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Page:United States Statutes at Large Volume 100 Part 3.djvu/1067

 PUBLIC LAW 99-514—OCT. 22, 1986

100 STAT. 2875

(5)(A) Paragraph (4) of section 1042(c) (defining qualified replacement property) is amended to read as follows: (4) QUALIFIED REPLACEMENT PROPERTY.—

(A) IN GENERAL.—The term 'qualified replacement property' means any security issued by a domestic operating corporation which— "(i) did not, for the taxable year preceding the tax'^,. able year in which such security was purchased, have ..i£i...; passive investment income (as defined in section 1362(d)(3)(D)) in excess of 25 percent of the gross receipts of such corporation for such preceding taxable year, and "(ii) is not the corporation which issued the qualified securities which such security is replacing or a member of the same controlled group of corporations (within the meaning of section 1563(a)(l)) as such corporation. For purposes of clause (i), income which is described in section 954(c)(3) shall not be treated as passive investment income. l! "(B) OPERATING CORPORATION,—For purposes of this paragraph— "(i) IN GENERAL.—The term 'operating corporation' means a corporation more than 50 percent of the assets ] of which were, at the time the security was purchsised or before the close of the placement period, used in the active conduct of the trade or business. ,,

"(ii) FINANCIAL INSTITUTIONS AND INSURANCE COMPA-

- 1'. *^.^! f ' '- "'^ ^ s r. --.u

NiES.—The term 'operating corporation' shall include— "(I) any financial institution described in section 581 or 593, and "(II) an insurance company subject to tax under subchapter L. "(Q

CONTROIXING

AND

CONTROLLED

CORPORATIONS

T R E A T E D A S 1 CORPORATION.—

'*?' • ' •«»'
 * "SJ'^

"(i) IN GENERAL.—For purposes of applying this paragraph, if— "(I) the corporation issuing the security owns stock representing control of 1 or more other corporations, "(II) 1 or more other corporations own stock representing control of the corporation issuing the security, or

"(III) both, then all such corporations shall be treated as 1 corporation. "(ii) (HoNTROL.—For purposes of clause (i), the term •^1 o» 'control' has the meaning given such term by section 304(c). In determining control, there shall be disregarded any qusdified replacement property of the taxpayer with respect to the section 1042 sale being tested. Ii "(D) SECURITY DEFINED.—For purposes of this paragraph, I the term 'security' has the meaning given such term by section 165(g)(2), except that such term shall not include any security issued by a government or political subdivision r thereof." (B) I f -
 * i:.A.i;.

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Page:United States Statutes at Large Volume 100 Part 3.djvu/1068

 100 STAT. 2876

PUBLIC LAW 99-514—OCT. 22, 1986

(i) before January 1, 1987, the taxpayer acquired any security (as defined in section 165(g)(2) of the Internal Revenue Code of 1954) issued by a domestic corporation or •-' by any State or political subdivision thereof, W-i'"'(ii) the taxpayer treated such security as qualified replacement property for purposes of section 1042 of such -A'Code, and (iii) such property does not meet the requirements of section 1042(c)(4) of such Code (as amended by subparagraph (A)), then, with respect to so much of any gain which the taxpayer treated as not recognized under section 1042(a) by reason of the acquisition of such property, the replacement period for purposes of such section shall not expire before January 1, 1987. (6)(A) Section 1042(c) (relating to definitions and special rules) is amended by adding at the end thereof the following new ^ paragraph: jnt

"(Y) SECTION NOT TO APPLY TO GAIN OF CORPORATION.—

Subsection (a) shall not apply to any gain on the sale of any "' qualified securities which is includible in the gross income of any C corporation." (B) The amendment made by subparagraph (A) shall apply to sales after March 28, 1985, except that such amendment shall not apply to sales made before July 1, 1985, if made pursuant to a binding contract in effect on March 28, 1985, and at all times thereafter. (C) The amendment made by subparagraph (A) shall not apply to any sale occurring on December 20, 1985, with respect to which— «^f (i) a commitment letter was issued by a bank on October 31, 1984, and gj^f (ii) a final purchase agreement was entered into on November 5, 1985. (D) In the case of a sale on September 27, 1985, with respect to which a preliminary commitment letter was issued by a bank on April 10, 1985, and with respect to which a commitment letter was issued by a bank on June 28, 1985, the amendment made by subparagraph (A) shall apply but such sale shall be treated as having occurred on September 27, 1986. ,.ri:i (7) Section 1042(d) (relating to basis of qualified replacement property) is amended by adding at the end thereof the following new flush sentence: "Any reduction in basis under this subsection shall not be taken into account for purposes of section 1278(a)(2)(A)(ii) (relating to definition of market discount)." (8)(A) Section 1042 is amended by redesignating subsection (e) as subsection (f) and by inserting after subsection (d) the following new subsection: "(e) RECAPTURE OF GAIN ON DISPOSITION OF QUALIFIED REPLACEMENT PROPERTY.—
 * -.i,

"(1) IN GENERAL.—If a taxpayer disposes of any qualified replacement property, then, notwithstanding any other provision of this title, gain (if any) shall be recognized to the extent of the gain which was not recognized under subsection (a) by reason of the acquisition by such taxpayer of such qualified replacement property.

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Page:United States Statutes at Large Volume 100 Part 3.djvu/1069

 PUBLIC LAW 99-514—OCT. 22, 1986

100 STAT. 2877

"(2) SPECIAL RULE FOR CORPORATIONS CONTROLLED BY THE TAX-

PAYER.—If—

"(A) a corporation issuing qualified replacement property disposes of a substantial portion of its assets other than in the ordinary course of its trade or business, and "(B) any taxpayer owning stock representing control (within the meaning of section 304(c)) of such corporation at the time of such disposition holds any qualified replacement property of such corporation at such time, qualified replacement property at such time. ^
 * then the taxpayer shall be treated as having disposed of such

"(3) RECAPTURE NOT TO APPLY IN CERTAIN CASES.—Paragraph

(1) shall not apply to any transfer of qualified replacement property— "(A) in any reorganization (within the meaning of section 368) unless the person making the election under subsection «u;«^i'*-i (a)(1) owns stock representing control in the acquiring or acquired corporation and such property is substituted basis property in the hands of the transferee, "(B) by reason of the death of the person making such "^ election, "(C) by gift, or "(D) in any transaction to which section 1042(a) applies." ^ (B) The amendment made by subparagraph (A) shall apply to dispositions after the date of the enactment of this Act, in taxable years ending after such date. -' (9)(A) Chapter 43 (relating to qualified pension, etc. plans) is amended by adding at the end thereof the following new section: "SEC. 4979A. TAX ON CERTAIN PROHIBITED ALLOCATIONS OF QUALIFIED SECURITIES.

"(a) IMPOSITION OF TAX.—If there is a prohibited allocation of qualified securities by any employee stock ownership plan or eligible worker-owned cooperative, there is hereby imposed a tax on such allocation equal to 50 percent of the amount involved. "(b) PROHIBITED ALLOCATION.—For purposes of this section, the term 'prohibited allocation' means— "(1) any allocation of qualified securities acquired in a sale to which section 1042 applies which violates the provisions of section 409(n), and "(2) any benefit which accrues to any person in violation of the provisions of section 409(n). "(c) LiABiliTY FOR TAX.—The tax imposed by this section shall be paid by— "(1) the employer sponsoring such plan, or "(2) the eligible worker-owned cooperative, which made the written statement described in section 10420t)X3XB). "(d) DEFINITIONS.—Terms used in this section have the same respective meaning as when used in section 4978." (B) Subparagraph (B) of section 1042(b)(3) is amended by striking out "section 4978(a)" and inserting in lieu thereof "sections 4978 and 4979A". (C) The table of sections for chapter 43 is amended by adding I at the end thereof the following new item: "Sec. 4979A. Tax on certain prohibited allocations of qualified securities."

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Page:United States Statutes at Large Volume 100 Part 3.djvu/1070

 100 STAT. 2878

PUBLIC LAW 99-514—OCT. 22, 1986

(D) The amendments made by this paragraph shall apply to sales of securities after the date of the enactment of this Act. '' (10) Paragraph (5) of section 1042(c) (relating to securities ^ acquired by underwriter) is amended— (A) by striking out "acquisition" and inserting in lieu •^ thereof "sale", ^: (B) by inserting "to an employee stock ownership plan or "^ * eligible worker-owned cooperative" before "in", and (C) by striking out "ACQUIRED" in the heading thereof and '^ inserting in lieu thereof "SOLD". (11) The heading for section 1042 is amended by inserting "EMPLOYEE" before "STOCK". ^ (12) The table of sections for part III of subchapter O of chapter 1 is amended by striking out the item relating to section 1042 and inserting in lieu thereof the following new item: "Sec. 1042. Sales of stock to employee stock ownership plans or certain cooperatives." (b) AMENDMENTS RELATED TO SECTION 542.—

^ _

(1) Paragraph (5) of section 72(e) is amended by adding at the end of subparagraph (D) the following new flush sentence: "Any dividend described in section 404(k) which is received by a • participant or beneficiary shall, for purposes of this subpara,^ graph, be treated as paid under a separate contract to which ^; clause (ii)(I) applies." (2) Section 404(k) is amended— (A) by adding at the end thereof the following new flush sentence: "Any deduction under subparagraph (A) or (B) of paragraph (2) shall be allowed in the taxable year of the corporation in which the dividend is paid or distributed to the participant under paragraph (2).", and (B) by striking out "during the taxable year" in the matter preceding paragraph (1). (3) Section 404(k), as amended by paragraph (2), is amended by ^^1 adding at the end thereof the following new sentence: "A plan to which this subsection applies shall not be treated as violating the requirements of section 401, 409, or 4975(e)(7) merely by reason of any distribution described in paragraph (2)." (4) Subsection (k) of section 404 is amended by adding at the end thereof the following new sentence: "The Secretary may disallow the deduction under this subsection for any dividend if the Secretary determines that such dividend constitutes, in substance, an avoidance of taxation." (5) Paragraph (2) of section 404(k) is amended by striking out "participants in the plan" each place it appears and inserting in lieu thereof "participants in the plan or their beneficiaries". (6) The amendments made by paragraphs (1) and (2) shall not apply to dividends paid before January 1, 1986, if the taxpayer ,, f treated such dividends in a manner inconsistent with such amendments on a return filed with the Secretary before the date of the enactment of this Act. (c) AMENDMENTS RELATED TO SECTION 543.— (1) Subparagraph (B) of section 291(e)(l) (defining financial institution preference item) is amended by adding at the end
 * ' thereof the following new clause:

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Page:United States Statutes at Large Volume 100 Part 3.djvu/1071

 PUBLIC LAW 99-514—OCT. 22, 1986

100 STAT. 2879

"(iv) SPECIAL RULES FOR OBLIGATIONS TO WHICH SECTION 133 APPLIES.—In the case of an obligation to which

section 133 applies, interest on such obligation shall not be treated as exempt from taxes for purposes of this subparagraph." (2)(A) Section 133 (relating to exemption for interest on certain loans used to acquire employer securities) is amended by adding at the end thereof the following new subsection: "(d) APPLICATION WITH SECTION 483 AND ORIGINAL ISSUE DISCOUNT

RULES.—In applying section 483 and subpart A of part V of subchapter P to any obligation to which this section applies, appropriate adjustments shall be made to the applicable Federal rate to take into account the exclusion under subsection (a)." (B) Section 7872(f) is amended by adding at the end thereof the following new paragraph: ,

"(11) SPECIAL RULE FOR CERTAIN EMPLOYER SECURITY LOANS.—

g I

This section shall not apply to any loan between a corporation (or any member of the controlled group of corporations which includes such corporation) and an employee stock ownership plan described in section 4975(e)(7) to the extent that the interest rate on such loan is equal to the interest rate paid on a related securities acquisition loan (as described in section 133(b)) to such corporation." (C) Section 1330t))(2) is amended by adding at the end thereof the following new flush sentence: "For purposes of this paragraph, subparagraphs (A) and (B) shall not apply to any loan which, but for such subparagraphs, would be a securities acquisition loan if such loan was not originated by the employer of any employees who are covered by the plan or by any member of the controlled group of corporations which includes such employer, except that this section shall not apply to any interest received on such loan during such time as such loan is held by such employer (or any member of such controlled group)." (D) Section 133(b) is amended by redesignating paragraph (3) as paragraph (4) and by adding after paragraph (2) the following new paragraph:

J f

"(3)

TERMS APPLICABLE TO CERTAIN SECURITIES ACQUISITION

LOANS.—A loan to a corporation shall not fail to be treated as a securities acquisition loan merely because the proceeds of such loan are lent to an employee stock ownership plan sponsored by such corporation (or by any member of the controlled group of corporations which includes such corporation) if such loan includes— "(A) repayment terms which are substantially similar to ,^. the terms of the loan of such corporation from a lender described in subsection (a), or ...JII "(B) repayment terms providing for more rapid repayment of principal or interest on such loan but only if— "(i) allocations under the plan attributable to such repayment do not discriminate in favor of highly compensated employees (within the meaning of sectio 414(q)), and "(ii) the total commitment period of such loan to the corporation does not exceed 7 years." (d) AMENDMENTS RELATED TO SECTION 544.—

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Page:United States Statutes at Large Volume 100 Part 3.djvu/1072

 100 STAT. 2880

PUBLIC LAW 99-514—OCT. 22, 1986

(1)(A) Section 2210(a) (relating to liability for payment of estate tax in case of transfer of employer securities to an ESOP or worker cooperative) is amended by striking out "and" at the end of paragraph (1), by redesignating paragraph (2) as paragraph (3), and by inserting after paragraph (1) the following new paragraph: "(2) the executor of the estate of the decedent may (without regard to this section) make an election under section 6166 with ^^ respect to that portion of the tax imposed by section 2001 which is attributable to employer securities, and". (B) The amendment made by subparagraph (A) shall apply to « the estates of decedents dying after September 27, 1985. (2) Section 2210(c) (relating to installment payments) is 'im amended by adding at the end thereof the following new paragraph: "(3) SPECIAL RULES FOR APPLICATION OF SECTION 6166(g).—In the case of any transfer of employer securities to an employee stock ownership plan or eligible worker-owned cooperative to which this section applies— "(A)

TRANSFER DOES NOT TRIGGER ACCELERATION.—Such

transfer shall not be treated as a disposition or withdrawal to which section 6166(g) applies. "(B)

SEPARATE APPLICATION TO ESTATE AND PLAN IN-

Josrf

J TERESTS.—Section 6166(g) shall be applied separately to the interests held after such transfer by the estate and such (^ r^' plan or cooperative. "(C) REQUIRED DISTRIBUTION NOT TAKEN INTO ACCOUNT.—

In the case of any distribution of such securities by such plan which is described in section 4978(d)(1)— "(i) such distribution shall not be treated as a disposition or withdrawal for purposes of section 6166(g), and "(ii) such securities shall not be taken into account in V-applying section 6166(g) to any subsequent disposition or withdrawal." (3) Section 2210(g) (relating to definitions) is amended by adding at the end thereof the following new paragraph: "(5) TAX IMPOSED BY SECTION 2001.—The term 'tax imposed by section 2001' includes any interest, penalty, addition to tax, or additional amount relating to any tax imposed by section 2001." (4) Section 2210(c)(1) is amended by inserting "any authorized officer o f before "the cooperative" in the matter following subparagraph (B). (5) Section 2210(d) (relating to guarantee of payments) is amended— (A) by inserting "and any eligible worker-owned coopera'" r tive" before "shall guarantee" in the matter following paragraph (2), •>' (B) by striking out "such plan" and inserting in lieu thereof "such plan or cooperative, respectively,", and (C) by striking out ", including any interest payable under section 6601 which is attributable to such amount". (6) Section 2210(g)(3) is amended by striking out "section 1041(b)(2)" and inserting in lieu thereof "section 1042(c)(2)". (e) AMENDMENTS RELATED TO SECTION 545.— (1) Section 4978(a)(1) (relating to tax on disposition of securities to which section 1042 applies before close of minimum

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Page:United States Statutes at Large Volume 100 Part 3.djvu/1073

 PUBLIC LAW 99-514—OCT. 22, 1986

100 STAT. 2881

holding period) is amended by striking out "then" and inserting in lieu thereof "than". (2) Section 497803)(1) is amended by striking out "paragraph (1)" and inserting in lieu thereof "subsection (a)". (3) Section 4978(c) is amended by striking out "section 1042(a)(2)(B)" and inserting in lieu thereof "section 1042(b)(3)". (4) Section 4978(d)(1)(C) is amended by striking out "section 72(m)(5)" and inserting in lieu thereof "section 72(m)(7)". (5) Section 4978(e)(2) is amended by striking out "section I 1042(b)(1)" and inserting in lieu thereof "section 1042(c)(1)". (6) Section 4978(e)(3) is amended by striking out "section 1042(b)(l)" and inserting in lieu thereof "section 1042(c)(2)". (7) Section 4978(d) (relating to dispositions to which section does not apply) is amended by adding at the end thereof the following new paragraph: "(3) LIQUIDATION OF CORPORATION INTO COOPERATIVE.—In the

' liquidation of the corporation issuing qualified securities into " the eligible worker-owned cooperative in a transaction which meets the requirements of section 332 (determined by substituting '100 percent' for '80 percent' each place it appears in section 332(b)(1)), such exchange shall not be treated as a disposition for ^ purposes of this section." (f) OTHER AMENDMENTS.—
 * case of any exchange of qualified securities pursuant to the

(1)(A) Section 409(e) (relating to voting rights) is amended by adding at the end thereof the following new paragraph: "(5) 1 VOTE PER PARTICIPANT.—A plan meets the requirements of paragraph (2) or (3) with respect to an issue if— "(A) the plan permits each participant 1 vote with respect ^, to such issue, and "(B) the trustee votes the shares held by the plan in the proportion determined after application of subparagraph (A)." (B) Paragraph (3) of section 409(e) (relating to requirement for other employers) is amended by striking out all that follows i "with respect to" and inserting in lieu thereof the following: "any corporate matter which involves the voting of such shares I with respect to the approval or disapproval of any corporate I merger or consolidation, recapitalization, reclassification, liquidation, dissolution, sale of substantially all assets of a trade or I business, or such similar transaction as the Secretary may prescribe in regulations." i (C) Paragraphs (2) and (3) of section 409(e) are amended by striking out "employer securities" and inserting in lieu thereof "securities of the employer". (D) Paragraphs (2) and (3) of section 409(e) are amended by f inserting "or beneficiary" after "participant" each place it appears. (2) Section 402 is amended by adding at the end thereof the following new section: "(g) EFFECT OF DISPOSITION OF STOCK BY PLAN ON N E T UNREAUZED APPRECIATION.—

"(1) IN GENERAL.—For purposes of subsection (a)(1) or (e)(4)(J), in the case of any transaction to which this subsection applies, the determination of net unrealized appreciation shall be made without regard to such transaction.

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Page:United States Statutes at Large Volume 100 Part 3.djvu/1074

 100 STAT. 2882

PUBLIC LAW 99-514—OCT. 22, 1986 M

"

"(2) TRANSACTION TO WHICH SUBSECTION APPLIES.—This subsec-

tion shall apply to any transaction in which— ' "(A) the plan trustee exchanges the plan's securities of the employer corporation for other such securities, or no^ s. "(B) the plan trustee disposes of securities of the employer corporation and uses the proceeds of such disposin^ g tion to acquire securities of the employer corporation within 90 days (or such longer period as the Secretary may ^ prescribe), except that this subparagraph shall not apply to any employee with respect to whom a distribution of m.' money was made during the period after such disposition and before such acquisition." (3)(A) Section 4975(e)(7) is amended by inserting ", section 409(o), and, if applicable, section 409(n)" after "section 409(h)". (B) Section 1042(b)(3)(B) is amended by inserting "and 4979A" M after "section 4978(a)". (C) Section 409(h)(2) is amended by striking out "in cash" in the second sentence thereof and inserting in lieu thereof "in cash, except that such plan may distribute employer securities subject to a requirement that such securities may be resold to the employer under terms which meet the requirements of section 409(o)". (4)(A) The amendments made by paragraph (I)(A) and (3) shall take effect on the date of the enactment of this Act. (B) The amendments made by subparagraphs (B), (C), and (D) of paragraph (1) shall apply after December 31, 1986, to stock v|, acquired after December 31, 1979. (C) The amendments made by paragraph (2) shall apply to any transaction occurring after December 31, 1984, except that in the case of any transaction occurring before the date of the enactment of this Act, the period under which proceeds are required to be invested under section 402(g) of the Internal Revenue Code of 1954 (as added by paragraph (2)) shall not end before the earlier of 1 year after the date of such transaction or 180 days after the date of the enactment of this Act. SEC. 1855. AMENDMENTS RELATED TO MISCELLANEOUS EMPLOYEE BENEFIT PROVISIONS. (a) AMENDMENT RELATED TO SECTION 555 OF THE ACT.—Subsection

(c) of section 555 of the Tax Reform Act of 1984 (relating to technical amendments to the incentive stock option provisions) is amended— (1) by striking out "subsection (a) in paragraph (1) and inserting in lieu thereof "subsection (a)(D", (2) by striking out "subsection (b)" in paragraph (2) and inserting in lieu thereof "subsection (a)(2)",, (3) by striking out "after March 20, 1984," in paragraph (2), ^''' and (4) by striking out "subsection (c)" in paragraph (3) and inserting in lieu thereof "subsection (b)". (b) AMENDMENT RELATED TO SECTION 556 OF THE ACT.—Section 556

of the Tax Reform Act of 1984 is amended by striking out so much of such section as precedes paragraph (1) thereof and inserting in lieu thereof the following: "SEC. 556. TIME FOR MAKING CERTAIN SECTION 83(b) ELECTIONS.

"In the case of any transfer of property in connection with the performance of services on or before November 18, 1982, the election

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Page:United States Statutes at Large Volume 100 Part 3.djvu/1075

 PUBLIC LAW 99-514—OCT. 22, 1986

100 STAT. 2883

permitted by section 83(b) of the Internal Revenue Code of 1954 may be made, notwithstanding paragraph (2) of such section 83(b), with the income tax return for any taxable year ending after July 18, 1984, and beginning before the date of the enactment of the Tax Reform Act of 1986 if—". CHAPTER 6—AMENDMENTS RELATED TO TITLE VI OF THE ACT SEC. 1861. AMENDMENTS RELATED TO SECTION 611 OF THE ACT. (a) EXTENSION OF TIME FOR SUBMITTING POLICY STATEMENT.—

Paragraph (5) of section 103A(j) is amended by adding at the end thereof the following new subparagraph: "(C) EXTENSION OF TIME.—The Secretary may grant an extension of time for the publishing of a report described in subparagraph (B) or the submittal of such report to the -^ Secretary if there is reasonable cause for the failure to publish or submit such report in a timely fashion." (b) DEFINITION OF QUALIFIED VETERAN.—Subparagraph (B) of section 103A(o)(4) (defining qualified veteran) is amended by striking out "January 1, 1985" and inserting in lieu thereof "January 31, 1985". (c) CLARIFICATION OF GOOD FAITH EFFORT PROVISIONS.—

(1) Subparagraph (B) of section 103A(c)(2) (defining qualified mortgage issue) is amended by striking out "and (j)" and inserting in lieu thereof "and (j)(1) and (2)". (2) Subparagraph (C) of section 103A(c)(2) is amended by striking out "and (i)" and inserting in lieu thereof "(i), and (j)(3), (4), and (5)". SEC. 1862. AMENDMENT RELATED TO SECTION 612 OF THE ACT. (a) REQUIREMENTS FOR QUALIFIED MORTGAGE CREDIT CERTIFICATE

PROGRAM.—Subclause (V) of section 25(c)(2)(A)(iii) (defining qualified mortgage credit certificate program) is amended by striking out "paragraph (1) of subsection (j)" and inserting in lieu thereof "subsection (j), other than paragraph (2) thereof. (b) GOOD FAITH EFFORT RULES MADE APPLICABLE.—Subparagraph

(A) of section 25(c)(2) (defining qualified mortgage credit certificate program) is amended by adding at the end thereof the following new sentence: "Under regulations, rules similar to the rules of subparagraphs (B) and (C) of section 103A(c)(2) shall apply to the requirements of this subparagraph." (c) CARRYFORWARD OF EXCESS CREDIT.—Subparagraph (B) of section 25(e)(1) (relating to carryforward of unused credit) is amended to read as follows: "(B) LIMITATION.—The amount of the unused credit which may be taken into account under subparagraph (A) for any taxable year shall not exceed the amount (if any) by which the applicable tax limit for such taxable year exceeds the sum of— f "(i) the credit allowable under subsection (a) for such taxable year determined without regard to this paragraph, and "(ii) the amounts which, by reason of this paragraph, are carried to such taxable year and are attributable to taxable years before the unused credit year."

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Page:United States Statutes at Large Volume 100 Part 3.djvu/1076

 100 STAT. 2884

PUBLIC LAW 99-514—OCT. 22, 1986 (d) CLERICAL AMENDMENTS.—

^ *

.'

(1) Subparagraph (B) of section 25(a)(1) is amended by striking out "paid or incurred" and inserting in lieu thereof "paid or ^^ accrued", (2) Subchapter B of chapter 68 is amended by redesignating , the section 6708 which relates to penalties with respect to ' mortgage credit certificates as section 6709. (3) The table of sections for subchapter B of chapter 68 is amended by striking out the item relating to the section 6708 which relates to penalties with respect to mortgage credit certificates and inserting in lieu thereof the following: ' •

' Sec. 6709. Penalties with respect to mortgage credit certificates.

.,.

SEC. 1863. AMENDMENT RELATED TO SECTION 613 OF THE ACT.

(a) GENERAL RULE.—Section 613 of the Tax Reform Act of 1984 (relating to authority to borrow from Federal Financing Bank) is amended to read as follows: "SEC. 613. ADVANCE REFUNDING OF CERTAIN VETERANS' MORTGAGE BONDS PERMITTED.

"(a) IN GENERAL.—Notwithstanding section 103A(n) of the Internal Revenue Code of 1954, an issuer of applicable mortgage bonds may issue advance refunding bonds with respect to such applicable mortgage bonds. "(h)

LIMITATION

ON

AMOUNT

OF

ADVANCED REFUNDING.—

"(1) IN GENERAL.—The amount of advanced refunding bonds which may be issued under subsection (a) shall not exceed the 16SS6F or

"(A) $300,000,000, or "(B) the excess of— "(i) the projected aggregate payments of principal on f, *' *' the applicable mortgage bonds during the 15-fiscal year period beginning with fiscal year 1984, over "(ii) the projected aggregate pa3mients during such luty* u period of principal on mortgages financed by the applicable mortgage bonds. "(2) ASSUMPTIONS USED IN MAKING PROJECTION.—The computation under paragraph (I)(B) shall be made by using the following percentages of the prepayment experience of the Federal Housing Administration in the State or region in which the issuer of the advance refunding bonds is located: "Fiscal Year: 1984 1985 1986 1987 and thereafter

Percentage: 15 20 25 30.

"(c) DEFINITIONS.—For purposes of this section.— "(1) APPLICABLE MORTGAGE BONDS.—The term 'applicable mortgage bonds' means any qualified veterans' mortgage bonds issued as part of an issue— "(A) which was outstanding on December 31, 1981, "(B) with respect to which the excess determined under subsection OJXIXB) exceeds 12 percent of the aggregate principal amount of such bonds outstanding on July 1, 1983, ' "(C) with respect to which the amount of the average -fannual prepayments during fiscal years 1981, 1982, and 1983 was less than 2 percent of the average of the loan

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Page:United States Statutes at Large Volume 100 Part 3.djvu/1077

 PUBLIC LAW 99-514—OCT. 22, 1986

100 STAT. 2885

r

balances as of the beginning of each of such fiscal years, and "(D) which, for fiscal year 1983, had a prepayment experience rate that did not exceed 20 percent of the prepayment experience rate of the Federal Housing Administration in the State or region in which the issuer is located. "(2) QUALIFIED VETERANS' MORTGAGE BONDS.—The term 'qualified veterans' mortgage bonds' has the meaning given to such term by section 103A(c)(3) of the Internal Revenue Code of 1954. "(3) FISCAL YEAR.—The term 'fiscal year' means the fiscal year of the State." (b) EFFECTIVE DATE.—The amendment made by subsection (a) shall take effect on the date of the enactment of this Act; except that such amendment shall not apply with respect to any loan made by the Federal Financing Bank to the State of Oregon pursuant to a credit agreement entered into on April 16, 1985 (as such agreement was in effect on such date). The Secretary of the Treasury shall guarantee any loan made by the Federal Financing Bank to the State of Oregon pursuant to such agreement. SEC. 1864. AMENDMENTS RELATED TO SECTION 621 OF THE ACT. (a) SPECIAL RULE FOR FACILITIES LOCATED OUTSIDE THE STATE.—

(1) IN GENERAL.—Subsection (n) of section 103 (relating to limitation on aggregate amount of private activity bonds issued during any calendar year) is amended by adding at the end thereof the following new paragraph: "(13) FACILITY MUST BE LOCATED WITHIN STATE.—

"(A) IN GENERAL.—Except as provided in subparagraph (B), no portion of the State ceiling applicable to any State for any calendar year may be used with respect to financing for a facility located outside such State. "(B) EXCEPTION FOR CERTAIN FACILITIES WHERE STATE WILL

GET PROPORTIONATE SHARE OF BENEFITS.—Subparagraph (A) shall not apply to any issue described in subparagraph (E), (G), or (H) of subsection (b)(4) if the issuer establishes that the State's share of the use of the facility (or its output) will equal or exceed the State's share of the private activity bonds issued to finance the facility."

^ ' ,

(2) EFFECTIVE DATE.—

(A) Except as provided in subparagraph (B), the amendment made by paragraph (1) shall apply to obligations issued after the date of the enactment of this Act in taxable years ending after such date. (B) At the election of the issuer (made at such time and in such manner as the Secretary of the Treasury or his delegate shall prescribe), the amendment made by paragraph (1) shall apply to any obligation issued on or before the date of the enactment of this Act. (b) CLARIFICATION OF AUTHORITY FOR DIFFERENT ALLOCATION.—

Subparagraphs (A) and (B)(i) of section 103(n)(6) (relating to State may provide for different allocation) are each amended by striking out "governmental units" and inserting in lieu thereof "governmental units or other authorities". (c) CLARIFICATION OF EXCEPTION FOR CERTAIN FACILITIES.—Clause

(i) of section 103(n)(7)(C) (relating to exception for certain facilities described in section 103(b)(4)(C) or (D)) is amended by striking out

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PUBLIC LAW 99-514—OCT. 22, 1986

"the property described in such subparagraph" and inserting in lieu thereof "all of the property to be financed by the obligation". (d) INFORMATION REPORTING ON ALLOCATION OF PRIVATE ACTIVITY

BOND LIMIT.—Paragraph (2) of section 103(1) (relating to information reporting requirements for certain bonds) is amended by striking out "and" at the end of subparagraph (D), by striking out the period at the end of subparagraph (E) and inserting in lieu thereof ", and", and by adding at the end thereof the following new subparagraph: "(F) if such obligation is a private activity bond (as defined in subsection (n)(7)), such information as the Secretary may require for purposes of determining whether the requirements of subsection (n) are met with respect to such obligation." (e) CLARIFICATION AUTHORITY.—

OF

CARRYFORWARD

OF

UNUSED

BOND

(1) Subparagraph (B) of section 103(n)(10) (relating to election must specify project) is amended— (A) by striking out "specify the project" in clause (i) and inserting in lieu thereof "identify (with reasonable specificity) the project", and (B) by striking out "SPECIFY PROJECT" in the subparagraph heading and insert in lieu thereof "IDENTIFY PROJECT". (2) Subparagraph (D) of section 103(n)(10) is amended by striking out "any specification" and inserting in lieu thereof "any identification or specification". SEC. 1865. AMENDMENT RELATED TO SECTION 622 OF THE ACT.

(a) CLERICAL AMENDMENT.—Subparagraph (A) of section 103(h)(5) (relating to certain obligations subsidized under energy program) is amended by striking out "the United States,". (b) TREATMENT OF CERTAIN GUARANTEES BY FARMERS HOME

ADMINISTRATION.—An obligation shall not be treated as federally guaranteed for purposes of section 103(h) of the Internal Revenue Code of 1954 by reason of a guarantee by the Farmers Home Administration if— (1) such guarantee is pursuant to a commitment made by the Farmers Home Administration before July 1, 1984, and (2) such obligation is issued to finance a convention center project in Carbondale, Illinois. (c) TREATMENT OF CERTAIN OBLIGATIONS USED TO FINANCE SOUD WASTE DISPOSAL FACILITY.—

(1) IN GENERAL.—Any obligation which is part of an issue a substantial portion of the proceeds of which is to be used to finance a solid waste disposal facility described in paragraph (2) shall not, for purposes of section 103(h) of the Internal Revenue Code of 1954, be treated as an obligation which is federally guaranteed by reason of the sale of fuel, steam, electricity, or other forms of usable energy to the Federal Government or any agency or instrumentality thereof. (2) SOLID WASTE DISPOSAL FACILITY.—A solid waste disposal facility is described in this paragraph if such facility is described in section 1030t))(4)(E) of such Code and— (A)if(i) a public State authority created pursuant to State Bii legislation which took effect on July 1, 1980, took formal action before October 19, 1983, to commit development funds for such facility.

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100 STAT. 2887

(ii) such authority issues obligations for such facility before January 1, 1988, and (iii) expenditures have been made for the development of such facility before October 19, 1983, (B) i f (i) such facility is operated by the South Eastern Public Service Authority of Virginia, and (ii) on December 20, 1984, the Internal Revenue Service issued a ruling concluding that a portion of the obligations with respect to such facility would not be treated as federally guaranteed under section 103(h) of such Code by reason of the transitional rule contained in section 631(c)(3)(A)(i) of the Tax Reform Act of 1984, ,::-

- ^^

•;v.

(C)i^

•

(i) a political subdivision of a State took formal action on April 1, 1980, to commit development funds for such facility, (ii) such facility has a contract to sell steam to a naval base, (iii) such political subdivision issues obligations for such facility before January 1, 1988, and (iv) expenditures have been made for the development of such facility before October 19, 1983, or (D) i f (i) such facility is a thermal transfer facility, (ii) is to be built and operated by the Elk Regional Resource Authority, and (iii) is to be on land leased from the United States Air Force at Arnold Engineering Development Center near Tullahoma, Tennessee. (3) LIMITATIONS.—

^

(A) In the case of a solid waste disposal facility described in paragraph (2)(A), the aggregate face amount of obligations to which paragraph (1) applies shall not exceed $65,000,000. (B) In the case of a solid waste disposal facility described in paragraph (2)(B), the aggregate face amount of obligations to which paragraph (1) applies shall not exceed $20,000,000. Such amount shall be in addition to the amount permitted under the Internal Revenue Service ruling referred to in paragraph (2)(B)(ii). (C) In the case of a solid waste disposal facility described in paragraph (2)(C), the aggregate face amount of obligations to which paragraph (1) applies shall not exceed $75,000,000. (D) In the case of a solid waste disposal facility described in paragraph (2)(D), the aggregate face amount of obligations to which paragraph (1) applies shall not exceed $25,000,000.

SEC. 1866. TRANSITIONAL RULE FOR LIMIT ON SMALL ISSUE EXCEPTION.

The amendment made by section 623 of the Tax Reform Act of 1984 shall not apply to any obligation issued to refund another taxexempt IDB to which the amendment made by such section 623 did not apply if— (1) the refunding obligation has a maturity date not later than the maturity date of the refunded obligation,

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 100 STAT. 2888

PUBLIC LAW 99-514—OCT. 22, 1986

'/tj;

(2) the amount of the refunding obligation does not exceed the amount of the refunded obligation, (3) the interest rate on the refunding obligation is lower than the interest rate on the refunded issue, and (4) the proceeds of the refunding obligation are used to redeem the refunded obligation not later than 30 days after the date of the issuance of the refunding obligation. For purposes of the preceding sentence, the term "tax-exempt IDB" means any industrial development bond (as defined in section 103(b) of the Internal Revenue Code of 1954) the interest on which is exempt from tax under section 103(a) of such Code. SEC. 1867. AMENDMENTS RELATED TO SECTION 624 OF THE ACT.

(a) Paragraph (2) of section 624(c) of the Tax Reform Act of 1984 (relating to effective date for limitations on arbitrage on nonpurpose obligations) is amended by striking out "by the Essex C!ounty Port Authority of New York and New Jersey as part of an issue approved" and inserting in lieu thereof "for the Essex (Dounty New Jersey Resource Recovery Project authorized by the Port Authority of New York and New Jersey on November 10, 1983, as part of an agreement approved". (b) The amendment made by section 624 of the Tax Reform Act of 1984 shall not apply to obligations issued with respect to the Downtown Muskogee Revitalization Project for which a UDAG grant was preliminarily approved on May 5, 1981, if— (1) such obligation is issued before Jsmuary 1, 1986, or (2) such obligation is issued after such date to provide additional financing for such project except that the aggregate amount of obligations to which this subsection applies shall not exceed $10,000,000. SEC. 1868. AMENDMENT RELATED TO SECTION 625 OF THE ACT.

Subparagraph (C) of section 625(a)(3) of the Tax Reform Act of 1984 (relating to arbitrage regulations) is amended by striking out "obligation issued exclusively" and inserting in lieu thereof "obligation (or series of refunding obligations) issued exclusively". SEC. 1869. AMENDMENTS RELATED TO SECTION 626 OF THE ACT.

(a) (DHANGE IN DEFINED TERM.—Subsection (o) of section 103 (relat-

ing to denial of tax exemption for consumer loan bonds) is amended— (1) by striking out "consumer loan bond" each place it appears and inserting in lieu thereof "private loan bond", (2) by striking out "(CONSUMER LOAN BONDS" in the subsection heading and inserting in lieu thereof "PRIVATE LOAN BONDS", and (3) by striking out "CONSUMER LOAN BONDS" in the heading for paragraph (2) and inserting in lieu thereof "PRIVATE LOAN BONDS". (b) CILERICAL AMENDMENTS.—

" ^

(1) Clause (ii) of section 103(o)(2)(C) (relating to excluded loans) is amended by striking out "subsection (c)(6)(G)(i)" and inserting in lieu thereof "subsection (c)(6)(H)(i)". (2) Section 103 is amended by redesignating the subsection vo) (relating to cross references) as subsection (p). (c) T ^ N S I T I O N A L RULES.—

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Page:United States Statutes at Large Volume 100 Part 3.djvu/1081

 PUBLIC LAW 99-514—OCT. 22, 1986

100 STAT. 2889

(1) TREATMENT OF CERTAIN OBLIGATIONS ISSUED BY THE CITY OF

BALTIMORE.—Obligations issued by the city of Baltimore, Maryland, after June 30, 1985, shall not be treated as private loan bonds for purposes of section 103(o) of the Internal Revenue Code of 1954 (or as private activity bonds for purposes of section 103 and part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986, as amended by title XIII of this Act) by reason of the use of a portion of the proceeds of such obligations to finance or refinance temporary advances made by the city of Baltimore in connection with loans to persons who are not exempt persons (within the meaning of section 1030t))(3) of such Code) if— (A) such obligations are not industrial development bonds (within the meaning of section 103(b)(2) of the Internal Revenue Code of 1954), (B) the portion of the proceeds of such obligations so used is attributable to debt approved by voter referendum on or before November 2, 1982, -. (C) the loans to such nonexempt persons were approved by the Board of Estimates of the city of Baltimore on or before October 19, 1983, and (D) the aggregate amount of such temporary advances financed or refinanced by such obligations does not exceed $27,000,000. (2) WHITE PINE POWER PROJECT.—The amendment made by section 626(a) of the Tax Reform Act of 1984 shall not apply to any obligation issued during 1984 to provide financing for the White Pine Power Project in Nevada. (3) TAX INCREMENT BONDS.—The amendment made by section 626(a) of the Tax Reform Act of 1984 shall not apply to any tax increment financing obligation issued before August 16, 1986, if— (A) substantially all of the proceeds of the issue are to be used to finance— (i) sewer, street, lighting, or other governmental improvements to real property, (ii) the acquisition of any interest in real property ., pursuant to the exercise of eminent domain, the preparation of such property for new use, or the trans,,, fer of such interest to a private developer, or (iii) payments of reasonable relocation costs of prior users of such real property, (B) all of the activities described in subparagraph (A) are pursuant to a redevelopment plan adopted by the issuing authority before the issuance of such issue, (C) repayment of such issue is secured exclusively by pledges of that portion of any increase in real property tax revenues (or their equivalent) attributable to the redevelopment resulting from the issue, and (D) none of the property described in subparagraph (A) is ., subject to a real property or other tax based on a rate or valuation method which differs from the rate and valuation method applicable to any other similar property located within the jurisdiction of the issuing authority. (4) EASTERN MAINE ELECTRIC COOPERATIVE.—The amendment

made by section 626(a) of the Tax Reform Act of 1984 shall not

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Page:United States Statutes at Large Volume 100 Part 3.djvu/1082

 100 STAT. 2890

PUBLIC LAW 99-514—OCT. 22, 1986

-io apply to obligations issued by Meissachusetts Municipal Whole-V- sale Electric Company Project No. 6 if— (A) such obligation is issued before January 1, 1986, (B) such obligation is issued after such date to refund a prior obligation for such project, except that the aggregate amount of obligations to which this subparagraph applies ^cf V shall not exceed $100,000,000, or ftrt (C) such obligation is issued after such date to provide additional financing for such project except that the aggregate amount of obligations to which this subparagraph applies shall not exceed $45,000,000. Subparagraph (B) shall not apply to any obligation issued for abr the advance refunding of any obligation. IBH

(5) CLARIFICATION OF TRANSITIONAL RULE FOR CERTAIN STUDENT

LOAN PROGRAMS.—Subparagraph (A) of section 6260t)X2) of the • 9f Tax Reform Act of 1984 is amended by striking out "$11 million" in the table contained in such subparagraph and inserting in lieu thereof "$70 million". IJ&Y (6) TREATMENT OF OBLIGATIONS TO FINANCE ST. JOHNS RIVER to POWER PARK.—

•!'!. 'irj.M -•• i o. ' -i.' . ^ 3, ' -• ^n !;. >r'.3iw' ^ h'iv, ^

(A) IN GENERAL.—The amendment made by section 626(a) of the Tax Reform Act of 1984 shall not apply to any obligation issued to finance the project described in subparagraph (B) if^ (i) such obligation is issued before September 27, 1985, (ii) such obligation is issued after such date to refund a prior tax exemption obligation for such project, the amount of such obligation does not exceed the outstanding amount of the refunded obligation, and such prior tax exempt obligation is retired not later than the date 30 days after the issuance of the refund«. ing obligation, or (iii) such obligation is issued after such date to prot vide additional financing for such project except that the aggregate sunount of obligations to which this clause applies shall not exceed $150,000,000. Clause (ii) shall not apply to any obligation issued for the advance refunding of any obligation. (B) DESCRIPTION OF PROJECT.—The project described in

l o i f - this subparagraph in the St. Johns River Power Park system in Florida which was authorized by legislation enacted by the Florida Legislature in February of 1982. SEC. 1870. AMENDMENT RELATED TO SECTION 627 OF THE ACT.

Subparagraph (A) of section 103(b)(16) (relating to limitation on use for land acquisition) is amended by striking out "clause (i)" in the last sentence and inserting in lieu thereof "clause (ii)". SEC. 1871. AMENDMENTS RELATED TO SECTION 628 OF THE ACT. (a) CERTAIN RESTRICTIONS APPLY TO EXEMPTIONS NOT (DONTAINED IN INTERNAL REVENUE CODE OF 1954.—

(1) IN GENERAL.—Paragraph (1) of section 103(m) (relating to obligations exempt other than under this title) is amended by striking out "(k), (1), and (n)" and inserting in lieu thereof "(j), (k),(l),(n),and(o)".

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Page:United States Statutes at Large Volume 100 Part 3.djvu/1083

 PUBLIC LAW 99-514-OCT. 22, 1986

100 STAT. 2891

"

(2) EFFECTIVE DATE.—The amendment made by paragraph (1) shall apply to obligations issued after March 28, 1985, in taxable years ending after such date.

(b) CONFORMING AMENDMENTS TO REPEAL OF ADVANCE REFUNDING OF QUALIFIED PUBLIC FACILITIES.—Paragraphs (13), (14XA), and

(17XA) of section 103(b) are each amended by striking out "(6), and (7)" and inserting in lieu thereof "and (6)". SEC. 1872. AMENDMENTS RELATED TO SECTION 631 OF THE ACT. (a) CLARIFICATION OF GENERAL EFFECTIVE DATE.—

(1) Paragraph (1) of section 631(c) of the Tax Reform Act of 1984 (relating to effective date for other provisions relating to t tax-exempt bonds) is amended by striking out "made by this subtitle" and inserting in lieu thereof "made by sections 622, 8 623, 627, and 628 (c), (d), and (e) (and the provisions of sections 625(c), 628(0, and 629(b))". (2)(A) Subparagraph (A) of section 631(c)(3) of the Tax Reform t Act of 1984 is amended by striking out "amendments made by this subtitle (other than section 621)" and inserting in lieu ^ thereof "amendments (and provisions) referred to in paragraph t (1)". (B) Effective with respect to obligations issued after March 28, 1985, subparagraph (A) of section 631(c)(3) of the Tax Reform • Act of 1984 is amended by striking out clauses (i) and (ii) and inserting in lieu thereof the following: "(i) the original use of which commences with the taxpayer and the construction, reconstruction, or •  rehabilitation of which began before October 19, 1983, and was completed on or after such date, - ' ' "(ii) the original use of which commences with the taxpayer and with respect to which a binding contract to incur significant expenditures for construction, ^ ' reconstruction, or rehabilitation was entered into before October 19, 1983, and some of such expenditures V are incurred on or after such date, or "(iii) acquired after October 19, 1983, pursuant to a <s«ifvt5 binding contract entered into on or before such date." (3) Paragraph (3) of section 631(c) of the Tsix Reform Act of ' 1984 is amended by adding at the end thereof the following new subparagraph: ^ "(C) EXCEPTION.—Subparagraph (A) shall not apply with respect to the amendment made by section 628(e) and the • provisions of sections 628(f) and 629(b)." (4) Subparagraph (B) of section 631(c)(3) of the Tax Reform Act of 1984 is amended by striking out "subsection (b)(2)(A)" and inserting in lieu thereof "subsection (b)(2)". (b) SPECIAL RULE FOR HEALTH CLUB FACILITIES.—Subsection (c) of

section 631 of the Tax Reform Act of 1984 is amended by adding at the end thereof the following new paragraph: "(5) SPECIAL RULE FOR HEALTH CLUB FACILITIES.—In the case of any health club facility, with respect to the amendment made by section 627(c)— "(A) paragraph (1) shall be applied by substituting ^J^t 'April 12, 1984' for 'December 31, 1983', and XB) paragraph (3) shall be applied by substituting -OMfl

'April 13, 1984^ for 'October

appears."

19, 1983' each

place

it

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Page:United States Statutes at Large Volume 100 Part 3.djvu/1084

 100 STAT. 2892

PUBLIC LAW 99-514—OCT. 22, 1986 (c) TREATMENT OF CERTAIN SOUD WASTE DISPOSAL FACILITIES.—-

(1) IN GENERAL.—Subsection (d) of section 631 of the Tax Reform Act of 1984 (relating to provisions of subtitle not to f>ii,; thereof the following: i^,. "(5) Any solid waste disposal facility described in section 103(b)(4)(E) of the Internal Revenue Code of 1954 if— "(A) a city government, by resolutions adopted on April 10, 1980, and December 27, 1982, took formal action to authorize the submission of a proposal for a feasibility )f\:-./ study for such facility and to authorize the presentation to - f •• the Department of the Army (U.S. Army Missile Command) of a proposed agreement to jointly pursue construction and operation of such facility, "(B) such city government (or a public authority on its behalf) issues obligations for such facility before January 1, . 1988, and !. "(C) expenditures have been made for the development of ,};; such facility before October 19, 1983. Notwithstanding the ji ft. • foregoing provisions of this subsection, the amendments made by section 624 (relating to arbitrage) shall apply to obligations issued to finance property described in parar graph (5)." (2) CONFORMING AMENDMENT.—Paragraph (1) of section 632(a) of the Tax Reform Act of 1984 is hereby repealed. SEC. 1873. AMENDMENTS RELATED TO SECTION 632 OF THE ACT.
 * 4^1 apply to certain property) is amended by adding at the end

(a) CLERICAL AMENDMENT.—Subsection (a) of section 632 of the Tax Reform Act of 1984 is amended by striking out "section 623" in the matter preceding paragraph (1) thereof and inserting in lieu thereof "section 624". (b) CERTAIN OBLIGATIONS NOT TREATED AS PRIVATE LOAN BONDS.—

Subsection (d) of section 632 of the Tax Reform Act of 1984 is amended by adding at the end thereof the following new sentence: "The amendment made by section 626 shall not apply to any obligations described in the preceding sentence." (c) TREATMENT OF CERTAIN OBLIGATIONS TO FINANCE HYDROELECTRIC GENERATING FACILITY.—If—

(1) obligations are to be issued in an amount not to exceed $9,500,000 to finance the construction of an approximately 4 megawatt hydroelectric generating facility owned and operated by the city of Hastings, Minnesota, and located on United States Army Corps of Engineers lock and dam No. 2 or are issued to refund any of such obligations, (2) substantially all of the electrical power generated by such facility is to be sold to a nongovernmental person pursuant to a long-term power sales agreement in accordance with the Public Utilities Regulatory Policies Act of 1978, and (3) the initially issued obligations are issued on or before December 31, 1986, and any of such refunding obligations are issued on or before December 31, 1996, then the person referred to in paragraph (2) shall not be treated as the principal user of such facilities by reason of such sales for purposes of subparagraphs (D) and (E) of section 103(b)(6) of the Internal Revenue Code of 1954. (d) TREATMENT OF CERTAIN OBLIGATIONS TO FINANCE HYDROELECTRIC GENERATING FACILITY.—If^

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Page:United States Statutes at Large Volume 100 Part 3.djvu/1085

 PUBLIC LAW 99-514—OCT. 22, 1986

100 STAT. 2893

(1) obligations are to be issued in an amount not to exceed $6,500,000 to finance the construction of an approximately 2.6 megawatt hydroelectric generating facility located on the Schroon River in Warren County, New York, near Warrensburg, New York, (2) such facility has a Federal Energy Regulatory Commission project number 8719-0000 under a preliminary permit issued on November 8, 1985, and 3 (3) substantially all of the electrical power generated by such facility is to be sold to a nongovernmental person pursuant to a long-term power sales agreement in accordance with the Public Utilities Regulatory Policies Act of 1978, then the person referred to in paragraph (3) shall not be treated as the principal user of such facilities by reason of such sales for purposes of subparagraphs (D) and (E) of section 103(b)(6) of the Internal Revenue Code of 1954. (e) TREATMENT OF CERTAIN OBLIGATIONS TO FINANCE HYDROELECTRIC GENERATING FACILITIES.—If—

(1) obligations in the amount of $6,000,000 issued on November 30, 1984, to finance the construction of an approximately 1.0 megawatt hydroelectric generating facility and an approxi' mately.6 megawatt hydroelectric generating facility, both of which are located near Los Banos, California, (2) such facilities have Federal Energy Regulatory Commission project numbers 5129-001 and 5128-001, respectively, under license exemptions issued on December 6, 1983, and (3) substantially all of the electrical power generated by such facility is to be sold to a nongovernmental person pursuant to a ' long-term power sales agreement in accordance with the Public Utilities Regulatory Policies Act of 1978, then the person referred to in paragraph (3) shall not be treated as the principal user of such facilities by reason of such sales for purposes of subparagraphs (D) and (E) of section 103(b)(6) of the Internal Revenue Code of 1954. (f) TREATMENT OF CERTAIN OBLIGATIONS TO FINANCE METHANE RECOVERY ELECTRIC GENERATING FACILITIES.—If—

(1) obligations are to be issued in an amount not to exceed ^ $3,000,000 to finance the construction of a methane recovery ' electric generating facility located on a sanitary landfill near I Richmond, California, and J (2) substantially all of the electrical power generated by such J facility is to be sold to a nongovernmental person pursuant to a long-term power sales agreement entered into on April 16, 1985, in accordance with the Public Utilities Regulatory Policies Act of 1978, then the person referred to in paragraph (2) shall not be treated as the principal user of such facilities by reason of such sales for purposes of subparagraphs (D) and (E) of section 103(b)(6) of the Internal Revenue Code of 1954. (g) TREATMENT OF CERTAIN OBLIGATIONS TO FINANCE HYDROELECTRIC GENERATING FACILITIES.—If—

'

(1) obligations are to be issued in an amount not to exceed $6,000,000 to finance the construction of a hydroelectric generating facility having a Federal Energy Regulatory Commission license number 3189, and located near Placerville, California,

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Page:United States Statutes at Large Volume 100 Part 3.djvu/1086

 100 STAT. 2894

PUBLIC LAW 99-514—OCT. 22, 1986

(2) an inducement resolution for such project was adopted in March 1985, and (3) substantially all of the electrical power generated by such facility is to be sold to a nongovernmental person pursuant to a long-term power sales agreement in accordance with the Public Utilities Regulatory Policies Act of 1978, then the person referred to in paragraph (3) shall not be treated as the principal user of such facilities by reason of such sales for purposes of subparagraphs (D) and (E) of section 103(b)(6) of the Internal Revenue Code of 1954. CHAPTER 7—MISCELLANEOUS PROVISIONS SEC. 1875. AMENDMENTS RELATED TO TITLE VII OF THE ACT.

(a) AMENDMENT RELATED TO SECTION 711(a).—Subsection (c) of section 58 (relating to estates and trusts) is amended by striking out "of tax preference" and inserting in lieu thereof "of tax preference (and any itemized deductions)". (b) AMENDMENT RELATED TO SECTION 712(1).—Paragraph (1) of section 304(a) (relating to treatment of certain stock purchases) is amended by striking out "In any such case" and inserting in lieu thereof "To the extent that such distribution is treated as a distribution to which section 301 applies". (c) AMENDMENTS RELATED TO SECTION 713.—

• ' r?i; ' ^ •'

''-

.-'-M t«i

dXA) Section 402(a)(5)(F)(ii) (relating to special rules for key employees) is amended to read as follows: "(ii) 5-PERCENT OWNERS.—An eligible retirement plan described in subclause (III) or (IV) of subparagraph (E)(iv) shall not be treated as an eligible retirement plan for the transfer of a distribution if the employee is a 5-percent owner at the time such distribution is ^ made. For purposes of the preceding sentence, the term ' =''"'*'>' '-^ time during the 5 plan years preceding the plan year in which the distribution is made." (B) The amendments made by subparagraph (A) shall apply to distributions after the date of the enactment of this Act. Such amendments shall apply also to distributions after 1983 and on or before the date of the enactment of this Act to individuals who are not 5-percent owners (as defined in section 402(a)(5)(F)(ii) of the Internal Revenue Code of 1954 (as amended by this paragraph)). (2) Section 713(c) of the Tax Reform Act of 1984 is amended by adding at the end thereof the following new paragraph: "(4) EFFECTIVE DATE FOR PARAGRAPH (3).—The amendment made by paragraph (3) shall apply to distributions after July 18, 1984." (3) Section 62(7) (relating to pension, profit-sharing, and annuity plans of self-employed individuals) is amended by striking out "to the extent attributable to contributions made on behalf of such individual". (4) Section 219(f)(l) (defining compensation) is amended by striking out "reduced by any amount allowable as a deduction to the individual in computing adjusted gross income under paragraph (7) of section 62 '.
 * '5-percent owner' means any individual who is a 5percent owner (as defined in section 416(i)(l)(B)) at any

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Page:United States Statutes at Large Volume 100 Part 3.djvu/1087

 PUBLIC LAW 99-514—OCT. 22, 1986

100 STAT. 2895

(5) Section 713(d)(l) of the Tax Reform Act of 1984 is amended by striking out "Paragraph" and inserting in lieu thereof "Effective with respect to contributions made in taxable years beginning after December 31, 1983, paragraph". (6)(A) Section 408(d)(5) (relating to certain distributions of excess contributions after due date) is amended by striking out "$15,000" and inserting in lieu thereof "the dollar limitation in • effect under section 415(c)(l)(A) for such taxable year". (B) Subparagraph (C) of section 2190t)X2) is amended by striking out "the $15,000 amount specified in subparagraph (A)(ii)" V and inserting in lieu thereof "the dollar limitation in effect under section 415(c)(l)(A)". (7)(A) Subparagraph (C) of section 404(a)(8) is amended by striking out "the earned income of such individual" and insert"'^ ing in lieu thereof "the earned income of such individual (determined without regard to the deductions allowed by this section)". (B) Effective with respect to taxable years beginning after December 31, 1984, subparagraph (D) of section 404(a)(8) is amended by striking out "(determined without regard to the deductions allowed by this section and section 405(c))'. «i (8) Subparagraph (A) of section 408(d)(3) is amended— (A) by striking out "(other than a trust forming part of a ^i,*"'.' plan under which the individual was an employee within ^ /•' the meaning of section 401(c)(l) at the time contributions were made on his behalf under the plan)" in clause (ii), (B) by striking out "(other than a plan under which the 5 individual was an employee within the meaning of section 401(c)(l) at the time contributions were made on his behalf ••': under the plan)" in clause (ii), and £5 (C) by adding at the end thereof the following new sentence: "Clause (ii) shall not apply during the 5-year period begin.;C2i V ning on the date of the qualified total distribution referred to in such clause if the individual was treated as a 5-percent owner with respect to such distribution under section 402(a)(5)(F)(ii)." (9) Clause (iii) of section 4150t)X2XE) is amended by striking s out "adjusting any benefit or limitation under subparagraph •I (B), (C), or (D)" and inserting in lieu thereof "this subsection". (10) Subparagraph (B) of section 3405(d)(l) is amended by striking out "or ' at the end of clause (ii), and by striking out the s material following clause (ii) and inserting in lieu thereof the following: "(iii) any amount which is subject to withholding under subchapter A of chapter 3 (relating to withholding of tax on nonresident aliens and foreign corporations) by the person pa3ring such amount or which would be so subject but for a tax treaty, or "(iv) any distribution described in section 404(k)(2)." (11) Subparagraph (C) of section 415(c)(3) is amended by strikn ing out "a profit-sharing or stock bonus plan" and inserting in lieu thereof "any defined contribution plan". (12) The amendments made by paragraphs (3), (4), and (6) shall take effect as if included in the amendments made by section 238 of the Tax Equity and Fiscal Responsibility Act of 1982.
 * > 'f

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Page:United States Statutes at Large Volume 100 Part 3.djvu/1088

 100 STAT. 2896

PUBLIC LAW 99-514—OCT. 22, 1986 (d) AMENDMENTS RELATING TO SECTION 714 OF THE ACT.— (1) PERIOD OF LIMITATIONS.—Section 6229 is amended by

adding at the end thereof the following new subsection: "(g) PERIOD OF LIMITATIONS FOR PENALTIES.—The provisions of this section shall apply also in the case of any addition to tax or an additional amount imposed under subchapter A of chapter 68 which arises with respect to any tax imposed under subtitle A in the same manner as if such addition or additional amount were a tax imposed by subtitle A." (2) COORDINATION WITH DEFICIENCY PROCEEDINGS.—

(A) IN GENERAL.—Subsection (a) of section 6230 is amended to read as follows: "(a) COORDINATION WITH DEFICIENCY PROCEEDINGS.—

"(1) IN GENERAL.—Except as provided in paragraph (2), subchapter B of this chapter shall not apply to the assessment or ^j J, collection of any computational adjustment. "(2) DEFICIENCY PROCEEDINGS TO APPLY IN CERTAIN CASES.—

"(A) Subchapter B shall apply to any deficiency attributable to— > r;xr "(i) affected items which require partner level determinations, or "(ii) items which have become nonpartnership items and are described in section 6231(e)(l)(B). "(B) Subchapter B shall be applied separately with respnect to each deficiency described in subparagraph (A) attributable to each partnership. "(C) Notwithstanding any other law or rule of law, any notice or proceeding under subchapter B with respect to a deficiency described in this paragraph shall not preclude or be precluded by any other notice, proceeding, or determinaw>ii r tion with respect to a partner's tax liability for a taxable year." (B) TECHNICAL AMENDMENTS.—

(i) Paragraph (4) of section 6213(h) is amended to read as follows:

f

"(4) For provisions relating to application of this subchapter in the case of certain partnership items, etc., see section 6230(a)."

'•^""'

(ii) Paragraph (1) of section 6503(a) is amended by striking out "section 6501 or 6502" and inserting in lieu thereof "section 6501 or 6502 (or section 6229, but only with respect to a deficiency described in section 6230(a)(2)(A))." '5. i (C) EFFECTIVE DATE.—The amendments made by this paragraph shall take effect as if included in the Tax Equity and Fiscal Responsibility Act of 1982. (3) EFFECTIVE DATE PROVISION.—Notwithstanding section 715 of the Tax Reform Act of 1984, the amendments made by section 714(n)(2) of such Act shall apply only to applications filed after July 18, 1984. (3) ESTATE AND TRUST INTERESTS HELD BY NOMINEES.—

•?

(A) IN GENERAL.—Section 6034A is amended— (i) by striking out "The fiduciary" and inserting in lieu thereof "(a) GENERAL RULE.—The fiduciary", (ii) by striking out "each beneficiary" and inserting in lieu thereof '^ach beneficiary (or nominee thereof)',

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(iii) by adding at the end thereof the following new subsection: "(b) NOMINEE REPORTING.—Any person who holds an interest in an estate or trust as a nominee for another person— "(1) shall furnish to the estate or trust, in the manner prescribed by the Secretary, the name and address of such other person, and any other information for the taxable year as the - Secretary may by form and regulations prescribe, and "(2) shall furnish in the manner prescribed by the Secretary to such other person the information provided by the estate or trust under subsection (a)." (B) EFFECTIVE DATE.—The amendments made by this paragraph shall apply to taxable years of estates and trusts beginning after the date of the enactment of this Act. (e) AMENDMENT RELATED TO SECTION 734 OF THE ACT.—Subsection

(a) of section 201 of the Land and Water Conservation Fund Act of 1965 (16 U.S.C. 4601-11) is amended by striking out "section 209(fK5) of the Highway Revenue Act of 1956 and inserting in lieu thereof "section 9503(c)(4)(B) of the Internal Revenue Code of 1954". (f) AMENDMENT RELATED TO SECTION 735 OF THE ACT.—The table of sections for part I of subchapter A of chapter 32 is amended by striking out "guzzlers" and inserting in lieu thereof "guzzler'. (g) AMENDMENT OF SECTION 1248.— (1) IN GENERAL.—Subsection (g) of section 1248 (relating to exceptions) is amended by inserting "or" at the end of paraqr graph (1), by striking out paragraph (2), and by redesignating paragraph (3) as paragraph (2). (2) EFFECTIVE DATE.—The amendment made by paragraph (1) shall apply to exchanges after March 1, 1986. (3) TRANSITIONAL RULE.—An exchange shall be treated as occurring on or before March 1, 1986, if— (A) on or before such date, the taxpayer adopts a plan of reorganization to which section 356 applies, and (B) such plan or reorganization is implemented and dis1^.. tributions pursuant to such plan are completed on or before the date of enactment of this Act. SEC. 1876. AMENDMENTS RELATED TO TITLE VIII OF THE ACT.

(a) TREATMENT OF SECTION 923(a)(2) NON-EXEMPT INCOME.— (1) Paragraph (6) of section 927(d) (defining section 923(a)(2) non-exempt income) is amended by adding at the end thereof the following new sentence: "Such term shall not include any income which is effectively connected with the conduct of a ,. trade or business within the United States (determined without regard to this subpart)." (2) Paragraph (6) of section 1248(d) (relating to foreign trade income) is amended to read as follows: "(6) FOREIGN TRADE INCOME.—Earnings and profits of the

^

foreign corporation attributable to foreign trade income of a FSC other than foreign trade income which— "(A) is section 923(a)(2) non-exempt income (within the meaning of section 927(d)(6)), or "(B) would not (but for section 923(a)(4)) be treated as exempt foreign trade income. For purposes of the preceding sentence, the terms 'foreign trade income' and 'exempt foreign trade income' have the respective meanings given such terms by section 923."

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Page:United States Statutes at Large Volume 100 Part 3.djvu/1090

 100 STAT. 2898

PUBLIC LAW 99-514—OCT. 22, 1986 (b) CLARIFICATION OF PREFERENCE CUTBACKS.—

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(1) Paragraph (4) of section 291(a) (relating to 20-percent reduction in certain preference items, etc.) is amended to read as follows: "(4) CERTAIN FSC INCOME.—In the case of taxable years beginning after December 31, 1984, section 923(a) shall be applied with respect to any FSC by substituting— "(A) '30 percent' for '32 percent' in paragraph (2), and "(B) '15/23' for ' i % 3 ' in paragraph (3). If all of the stock in the FSC is not held by 1 or more C corporations throughout the taxable year, under regulations, proper adjustments shall be made in the application of the preceding sentence to take into account stock held by persons other than C corporations." (2) Subparagraph (F) of section 995(b)(1) (relating to deemed distributions from a DISC) is amended— (A) by inserting "in the case of a shareholder which is a C corporation," before "one-seventeenth" in clause (i), and (B) by striking out "the amount determined under clause (i)" in clause (ii) and inserting in lieu thereof "Vn of the excess referred to in clause (i),". (3) Subsection (a) of section 923 (defining exempt foreign trade income) is amended by adding at the end thereof the following new paragraph:

••'"-" "(6) CROSS REFERENCE.—

"For reduction in amount of exempt foreign trade income, see section 291(a)(4)." (c) TREATMENT OF FOREIGN TRADE INCOME UNDER SUBPART F. —

(1) Subsection O3) of section 952 (relating to exclusion of United States income) is amended by adding at the end thereof .|^ the following new sentence: "For purposes of the preceding sentence, income described in paragraph (2) or (3) of section 921(d) shall be treated as derived from sources within the (2) Paragraph (1) of section 951(e) is amended by striking out the last sentence. (d) DIVIDENDS RECEIVED DEDUCTION FOR CERTAIN DISTRIBUTIONS FROM A FSC— >,.,, ,v (1) DEDUCTION FOR CERTAIN DIVIDENDS.— ' ^ "^^^ •
 * United States."

(A) Paragraph (1) of section 245(c) (relating to certain .' dividends received from FSC) is amended to read as follows: "(1) IN GENERAL.—In the case of a domestic corporation, there shall be allowed as a deduction an amount equal to— "(A) 100 percent of any dividend received by such corporation from another corporation which is distributed out of earnings and profits attributable to foreign trade income for a period during which such other corporation was a "(B) 85 percent of any dividend received by such corpora..^ ^ tion from another corporation which is distributed out of ' ' • earnings and profits attributable to qualified interest and carrying charges received or accrued by such other corporation while such other corporation was a FSC. ^ J The deduction allowable under the preceding sentence with ]*; respect to any dividend shall be in lieu of any deduction allowable under subsection (a) or (b) with respect to such dividend."
 * FSC, and

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Page:United States Statutes at Large Volume 100 Part 3.djvu/1091

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100 STAT. 2899

(B) Paragraph (3) of section 245(c) (relating to definitions) is simended by adding at the end thereof the following new sentence: "For purposes of this subsection, the term 'qualified interest and carrying charges' means any interest or carrying charges (as defined in section 927(d)(l)) derived from a transaction which results in foreign trade income." j,^ (2) SEPARATE APPLICATION OF SECTION 904.—Subparagraph (D) of section 904(d)(l) is amended to read as follows: "(D) distributions from a FSC (or a former FSC) out of earnings and profits attributable to foreign trade income (within the meaning of section 923(b)) or qualified interest •,^ and carrying charges (as defined in section 245(c)), and". (3) (COORDINATION OF SECTIONS 906 AND 902.—Subsection 0)) of

I section 906 (relating to nonresident alien individuals and for.. \ eign corporations) is amended by adding at the end thereof the following new paragraph: ., "(6) For purposes of section 902, any income, war profits, and excess profits taxes paid or accrued (or deemed paid or accrued) to any foreign country or possession of the United States with respect to income effectively connected with the conduct of a _^, trade or business within the United States shall not be taken into account, and any accumulated profits attributable to such income shall not be taken into account." (e) EXCHANGE OF INFORMATION REQUIREMENTS.—

' i '

. ,, ''

(1) Paragraph (3) of section 927(e) (relating to exchange of information requirements) is amended— (A) by striking out "unless, at the same time such corporation was created or organized, there was" and inserting in lieu thereof "unless there is", (B) by striking out "section 274(h)(6)(C)" in subparagraph (A) and inserting in lieu thereof "section 274(h)(6)(C) (determined by treating any reference to a beneficiary country as being a reference to any foreign country and by applying such section without regard to clause (ii) thereof", and (C) by amending subparagraph (B) to read as follows:

"(B) an income tax treaty which contains an exchange of information program— "(i) which the Secretary certifies (and has not revoked such certification) is satisfactory in practice for purposes of this title, and "(ii) to which the FSC is subject." (2) Effective for periods after March 28, 1985, paragraph (2) of section 924(c) (relating to requirement that FSC be managed outside the United States) is amended to read as follows: "(2) the principal bank account of the corporation is maintained in a foreign country which meets the requirements of section 927(e)(3) or in a possession of the United States at all times during the taxable year, and".

(f) COORDINATION WITH POSSESSIONS TAXATION.—

(1) Paragraph (5) of section 927(e) (relating to exemption from certain other taxes) is amended to read EIS follows: "(5) COORDINATION WITH POSSESSIONS TAXATION.—

"(A) EXEMPTION.—No tax shall be imposed by any possession of the United States on any foreign trade income derived before January 1, 1987. The preceding sentence shall not apply to any income attributable to the sale of

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Page:United States Statutes at Large Volume 100 Part 3.djvu/1092

 100 STAT. 2900

PUBLIC LAW 99-514—OCT. 22, 1986 property or the performance of services for ultimate use, consumption, or disposition within the possession. "(B) CLARIFICATION THAT POSSESSION MAY EXEMPT CERTAIN

INCOME FROM TAX.—Nothing in any provision of law shall be construed as prohibiting any possession of the United States from exempting from tax any foreign trade income of a FSC or any other income of a FSC described in paragraph (2) or (3) of section 921(d).

"; '^

"(C) N o COVER OVER OF TAXES IMPOSED ON FSC.—Nothing

> •

in any provision of law shall be construed as requiring any tax imposed by this title on a FSC to be covered over (or otherwise transferred) to any possession of the United ^i States." (2) CLERICAL AMENDMENT.—Section 934 is amended by strik' ing out the subsection (f) added by section 801(d)(7) of the Tax Reform Act of 1984. '

(g) CLARIFICATION OF INTEREST ON DISC-RELATED DEFERRED TAX

LIABILITY.—Subsection (f) of section 995 (relating to interest on DISC-related deferred tax liability) is amended by adding at the end thereof the following new paragraph: "(7) DISC INCLUDES FORMER DISC.—For purposes of this subsection, the term 'DISC includes a former DISC." (h) CLARIFICATION OF EXEMPTION OF ACCUMULATED DISC INCOME.—Subparagraph (A) of section 805(b)(2) of the Tax Reform Act of 1984 (relating to exemption of accumulated DISC income from tax) is amended by adding at the end thereof the following new sentence: "For purposes of the preceding sentence, the term 'actual distribution' includes a distribution in liquidation, and the earnings and profits of any corporation receiving a distribution not included in gross income by reason of the preceding sentence shall be increased by the amount of such distribution." (i) CLARIFICATION OF EFFECTIVE DATE FOR REQUIREMENT THAT TAXABLE YEAR OF DISC AND FSC CONFORM TO TAXABLE YEAR OF MAJORITY SHAREHOLDER.—Paragraph (4) of section 805(a) of the Tax

Reform Act of 1984 is amended to read as follows: "(4) SECTION 803.—The amendments made by section 803 shall apply to taxable years beginning after December 31, 1984." (j) APPLICATION OF DIVIDENDS RECEIVED DEDUCTION WITH RESPECT

TO CERTAIN DIVIDENDS.—Subsection (c) of section 245 (relating to dividends received from certain foreign corporations) is amended by redesignating paragraph (3) as paragraph (4) and by inserting after paragraph (2) the following new paragraph: "(3) COORDINATION WITH SUBSECTIONS (a) AND (b).—The gross income giving rise to the earnings and profits described in - subparagraph (A) or (B) of paragraph (1) (and not described in i paragraph (2)) shall not be taken into account under subsections (a) and (b)." (k)

TREATMENT OF CERTAIN QUALIFYING DISTRIBUTIONS FROM

DISC.—Paragraph (2) of section 996(a) (relating to qualifying distributions) is amended by striking out the last sentence and inserting in lieu thereof the following: "In the case of any amount of any actual distribution to a C corporation made pursuant to section 992(c) which is required to satisfy the condition of section 992(a)(l)(A), the preceding sentence shall apply to 16/17ths of such amount and paragraph (1) shall apply to the remaining l/17th of such amount.'

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Page:United States Statutes at Large Volume 100 Part 3.djvu/1093

 PUBLIC LAW 99-514—OCT. 22, 1986

100 STAT. 2901

(1) TREATMENT OF CERTAIN RECEIPTS FROM OTHER FSC.—Para-

graph (1) of section 924(f) (relating to certain receipts not included in foreign trade gross receipts) is amended by adding at the end thereof the following new sentence: "In the case of gross receipts of a FSC from a transaction involving any property, subparagraph (C) shall not apply if such FSC (and all other FSC's which are members of the same controlled group and which receive gross receipts from a transaction involving such property) do not use the pricing rules under paragraph (1) of section 925(a) (or the corresponding provisions of the regulations prescribed under section 925(b)) with respect to any transaction involving such property." (m) TREATMENT OF CERTAIN FORMER EXPORT TRADE CORPORA-

TIONS.—If^

(1) a corporation which is not an export trading corporation for its most recent taxable year ending before the date of the enactment of the Tax Reform Act of 1984 but was an export trading corporation for any prior taxable year, and (2)(A) such corporation may not qualify as an export trade corporation for any taxable year beginning after December 31, 1984, by reason of section 971(a)(3) of the Internal Revenue Code of 1954, or (B) such corporation makes an election, before the date 6 months after the date of the enactment of this Act, not to be treated as an export trade corporation with respect to taxable years beginning after December 31, 1984, rules similar to the rules of paragraphs (2) and (4) of section 8050t)) of the Tax Reform Act of 1984 shall apply to such corporation. For purposes of the preceding sentence, the term "export trade corporation" has the meaning given such term by section 971 of such Code. (n) TREATMENT OF DISTRIBUTION OF ACCUMULATED DISC INCOME RECEIVED BY COOPERATIVES.—Paragraph (2) of section 805(b) of the Tax Reform Act of 1984 (relating to transition rules for DISC's) is amended by adding at the end thereof the following new subparagraph: "(C) TREATMENT OF DISTRIBUTION OF ACCUMULATED DISC INCOME RECEIVED BY COOPERATIVES.—In the case of any

actual distribution received by an organization described in section 1381 of such Code and excluded from the gross income of such corporation by reason of subparagraph (A)— "(i) such amount shall not be included in the gross income of any member of such organization when distributed in the form of a patronage dividend or otherwise, and "(ii) no deduction shall be allowed to such organization by reason of any such distribution." (o) TREATMENT OF CERTAIN CONTRACTS.—Paragraph (2) of section 805(a) of the Tax Reform Act of 1984 (relating to transitional rule for certain contracts) is amended to read as follows: "(2) SPECIAL RULE FOR CERTAIN CONTRACTS.—To the extent provided in regulations prescribed by the Secretary of the Treasury or his delegate, any event or activity required to occur or required to be performed, before January 1, 1985, by section 924 (c) or (d) or 925(c) of the Internal Revenue Code of 1954 shall be treated as meeting the requirements of such section if such event or activity is with respect to— "(A) any lease of more than 3 years duration which was entered into before January 1, 1985,

71-19A 0 - 89 - 36: QL. 3 Part 3

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Page:United States Statutes at Large Volume 100 Part 3.djvu/1094

 100 STAT. 2902

PUBLIC LAW 99-514—OCT. 22, 1986 "(B) any contract with respect to which the taxpayer uses the completed contract method of accounting which was entered into before January 1, 1985, or "(C) in the case of any contract other than a lease or contract described in subparagraph (A) or (B), any contract which was entered into before January 1, 1985; except that this subparagraph shall only apply to the first 3 taxable years of the FSC ending after January 1, 1985, or such later taxable years as the Secretary of the Treasury or his delegate may prescribe." (p) CLERICAL AMENDMENTS.—

(1) Subsection (f) of section 995 is amended by redesignating the paragraphs following the paragraph (3) relating to deferred DISC income as paragraphs (4), (5), and (6). (2) Subsection (h) of section 901 is amended by striking out "section 927(d)(6)" and inserting in lieu thereof "section 927(d)(6))". (3) Paragraph (3) of section 802(c) of the Tax Reform Act of 1984 is hereby repealed. (4) Subparagraph (A) of section 805(a)(2) of the Tax Reform Act of 1984 is amended by striking out "the taxpayer" and inserting in lieu thereof "the DISC or a related party. (5) Paragraph (2) of section 927(e) is amended by striking out "clauses (i) and (ii)" and inserting in lieu thereof "clauses (ii) and (iii)". SEC. 1877. AMENDMENTS RELATED TO TITLE IX OF THE ACT. (a) AMENDMENT RELATED TO SECTION 911 OF THE ACT.—Paragraph

(3) of section 34(a) (relating to credit for certain uses of gasoline and special fuels) is amended to read as follows: "(3) under section 6427— "(A) with respect to fuels used for nontaxable purposes or resold, or "(B) with respect to any qualified diesel-powered highway vehicle purchased (or deemed purchased under section 6427(g)(6)), during the taxable year (determined without regard to section 64270"))." (b) AMENDMENTS RELATED TO SECTION 915 OF THE ACT.—

(1) Paragraph (2) of section 6427(b) (relating to intercity, local, or school buses) is amended by redesignating subparagraphs (B) and (C) as subparagraphs (C) and (D), respectively, and by inserting after subparagraph (A) the following new subparagraph: "(B)

EXCEPTION

FOR SCHOOL

BUS TRANSPORTATION.—

Subparagraph (A) shall not apply to fuel used in an automobile bus while engaged in the transportation described in paragraph (1)(B)." (2) Subparagraph (A) of section 64270t>)(2) is amended by striking out "subparagraph (B)" and inserting in lieu thereof "subparagraphs (B) and (C)". (3) The heading for subparagraph (C) of section 6427(b)(2), as redesignated by paragraph (1), is amended by striking out "EXCEPTION" and inserting in lieu thereof "EXCEPTION FOR CERTAIN INTRACITY TRANSPORTATION". (c) AMENDMENT RELATED TO SECTION 921 OF THE ACT.—Paragraph

(3) of section 4051(d) (relating to temporary reduction in tax on

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Page:United States Statutes at Large Volume 100 Part 3.djvu/1095

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100 STAT. 2903

certain piggyback trailers) is amended by adding at the end thereof the following new sentence: "No tax shall be imposed by reason of this paragraph on any use or resale which occurs more than 6 years after the date of the first retail sale." SEC. 1878. AMENDMENTS RELATED TO TITLE X OF THE ACT. (a) AMENDMENT RELATED TO SECTION 1001 OF THE ACT.—Subsec-

tion O> of section 1001 of the Tax Reform Act of 1984 is amended by t) adding at the end thereof the following new paragraph: "(24) Clause (i) of section 1278(a)(l)(B) (relating to short-term obligations)." (h) AMENDMENT RELATED TO SECTION 1015 OF THE ACT.—Subpara-

graph (I) of section 4162(a)(6) (defining sport fishing equipment) is amended to read as follows: "(I) fishing hook disgorgers, and". (c) AMENDMENTS RELATED TO SECTION 1018 OF THE ACT.—

(1) Paragraph (1) of section 4041(1) (relating to exemption for certain helicopter uses) is amended to read as follows: "(1) transporting individuals, equipment, or supplies in the exploration for, or the development or removal of, hard minerals, oil, or gas, or". (2) Paragraph (1) of section 4261(e) (relating to exemption for certain helicopter uses) is amended to read as follows: "(1) transporting individuals, equipment, or supplies in the exploration for, or the development or removal of, hard minerals, oil, or gas, or". (d) AMENDMENTS RELATED TO SECTION 1028 OF THE ACT.—Subsec-

tion (b) of section 1028 of the Tax Reform Act of 1984 (relating to credit against estate tax for transfers to Toiyabe National Forest) is amended to read as follows: "(b) AMOUNT OF CREDIT.—

"(1) IN GENERAL.—The amount allowed as a credit under subsection (a) shall be equal to the lesser of— "(A) the fair market value of the real property transferred by each estate as of the valuation date used for purposes of the tax imposed by chapter 11 of such Code, or "(B) the Federal estate tax liability (and interest thereon) of each estate. "(2) SPECIAL RULE FOR RABE ESTATE.—In the case of the estate described in paragraph (2) of subsection (a), the amount allowed as a credit under subsection (a) shall be equal to the Federal estate tax liability (and interest accruing thereon through the date of a transfer described in paragraph (1) of subsection (c)) of such estate." (e) AMENDMENTS RELATED TO SECTION 1034 OF THE ACT.—

(1) The last sentence of section 514(c)(9)(B) (relating to exceptions) is amended by striking out "would be unrelated business taxable income (determined without regard to this paragraph)" and inserting in lieu thereof "is unrelated business taxable income". (2) Clause (i) of section 514(c)(9)(C) is amended by striking out "section 509(a)" and inserting in lieu thereof "section 509(a)(3)". (3) Clause (vi) of section 514(c)(9)(B) is amended to read as follows:

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Page:United States Statutes at Large Volume 100 Part 3.djvu/1096

 100 STAT. 2904

PUBLIC LAW 99-514—OCT. 22, 1986

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"(vi) the real property is held by a partnership (which does not fail to meet the requirements of clauses (i) through (v)), and— "(I) any partner of the partnership is not a qualified organization, and "(II) the principal purpose of any allocation to any partner of the partnership which is a qualified organization which is not a qualified allocation (within the meaning of section 1680*)(9)) is the avoidance of income tax. For purposes of subclause (I) of clause (vi), an organization shall not be treated as a qualified organization if any income of such organization would be unrelated business taxable income (determined without regard to this paragraph. For purposes of clause (vi), an interest in a mortgage shall in no event be treated as real property."

(f) AMENDMENTS RELATED TO SECTION 1041 OF THE ACT.—

(1) The subsection (j) of section 51 (relating to targeted jobs credit) added by section 1041 of the Tax Reform Act of 1984 is hereby redesignated as subsection (k). (2) Subparagraph (B) of section 1041(c)(5) of the Tax Reform Act of 1984 is amended by striking out "section 51(j)" and inserting in lieu thereof "section 51(k)". (g) AMENDMENT RELATED TO SECTION 1053 OF THE ACT.—Para-

graph (2) of section 1034(h) (relating to members of armed forces) is amended by striking out "before the last day described" and inserting in lieu thereof "before the day which is 1 year after the last day described". (h) AMENDMENT RELATED TO SECTION 1063 OF THE ACT.—Subsec-

tion (c) of section 1063 of the Tax Reform Act of 1984 (relating to permanent disallowance of deduction for expenses of demolition of certain structures) is amended to read as follows: "(c) EFFECTIVE DATES.—

"(1) The amendments made by this section shall apply to taxable years ending after December 31, 1983, but shall not apply to any demolition (other than of a certified historic structure) commencing before July 19, 1984. "(2) For purposes of paragraph (1), if a demolition is delayed until the completion of the replacement structure on the same site, the demolition shall be treated as commencing when construction of the replacement structure commences. "(3) The amendments made by this section shall not apply to any demolition commencing before September 1, 1984, pursuant to a bank headquarters building project if— "(A) on April 1, 1984, a corporation was retained to advise the bank on the final completion of the project, and "(B) on June 12, 1984, the Comptroller of the Currency approved the project. "(4) The amendments made by this section shall not apply to the remaining adjusted basis at the time of demolition of any structure if— "(A) such structure was used in the manufacture, storage, or distribution of lead alkyl antiknock products and intermediate and related products at facilities located in or near Baton Rouge, Louisiana, and Houston, Texas, owned by the same corporation, and

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100 STAT. 2905

"(B) demolition of at least one such structure at the Baton Rouge facility commenced before January 1, 1984." (i) AMENDMENT RELATED TO SECTION 1065 OF THE ACT.—Subsection

Q>) of section 1065 of the Tax Reform Act of 1984 (relating to rules treating Indian tribal governments as States) is amended by striking out "section 7871" and inserting in lieu thereof "section 7871(a)". (j) AMENDMENTS RELATED TO SECTION 1071 OF THE ACT.—

(1) Subsection (a) of section 852 (relating to taxation of regulated investment companies and their shareholders) is amended by adding "and" at the end of paragraph (1), by striking out paragraph (2), and by redesignating paragraph (3) as paragraph (2). (2) Paragraph (1) of section 8520?) (relating to imposition of tax on regulated investment companies) is amended by striking out the last sentence and inserting in lieu thereof the following: "In the case of a regulated investment company which is a personal holding company (as defined in section 542) or which fails to comply for the taxable year with regulations prescribed by the Secretary for the purpose of ascertaining the actual ownership of its stock, such tax shall be computed at the highest rate of tsix specified in section 110t>)." SEC. 1879. MISCELLANEOUS PROVISIONS.

(a) WAIVER OF ESTIMATED TAX PENALTIES.—No addition to tax shall be made under section 6654 or 6655 of the Internal Revenue Code of 1954 (relating to failure to pay estimated income tax) for any period before April 16, 1985 (March 16, 1985 in the case of a taxpayer subject to section 6655 of such Code), with respect to any underpayment, to the extent that such underpayment was created or increased by any provision of the Teix Reform Act of 1984. (b) AMENDMENTS RELATED TO ORPHAN DRUG CREDIT.—

(1) Clause (ii) of section 280t)X2XA) (defining clinical testing) is amended— (A) by striking out "the date of such drug" in subclause (I) and inserting in lieu thereof "the date such drug", and (B) by striking out "of such Act" in subclause (II) and inserting in lieu thereof "of such Act or, if the drug is a biological product, before the date on which a license for such drug is issued under section 351 of the Public Health Services Act". (2) Paragraph (1) of section 28(d) (defining rare disease or condition) is amended to read as follows: "(1) RARE DISEASE OR CONDITION.—For purposes of this section, the term 'rare disease or condition' means any disease or condition which— "(A) affects less than 200,000 persons in the United States, or "(B) affects more than 200,000 persons in the United States but for which there is no reasonable expectation that the cost of developing and making available in the United States a drug for such disease or condition will be recovered from sales in the United States of such drug. Determinations under the preceding sentence with respect to any drug shall be made on the basis of the facts and circumstances as of the date such drug is designated under section 526 of the Federal Food, Drug, and Cosmetic Act."

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Page:United States Statutes at Large Volume 100 Part 3.djvu/1098

 100 STAT. 2906

PUBLIC LAW 99-514—OCT. 22, 1986 (3) The amendments made by this subsection shall apply to amounts paid or incurred after December 31, 1982, in taxable years ending after such date.

(c) TREATMENT OF SALES WITHIN AFFIUATED GROUP FOR PURPOSES OF SECTION 29.—

(1) Paragraph (8) of section 29(d) (relating to related persons) is amended by adding at the end thereof the following new sentence: "In the case of a corporation which is a member of an affiliated group of corporations filing a consolidated return, such corporation shall be treated as selling qualified fuels to an unrelated person if such fuels are sold to such a person by another member of such group." (2) The amendment made by paragraph (1) shall take effect as if included in the amendments made by section 231 of Public Law 96-223. (d) RETURNS AND RECORDS WITH RESPECT TO CERTAIN FRINGE BENEFITS.—

(1) Subsection (d) of section 6039D (added by section 1 of Public Law 98-611) is amended to read as follows: "(d) DEFINITIONS.—For purposes of this section— "(1) SPECIFIED FRINGE BENEFIT PLAN.—The term 'specified fringe benefit plan' means— "(A) any qualified group legal services plan (as defined in section 120), "(B) any cafeteria plan (as defined in section 125), and "(C) any educational assistance plan (as defined in section 127). "(2) APPLICABLE EXCLUSION.—The term 'applicable exclusion' means— "(A) section 120 in the case of a qualified group legal services plan, "(B) section 125 in the case of a cafeteria plan, and "(C) section 127 in the case of an educational assistance plan." (2) The section 6039D added by section 1 of Public Law 98-612 is hereby repealed. (e) REPEAL OF JOINT COMMITTEE REPORT REQUIREMENT.—Section

6405 (relating to reports of refunds and credits) is amended by striking out subsection (b) and redesignating subsections (c), (d), and (e) as subsections (b), (c), and (d), respectively. if) AMENDMENTS RELATED TO PUBLIC LAW 99-121.—

(1) The table contained in section 467(e)(3)(A) is amended— (A) by striking out "18-year real property" and inserting in lieu thereof "19-year real property", and (B) by striking out "18 years" and inserting in lieu thereof "19 years". (2) The amendments made by paragraph (1) shall take effect as if included in the amendments made by section 103 of Public Law 99-121. (g) DEFINED CONTRIBUTION PLAN OF RURAL ELECTRIC COOPERATIVE MAY INCLUDE QUALIFIED CASH OR DEFERRED ARRANGEMENT.—

(1) IN GENERAL.—Paragraphs (1) and (2) of section 401(k) (relating to cash or deferred arrangements) are each amended by striking out "(or a pre-ERISA money purchase plan)" and inserting in lieu thereof ", a pre-ERISA money purchase plan, or a rural electric cooperative plan".

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