< Back to H.R. 1950 (103rd Congress, 1993–1994)

Text of the Family and Economic Recovery Act

This bill was introduced on April 29, 1993, in a previous session of Congress, but was not enacted. The text of the bill below is as of Aug 02, 1993 (Introduced).

Source: GPO

HR 1950 SC

103d CONGRESS

1st Session

H. R. 1950

To provide assistance to families, enhance economic growth and opportunity, and advance education reform.

IN THE HOUSE OF REPRESENTATIVES

April 29, 1993

Mr. WOLF (for himself, Mr. ALLARD, Mr. ARMEY, Mr. KINGSTON, and Mr. LEVY) introduced the following bill; which was referred jointly to the Committees on Ways and Means, Education and Labor, and the Judiciary

August 2, 1993

Additional sponsors: Mr. HUTCHINSON, Mr. BARTLETT of Maryland, Mr. HYDE, Mr. KING, Mr. PAXON, Mr. TAYLOR of North Carolina, Mr. DORNAN, Mr. LIGHTFOOT, Mr. CRAPO, Mr. GALLEGLY, Mr. DUNCAN, Mr. GINGRICH, Mr. PACKARD, Mr. LIPINSKI, Mr. GREENWOOD, Mr. HUNTER, Mr. BAKER of California, Mr. BURTON of Indiana, Mr. POMBO, Mr. DOOLITTLE, Mr. SENSENBRENNER, Mr. ISTOOK, and Mr. Inhofe


A BILL

To provide assistance to families, enhance economic growth and opportunity, and advance education reform.

    Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE.

    (a) SHORT TITLE- This Act may be cited as ‘The Family and Economic Recovery Act’.

    (b) AMENDMENT OF 1986 CODE- Except as otherwise expressly provided, whenever in this Act an amendment or repeal is expressed in terms of an amendment to, or repeal of, a section or other provision, the reference shall be considered to be made to a section or other provision of the Internal Revenue Code of 1986.

TITLE I--TAX RELIEF FOR FAMILIES

SEC. 101. TAX CREDIT FOR CHILDREN.

    (a) IN GENERAL- Subpart B of part IV of subchapter A of chapter 1 (relating to foreign tax credit, etc.) is amended by adding at the end thereof the following new section:

‘SEC. 30A. CREDIT FOR CHILDREN.

    ‘(a) GENERAL RULE- In the case of an eligible individual, there shall be allowed as a credit against the tax imposed by this chapter and chapter 21 for the taxable year an amount equal to $600 multiplied by the number of qualifying children of the taxpayer who have not attained the age of 19 as of the close of the calendar year in which the taxable year of the taxpayer begins.

    ‘(b) LIMITATION BASED ON AMOUNT OF TAX- The credit allowed by subsection (a) for a taxable year shall not exceed the excess (if any) of--

      ‘(1) the sum of the regular tax (reduced by the sum of the credits allowable under subpart A and section 32) and the tax imposed by chapter 21, over

      ‘(2) the tentative minimum tax,

    for the taxable year.

    ‘(c) DEFINITIONS AND SPECIAL RULES- For purposes of this section--

      ‘(1) ELIGIBLE INDIVIDUAL- The term ‘eligible individual’ has the meaning given to such term by section 32(c)(1) (determined without regard to subparagraph (B) thereof).

      ‘(2) QUALIFYING CHILD- The term ‘qualifying child’ has the meaning given to such term by section 32(c)(3) (determined without regard to subparagraphs (C) and (E) thereof).

      ‘(3) CERTAIN OTHER RULES APPLY- Subsections (d) and (e) of section 32 shall apply.’

    (b) DENIAL OF DOUBLE BENEFIT- Subparagraph (A) of section 21(b)(1) (defining qualifying individual) is amended by inserting ‘(other than an individual described in section 30A(a))’ after ‘taxpayer’.

    (c) CONFORMING AMENDMENT- The table of sections for such subpart B is amended by adding at the end thereof the following new item:

‘Sec. 30A. Credit for children.’

    (d) EFFECTIVE DATE- The amendments made by this section shall apply to taxable years beginning after December 31, 1993.

SEC. 102. REFUNDABLE CREDIT FOR ADOPTION EXPENSES.

    (a) CREDIT FOR ADOPTION EXPENSES-

      (1) IN GENERAL- Subpart C of part IV of subchapter A of chapter 1 (relating to refundable credits) is amended by redesignating section 35 as section 36 and by inserting after section 34 the following new section:

‘SEC. 35. ADOPTION EXPENSES.

    ‘(a) ALLOWANCE OF CREDIT- In the case of an individual, there shall be allowed as a credit against the tax imposed by this subtitle for the taxable year the amount of the qualified adoption expenses paid or incurred by the taxpayer during such taxable year.

    ‘(b) LIMITATIONS-

      ‘(1) DOLLAR LIMITATION- The aggregate amount of qualified adoption expenses which may be taken into account under subsection (a) with respect to the adoption of a child shall not exceed $5,000.

      ‘(2) INCOME LIMITATION- The amount allowable as a credit under subsection (a) for any taxable year shall be reduced (but not below zero) by an amount which bears the same ratio to the amount so allowable (determined without regard to this paragraph but with regard to paragraph (1)) as--

        ‘(A) the amount (if any) by which the taxpayer’s adjusted gross income exceeds $60,000, bears to

        ‘(B) $40,000.

      For purposes of this paragraph, adjusted gross income shall be determined without regard to section 136.

      ‘(3) DENIAL OF DOUBLE BENEFIT-

        ‘(A) IN GENERAL- No credit shall be allowed under subsection (a) for any expense for which a deduction or credit is allowable under any other provision of this chapter.

        ‘(B) GRANTS- No credit shall be allowed under subsection (a) for any expenses paid from any funds received under any Federal, State, or local program.

    ‘(c) QUALIFIED ADOPTION EXPENSES- For purposes of this section, the term ‘qualified adoption expenses’ means reasonable and necessary adoption fees, court costs, attorney fees, and other expenses which are directly related to the legal adoption of a child by the taxpayer and which are not incurred in violation of State or Federal law or in carrying out any surrogate parenting arrangement. The term ‘qualified adoption expenses’ shall not include any expenses in connection with the adoption by an individual of a child who is the child of such individual’s spouse.’.

      (2) CLERICAL AMENDMENT- The table of sections for such subpart C is amended by striking the last item and inserting the following:

‘Sec. 35. Adoption expenses.

‘Sec. 36. Overpayments of tax.’

    (b) EFFECTIVE DATE- The amendments made by subsection (a) shall apply to taxable years beginning after December 31, 1993.

TITLE II--FAMILY SAVINGS INCENTIVES

Subtitle A--Increase in Income Limitations for Deductible IRA Contributions; Increase in IRA Contribution Limits; Penalty-Free Withdrawals for Home Ownership, Education, and Medical Expenses

SEC. 201. INCREASE IN INCOME LIMITATIONS.

    (a) IN GENERAL- Subparagraph (B) of section 219(g)(3) is amended--

      (1) by striking ‘$40,000’ in clause (i) and inserting ‘$100,000’, and

      (2) by striking ‘$25,000’ in clause (ii) and inserting ‘$75,000’.

    (b) COST-OF-LIVING ADJUSTMENT- Section 219(g)(3) is amended by adding at the end the following new subparagraph:

        ‘(C) COST-OF-LIVING ADJUSTMENT- In the case of taxable years beginning after 1994, the applicable dollar amounts under subparagraph (B) shall be adjusted in the same manner as under subsection (h), except that such subsection shall be applied--

          ‘(i) by substituting ‘$20,000’ for ‘$500’ each place it appears in paragraph (1), and

          ‘(ii) by substituting the appropriate dollar amounts for the amounts contained in paragraph (2).’

    (c) IRA ALLOWED FOR SPOUSES WHO ARE NOT ACTIVE PLAN PARTICIPANTS- Section 219(g)(1) is amended by striking ‘or the individual’s spouse’.

    (d) EFFECTIVE DATE- The amendments made by this section shall apply to taxable years beginning after December 31, 1994.

SEC. 202. INFLATION ADJUSTMENT FOR DEDUCTIBLE AMOUNT.

    (a) IN GENERAL- Section 219 is amended by redesignating subsection (h) as subsection (i) and by inserting after subsection (g) the following new subsection:

    ‘(h) COST-OF-LIVING ADJUSTMENTS-

      ‘(1) IN GENERAL- If the cost-of-living amount for any calendar year is equal to or greater than $500, then each applicable dollar amount (as previously adjusted under this subsection) for any taxable year beginning in any subsequent calendar year shall be increased by $500.

      ‘(2) COST-OF-LIVING AMOUNT- The cost-of-living amount for any calendar year is the excess (if any) of--

        ‘(A) $2,000, increased by the cost-of-living adjustment for such calendar year, over

        ‘(B) the applicable dollar amount in effect under subsection (b)(1)(A) for taxable years beginning in such calendar year.

      ‘(3) COST-OF-LIVING ADJUSTMENT- For purposes of this subsection--

        ‘(A) IN GENERAL- The cost-of-living adjustment for any calendar year is the percentage (if any) by which--

          ‘(i) the CPI for such calendar year, exceeds

          ‘(ii) the CPI for 1992.

        ‘(B) CPI FOR ANY CALENDAR YEAR- The CPI for any calendar year shall be determined in the same manner as under section 1(f)(4).

      ‘(4) APPLICABLE DOLLAR AMOUNT- For purposes of this subsection, the term ‘applicable dollar amount’ means the dollar amount in effect under any of the following provisions:

        ‘(A) Subsection (b)(1)(A).

        ‘(B) Subsection (c)(2)(A)(i).

        ‘(C) The last sentence of subsection (c)(2).’

    (b) CONFORMING AMENDMENTS-

      (1) Section 408(a)(1) is amended by striking ‘in excess of $2,000 on behalf of any individual’ and inserting ‘on behalf of any individual in excess of the amount in effect for such taxable year under section 219(b)(1)(A)’.

      (2) Section 408(b)(2)(B) is amended by striking ‘$2,000’ and inserting ‘the dollar amount in effect under section 219(b)(1)(A)’.

      (3) Section 408(j) is amended by striking ‘$2,000’.

    (c) EFFECTIVE DATE- The amendments made by this section shall apply to taxable years beginning after December 31, 1993.

SEC. 203. DISTRIBUTIONS FROM CERTAIN PLANS MAY BE USED WITHOUT PENALTY TO PURCHASE FIRST HOMES, TO PAY HIGHER EDUCATION, OR FINANCIALLY DEVASTATING MEDICAL EXPENSES, OR BY THE LONG-TERM UNEMPLOYED.

    (a) IN GENERAL- Paragraph (2) of section 72(t) (relating to exceptions to 10-percent additional tax on early distributions from qualified retirement plans) is amended by adding at the end thereof the following new subparagraph:

        ‘(D) DISTRIBUTIONS FROM CERTAIN PLANS FOR FIRST HOME PURCHASES OR EDUCATIONAL EXPENSES- Distributions to an individual from an individual retirement plan, or from amounts attributable to employer contributions made pursuant to elective deferrals described in subparagraph (A) or (C) of section 402(g)(3) or section 501(c)(18)(D)(iii)--

          ‘(i) which are qualified first-time homebuyer distributions (as defined in paragraph (6)); or

          ‘(ii) to the extent such distributions do not exceed the qualified higher education expenses (as defined in paragraph (7)) of the taxpayer for the taxable year.’

    (b) FINANCIALLY DEVASTATING MEDICAL EXPENSES-

      (1) IN GENERAL- Section 72(t)(3)(A) is amended by striking ‘(B),’.

      (2) CERTAIN LINEAL DESCENDANTS AND ANCESTORS TREATED AS DEPENDENTS- Subparagraph (B) of section 72(t)(2) is amended by striking ‘medical care’ and all that follows and inserting ‘medical care determined--

          ‘(i) without regard to whether the employee itemizes deductions for such taxable year, and

          ‘(ii) by treating such employee’s dependents as including--

            ‘(I) all children and grandchildren of the employee or such employee’s spouse, and

            ‘(II) all ancestors of the employee or such employee’s spouse.’

      (3) CONFORMING AMENDMENT- Subparagraph (B) of section 72(t)(2) is amended by striking ‘or (C)’ and inserting ‘, (C) or (D)’.

    (c) DEFINITIONS- Section 72(t) is amended by adding at the end thereof the following new paragraphs:

      ‘(6) QUALIFIED FIRST-TIME HOMEBUYER DISTRIBUTIONS- For purposes of paragraph (2)(D)(i)--

        ‘(A) IN GENERAL- The term ‘qualified first-time homebuyer distribution’ means any payment or distribution received by an individual to the extent such payment or distribution is used by the individual before the close of the 60th day after the day on which such payment or distribution is received to pay qualified acquisition costs with respect to a principal residence of a first-time homebuyer who is such individual or the spouse, child, or grandchild of such individual.

        ‘(B) QUALIFIED ACQUISITION COSTS- For purposes of this paragraph, the term ‘qualified acquisition costs’ means the costs of acquiring, constructing, or reconstructing a residence. Such term includes any usual or reasonable settlement, financing, or other closing costs.

        ‘(C) FIRST-TIME HOMEBUYER; OTHER DEFINITIONS- For purposes of this paragraph--

          ‘(i) FIRST-TIME HOMEBUYER- The term ‘first-time homebuyer’ means any individual if--

            ‘(I) such individual (and if married, such individual’s spouse) had no present ownership interest in a principal residence during the 3-year period ending on the date of acquisition of the principal residence to which this paragraph applies, and

            ‘(II) subsection (a)(6), (h), or (k) of section 1034 did not suspend the running of any period of time specified in section 1034 with respect to such individual on the day before the date the distribution is applied pursuant to subparagraph (A)(ii).

          In the case of an individual described in section 143(i)(1)(C) for any year, an ownership interest shall not include any interest under a contract of deed described in such section.

          ‘(ii) PRINCIPAL RESIDENCE- The term ‘principal residence’ has the same meaning as when used in section 1034.

          ‘(iii) DATE OF ACQUISITION- The term ‘date of acquisition’ means the date--

            ‘(I) on which a binding contract to acquire the principal residence to which subparagraph (A) applies is entered into, or

            ‘(II) on which construction or reconstruction of such a principal residence is commenced.

        ‘(D) SPECIAL RULE WHERE DELAY IN ACQUISITION- If any distribution from any individual retirement plan fails to meet the requirements of subparagraph (A) solely by reason of a delay or cancellation of the purchase or construction of the residence, the amount of the distribution may be contributed to an individual retirement plan as provided in section 408(d)(3)(A)(i) (determined by substituting ‘120 days’ for ‘60 days’ in such section), except that--

          ‘(i) section 408(d)(3)(B) shall not be applied to such contribution, and

          ‘(ii) such amount shall not be taken into account in determining whether section 408(d)(3)(A)(i) applies to any other amount.

      ‘(7) QUALIFIED HIGHER EDUCATION EXPENSES- For purposes of paragraph (2)(D)(ii)--

        ‘(A) IN GENERAL- The term ‘qualified higher education expenses’ means tuition, fees, books, supplies, and equipment required for the enrollment or attendance of--

          ‘(i) the taxpayer,

          ‘(ii) the taxpayer’s spouse, or

          ‘(iii) the taxpayer’s child (as defined in section 151(c)(3)) or grandchild,

        at an eligible educational institution (as defined in section 135(c)(3)).

        ‘(B) COORDINATION WITH SAVINGS BOND PROVISIONS- The amount of qualified higher education expenses for any taxable year shall be reduced by any amount excludable from gross income under section 135.’.

    (d) PENALTY-FREE DISTRIBUTIONS FOR CERTAIN UNEMPLOYED INDIVIDUALS- Paragraph (2) of section 72(t) is amended by adding at the end thereof the following new subparagraph:

      ‘(E) DISTRIBUTIONS TO UNEMPLOYED INDIVIDUALS- A distribution from an individual retirement plan (other than a plan referred to in subclause (I) or (II) of paragraph (6)(A)(iii)) to an individual after separation from employment, if--

        ‘(i) such individual has received unemployment compensation for 12 consecutive weeks under any Federal or State unemployment compensation law by reason of such separation, and

        ‘(ii) such distributions are made during any taxable year during which such unemployment compensation is paid or the succeeding taxable year.’.

    (e) SPECIAL RULE FOR CERTAIN DISASTER VICTIMS- For purposes of section 72(t)(6) of the Internal Revenue Code of 1986, an individual whose principal residence was destroyed or substantially damaged by Hurricane Andrew, Hurricane Iniki, or Typhoon Omar shall be treated as a first-time homebuyer with respect to such residence if the individual rebuilds it or with respect to any other principal residence acquired to replace such residence.

    (f) Conforming Amendments-

      (1) Section 401(k)(2)(B)(i) is amended by striking ‘or’ at the end of subclause (III), by striking ‘and’ at the end of subclause (IV) and inserting ‘or’, and by inserting after subclause (IV) the following new subclause:

            ‘(V) the date on which qualified first-time homebuyer distributions (as defined in section 72(t)(6)) or distributions for qualified higher education expenses (as defined in section 72(t)(7)) are made, and’.

      (2) Section 403(b)(11) is amended by striking ‘or’ at the end of subparagraph (A), by striking the period at the end of subparagraph (B) and inserting ‘, or’, and by inserting after subparagraph (B) the following new subparagraph:

        ‘(C) for qualified first-time homebuyer distributions (as defined in section 72(t)(6)) or for the payment of qualified higher education expenses (as defined in section 72(t)(7)).’.

    (g) EFFECTIVE DATE- The amendments made by this section shall apply to payments and distributions after December 31, 1993.

Subtitle B--Exclusion for Employer-Provided Educational Assistance To Include Educational Assistance for Spouse and Dependents of Employee

SEC. 211. EXPANSION OF EXCLUSION FOR EMPLOYER-PROVIDED EDUCATIONAL ASSISTANCE.

    (a) IN GENERAL- Paragraph (1) of section 127(b) (relating to educational assistance program) is amended by inserting ‘or their spouses and dependents (as defined in section 152)’ after ‘employees’ the second place it appears.

    (b) EXCLUSION MADE PERMANENT-

      (1) Section 127 is amended by striking subsection (d) and by redesignating subsection (e) as subsection (d).

      (2) Subsection (a) of section 103 of the Tax Extension Act of 1991 is amended by striking paragraph (2).

    (c) CONFORMING AMENDMENT- Paragraph (1) of section 127(c) is amended--

      (1) by striking ‘education of the employee’ in subparagraph (A) and inserting ‘education of a qualified individual’,

      (2) by striking ‘retained by the employee’ and inserting ‘retained by the qualified individual’, and

      (3) by adding at the end thereof the following new sentence: ‘For purposes of this paragraph, the term ‘qualified individual’ means the employee and the spouse and any dependent (as defined in section 152) of the employee.’

    (d) EFFECTIVE DATES-

      (1) IN GENERAL- Except as provided in paragraph (2), the amendments made by this section shall apply to taxable years beginning after December 31, 1993.

      (2) EXCLUSION MADE PERMANENT- The amendments made by subsection (b) shall apply to taxable years beginning after December 31, 1991.

TITLE III--MEDICAL CARE SAVINGS ACCOUNTS; HEALTH CARE COST CONTROLS; DEDUCTION FOR HEALTH INSURANCE COSTS OF SELF-EMPLOYED INDIVIDUALS

SEC. 301. MEDICAL CARE SAVINGS BENEFITS.

    (a) IN GENERAL- Part III of subchapter B of chapter 1 is amended by inserting after section 125 the following new section:

‘SEC. 125A. MEDICAL CARE SAVINGS BENEFITS.

    ‘(a) IN GENERAL- A medical care savings benefit is a qualified benefit which consists of a Health Plan meeting the requirements of this section that includes, as part thereof, a Medical Care Savings Account, as set forth in section 408A.

    ‘(b) ESTABLISHMENT OF MEDICAL CARE SAVINGS BENEFIT- A medical care savings benefit shall be established as a Health Plan which provides that all or part of the premium differential realized by instituting a Qualified Higher Deductible Health Plan is credited to a participating employee during a plan year to pay for medical care described in section 213(d) and, to the extent that any amount remains credited to that participant at the end of each plan year, such amount is deposited to a section 408(A) medical care savings account for that participant.

    ‘(c) PAYMENTS FROM ACCOUNT BALANCE- If the plan provides for level installment payments, the plan may also provide that the maximum amount of reimbursement at a particular time during the period of coverage may be limited to the amount of actual contributions to the arrangement. A participant may be advanced, interest free, such amounts necessary to cover incurred medical expenses which exceed the amount then credited to the participant’s account, upon the participant’s agreement to repay such advancement from future installments or upon ceasing to be a participant.

    ‘(d) REPORTING- Employers shall cause to be issued to participating employees, not less frequently than quarterly, a statement setting forth amounts remaining in their accounts.

    ‘(e) LIMITS ON AMOUNTS CONTRIBUTED TO MEDICAL CARE SAVINGS ACCOUNT- The maximum amount that may be contributed annually to a Medical Care Savings Account shall not exceed the premium differential set forth in subsection (b). For purposes of determining the maximum premium differential in those years when only the Qualified Higher Deductible Plan is offered, the differential shall be the difference between the premiums for the Qualified Higher Deductible Plan and the plan previously offered, based on bona fide quotes for a Health Plan offering similar benefits for similar employees in the same geographic area. Additionally, this method for calculating said premium differential shall also be used by an employer that has not previously sponsored a Health Plan but desires to institute a medical care savings benefit.

    ‘(f) HEALTH PLAN- The term ‘Health Plan’ means an employee welfare benefit plan providing medical care (as defined in section 213(d) of the Internal Revenue Code of 1954) to participants or beneficiaries directly or through insurance, reimbursement, or otherwise.

    ‘(g) QUALIFIED HIGHER DEDUCTIBLE PLAN- The term ‘Qualified Higher Deductible Plan’ is a Health Plan which provides for payment of covered benefits in excess of the higher deductible, which higher deductible shall not exceed $3,000 in 1992 and, adjusted annually thereafter for increases in the cost of living in accordance with regulations prescribed by the Secretary.

    ‘(h) PREVENTATIVE HEALTH CARE- By allowing medical expenses payable from a medical care savings benefit to be those permitted under section 213(d) of the Internal Revenue Code, participating employees are encouraged to use this benefit to promote good health, to use preventative medical and health procedures, and to seek appropriate consultive and second opinions.

    ‘(i) PREEMPTION- Insurance policies issued as a part of a medical care savings benefit shall not be required to duplicate expenses that may be proper expenses covered by the medical care savings benefit. Additionally, the higher deductible insurance plan may provide that the deductible specified in the policy may be increased by the amount of any benefits payable by any other health benefits program or plan.’.

    (b) MEDICAL CARE SAVINGS ACCOUNTS- Subpart A of part I of subchapter D of chapter 1 is amended by inserting after section 408 the following new section:

‘SEC. 408A. MEDICAL CARE SAVINGS ACCOUNTS.

    ‘(a) MEDICAL CARE SAVINGS ACCOUNTS- For purposes of this section, the term ‘medical care savings account’ means a trust created or organized in the United States for the exclusive benefit of an individual, his dependents (as defined in section 152) or beneficiaries, but only if the written instrument creating the trust meets the following requirements:

      ‘(1) No contributions will be accepted unless it is in cash.

      ‘(2) The trustee is a bank (as defined in subsection (d)), insurance company (as defined in section 816), or such other person who demonstrates to the satisfaction of the Secretary that the manner in which such other person will administer the trust will be consistent with the requirements of this section.

      ‘(3) No part of the trust funds will be invested in life insurance contracts.

      ‘(4) The interest of an individual in the balance of the account is nonforfeitable.

      ‘(5) The assets of the trust will not be commingled with other property except in a common trust fund or common investment fund.

    ‘(b) TAX TREATMENT OF ACCOUNTS-

      ‘(1) EXEMPTION FROM TAX- Any medical care savings account is exempt from taxation under this subtitle unless such account has ceased to be a medical care savings account by reason of paragraph (2) or (3). Notwithstanding the preceding sentence, any such account is subject to the taxes imposed by section 511 (relating to imposition of tax on unrelated business income of charitable, etc. organizations).

      ‘(2) LOSS OF EXEMPTION OF ACCOUNT WHERE EMPLOYEE ENGAGES IN PROHIBITED TRANSACTION-

        ‘(A) IN GENERAL- If, during any taxable year of the individual for whose benefit any medical care savings account is established, that individual, dependent, or his beneficiary engages in any transaction prohibited by section 4975 with respect to such account, such account ceases to be a medical care savings account as of the first day of such taxable year. For purposes of this paragraph the individual for whose benefit any account was established is treated as the creator of such account.

        ‘(B) ACCOUNT TREATED AS DISTRIBUTING ALL ITS ASSETS- In any case in which any account ceases to be a medical savings account by reason of subparagraph (A) as of the first day of any taxable year, section 511 shall apply as if there were a distribution on such first day in an amount equal to the fair market value (on such first day) of all assets in the account (on such first day).

      ‘(3) EFFECT OF PLEDGING ACCOUNT AS SECURITY- If, during any taxable year of the individual for whose benefit a medical care savings account is established, that individual uses the account or any portion thereof as security for a loan, the portion so used is treated as distributed to that individual.

      ‘(4) COMMINGLING MEDICAL CARE SAVINGS ACCOUNT AMOUNTS IN CERTAIN COMMON TRUST FUNDS AND COMMON INVESTMENT FUNDS- Any common trust fund or common investment fund of individual medical care savings account assets which is exempt from taxation under this subtitle does not cease to be exempt on account of the participation or inclusion of assets of a trust exempt from taxation under section 501(a) which is described in section 401(a).

    ‘(c) TREATMENT OF DISTRIBUTIONS-

      ‘(1) IN GENERAL- Except as otherwise provided in this subsection, any amount paid or distributed out of a medical savings account shall be included in gross income by the distributee.

      ‘(2) DISTRIBUTIONS FOR MEDICAL EXPENSES- Distributions from a medical care savings account shall not be taxable to the distributee, for amounts paid directly or indirectly for medical expenses as defined in section 213(d).

      ‘(3) 10 PERCENT ADDITIONAL TAX FOR EARLY WITHDRAWALS- Distributions described in paragraph 1 and not described in paragraph 2 shall be subject to an additional 10 percent tax for distributions made prior to age 59 1/2 of the distributee.

      ‘(4) ROLLOVER CONTRIBUTION- An amount is described in this paragraph as a rollover contribution which shall not be included in the gross income of the distributee if it meets the requirements of subparagraphs (A) and (B).

        ‘(A) IN GENERAL- Paragraph (1) does not apply to any amount paid or distributed out of a medical care savings account to the individual for whose benefit the account is maintained if the entire amount received is paid into a medical care savings account for the benefit of such individual not later than the sixtieth day after the day on which he receives the payment or distribution.

        ‘(B) LIMITATION- This paragraph does not apply to any amount described in paragraph (A) received by an individual from a medical savings account if at any time during the one-year period ending on the day of such receipt such individual received any other amount described in that subparagraph from a medical care savings account which was not includible in his gross income because of the application of this paragraph.

        ‘(C) DENIAL OF ROLLOVER TREATMENT FOR INHERITED ACCOUNTS, ETC-

          ‘(i) IN GENERAL- In the case of an inherited medical savings account--

            ‘(I) this paragraph shall not apply to any amount received by an individual from such an account (and no amount transferred from such account to another medical care savings account shall be excluded from gross income by reason of such transfer), and

            ‘(II) such inherited account shall not be treated as a medical care savings account for purposes of determining whether any other amount is a rollover contribution.

          ‘(ii) INHERITED MEDICAL CARE SAVINGS ACCOUNT-

            ‘(I) the individual for whose benefit the account is maintained acquired such account by reason of the death of another individual, and

            ‘(II) such individual was not the surviving spouse of such other individual.

    ‘(d) BANK- For purposes of subsection (a)(2), the term ‘bank’ means--

      ‘(1) a bank (as defined in section 581),

      ‘(2) an insured credit union (within the meaning of section 101(6) of the Federal Credit Union Act), and

      ‘(3) a corporation which, under the laws of the State of its incorporation, is subject to supervision and examination by the Commissioner of Banking or other officer of such State in charge of the administration of the banking laws of such state.’.

    (c) CLERICAL AMENDMENTS-

      (1) The table of sections for part III of subchapter B of chapter 1 is amended by inserting after the item relating to section 125 the following new item:

‘Sec. 125A. Medical care savings benefits.’

      (2) The table of sections for subpart A of part I of subchapter D of chapter 1 is amended by inserting after the item relating to section 408 the following new item:

‘Sec. 408A. Medical care savings accounts.’

    (c) EFFECTIVE DATE- The amendments made by this section shall apply to taxable years beginning after December 31, 1993.

SEC. 302. DEDUCTION FOR HEALTH INSURANCE COSTS OF SELF-EMPLOYED INCREASED AND MADE PERMANENT.

    (a) PERMANENT EXTENSION OF DEDUCTION-

      (1) IN GENERAL- Subsection (l) of section 162 (relating to special rules for health insurance costs of self-employed individuals) is amended by striking paragraph (6).

      (2) CONFORMING AMENDMENT- Paragraph (2) of section 110(a) of the Tax Extension Act of 1991 is hereby repealed.

      (3) EFFECTIVE DATE- The amendments made by this subsection shall apply to taxable years beginning after December 31, 1991.

    (b) INCREASE IN AMOUNT OF DEDUCTION-

      (1) IN GENERAL- Paragraph (1) of section 162(l) is amended by striking ‘25 percent of’ and inserting ‘100 percent (50 percent in the case of taxable years beginning in 1995 or 1996) of’.

      (2) EFFECTIVE DATE- The amendment made by paragraph (1) shall apply to taxable years beginning after December 31, 1994.

SEC. 303. PREEMPTION FROM INSURANCE MANDATES FOR QUALIFIED SMALL EMPLOYER PURCHASING GROUPS.

    (a) QUALIFIED SMALL EMPLOYER PURCHASING GROUP DEFINED- For purposes of this section, an association is a qualified small employer purchasing group if--

      (1) the association submits an application to the Secretary of Health and Human Services at such time and in such form as the Secretary may require; and

      (2) on the basis of information contained in the application and any other information the Secretary may require, the Secretary determines that--

        (A) the association is administered solely under the authority and control of its member employers,

        (B) the association’s membership consists solely of employers with not more than 100 employees (except that an employer member of the group may retain its membership in the group if, after the Secretary determines that the association meets the requirements of this paragraph, the number of employees of the employer member increases to more than 100),

        (C) with respect to each State in which its members are located, the association consists of not fewer than 100 employers, and

        (D) at the time the association submits its application, the health benefit plans with respect to the employer members of the association are in compliance with applicable State laws relating to health benefit plans.

    (b) PREEMPTION FROM INSURANCE MANDATES-

      (1) FINDING- Congress finds that employer purchasing groups organized for the purpose of obtaining health insurance for employer members affect interstate commerce.

      (2) PREEMPTION OF STATE MANDATES- In the case of a qualified small employer purchasing group described in subsection (a), no provision of State law shall apply that requires the offering, as part of the health benefit plan with respect to an employer member of such a group, of any services, category of care, or services of any class or type of provider.

      (3) PREEMPTION OF PROVISIONS PROHIBITING EMPLOYER GROUPS FROM PURCHASING HEALTH INSURANCE- In the case of a qualified small employer purchasing group described in subsection (a), no provision of State or local law shall apply that prohibits a group of employers from purchasing health insurance with respect to member employers of the group or their employees.

    (c) EFFECTIVE DATE- This section shall take effect 60 days after the date of the enactment of this Act.

TITLE IV--EDUCATIONAL CHOICE PROGRAMS

SECTION 401. SHORT TITLE.

    This title may be cited as the ‘Educational Choice Programs Act’.

SEC. 402. PURPOSES.

    The purposes of this title are--

      (1) to assist and encourage States and localities to--

        (A) give children from middle- and low-income families more of the same choices of all elementary and secondary schools and other academic programs that children from wealthier families already have;

        (B) improve schools and other academic programs by giving middle- and low-income parents increased consumer power to choose the schools and programs that they determine best fit the needs of their children;

        (C) more fully engage middle- and low-income parents in their children’s schooling; and

        (D) through families, provide new funds at the school site that teachers and principals can use to help all children achieve the high educational standards called for by the National Education Goals;

      (2) to encourage the creation and use of supplementary academic programs during and after regular school hours, on weekends, and during school vacation periods for children of middle- and low-income families; and

      (3) to demonstrate, through a competitive discretionary grant program, the effects of State and local programs that give middle- and low-income families more of the same choices of all schools, public, private or religious, that wealthier families have.

SEC. 403. AUTHORIZATION OF APPROPRIATIONS.

    (a) AUTHORIZATION- For the purpose of carrying out this title, there are authorized to be appropriated $1,000,000,000 for fiscal year 1993 and such sums as may be necessary for each of the fiscal years 1994 through 2000.

    (b) NATIONAL EVALUATION- From the sums appropriated for any fiscal year for carrying out this title, the Secretary may reserve up to $2,000,000 to carry out the national evaluation described in section 412.

    (c) REMAINDER OF FUNDS- The Secretary shall use any funds remaining after such reservation to make competitive grants to States and to localities to carry out eligible programs under this title.

SEC. 404. ELIGIBILITY.

    A State or locality is eligible for a grant under this title if--

      (1) it has taken significant steps to provide a choice of schools to families with school children residing in the program area described in the application submitted under section 407, including families who are not eligible for scholarships under this title;

      (2) during the year for which assistance is sought, assurances are made that if awarded a grant under this title, such State or locality will provide scholarships to parents of eligible children that may be redeemed for elementary or secondary education for their children at a broad variety of public and private elementary and secondary schools, including religious schools, if any, serving the area; and

      (3) it allows lawfully operating public and private elementary and secondary schools, including religious schools, if any, serving the area to participate in its program.

SEC. 405. SCHOLARSHIPS.

    (a) SCHOLARSHIP AWARDS- With funds awarded under this title, each grantee under this title shall provide scholarships to the parents of eligible children, in accordance with section 406.

    (b) SCHOLARSHIP VALUE- The value of each scholarship shall be the sum of--

      (1) $2,000 from funds provided under this title; and

      (2) an additional amount, if any, of State, local, and nongovernmental funds.

    (c) TAX EXEMPTION- Scholarships shall not be deemed income of the parents for Federal income tax purposes or for determining eligibility for any other Federal program.

SEC. 406. ELIGIBLE CHILDREN.

    (a) ELIGIBILITY- With funds awarded under this title, each grantee shall provide a scholarship--

      (1) to the parents of children who--

        (A) reside in the program area described in the application submitted under section 407;

        (B) will attend a public or private elementary or secondary school that is participating in the program; and

        (C) are from a middle- or low-income family, as determined by the grantee in accordance with regulations of the Secretary, except that the maximum family income for eligibility may not exceed the State or national median family income (adjusted for family size), whichever is higher, as determined by the Secretary, in consultation with the Bureau of the Census, on the basis of the most recent satisfactory data available; and

      (2) in each year of its program to each child who received a scholarship during the previous year of the program, unless--

        (A) the child no longer resides in the program area;

        (B) the child no longer attends school; or

        (C) the child’s family income exceeds, by 20 percent or more, the maximum family income of families who received scholarship in the preceding year.

    (b) PRIORITY- If the amount of the grant under this title is not sufficient to provide a scholarship to each child up to the income level for which the grantee applied as described in subsection (a)(1)(C), the grantee shall provide scholarships to the lowest income families.

SEC. 407. APPLICATIONS.

    (a) APPLICATION- Each State or locality that wishes to receive a grant under this title shall submit an application to the Secretary at such time and in such manner as the Secretary may reasonably require.

    (b) CONTENTS- Each such application shall contain--

      (1) a description of the program area;

      (2) an economic profile of children residing in the program area, in terms of family income and poverty status;

      (3) the family income range of children who will be eligible to participate in the proposed program, consistent with section 406(a)(1)(C), and a description of the applicant’s method for identifying children who fall within that range;

      (4) an estimate of the number of children, within the income range specified in paragraph (3), who would be eligible to receive scholarships under the program;

      (5) information demonstrating that the applicant’s proposed program complies with the eligibility requirements of section 404 and with the other requirements of this title;

      (6) a description of the procedures the applicant has used, including timely and meaningful consultation with private school officials, to encourage public and private elementary and secondary schools to participate in the programs and to ensure maximum educational choices for the parents of eligible children and for other children residing in the program area;

      (7) an identification of the public, private, and religious elementary and secondary schools that are eligible and have chosen to participate in the program;

      (8) a description of how the applicant will inform children and their parents of the program and of the choices available to them under the program, including the availability of supplementary academic services under section 410(2);

      (9) a description of the procedures to be used to provide scholarships to parents and to enable parents to use such scholarships, such as the issuance of checks payable to both parents and schools;

      (10) a description of--

        (A) the procedures by which a school will make a pro rata refund to the grantee of a scholarship for any participating child who, before completing 50 percent of the school attendance period for which the scholarship was issued--

          (i) is released or expelled from the school; or

          (ii) withdraws for any reason; or

        (B) another refund policy that addresses special circumstances an applicant can reasonably anticipate and that the applicant demonstrates, to the Secretary’s satisfaction, adequate protection of participating children, in light of the purposes of this title;

      (11) a description of procedures the applicant will use to--

        (A) determine a child’s continuing eligibility to participate in the program; and

        (B) bring new children into the program;

      (12) an assurance that the applicant will cooperate in carrying out the national evaluation described in section 412;

      (13) an assurance that the applicant will maintain such records relating to the program as the Secretary may require and will comply with the Secretary’s reasonable requests for information about the program;

      (14) a description of State and local funds (including tax benefits) and nongovernmental funds, if any, that will be available under section 405(b)(2) to supplement scholarship funds provided under this title; and

      (15) such other assurance and information as the Secretary may require.

    (c) REVISIONS- Each such application shall be updated annually as may be needed to reflect revised conditions.

SEC. 408. APPROVAL OF PROJECTS.

    (a) SELECTION- From applications received each year, the Secretary shall select programs on the basis of--

      (1) the number and variety of educational choices that are available under the program to families of eligible children;

      (2) the extent to which educational choices among public, private, and religious schools are available to all families in the program area, including families that are not eligible for scholarships under this title;

      (3) the proportion of children who will participate in the program who are from low-income families;

      (4) the applicant’s financial support of the program, including the amount of State, local, and nongovernmental funds that will be provided to supplement Federal funds, including not only direct expenditures for scholarships, but also other economic incentives provided to families participating in the program, such as a tax relief program. In considering this factor, the Secretary may take differences in local conditions into account; and

      (5) other criteria established by the Secretary.

    (b) GEOGRAPHIC DISTRIBUTION- The Secretary shall ensure that, to the extent feasible, grants are awarded for programs in urban and rural areas and in a variety of geographic areas throughout the Nation.

SEC. 409. AMOUNTS AND LENGTH OF GRANTS.

    (a) AWARDS- The Secretary shall award annual grants taking into account the availability of appropriations, the number and quality of applications, and other factors related to the purposes of this title that the Secretary determines are appropriate.

    (b) RENEWAL- Each grant under this title may be for a period of up to 4 years, and may be renewed for an additional 4-year period.

SEC. 410. USES OF FUNDS.

    The Federal portion of any scholarship awarded under this title shall be used for the following purposes:

      (1) first, for--

        (A) the payment of tuition and fees at the school selected by the parents of the child for whom the scholarship was provided; and

        (B) the reasonable costs of the child’s transportation to the school, if--

          (i) the school is not the school to which the child would be assigned in the absence of a program under this title; and

          (ii) the parents of an eligible child choose to use scholarship funds for that purpose;

      (2) second, if the parents so choose, to obtain supplementary academic services for the child, at a cost of not more than $500, from any provider chosen by the parents that the grantee, in accordance with regulations of the Secretary, determines is capable of providing such services and has an appropriate refund policy; and

      (3) finally, any remaining funds shall be used--

        (A) for educational programs that help students achieve high levels of academic excellence in the school attended by the child for whom a scholarship was issued, if the child attends a public school; or

        (B) by the grantee for additional scholarships in the year or the succeeding year of its program, in accordance with this title, if the child attends a private school.

SEC. 411. EFFECT OF PROGRAMS.

    (a) CHAPTER 1- Notwithstanding any other provision of law, a local educational agency that, in the absence of an educational choice program that is funded under this title, would provide services to a participating child under part A of chapter 1 of title I of the Elementary and Secondary Education Act of 1965, shall provide such services to such child.

    (b) INDIVIDUALS WITH DISABILITIES- Nothing in this title shall be read to affect the applicability or requirements of part B of the Individuals With Disabilities Education Act.

    (c) AID- (1) Scholarships under this title are to aid families, not institutions. A parent’s expenditure of scholarship funds at a school or for supplementary academic services shall not constitute Federal financial aid or assistance to that school or to the provider of supplementary academic services.

    (2) Notwithstanding paragraph (1), a school or provider of supplementary academic services that receives scholarship funds under this title shall, as a condition of participation under this title, comply with the anti discrimination provisions of section 601 of title VI of the Civil Rights Act of 1964 (42 U.S.C. 1681) and section 504 of the Rehabilitation Act of 1973 (27 U.S.C. 794).

    (3) The Secretary shall promulgate new regulations to implement the provisions of paragraph (2), taking into account the purposes of this title and the nature, variety, and missions of schools and providers that may participate in providing services to children under this title.

    (d) OTHER FEDERAL FUNDS- No Federal, State, or local agency may, in any year, take into account Federal funds provided to a grantee or to the parents of any child under this title in determining whether to provide any other funds from Federal, State, or local resources, or in determining the amount of such assistance, to such grantee or to a school attended by such child.

    (e) EXISTING PROVISIONS OF LAW- Nothing in this title shall be construed to supersede or modify any provision of a State constitution or State law that prohibits the expenditure of public funds in or by religious or other private institutions, except that no provision of a State constitution or State law shall be construed or applied to prohibit any grantee from paying the administrative costs of a program under this title or providing any Federal funds received under this title to parents for use at religious or other private institutions.

    (f) NO DISCRETION- Nothing in this title shall be construed to authorize the Secretary to exercise any direction, supervision, or control over the curriculum, program of instruction, administration, or personnel of any educational institution or school participating in a program under this title.

    (g) DISCRIMINATION- No person shall, on the ground of race, color, or national origin, be excluded from participation in, be denied the benefits of, or be subjected to discrimination under any program or activity under this title.

SEC. 412. NATIONAL EVALUATION.

    With funds reserved under section 403(b), the Secretary shall conduct a national evaluation of the program authorized by this title. Such evaluation shall, at a minimum--

      (1) assess the implementation of assisted programs and their effect on participants, schools, and communities in the program area, including parental involvement in, and satisfaction with, the program and their children’s education;

      (2) compare educational achievement of participating children with the achievement of similar non-participating children before, during, and after the program; and

      (3) compare--

        (A) educational achievement of children who use scholarships to attend schools other than the ones they would attend in the absence of the program; with

        (B) educational achievement of children who attend the schools they would attend in the absence of the program.

SEC. 413. ENFORCEMENT.

    (a) REGULATIONS- The Secretary shall promulgate regulations to enforce the provisions of this title.

    (b) PRIVATE CAUSE- No provision or requirement of this title shall be enforced through a private cause of action.

SEC. 414. DEFINITIONS.

    For the purpose of this title--

      (1) the terms ‘elementary school’, ‘local educational agency’, ‘parent’, ‘secondary school’, and ‘State educational agency’ have the same meanings given such terms in section 1471 of the Elementary and Secondary Education Act of 1965;

      (2) the term ‘locality’ means--

        (A) a unit of general purpose local government, such as a city, township, or village; or

        (B) a local educational agency;

      (3) the term ‘Secretary’ means the Secretary of Education; and

      (4) the term ‘State’ means each of the 50 States, the District of Columbia, and the Commonwealth of Puerto Rico.

TITLE V--GRANTS TO ENCOURAGE EMPLOYERS TO ADOPT FLEXIBLE WORK AND FAMILY POLICIES

SEC. 501. PURPOSES.

    The purpose of this title is to provide grants as start up funds for employers to--

      (1) explore, initiate, or expand flexible work policies (including for example, flexitime, part-time work, job sharing, telecommuting, flexiplace, or compressed work weeks) in an effort to ease the work and family demands on employees;

      (2) efficiently adapt to the Family and Medical Leave Act of 1993 in a comprehensive manner while strategically planning for changes in work force demographics;

      (3) assess the needs of employees and determine various work and family policies and human resource policies that best fit with a particular work force or workplace;

      (4) design work and family programs in such a way that improves recruitment, retention and productivity in the context of a changing work force; and

      (5) share and communicate successful work and family policies with the outside business community.

SEC. 502. APPLICATIONS.

    (a) IN GENERAL- To receive a grant under this title, an employer must submit an application to the Secretary of Labor at such time and in such manner as such Secretary may prescribe.

    (b) CONTENTS OF APPLICATION- Each application shall contain--

      (1) a description of the employer’s business, including the number of employees and their demographic makeup;

      (2) an economic and work profile of the families of employees of such employer, including the work and family situations of the employees who would benefit from a program and their family income range;

      (3) a description of the work and family program the employer plans to implement, including a description of--

        (A) the methods to be used to assess the needs of employees,

        (B) the methods to be used to determine which work and family policies best fit the needs of both the employer and the employees,

        (C) how the new policies will be piloted or implemented, and

        (D) which work policies will be focused upon, and how support for such policies will be developed and integrated into the management structure;

      (4) a profile of surrounding businesses that might benefit from the type of program proposed and how information on that program will be shared with those businesses; and

      (5) how, and the extent to which, the efforts of the applicant will be communicated back to the Department of Labor.

SEC. 503. APPROVAL OF APPLICATIONS.

    (a) IN GENERAL- The Secretary of Labor shall approve applications on the basis of--

      (1) the comprehensiveness of the approach of the applicant’s work and family programs, the efforts made to survey and assess the work and family needs of employees, and the number of families impacted and the economic demands on the families affected;

      (2) the applicant’s ability and commitment to developing an ongoing and comprehensive approach to flexible work and family policies; and

      (3) the efforts by the applicant to share information of its work and family policies with the surrounding business community as well as their ability to provide information to the Department of Labor on the development and implementation of their policies.

    (b) DIVERSITY OF APPROVED APPLICATIONS- The Secretary of Labor shall ensure that, to the extent feasible, grants are awarded to a variety of businesses with varying work populations and economic means as well as variety in both urban and rural areas and in different geographic areas throughout the Nation.

SEC. 504. LIMIT ON AMOUNT OF GRANTS; AUTHORIZATION OF APPROPRIATIONS.

    (a) LIMIT ON AMOUNT OF GRANTS- The maximum grant that may be awarded under this title to a business for any year shall not exceed $50,000.

    (b) AUTHORIZATION- There are authorized to be appropriated to carry out this title $10,000,000 for fiscal year 1993, to remain available until expended or the close of fiscal year 1994.

    (c) FUNDS NOT USED FOR GRANTS- If funds appropriated pursuant to subsection (b) remain available as of the close of fiscal year 1994, the Secretary of Labor shall conduct a national evaluation of the various programs funded by grants under this title. Notwithstanding subsection (b), such funds may be used during fiscal year 1995 for such purpose.

TITLE VI--REDUCING THE COST OF CAPITAL BY REDUCING CAPITAL GAINS TAX RATES, INDEXING THE BASIS OF CERTAIN ASSETS, AND EXCLUDING GAIN FROM SALES OF PRINCIPAL RESIDENCES

SEC. 601. REDUCTION IN INDIVIDUAL CAPITAL GAINS RATE.

    (a) GENERAL RULE- Subsection (h) of section 1 (relating to maximum capital gains rate) is amended to read as follows:

    ‘(h) MAXIMUM CAPITAL GAINS RATE- If a taxpayer has a net capital gain for any taxable year, then the tax imposed by this section shall not exceed the sum of--

        ‘(A) a tax computed at the rates and in the same manner as if this subsection had not been enacted on the taxable income reduced by the net capital gain, plus

        ‘(B) a tax equal to 15 percent of the net capital gain in excess of--

          ‘(i) the maximum amount of taxable income to which the 15-percent rate applies under the table applicable to the taxpayer, reduced by

          ‘(ii) the taxable income to which subparagraph (A) applies.

    (b) PHASEOUT OF PERSONAL EXEMPTIONS AND LIMITATION ON DEDUCTION OF ITEMIZED DEDUCTIONS NOT TO RESULT FROM NET CAPITAL GAIN-

      (1)(A) Subparagraphs (A) and (B) of section 151(d)(3) (relating to phaseout of exemption amount) are each amended by inserting ‘modified’ before ‘adjusted gross income’.

      (B) Paragraph (3) of section 151(d) of such Code is amended by redesignating subparagraphs (D) and (E) as subparagraphs (E) and (F), respectively, and by inserting after subparagraph (C) the following new subparagraph:

        ‘(D) MODIFIED ADJUSTED GROSS INCOME- For purposes of this paragraph, the term ‘modified adjusted gross income’ means adjusted gross income reduced by net capital gain.’

      (2) Subsection (a) of section 68 (relating to overall limitation on itemized deductions) is amended by inserting ‘(reduced by net capital gain (determined in accordance with the last sentence of section 151(d)(3)(D)))’ after ‘adjusted gross income’.

    (c) TECHNICAL AMENDMENTS-

      (1) Paragraph (1) of section 170(e) is amended by striking ‘the amount of gain’ in the material following subparagraph (B)(ii) and inserting ‘13/28 (19/34 in the case of a corporation) of the amount of gain’.

      (2)(A) The second sentence of section 7518(g)(6)(A) is amended by striking ‘28 percent (34 percent in the case of a corporation)’ and inserting ‘15 percent’.

      (B) The second sentence of section 607(h)(6)(A) of the Merchant Marine Act, 1936, is amended by striking ‘28 percent (34 percent in the case of a corporation)’ and inserting ‘15 percent’.

SEC. 602. REDUCTION IN CORPORATE CAPITAL GAINS RATE.

    (a) GENERAL RULE- Section 1201 (relating to alternative tax for corporations) is amended by redesignating subsection (b) as subsection (c), and by striking subsection (a) and inserting the following:

    ‘(a) GENERAL RULE- If for any taxable year a corporation has a net capital gain, then, in lieu of the tax imposed by sections 11, 511, or 831(a) (whichever applies), there is hereby imposed a tax (if such tax is less than the tax imposed by such section) which shall consist of the sum of--

      ‘(1) a tax computed on the taxable income reduced by the net capital gain, at the same rates and in the same manner as if this subsection had not been enacted, plus

      ‘(2) a tax of 15 percent of the net capital gain.

    ‘(b) TRANSITIONAL RULE- In the case of a taxable year which includes December 31, 1992, the amount of the net capital gain for purposes of subsection (a) shall not exceed the net capital gain determined by only taking into account gains and losses properly taken into account for the portion of the taxable year on or after such date.’

    (b) TECHNICAL AMENDMENTS-

      (1) Clause (iii) of section 852(b)(3)(D) is amended by striking ‘66 percent’ and inserting ‘85 percent’.

      (2) Paragraphs (1) and (2) of section 1445(e) are each amended by striking ‘34 percent’ and inserting ‘15 percent’.

SEC. 603. REDUCTION OF MINIMUM TAX RATE ON CAPITAL GAINS.

    Subparagraph (A) of section 55(b)(1) (relating to tentative minimum tax) is amended to read as follows:

        ‘(A) the sum of--

          ‘(i) 15 percent of the lesser of--

            ‘(I) the net capital gain (determined with the adjustments provided in this part and (to the extent applicable) the limitations of sections 1(h)(2) and 1201(b)), or

            ‘(II) so much of the alternative minimum taxable income for the taxable year as exceeds the exemption amount, plus

          ‘(ii) 20 percent (24 percent in the case of a taxpayer other than a corporation) of the amount (if any) by which the excess referred to in clause (i)(II) exceeds the net capital gain (as so determined), reduced by’.

SEC. 604. INDEXING OF CERTAIN ASSETS FOR PURPOSES OF DETERMINING GAIN OR LOSS.

    (a) IN GENERAL- Part II of subchapter O of chapter 1 (relating to basis rules of general application) is amended by inserting after section 1021 the following new section:

‘SEC. 1022. INDEXING OF CERTAIN ASSETS FOR PURPOSES OF DETERMINING GAIN OR LOSS.

    ‘(a) General Rule-

      ‘(1) INDEXED BASIS SUBSTITUTED FOR ADJUSTED BASIS- Except as provided in paragraph (2), if an indexed asset which has been held for more than 1 year is sold or otherwise disposed of, for purposes of this title the indexed basis of the asset shall be substituted for its adjusted basis.

      ‘(2) EXCEPTION FOR DEPRECIATION, ETC- The deduction for depreciation, depletion, and amortization shall be determined without regard to the application of paragraph (1) to the taxpayer or any other person.

    ‘(b) INDEXED ASSET-

      ‘(1) IN GENERAL- For purposes of this section, the term ‘indexed asset’ means--

        ‘(A) stock in a corporation, and

        ‘(B) tangible property (or any interest therein), which is a capital asset of property used in the trade or business (as defined in section 1231(b)).

      ‘(2) CERTAIN PROPERTY EXCLUDED- For purposes of this section, the term ‘indexed asset’ does not include--

        ‘(A) CREDITOR’S INTEREST- Any interest in property which is in the nature of a creditor’s interest.

        ‘(B) OPTIONS- Any option or other right to acquire an interest in property.

        ‘(C) NET LEASE PROPERTY- In the case of a lessor, net lease property (within the meaning of subsection (h)(1)).

        ‘(D) CERTAIN PREFERRED STOCK- Stock which is fixed and preferred as to dividends and does not participate in corporate growth to any significant extent.

        ‘(E) STOCK IN CERTAIN CORPORATIONS- Stock in--

          ‘(i) an S corporation (within the meaning of section 1361),

          ‘(ii) a personal holding company (as defined in section 542), and

          ‘(iii) a foreign corporation.

      ‘(3) EXCEPTION FOR STOCK IN FOREIGN CORPORATION WHICH IS REGULARLY TRADED ON NATIONAL OR REGIONAL EXCHANGE- Clause (iii) of paragraph (2)(E) shall not apply to stock in a foreign corporation the stock of which is listed on the New York Stock Exchange, the American Stock Exchange, or any domestic regional exchange for which quotations are published on a regular basis other than--

        ‘(A) stock of a foreign investment company (within the meaning of section 1246(b)), and

        ‘(B) stock in a foreign corporation held by a United States person who meets the requirements of section 1248(a)(2).

    ‘(c) INDEXED BASIS- For purposes of this section--

      ‘(1) INDEXED BASIS- The indexed basis for any asset is--

        ‘(A) the adjusted basis of the asset, multiplied by

        ‘(B) the applicable inflation ratio.

      ‘(2) APPLICABLE INFLATION RATIO- The applicable inflation ratio for any asset is the percentage arrived at by dividing--

        ‘(A) the gross national product deflator for the calendar quarter in which the disposition takes place, by

        ‘(B) the gross national product deflator for the calendar quarter in which the asset was acquired by the taxpayer (or, if later, the calendar quarter ending December 31, 1992).

      The applicable inflation ratio shall not be taken into account unless it is greater than 1. The applicable inflation ratio for any asset shall be rounded to the nearest one-tenth of 1 percent.

        ‘(3) GROSS NATIONAL PRODUCT DEFLATOR- The gross national product deflator for any calendar quarter is the implicit price deflator for the gross national product for such quarter (as shown in the first revision thereof).

        ‘(4) SECRETARY TO PUBLISH TABLES- The Secretary shall publish tables specifying the applicable inflation ratios for each calendar quarter.

    ‘(d) SPECIAL RULES- For purposes of this section--

      ‘(1) TREATMENT AS SEPARATE ASSET- In the case of any asset, the following shall be treated as a separate asset:

        ‘(A) a substantial improvement to property,

        ‘(B) in the case of stock of a corporation, a substantial contribution to capital, and

        ‘(C) any other portion of an asset to the extent that separate treatment of such portion is appropriate to carry out the purposes of this section.

      ‘(2) Assets which are not indexed assets throughout holding period-

        ‘(A) IN GENERAL- The applicable inflation ratio shall be appropriately reduced for calendar months at any time during which the asset was not an indexed asset.

        ‘(B) CERTAIN SHORT SALES- For purposes of applying subparagraph (A), an asset shall be treated as not an indexed asset for any short sale period during which the taxpayer or the taxpayer’s spouse sells short property substantially identical to the asset. For purposes of the preceding sentence, the short sale period begins on the day after the substantially identical property is sold and ends on the closing date for the sale.

      ‘(3) TREATMENT OF CERTAIN DISTRIBUTIONS- A distribution with respect to stock in a corporation which is not a dividend shall be treated as a disposition.

      ‘(4) SECTION CANNOT INCREASE ORDINARY LOSS- To the extent that (but for this paragraph) this section would create or increase a net ordinary loss to which section 1231(a)(2) applies or an ordinary loss to which any other provision of this title applies, such provision shall not apply. The taxpayer shall be treated as having a long-term capital loss in an amount equal to the amount of the ordinary loss to which the preceding sentence applies.

      ‘(5) ACQUISITION DATE WHERE THERE HAS BEEN PRIOR APPLICATION OF SUBSECTION (a)(1) WITH RESPECT TO THE TAXPAYER- If there has been a prior application of subsection (a)(1) to an asset while such asset was held by the taxpayer, the date of acquisition of such asset by the taxpayer shall be treated as not earlier than the date of the most recent such prior application.

      ‘(6) COLLAPSIBLE CORPORATIONS- The application of section 341(a) (relating to collapsible corporations) shall be determined without regard to this section.

    ‘(e) CERTAIN CONDUIT ENTITIES-

      ‘(1) REGULATED INVESTMENT COMPANIES; REAL ESTATE INVESTMENT TRUSTS; COMMON TRUST FUNDS-

        ‘(A) IN GENERAL- Stock in a qualified investment entity shall be an indexed asset for any calendar month in the same ratio as the fair market value of the assets held by such entity at the close of such month which are indexed assets bears to the fair market value of all assets of such entity at the close of such month.

        ‘(B) RATIO OF 90 PERCENT OR MORE- If the ratio for any calendar month determined under subparagraph (A) would (but for the subparagraph) be 90 percent or more, such ratio for such month shall be 100 percent.

        ‘(C) RATIO OF 10 PERCENT OR LESS- If the ratio for any calendar month determined under subparagraph (A) would (but for this subparagraph) be 10 percent or less, such ratio for such month shall be zero.

        ‘(D) VALUATION OF ASSETS IN CASE OF REAL ESTATE INVESTMENT TRUSTS- Nothing in this paragraph shall require a real estate investment trust to value its assets more frequently than once each 36 months (except where such trust ceases to exist). The ratio under subparagraph (A) for any calendar month for which there is no valuation shall be the trustee’s good faith judgment as to such valuation.

        ‘(E) QUALIFIED INVESTMENT ENTITY- For purposes of this paragraph, the term ‘qualified investment entity’ means--

          ‘(i) a regulated investment company (within the meaning of section 851),

          ‘(ii) a real estate investment trust (within the meaning of section 856), and

          ‘(iii) a common trust fund (within the meaning of section 584).

      ‘(2) PARTNERSHIPS- In the case of a partnership, the adjustment made under subsection (a) at the partnership level shall be passed through to the partners.

      ‘(3) SUBCHAPTER S CORPORATIONS- In the case of an electing small business corporation, the adjustment under subsection (a) at the corporate level shall be passed through to the shareholders.

    ‘(f) DISPOSITIONS BETWEEN RELATED PERSONS-

      ‘(1) IN GENERAL- This section shall not apply to any sale or other disposition of property between related persons except to the extent that the basis of such property in the hands of the transferee is a substituted basis.

      ‘(2) RELATED PERSONS DEFINED- For purposes of this section, the term ‘related persons’ means--

        ‘(A) persons bearing a relationship set forth in section 267(b), and

        ‘(B) persons treated as single employer under subsection (b) or (c) of section 414.

    ‘(g) TRANSFERS TO INCREASE INDEXING ADJUSTMENT OR DEPRECIATION ALLOWANCE- If any person transfers cash, debt, or any other property to another person and the principal purpose of such transfer is--

      ‘(1) to secure or increase an adjustment under subsection (a), or

      ‘(2) to increase (by reason of an adjustment under subsection (a)) a deduction for depreciation, depletion, or amortization,

    the Secretary may disallow part or all of such adjustment or increase.

    ‘(h) DEFINITIONS- For purposes of this section--

      ‘(1) NET LEASE PROPERTY DEFINED- The term ‘net lease property’ means leased real property where--

        ‘(A) the term of the lease (taking into account options to renew) was 50 percent or more of the useful life of the property, and

        ‘(B) for the period of the lease, the sum of the deductions with respect to such property which are allowable to the lessor solely by reason of section 162 (other than rents and reimbursed amounts with respect to such property) is 15 percent or less of the rental income produced by such property.

      ‘(2) STOCK INCLUDES INTEREST IN COMMON TRUST FUND- The term ‘stock in a corporation’ includes any interest in a common fund (as defined in section 584(a)).

    ‘(i) REGULATIONS- The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this section.’

    (b) CLERICAL AMENDMENT- This table of sections for part II of subchapter O of such chapter 1 is amended by inserting after the item relating to section 1021 the following new item:

‘Sec. 1022. Indexing of certain assets for purposes of determining gain or loss.’

    (c) ADJUSTMENT TO APPLY FOR PURPOSES OF DETERMINING EARNINGS AND PROFITS- Subsection (f) of section 312 (relating to effect on earnings and profits of gain or loss and of receipt of tax-free distributions) is amended by adding at the end thereof the following new paragraph:

      ‘(3) EFFECT ON EARNINGS AND PROFITS OF INDEXED BASIS- For substitution of indexed basis for adjusted basis in the case of the disposition of certain assets after December 31, 1992, see section 1022(a)(1).’

SEC. 605. INDEXING OF LIMITATION ON CAPITAL LOSSES OF INDIVIDUALS.

    Section 1211 (relating to limitation on capital losses) is amended by adding at the end thereof the following new subsection:

    ‘(c) INDEXATION OF LIMITATION ON NONCORPORATE TAXPAYERS-

      ‘(1) IN GENERAL- In the case of any taxable year beginning in a calendar year after 1993, the $3,000 and $1,500 amounts under subsection (b)(1) shall be increased by an amount equal to--

        ‘(A) such dollar amount, multiplied by

        ‘(B) the applicable inflation adjustment for the calendar year in which the taxable year begins.

      ‘(2) APPLICABLE INFLATION ADJUSTMENT- For purposes of paragraph (1), the applicable inflation adjustment for any calendar year is the percentage (if any) by which--

        ‘(A) the gross national product deflator for the last calendar quarter of the preceding calendar year, exceeds

        ‘(B) the gross national product deflator for the last calendar quarter of 1990.

      For purposes of this paragraph, the term ‘gross national product deflator’ has the meaning given such term by section 1022(c)(3).’

SEC. 606. EXCLUSION OF GAIN FROM SALE OF PRINCIPAL RESIDENCE.

    (a) IN GENERAL- Section 121 (relating to one-time exclusion of gain from sale of principal residence by individual who has attained age 55) is amended to read as follows:

‘SEC. 121. EXCLUSION OF GAIN FROM SALE OF PRINCIPAL RESIDENCE.

    ‘(a) GENERAL RULE- Gross income does not include gain from the sale or exchange of property if such property has been owned and used by the taxpayer as the taxpayer’s principal residence.

    ‘(b) SPECIAL RULES-

      ‘(1) TENANT-STOCKHOLDER IN COOPERATIVE HOUSING CORPORATION- For purposes of this section, if the taxpayer holds stock as a tenant-stockholder (as defined in section 216) in a cooperative housing corporation (as defined in such section), then the use requirements of subsection (a) shall be applied to the house or apartment which the taxpayer was entitled to occupy as such stockholder.

      ‘(2) INVOLUNTARY CONVERSIONS- For purposes of this section, the destruction, theft, seizure, requisition, or condemnation of property shall be treated as the sale of such property.

      ‘(3) PROPERTY USED IN PART AS PRINCIPAL RESIDENCE- In the case of property only a portion of which has been owned and used by the taxpayer as the taxpayer’s principal residence, this section shall apply with respect to so much of the gain from sale or exchange of such property as is determined, under regulations prescribed by the Secretary, to be attributable to the portion of the property so owned and used by the taxpayer.’

    (b) CONFORMING AMENDMENTS-

      (1) Paragraph (3) of section 1033(h) is amended to read as follows:

      ‘(3) For exclusion from gross income of gain from involuntary conversion of principal residence, see section 121.’

      (2) Subsection (l) of section 1034 is amended to read as follows:

    ‘(l) TERMINATION- This section shall not apply to any sale or exchange occurring after December 31, 1992, in taxable years ending after such date.’

      (3) Section 1038 is amended by striking subsection (e) and redesignating subsections (f) and (g) as subsections (e) and (f), respectively.

      (4) Paragraph (7) of section 1250(d) is amended to read as follows:

      ‘(7) DISPOSITION OF PRINCIPAL RESIDENCE- Subsection (a) shall not apply to a disposition of property to the extent used by the taxpayer as the taxpayer’s principal residence (within the meaning of section 121).’

      (5) Subsection (c) of section 6012 is amended by striking ‘one-time exclusion of gain from sale of principal residence by individual who has attained age 55’ and inserting ‘exclusion of gain from sale of principal residence’.

    (c) CLERICAL AMENDMENT- The table of sections for part III of subchapter B of chapter 1 is amended by striking the item relating to section 121 and inserting the following new item:

‘Sec. 121. Exclusion of gain from sale of principal residence.’

SEC. 607. EFFECTIVE DATES.

    (a) IN GENERAL- Except as provided in subsection (b), the amendments made by this subtitle shall apply to sales or exchanges occurring after December 31, 1992, in taxable years ending after such date.

    (b) INDEXING OF LOSS LIMITATION- The amendments made by section 605 shall apply to taxable years beginning after December 31, 1992.

TITLE VII--ENTERPRISE ZONES

SEC. 700. PURPOSE.

    It is the purpose of this title to provide for the establishment of enterprise zones in order to stimulate entrepreneurship, particularly by zone residents, the creation of new jobs, particularly for disadvantaged workers and long-term unemployed individuals, and to promote revitalization of economically distressed areas primarily by providing or encouraging--

      (1) tax relief at the Federal, State, and local levels;

      (2) regulatory relief at the Federal, State, and local levels; and

      (3) improved local services and an increase in the economic stake of enterprise zone residents in their own community and its development, particularly through the increased involvement of private, local, and neighborhood organizations.

Subtitle A--Designation of Enterprise Zones

SEC. 701. DESIGNATION OF ZONES.

    (a) GENERAL RULE- Chapter 80 (relating to general rules) is amended by adding at the end thereof the following new subchapter:

‘Subchapter D--Designation of Enterprise Zones

‘Sec. 7880. Designation.

‘SEC. 7880. DESIGNATION.

    ‘(a) Designation of Zones-

      ‘(1) DEFINITION- For purposes of this title, the term ‘enterprise zone’ means any area--

        ‘(A) which is nominated by one or more local governments and the State or States in which it is located for designation as an enterprise zone (hereinafter in this section referred to as a ‘nominated area’), and

        ‘(B) which the Secretary of Housing and Urban Development, after consultation with--

          ‘(i) the Secretaries of Agriculture, Commerce, Labor, and the Treasury; the Director of the Office of Management and Budget; and the Administrator of the Small Business Administration, and

          ‘(ii) in the case of an area on an Indian reservation, the Secretary of the Interior,

        designates as an enterprise zone.

      ‘(2) AUTHORITY TO DESIGNATE- The Secretary of Housing and Urban Development is authorized to designate enterprise zones in accordance with the provisions of this section.

      ‘(3) Limitations on designations-

        ‘(A) PUBLICATION OF REGULATIONS- Before designating any area as an enterprise zone and not later than 4 months following the date of the enactment of this section, the Secretary of Housing and Urban Development shall prescribe by regulation, after consultation with the officials described in paragraph (1)(B)--

          ‘(i) the procedures for nominating an area, and

          ‘(ii) the procedures for designation as an enterprise zone, including a method for comparing courses of action under subsection (d) proposed for nominated areas, and the other factors specified in subsection (e).

        ‘(B) TIME LIMITATIONS- The Secretary of Housing and Urban Development shall designate nominated areas as enterprise zones only during the 48-month period beginning on the later of--

          ‘(i) the first day of the first month following the month in which the effective date of the regulations described in subparagraph (A) occurs, or

          ‘(ii) June 30, 1992.

        ‘(C) NUMBER OF DESIGNATIONS-

          ‘(i) IN GENERAL- The Secretary of Housing and Urban Development may designate--

            ‘(I) not more than 50 nominated areas as enterprise zones under this section, and

            ‘(II) not more than 15 nominated areas as enterprise zones during the first 12-month period beginning on the date determined under subparagraph (B), not more than 30 by the end of the second 12-month period, not more than 45 by the end of the third 12-month period, and not more than 50 by the end of the fourth 12-month period.

          ‘(ii) MINIMUM DESIGNATION IN RURAL AREAS- Of the areas designated as enterprise zones, at least one-third must be areas that are--

            ‘(I) within a local government jurisdiction or jurisdictions with a population of less than 50,000 (as determined using the most recent census data available);

            ‘(II) outside of a metropolitan statistical area (within the meaning of section 143(k)(2)(B)); or

            ‘(III) determined by the Secretary of Housing and Urban Development, after consultation with the Secretary of Commerce, to be rural areas.

        ‘(D) PROCEDURAL RULES- The Secretary of Housing and Urban Development shall not make any designations under this section unless--

          ‘(i) the local government and the State in which the nominated area is located have the authority to--

            ‘(I) nominate such area for designation as an enterprise zone,

            ‘(II) make the State and local commitments under subsection (d), and

            ‘(III) provide assurances satisfactory to the Secretary of Housing and Urban Development that such commitments will be fulfilled, and

          ‘(ii) a nomination therefor is submitted by such State and local governments in such a manner and in such form, and contains such information, as the Secretary of Housing and Urban Development shall prescribe by regulation.

      ‘(4) NOMINATION PROCESS FOR INDIAN RESERVATIONS- In the case of a nominated area on an Indian reservation, the reservation governing body (as determined by the Secretary of the Interior) shall be deemed to be both the State and local governments with respect to such area.

    ‘(b) TIME PERIOD FOR WHICH DESIGNATION IS IN EFFECT-

      ‘(1) IN GENERAL- Any designation of an area as an enterprise zone shall remain in effect during the period beginning on the date of the designation and ending on the earliest of--

        ‘(A) December 31 of the 24th calendar year following the calendar year in which such date occurs,

        ‘(B) the termination date specified by the State and local governments as provided in the nomination submitted in accordance with subsection (a)(3)(D)(ii),

        ‘(C) such other date as the Secretary of Housing and Urban Development shall specify as a condition of designation, or

        ‘(D) the date upon which the Secretary of Housing and Urban Development revokes such designation.

      ‘(2) REVOCATION OF DESIGNATION- The Secretary of Housing and Urban Development, after consultation with the officials described in subsection (a)(1)(B), may revoke the designation of an area if the Secretary of Housing and Urban Development determines that the State or a local government in which the area is located is not complying substantially with the agreed course of action for the area.

    ‘(c) AREA AND ELIGIBILITY REQUIREMENTS-

      ‘(1) IN GENERAL- The Secretary of Housing and Urban Development may designate a nominated area as an enterprise zone only if it meets the requirements of paragraphs (2) and (3).

      ‘(2) AREA REQUIREMENTS- A nominated area meets the requirements of this paragraph if--

        ‘(A) the area is within the jurisdiction of the local government;

        ‘(B) the boundary of the area is continuous; and

        ‘(C) the area--

          ‘(i) has a population, as determined by the most recent census data available, of not less than--

            ‘(I) 4,000 if any portion of such area (other than a rural area described in subsection (a)(3)(C)(ii)) is located within a metropolitan statistical area (as designated by the Director of the Office of Management and Budget) with a population of 50,000 or more; or

            ‘(II) 1,000 in any other case; or

          ‘(ii) is entirely within an Indian reservation (as determined by the Secretary of the Interior).

      ‘(3) ELIGIBILITY REQUIREMENTS- For purposes of paragraph (1), a nominated area meets the requirements of this paragraph if the State or local governments in which the nominated area is located certifies, and the Secretary of Housing and Urban Development accepts such certification, that--

        ‘(A) the area is one of pervasive poverty, unemployment and general distress;

        ‘(B) the unemployment rate for the area, as determined by the appropriate available data, was not less than 1.5 times the national unemployment rate for the period;

        ‘(C) the poverty rate (as determined by the most recent census data available) for each populous census tract (or where not tracted, the equivalent county division as defined by the Bureau of the Census for the purpose of defining poverty areas) within the area was not less than 1.5 times the national poverty rate for the period to which such data relate; and

        ‘(D) the area meets at least one of the following criteria:

          ‘(i) Not less than 70 percent of the households living in the area have incomes below 80 percent of the median income of households of the local government (determined in the same manner as under section 119(b)(2) of the Housing and Community Development Act of 1974).

          ‘(ii) The population of the area decreased by 20 percent or more between 1970 and 1980 (as determined from the most recent census available).

      ‘(4) ELIGIBILITY REQUIREMENTS FOR RURAL AREAS- For purposes of paragraph (1), a nominated area that is a rural area described in subsection (a)(3)(C)(ii) meets the requirements of paragraph (3) if the State and local governments in which it is located certify and the Secretary, after such review of supporting data as he deems appropriate, accepts such certification, that the area meets--

        ‘(A) the criteria set forth in subparagraphs (A) and (B) of paragraph (3); and

        ‘(B) not less than one of the criteria set forth in the other subparagraphs of paragraph (3).

    ‘(d) REQUIRED STATE AND LOCAL COMMITMENTS-

      ‘(1) IN GENERAL- No nominated area shall be designated as an enterprise zone unless the State and the local government or governments of the jurisdictions in which the nominated area is located agree in writing that, during any period during which the nominated area is an enterprise zone, such governments will follow a specified course of action designed to reduce the various burdens borne by employers or employees in such area.

      ‘(2) COURSE OF ACTION- The course of action under paragraph (1) may include, but is not limited to--

        ‘(A) the reduction or elimination of tax rates or fees applying within the enterprise zone,

        ‘(B) actions to reduce, remove, simplify, or streamline governmental requirements applying within the enterprise zone,

        ‘(C) an increase in the level or efficiency of local services within the enterprise zone, for example, crime prevention, and drug enforcement prevention and treatment,

        ‘(D) involvement in the program by private entities, organizations, neighborhood associations, and community groups, particularly those within the nominated area, including a commitment from such private entities to provide jobs and job training for, and technical, financial or other assistance to, employers, employees, and residents of the nominated area,

        ‘(E) mechanisms to increase equity ownership by residents and employees within the enterprise zone,

        ‘(F) donation (or sale below market value) of land and buildings to benefit low and moderate income people,

        ‘(G) linkages to--

          ‘(i) job training,

          ‘(ii) transportation,

          ‘(iii) education,

          ‘(iv) day care,

          ‘(v) health care, and

          ‘(vi) other social service support,

        ‘(H) provision of supporting public facilities, and infrastructure improvements,

        ‘(I) encouragement of local entrepreneurship; and

        ‘(J) other factors determined essential to support enterprise zone activities and encourage livability or quality of life.

      ‘(3) LATER MODIFICATION OF A COURSE OF ACTION- The Secretary of Housing and Urban Development may by regulation prescribe procedures to permit or require a course of action to be updated or modified during the time that a designation is in effect.

    ‘(e) PRIORITY OF DESIGNATION- In choosing nominated areas for designation, the Secretary of Housing and Urban Development shall give preference to the nominated areas--

      ‘(1) with respect to which the strongest and highest quality contributions have been promised as part of the course of action, taking into consideration the fiscal ability of the nominating State and local governments to provide tax relief,

      ‘(2) with respect to which the nominating State and local governments have provided the most effective and enforceable guarantees that the proposed course of action will actually be carried out during the period of the enterprise zone designation,

      ‘(3) with respect to which private entities have made the most substantial commitments in additional resources and contributions, including the creation of new or expanded business activities, and

      ‘(4) which best exhibit such other factors determined by the Secretary of Housing and Urban Development, including relative distress, as are consistent with the intent of the enterprise zone program and have the greatest likelihood of success.

    ‘(f) GEOGRAPHIC DISTRIBUTION- In making designations, the Secretary of Housing and Urban Development will take into consideration a reasonable geographic distribution of enterprise zones.

    ‘(g) DEFINITIONS- For the purposes of this title--

      ‘(1) GOVERNMENTS- If more than one government seeks to nominate an area as an enterprise zone, any reference to, or requirement of, this section shall apply to all such governments.

      ‘(2) STATE- The term ‘State’ shall also include the Commonwealth of Puerto Rico, the Virgin Islands, Guam, American Samoa, the Commonwealth of the Northern Mariana Islands, and any other possession of the United States.

      ‘(3) LOCAL GOVERNMENT- The term ‘local government’ means--

        ‘(A) any county, city, town, township, parish, village, or other general purpose political subdivision of a State,

        ‘(B) any combination of political subdivisions described in subparagraph (A) recognized by the Secretary of Housing and Urban Development, and

        ‘(C) the District of Columbia.

    ‘(h) CROSS REFERENCES FOR--

‘(1) definitions, see section 1391,

‘(2) treatment of employees in enterprise zones, see section 1392, and

‘(3) treatment of investments in enterprise zones, see sections 1393 and 1394.’.

    (b) CLERICAL AMENDMENT- The table of subchapters for chapter 80 is amended by adding at the end thereof the following new item:

‘SUBCHAPTER D. Designation of enterprise zones.’.

SEC. 702. REPORTING REQUIREMENTS.

    Not later than the close of the second calendar year after the calendar year in which the Secretary of Housing and Urban Development first designates areas as enterprise zones, and at the close of each second calendar year thereafter, the Secretary of Housing and Urban Development shall submit to the Congress a report on the effects of such designation in accomplishing the purposes of this title.

SEC. 703. INTERACTION WITH OTHER FEDERAL PROGRAMS.

    (a) COORDINATION WITH RELOCATION ASSISTANCE- The designation of an enterprise zone under section 7880 of the Internal Revenue Code of 1986 (as added by this title) shall not--

      (1) constitute approval of a Federal or federally assisted program or project (within the meaning of the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970 (42 U.S.C. 4601)); or

      (2) entitle any person displaced from real property located in such zone to any rights or any benefits under such title.

    (b) COORDINATION WITH ENVIRONMENTAL POLICY- Designation of an enterprise zone under section 7880 of the Internal Revenue Code of 1986 shall not constitute a Federal action for purposes of applying the procedural requirements of the National Environmental Policy Act of 1969 (42 U.S.C. 4341) or other provisions of Federal law relating to the protection of the environment.

Subtitle B--Federal Income Tax Incentives

SEC. 711. DEFINITIONS AND REGULATIONS; EMPLOYEE CREDIT; CAPITAL GAIN EXCLUSION; STOCK EXPENSING.

    (a) GENERAL RULE- Chapter 1 (relating to normal tax and surtax rules) is amended by inserting after subchapter T the following new subchapter:

‘Subchapter U--Enterprise Zones

‘Sec. 1391. Definitions and regulatory authority.

‘Sec. 1392. Credit for enterprise zone employees.

‘Sec. 1393. Enterprise zone capital gain.

‘Sec. 1394. Enterprise zone stock.

‘SEC. 1391. DEFINITIONS AND REGULATORY AUTHORITY.

    ‘(a) Enterprise Zone-

      ‘(1) IN GENERAL- For purposes of this subchapter, the term ‘enterprise zone’ means any area which the Secretary of Housing and Urban Development designates pursuant to section 7880(a) as a Federal enterprise zone for purposes of this title.

      ‘(2) TERMINATION OF ENTERPRISE ZONE- An area will cease to constitute an enterprise zone once its designation as such terminates or is revoked under section 7880(b).

    ‘(b) Enterprise Zone Business-

      ‘(1) IN GENERAL- For purposes of this subchapter, the term ‘enterprise zone business’ means an activity constituting the active conduct of a trade or business within an enterprise zone, and with respect to which--

        ‘(A) at least 80 percent of the gross income in each calendar year is attributable to the active conduct of a trade or business within an enterprise zone,

        ‘(B) less than 10 percent of the property (as measured by unadjusted basis) constitutes stocks, securities, or property held for use by customers,

        ‘(C) less than 10 percent of the property constitutes collectibles (as defined in section 408(m)(2)), unless such collectibles constitute property held primarily for sale to customers in the ordinary course of the active trade or business,

        ‘(D) substantially all of the property (whether owned or leased) is located within an enterprise zone, and

        ‘(E) substantially all of the employees work within an enterprise zone.

      ‘(2) RELATED ACTIVITIES TAKEN INTO ACCOUNT- Except as otherwise provided in regulations, all activities conducted by a taxpayer and persons related to the taxpayer shall be treated as one activity for purposes of paragraph (1).

      ‘(3) Special rules-

        ‘(A) RENTAL REAL PROPERTY- For purposes of paragraph (1), real property located within an enterprise zone and held for use by customers other than related persons shall be treated as the active conduct of a trade or business for purposes of paragraph (1)(A) and as not subject to paragraph (1)(B).

        ‘(B) TERMINATION OF ENTERPRISE ZONE BUSINESS- An activity shall cease to be an enterprise zone business if--

          ‘(i) the designation of the enterprise zone in which the activity is conducted terminates or is revoked pursuant to section 7880(b);

          ‘(ii) more than 50 percent (by value) of the activity’s property or services are obtained from related persons other than enterprise zone businesses; or

          ‘(iii) more than 50 percent of the activity’s gross income is attributable to property or services provided to related persons other than enterprise zone businesses.

    ‘(c) Enterprise Zone Property-

      ‘(1) IN GENERAL- For purposes of this subchapter, the term ‘enterprise zone property’ means any property used in the active conduct of an enterprise zone business.

      ‘(2) TERMINATION OF ENTERPRISE ZONE- The treatment of property as enterprise zone property under subparagraph (A) shall not terminate upon the termination or revocation of the designation of the enterprise zone in which the property is located, but instead shall terminate immediately after the first sale or exchange of such property occurring after the expiration or revocation.

    ‘(d) RELATED PERSONS- For purposes of this subchapter, a person shall be treated as related to another person if--

      ‘(1) the relationship of such persons is described in section 267(b) or 707(b)(1), or

      ‘(2) such persons are engaged in trades or businesses under common control (within the meaning of subsections (a) and (b) of section 52).

    For purposes of paragraph (1), in applying section 267(b) or 707(b)(1), ‘33 percent’ shall be substituted for ‘50 percent’.

    ‘(e) REGULATORY AUTHORITY- The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of title VI of the Family and Economic Recovery Act, including--

      ‘(1) providing that Federal tax relief is unavailable to an activity that does not stimulate employment in, or revitalization of, enterprise zones,

      ‘(2) providing for appropriate coordination with other Federal programs that, in combination, might enable activity within enterprise zones to be more than 100 percent subsidized by the Federal government, and

      ‘(3) preventing the avoidance of the rules in this subchapter.

‘SEC. 1392. CREDIT FOR ENTERPRISE ZONE EMPLOYEES.

    ‘(a) GENERAL RULE- In the case of a taxpayer who is an enterprise zone employee, there shall be allowed as a credit against the tax imposed by this subtitle for the taxable year an amount equal to 5 percent of so much of the qualified wages of the taxpayer for the taxable year as does not exceed $10,500.

    ‘(b) DEFINITIONS- For purposes of this section--

      ‘(1) ENTERPRISE ZONE EMPLOYEE- The term ‘enterprise zone employee’ means an individual--

        ‘(A) performing services during the taxable year that are directly related to the conduct of an enterprise zone business,

        ‘(B) substantially all of the services described in paragraph (1)(A) are performed within an enterprise zone, and

        ‘(C) the employer for whom the services described in paragraph (1)(A) are performed is not the Federal government, any State government or subdivision thereof, or any local government.

      ‘(2) WAGES- The term ‘wages’ has the meaning given to such term by subsection (b) of section 3306 (determined without regard to any dollar limitation contained in such subsection).

      ‘(3) QUALIFIED WAGES- The term ‘qualified wages’ means all wages of the taxpayer, to the extent attributable to services described in paragraph (1).

    ‘(c) Limitations-

      ‘(1) PHASE-OUT OF CREDIT- The amount of the credit allowable to a taxpayer under subsection (a) for any taxable year shall not exceed the excess (if any) of--

        ‘(A) $525, over

        ‘(B) 10.5 percent of so much of the taxpayer’s total wages (whether or not constituting qualified wages) as exceeds $20,000.

      ‘(2) PARTIAL TAXABLE YEAR- If designation of an area as an enterprise zone occurs, expires, or is revoked pursuant to section 7880 on a date other than the first or last day of the taxable year of the taxpayer, or in the case of a short taxable year, the limitations specified in subsection (c)(1) shall be adjusted on a pro rata basis (based upon the number of days).

    ‘(d) REDUCTION OF CREDIT TO TAXPAYERS SUBJECT TO ALTERNATIVE MINIMUM TAX- The credit allowed under this section for the taxable year shall be reduced by the amount (if any) of tax imposed by section 55 (relating to the alternative minimum tax) with respect to such taxpayer for such year.

    ‘(e) CREDIT TREATED AS SUBPART C CREDIT- For purposes of this title, the credit allowed under subsection (a) shall be treated as a credit allowed under subpart C of part IV of subchapter A of this chapter.

‘SEC. 1393. ENTERPRISE ZONE CAPITAL GAIN.

    ‘(a) GENERAL RULE- Gross income does not include the amount of any gain constituting enterprise zone capital gain.

    ‘(b) DEFINITION- For purposes of this section--

      ‘(1) IN GENERAL- The term ‘enterprise zone capital gain’ means gain--

        ‘(A) treated as long-term capital gain,

        ‘(B) allocable in accordance with the rules under subsection (b)(5) of section 338 to the sale or exchange of enterprise zone property, and

        ‘(C) properly attributable to periods of use in an enterprise zone business.

      ‘(2) LIMITATIONS- Enterprise zone capital gain does not include any gain attributable to--

        ‘(A) the sale or exchange of property not constituting enterprise zone property with respect to the taxpayer throughout the period of twenty-four full calendar months immediately preceding the sale or exchange,

        ‘(B) any collectibles (as defined in section 408(m)), or

        ‘(C) sales or exchanges to persons controlled by the same interests.

    ‘(c) BASIS- Amounts excluded from gross income pursuant to subsection (a) shall not be applied in reduction to the basis of any property held by the taxpayer.

‘SEC. 1394. ENTERPRISE ZONE STOCK.

    ‘(a) GENERAL RULE- At the election of any individual, the aggregate amount paid by such taxpayer during the taxable year for the purchase of enterprise zone stock on the original issue of such stock by a qualified issuer shall be allowed as a deduction.

    ‘(b) Limitations-

      ‘(1) CEILING- The maximum amount allowed as a deduction under subsection (a) to a taxpayer shall not exceed $100,000 for any taxable year, nor $500,000 during the taxpayer’s lifetime.

        ‘(A) EXCESS AMOUNTS- If the amount otherwise deductible by any person under subsection (a) exceeds the limitation under this paragraph (1)--

          ‘(i) the amount of such excess shall be treated as an amount paid in the next taxable year, and

          ‘(ii) the deduction allowed for any taxable year shall be allocated among the enterprise zone stock purchased by such person in accordance with the purchase price per share.

      ‘(2) RELATED PERSON-

        ‘(A) IN GENERAL- The taxpayer and all individuals related to the taxpayer shall be treated as one person for purposes of the limitations described in subsection (b)(1).

        ‘(B) EXCESS AMOUNTS- The limitations described in subsection (b)(1) shall be allocated among the taxpayer and related persons in accordance with their respective purchases of enterprise zone stock.

      ‘(3) PARTIAL TAXABLE YEAR- If designation of an area as an enterprise zone occurs, expires, or is revoked pursuant to section 7880 on a date other than the first or last day of the taxable year of the taxpayer, or in the case of a short taxable year, the limitations specified in subsection (b)(1) shall be adjusted on a pro rata basis (based upon the number of days).

    ‘(c) DISPOSITIONS OF STOCK-

      ‘(1) GAIN TREATED AS ORDINARY INCOME- Except as otherwise provided in regulations, if a taxpayer disposes of any enterprise zone stock with respect to which a deduction was allowed under subsection (a), the amount realized upon such disposition shall be treated as ordinary income and recognized notwithstanding any other provision of this subtitle.

      ‘(2) Interest charged if disposition within 5 years of purchase-

        ‘(A) IN GENERAL- If a taxpayer disposes of any enterprise zone stock before the end of the 5-year period beginning on the date such stock was purchased by the taxpayer, the tax imposed by this chapter for the taxable year in which such disposition occurs shall be increased by the amount determined under subparagraph (B).

        ‘(B) ADDITIONAL AMOUNT- For purposes of subparagraph (A), the additional amount shall be equal to the amount of interest (determined at the rate applicable under section 6621(a)(2)) that would accrue--

          ‘(i) during the period beginning on the date the stock was purchased by the taxpayer and ending on the date such stock was disposed of by the taxpayer,

          ‘(ii) on an amount equal to the aggregate decrease in tax of the taxpayer resulting from the deduction allowed under this subsection (a) with respect to the stock so disposed of.

    ‘(d) DISQUALIFICATION-

      ‘(1) ISSUER OR STOCK CEASES TO QUALIFY- If a taxpayer elects the deduction under subsection (a) with respect to enterprise zone stock, and either--

        ‘(A) the issuer with respect to which the election was made ceases to be a qualified issuer, or

        ‘(B) the proceeds from the issuance of the taxpayer’s enterprise zone stock fail or otherwise cease to be invested by the issuer in enterprise zone property, then, notwithstanding any provision of this subtitle other than paragraph (2) to the contrary, the taxpayer shall recognize as ordinary income the amount of the deduction allowed under subsection (a) with respect to the issuer’s enterprise zone stock.

      ‘(2) SPECIAL RULES-

        ‘(A) LIQUIDATION- Where enterprise zone property acquired with proceeds from the issuance of enterprise zone stock is sold or exchanged pursuant to a plan of complete liquidation, the treatment described in paragraph (1) shall be inapplicable.

        ‘(B) TERMINATION OF ENTERPRISE ZONE- The treatment of an activity as an enterprise zone business shall not cease for purposes of paragraph (1) solely by reason of the termination or revocation of the designation of the enterprise zone with respect to the activity.

        ‘(C) PARTIAL DISQUALIFICATION- Where some, but not all, of the property acquired by the issuer with the proceeds of enterprise zone stock ceases to constitute enterprise zone property, the treatment described in paragraph (1) shall be modified as follows--

          ‘(i) the total amount recognized as ordinary income by all shareholders of the issuer shall be limited to an amount of deduction allowed up to the unadjusted basis of property ceasing to constitute enterprise zone property,

          ‘(ii) the amount recognized shall be allocated among enterprise zone stock with respect to which the election in subsection (a) was made in the reverse order in which such stock was issued, and

          ‘(iii) the amount recognized shall be apportioned among taxpayers having made the election in subsection (a) in the ratios in which the stock described in paragraph (2)(C)(ii) was purchased.

      ‘(3) ADDITIONAL AMOUNT- If income is recognized pursuant to paragraph (1) at any time before the close of the 5th calendar year ending after the date the enterprise zone stock was purchased, the tax imposed by this chapter with respect to such income shall be increased by an amount equal to the amount of interest (determined at the rate applicable under section 6621(a)(2)) that would accrue--

        ‘(A) during the period beginning on the date the stock was purchased by the taxpayer and ending on the date of the disqualification event described in paragraph (1),

        ‘(B) on an amount equal to the aggregate decrease in tax of the taxpayer resulting from the deduction allowed under this subsection (a) with respect to the stock so disqualified.

    ‘(e) DEFINITIONS- For purposes of this section--

      ‘(1) ENTERPRISE ZONE STOCK- The term ‘enterprise zone stock’ means common stock issued by a qualified issuer, but only to the extent that the amount of proceeds of such issuance are used by such issuer no later than twelve months followed issuance to acquire and maintain an equal amount of newly acquired enterprise zone property.

      ‘(2) QUALIFIED ISSUER-

        ‘(A) IN GENERAL- The term ‘qualified issuer’ means any subchapter C corporation which--

          ‘(i) does not have more than one class of stock,

          ‘(ii) is engaged solely in the conduct of one or more enterprise zone businesses,

          ‘(iii) does not own or lease more than $50,000,000 of total property (including money), as measured by the unadjusted basis of the property, and

          ‘(iv) more than 20 percent of the total voting power and 20 percent of the total value of the stock of such corporation is owned by individuals, partnerships, estates or trusts.

        ‘(B) LIMITATION ON TOTAL ISSUANCES- A qualified issuer may issue no more than an aggregate of $50,000,000 of enterprise zone stock.

        ‘(C) AGGREGATION- For purposes of applying the limitations under paragraph (2), the issuer and all related persons shall be treated as one person.

      ‘(3) AMOUNT PAID- For purposes of subsection (a), the amount ‘paid’ by a taxpayer for any taxable year shall not include the issuance of evidences of indebtedness of the taxpayer (whether or not such indebtedness is guaranteed by another person), nor amounts paid by the taxpayer after the close of the taxable year.

    ‘(f) ISSUANCES IN EXCHANGE FOR PROPERTY- If enterprise zone stock is issued in exchange for property, then notwithstanding any provision of subchapter C of this chapter to the contrary--

      ‘(1) the issuance shall be treated for purposes of this subtitle as the sale of the property at its then fair market value to the corporation, and a contribution to the corporation of the proceeds immediately thereafter in exchange for the enterprise zone stock, and

      ‘(2) the issuer’s basis for the property shall be equal to the fair market value of such property at the time of issuance.

    ‘(g) BASIS ADJUSTMENT- For purposes of this subtitle, if a taxpayer elects the deduction under subsection (a), the taxpayer’s basis (without regard to this subsection) for the enterprise zone stock with respect to such election shall be reduced by the deduction allowed or allowable.

    ‘(h) LIMITATIONS ON ASSESSMENT AND COLLECTION- If a taxpayer elects the deduction under subsection (a) for any taxable year, then--

      ‘(1) the period for assessment and collection of any deficiency attributable to any part of the deduction shall not expire before one year following expiration of such period of the qualified issuer that includes the circumstances giving rise to the deficiency, and

      ‘(2) such deficiency may be assessed before expiration of the period described in paragraph (1) notwithstanding any provisions of this subtitle to the contrary.

    ‘(i) Cross Reference-

‘For treatment of the deduction under subsection (a) for purposes of the alternative minimum tax, see section 56.’.

    (b) TECHNICAL AMENDMENT- Subsection (a) of section 1016 (relating to adjustments to basis) is amended by striking out ‘and’ at the end of paragraph (23); by striking out the period at the end of paragraph (24) and inserting in lieu thereof ‘; and’; and by adding at the end thereof the following new paragraph:

      ‘(25) to the extent provided in section 1394(g), in the case of stock with respect to which a deduction was allowed or allowable under section 1394(a).’.

    (c) CLERICAL AMENDMENT- The table of subchapters for chapter 1 is amended by inserting after the item relating to subchapter T the following new item:

‘SUBCHAPTER U. Enterprise zones.’.

SEC. 712. CORPORATE ALTERNATIVE MINIMUM TAX.

    Section 56(g)(4)(B) (relating to adjustments based on adjusted current earnings of corporations) is amended by adding the following new clause at the end thereof:

          ‘(iii) EXCLUSION OF ENTERPRISE ZONE CAPITAL GAIN- Clause (i) shall not apply in the case of any enterprise zone capital gain (as defined in section 1393(b)), and such gain shall not be included in income for purposes of computing alternative minimum taxable income.’

SEC. 713. ADJUSTED GROSS INCOME DEFINED.

    Section 62(a) (relating to the definition of adjusted gross income) is amended by inserting after paragraph (13) the following new paragraph:

      ‘(14) ENTERPRISE ZONE STOCK- The deduction allowed by section 1394.’.

SEC. 714. EFFECTIVE DATE.

    The amendments made by this subtitle shall apply to taxable years ending after December 31, 1993.

Subtitle C--Regulatory Flexibility

SEC. 721. DEFINITION OF SMALL ENTITIES IN ENTERPRISE ZONE FOR PURPOSES OF ANALYSIS OF REGULATORY FUNCTIONS.

    Section 601 of title 5, United States Code, is amended by--

      (1) striking out ‘and’ at the end of paragraph (5); and

      (2) striking out paragraph (6) and inserting in lieu thereof the following:

      ‘(6) the term ‘small entity’ means--

        ‘(A) a small business, small organization, or small governmental jurisdiction defined in paragraphs (3), (4), and (5) of this section, respectively; and

        ‘(B) any qualified enterprise zone business; any unit of government that nominated an area which the Secretary of Housing and Urban Development designates as an enterprise zone (within the meaning of section 7880 of the Internal Revenue Code of 1986) that has a rule pertaining to the carrying out of any project, activity, or undertaking within such zone; and any not-for-profit enterprise carrying out a significant portion of its activities within such a zone; and

      ‘(7) the term ‘qualified enterprise zone business’ means any person, corporation, or other entity--

        ‘(A) which is engaged in the active conduct of a trade or business within an enterprise zone (within the meaning of section 7880 of the Internal Revenue Code of 1986); and

        ‘(B) for whom at least 50 percent of its employees are qualified employees (within the meaning of section 1392(b)(1) of such Code).’

SEC. 722. WAIVER OR MODIFICATION OF AGENCY RULES IN ENTERPRISE ZONES.

    (a) Chapter 6 of title 5, United States Code, is amended by redesignating sections 611 and 612 as sections 612 and 613, respectively, and inserting the following new section immediately after section 610:

‘Sec. 611. Waiver or modification of agency rules in enterprise zones

    ‘(a) Upon the written request of any government which nominated an area that the Secretary of Housing and Urban Development has designated as an enterprise zone under section 7880 of the Internal Revenue Code of 1986, an agency is authorized, in order to further the job creation, community development, or economic revitalization objectives with respect to such zone, to waive or modify all or part of any rule which it has authority to promulgate, as such rule pertains to the carrying out of projects, activities, or undertakings within such zone.

    ‘(b) Nothing in this section shall authorize an agency to waive or modify any rule adopted to carry out a statute or Executive order which prohibits, or the purpose of which is to protect persons against, discrimination on the basis of race, color, religion, sex, familial status, national origin, age, or handicap.

    ‘(c) A request under subsection (a) shall specify the rule or rules to be waived or modified and the change proposed, and shall briefly describe why the change would promote the achievement of the job creation, community development, or economic revitalization objectives of the enterprise zone. If such a request is made to any agency other than the Department of Housing and Urban Development, the requesting government shall send a copy of the request to the Secretary of Housing and Urban Development at the time the request is made.

    ‘(d) In considering a request, the agency shall weigh the extent to which the proposed change is likely to further job creation, community development, or economic revitalization within the enterprise zone against the effect the change is likely to have on the underlying purposes of applicable statutes in the geographic area which would be affected by the change. The agency shall approve the request whenever it finds, in its discretion, that the public interest which the proposed change would serve in furthering such job creation, community development, or economic revitalization outweighs the public interest which continuation of the rule unchanged would serve. The agency shall not approve any request to waive or modify a rule if that waiver or modification would--

      ‘(1) violate a statutory requirement (including any requirements of the Fair Labor Standards Act of 1938 (52 Stat. 1060; 29 U.S.C. 201 et seq.)); or

      ‘(2) be likely to present a significant risk to the public health, including environmental or occupational health or safety, or of environmental pollution.

    ‘(e) If a request is disapproved, the agency shall inform all the requesting governments, and the Department of Housing and Urban Development, in writing of the reasons therefor and shall, to the maximum extent possible, work with such governments to develop an alternative, consistent with the standards contained in subsection (d).

    ‘(f) Agencies shall discharge their responsibilities under this section in an expeditious manner, and shall make a determination on requests not later than 90 days after their receipt.

    ‘(g) A waiver or modification of a rule under subsection (a) shall not be considered to be a rule, rulemaking, or regulation under chapter 5 of this title. To facilitate reaching its decision on any requested waiver or modification, the agency may seek the views of interested parties and, if the views are to be sought, determine how they should be obtained and to what extent, if any, they should be taken into account in considering the request. The agency shall publish a notice in the Federal Register stating any waiver or modification of a rule under this section, the time such waiver or modification takes effect and its duration, and the scope of applicability of such waiver or modification.

    ‘(h) In the event that an agency proposes to amend a rule for which a waiver or modification under this section is in effect, the agency shall not change the waiver or modification to impose additional requirements unless it determines, consistent with standards contained in subsection (d), that such action is necessary. Such determinations shall be published with the proposal to amend such rule.

    ‘(i) No waiver or modification of a rule under this section shall remain in effect with respect to an enterprise zone after the enterprise zone designation has expired or has been revoked.

    ‘(j) For purposes of this section, the term ‘rule’ means (1) any rule as defined in section 551(4) of this title or (2) any rulemaking conducted on the record after opportunity for an agency hearing pursuant to sections 556 and 557 of this title.’.

    (b) The analysis for chapter 6 of title 5, United States Code, is amended by redesignating the items relating to sections 611 and 612 as items relating to sections 612 and 613, respectively, and by inserting after the item relating to section 610 the following new item:

‘611. Waiver or modification of agency rules in enterprise zones.’.

    (c) Section 601(2) of such title 5 is amended by inserting ‘(except for purposes of section 611’ immediately before ‘means’.

    (d) Section 613 of such title 5, as redesignated by subsection (a), is amended--

      (1) in subsection (a) by inserting ‘(except section 611)’ immediately after ‘chapter’; and

      (2) in subsection (b) by inserting ‘as defined in section 601(2)’ immediately before the period at the end of the first sentence.

SEC. 723. FEDERAL AGENCY SUPPORT OF ENTERPRISE ZONES.

    In order to maximize all agencies’ support of enterprise zones, the Secretary of Housing and Urban Development is authorized to convene regional and local coordinating councils of any appropriate agencies to assist State and local governments to achieve the objectives agreed to in the course of action under section 7880 of the Internal Revenue Code of 1986.

Subtitle D--Establishment of Foreign-Trade Zones in Enterprise Zones

SEC. 731. FOREIGN-TRADE ZONE PREFERENCES.

    (a) PREFERENCE IN ESTABLISHMENT OF FOREIGN-TRADE ZONES IN REVITALIZATION AREAS- In processing applications for the establishment of foreign-trade zones pursuant to an Act ‘To provide for the establishment, operation, and maintenance of foreign-trade zones in ports of entry of the United States, to expedite and encourage foreign commerce, and for other purposes’, approved June 18, 1934 (48 Stat. 998), the Foreign-Trade Zone Board shall consider on a priority basis and expedite, to the maximum extent possible, the processing of any application involving the establishment of a foreign-trade zone within an enterprise zone designated pursuant to section 7880 of the Internal Revenue Code of 1986.

    (b) APPLICATION PROCEDURE- In processing applications for the establishment of ports of entry pursuant to ‘An Act making appropriations for sundry civil expenses of the Government for the fiscal year ending June thirtieth, nineteen hundred and fifteen, and for other purposes’, approved August 1, 1914 (38 Stat. 609), the Secretary of the Treasury shall consider on a priority basis and expedite, to the maximum extent possible, the processing of any application involving the establishment of a port of entry which is necessary to permit the establishment of a foreign-trade zone within an enterprise zone so designated.

    (c) APPLICATION EVALUATION- In evaluating applications for the establishment of foreign-trade zones and ports of entry in connection with enterprise zones so designated, the Foreign-Trade Zone Board and the Secretary of the Treasury shall approve the applications, to the maximum extent practicable, consistent with their respective statutory responsibilities.