking out `$202' and inserting in lieu 
                thereof `$242';
            ``(2) in subsection (a)(2), by striking out `$404' and 
        inserting in lieu thereof `$485';
            ``(3) in subsection (b), by striking out `$404' and 
        inserting in lieu thereof `$485'; and
            ``(4) in subsection (c)(2)--
                    ``(A) by striking out `$327' and inserting in lieu 
                thereof `$392';
                    ``(B) by striking out `$245' and inserting in lieu 
                thereof `$294'; and
                    ``(C) by striking out `$163' and inserting in lieu 
                thereof `$196'.

    ``(b) Correspondence Course.--Section 3534(b) of such title is 
amended by striking out `$404' and inserting in lieu thereof `$485'.
    ``(c) Special Restorative Training.--Section 3542(a) of such title 
is amended--
            ``(1) by striking out `$404' and inserting in lieu thereof 
        `$485';
            ``(2) by striking out `$127' each place it appears and 
        inserting in lieu thereof `$152'; and
            ``(3) by striking out `$13.46' and inserting in lieu thereof 
        `$16.16'.

    ``(d) Apprenticeship Training.--Section 3687(b)(2) of such title is 
amended--
            ``(1) by striking out `$294' and inserting in lieu thereof 
        `$353';
            ``(2) by striking out `$220' and inserting in lieu thereof 
        `$264';
            ``(3) by striking out `$146' and inserting in lieu thereof 
        `$175'; and
            ``(4) by striking out `$73' and inserting in lieu thereof 
        `$88'.

[[Page 112 STAT. 867]]

     <<NOTE: Applicability.>> ``(e) Effective Date.--The amendments made 
by this section shall take effect on October 1, 1998, and shall apply 
with respect to educational assistance allowances paid for months after 
September 1998.''.

SEC. 9015. TECHNICAL CORRECTIONS REGARDING TITLE IX.

    (a) Highway Trust Fund.--Subsection (f ) of section 9002 of the 
Transportation Equity Act for the 21st Century <<NOTE: Ante, p. 
499.>> is amended by adding at the end the following new paragraphs:
            ``(4) The last sentence of section 9503(c)(1), as amended by 
        subsection (d), is amended by striking `the date of enactment of 
        the Transportation Equity Act for the 21st Century' and 
        inserting `the date of the enactment of the TEA 21 Restoration 
        Act'.
            ``(5) Paragraph (3) of section 9503(e), as amended by 
        subsection (d), is amended by striking `the date of enactment of 
        the Transportation Equity Act for the 21st Century' and 
        inserting `the date of the enactment of the TEA 21 Restoration 
        Act'.''.

    (b) Boat Safety Account and Sport Fish Restoration Account.--Section 
9005 of the Transportation Equity Act for the 21st Century <<NOTE: Ante, 
p. 504.>> is amended by adding at the end the following new subsection:

    ``(f ) Clerical Amendments.--
            ``(1) Subparagraph (A) of section 9504(b)(2), as amended by 
        subsection (b)(1), is amended by striking `the date of the 
        enactment of the Transportation Equity Act for the 21st Century' 
        and inserting `the date of the enactment of the TEA 21 
        Restoration Act'.
            ``(2) Subparagraph (B) of section 9504(b)(2), as added by 
        subsection (b)(3), is amended by striking `such Act' and 
        inserting `the TEA 21 Restoration Act'.
            ``(3) Subparagraph (C) of section 9504(b)(2), as amended by 
        subsection (b)(2) and redesignated by subsection (b)(3), is 
        amended by striking `the date of the enactment of the 
        Transportation Equity Act for the 21st Century' and inserting 
        `the date of the enactment of the TEA 21 Restoration Act'.
            ``(4) Subsection (c) of section 9504, as amended by 
        subsection (c)(2), is amended by striking `the date of enactment 
        of the Transportation Equity Act for the 21st Century' and 
        inserting `the date of the enactment of the TEA 21 Restoration 
        Act'.''.

[[Page 112 STAT. 868]]

SEC. 9016. <<NOTE: 23 USC 101 note.>> EFFECTIVE DATE.

    This title and the amendments made by this title shall take effect 
simultaneously with the enactment of the Transportation Equity Act for 
the 21st Century. For purposes of all Federal laws, the amendments made 
by this title shall be treated as being included in the Transportation 
Equity Act for the 21st Century at the time of the enactment of such 
Act, and the provisions of such Act (including the amendments made by 
such Act) (as in effect on the day before the date of enactment of this 
Act) that are amended by this title shall be treated as not being 
enacted.

    Approved July 22, 1998.

LEGISLATIVE HISTORY--H.R. 2676:
---------------------------------------------------------------------------

HOUSE REPORTS: Nos. 105-364, Pt. 1 (Comm. on Ways and Means) and 105-599 
(Comm. of Conference).
SENATE REPORTS: No. 105-174 (Comm. on Finance).
CONGRESSIONAL RECORD:
                                                        Vol. 143 (1997):
                                    Nov. 5, considered and passed House.
                                                        Vol. 144 (1998):
                                    May 4-7, considered and passed 
                                        Senate, amended.
                                    June 25, House agreed to conference 
                                        report.
                                    July 7-9, Senate considered and 
                                        agreed to conference report.
WEEKLY COMPILATION OF PRESIDENTIAL DOCUMENTS, Vol. 34 (1998):
            July 22, Presidential remarks.

                                  <all>