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[Congressional Record: December 15, 2000 (House)]
[Page H12406-H12439]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]
[DOCID:cr15de00-45]                         
 
[[pp. H12406-H12439]] CONFERENCE REPORT ON H.R. 4577, DEPARTMENTS OF LABOR, HEALTH AND HUMAN 
 SERVICES, AND EDUCATION, AND RELATED AGENCIES APPROPRIATIONS ACT, 2001

[[Continued from page H12405]]

[[Page H12406]]

                               HOUSE BILL

       No provision. However, H.R. 5542 conforms and enhances the 
     tax incentives for the Round I and Round II empowerment zones 
     and extends their designations through December 31, 2009. The 
     bill also authorizes the designation of nine new empowerment 
     zones (``Round III empowerment zones'').
     Extension of tax incentives for Round I and Round II 
         empowerment zones
       The designation of empowerment zones status for Round I and 
     II empowerment zones (other than the District of Columbia 
     Enterprise Zone) is extended through December 31, 2009. In 
     addition, the 20-percent wage credit is made available in all 
     Round I and II empowerment zones for qualifying wages paid or 
     incurred after December 31, 2001. The credit rate remains at 
     20 percent (rather than being phased down) through December 
     31, 2009, in Round I and Round II empowerment zones.
       In addition, $35,000 (rather than $20,000) of additional 
     section 179 expensing in available for qualified zone 
     property placed in service in taxable years beginning after 
     December 31, 2001, by a qualified business in any of the 
     empowerment zones.\12\ Businesses in the D.C. Enterprise Zone 
     are entitled to the additional section 179 expensing until 
     the termination of the D.C. Enterprise zone designation.
---------------------------------------------------------------------------
     \12\ The additional $35,000 of section 179 expensing is 
     available throughout all areas that are part of a designated 
     empowerment zone, including the non-contiguous ``developable 
     sites'' that were allowed to be part of the designated Round 
     II empowerment zones under the 1997 Act.
---------------------------------------------------------------------------
       Businesses located in Round I empowerment zones (other than 
     the D.C. Enterprise Zone \13\ also are eligible for the more 
     generous tax-exempt bond rules that apply under present law 
     to businesses in the Round II empowerment zones (sec. 
     1394(f)). The bill applies to tax-exempt bonds issued after 
     December 31, 2001. Bonds that have been issued by businesses 
     in Round I zones before January 1, 2002, are not taken into 
     account in applying the limitations on the amount of new 
     empowerment zone facility bonds that can be issued under the 
     bill.
---------------------------------------------------------------------------
     \13\ The present-law rules of sections 1394 and 1400A 
     continue to apply with respect to the D.C. Enterprise Zone.
---------------------------------------------------------------------------
     Nine new empowerment zones
       The Secretaries of HUD and Agriculture are authorized to 
     designate nine additional empowerment zones (``Round III 
     empowerment zones''). Seven of the Round III empowerment 
     zones will be located in urban areas, and two will be located 
     in rural areas.
       The eligibility and selection criteria for the Round III 
     empowerment zones are the same as the criteria that applied 
     to the Round II Round empowerment zones. The Round III 
     empowerment zones must be designated by January 1, 2002, and 
     the tax incentives with respect to the Round III empowerment 
     zones generally are available during the period beginning on 
     January 1, 2002, and ending on December 31, 2009.
       Busineses in the Round III empowerment zones are eligible 
     for the same tax incentives that, under the bill, are 
     available to Round I and Round II empowerment zones (i.e., a 
     20 percent wage credit, an additional $35,000 of section 179 
     expensing, and the enhanced tax-exempt financing benefits 
     presently available to Round II empowerment zones).
     GAO report
       The bill provides that the GAO will audit and report to 
     Congress on January 31, 2004, and again in 2007 and 2010, on 
     the empowerment zone and enterprise community program and its 
     effect on poverty, unemployment, and economic growth within 
     the designated areas.
     Effective date
       The extension of the existing empowerment zone designations 
     is effective after the date of enactment. The extension of 
     the tax benefits to existing empowerment zones (i.e., the 
     expanded wage credit, the additional section 179 expensing, 
     and the more generous tax-exempt bond rules) generally is 
     effective after December 31, 2001. The new Round III 
     empowerment zones must be designated by January 1, 2002, and 
     the tax incentives with respect to the Round III empowerment 
     zones generally are available during the period beginning on 
     January 1, 2002, and ending on December 31, 2009.


                            Senate Amendment

       No provision. However, S. 3152 contains a provision that 
     conforms and enhances incentives of existing empowerment 
     zones. Specifically, the provision extends the designation of 
     empowerment zone status for Round I and II empowerment zones 
     through December 31, 2009. In addition, a 15-percent wage 
     credit is made available in all Round I and II empowerment 
     zones, effective in 2002 (except in the case of the two 
     additional Round I empowerment zones added by the 197 Act, 
     for which the 15-percent wage credit takes effect in 2005 as 
     scheduled under present law). For all the empowerment zones, 
     the 15-percent wage credit expires on December 31, 2009.
       As in the House bill, $35,000 (rather than $20,000) in 
     additional section 179 expensing is made available for 
     qualified zone property placed in service in taxable years 
     beginning after December 31, 2001, by a qualified business in 
     any of the empowerment zones. Similarly, S. 3152 extends to 
     businesses located in Round I empowerment zones the more 
     generous tax-exempt bond rules that apply under present law 
     to businesses in the Round II empowerment zones (sec. 
     1394(f)) for bonds issued after December 31, 2001.
       Businesses located in any empowerment zone also qualify for 
     a zero-percent capital gains rate for gain from the sale of a 
     qualifying zone assets acquired after date of enactment and 
     before January 1, 2010, and held more than five years. Assets 
     that qualify for this incentive are similar to the types of 
     assets that qualify for the present-law zero percent capital 
     gains rate for qualifying D.C. Zone assets. The zero-percent 
     capital gains rate is limited to an aggregate amount not to 
     exceed $25 million of gain per taxpayer. Gain attributable to 
     the period before the date of enactment or after December 31, 
     2014, is not eligible for the zero-percent rate.
       Effective date.--The extension of the existing empowerment 
     zone designations is effective after the date of enactment. 
     The additional section 179 expensing and the more generous 
     tax-exempt bond rules for the existing empowerment zones is 
     effective after December 31,2001. The zero-percent capital 
     gains rate applies to qualifying property purchased after the 
     date of enactment. The 15-percent wage credit generally is 
     effective for qualifying wages paid after December 31, 2001 
     (December 31, 2004 for the two additional Round I empowerment 
     zones).


                          Conference Agreement

       The conference agreement follows H.R. 5542. The conference 
     agreement also provides that the Secretaries of HUD and 
     Agriculture are authorized to designate a replacement 
     empowerment zone for each empowerment zone that becomes a 
     renewal community. The replacement empowerment zone will have 
     the same urban or rural character as the empowerment zone 
     that it is replacing.
     2. Rollover of gain from the sale of qualified empowerment 
         zone investments (sec. 116 of the bill and new sec. 1397B 
         of the Code)


                              Present Law

       In general, gain or loss is recognized on any sale, 
     exchange, or other disposition of property. A taxpayer (other 
     than a corporation) may elect to roll over without payment of 
     tax any capital gain realized upon the sale of qualified 
     small business stock held for more than six months where the 
     taxpayer uses the proceeds to purchase other qualified small 
     business stock within 60 days of the sale of the original 
     stock.


                               House Bill

       No provision. However, H.R. 5542 provides that a taxpayer 
     can elect to roll over capital gain from the sale or exchange 
     of any qualified empowerment zone asset purchased after the 
     date of enactment and held for more than one year (``original 
     zone asset'') where the taxpayer uses the proceeds to 
     purchase other qualifying empowerment zone assets in the same 
     zone (``replacement zone asset'') within 60 days of the sale 
     of the original zone asset. The holding period of the 
     replacement zone asset includes the holding period of the 
     original zone asset, except that the replacement asset must 
     actually be held for more than one year to qualify for 
     another tax-free rollover. The basis of the replacement zone 
     asset is reduced by the gain not recognized on the rollover. 
     However, if the replacement zone asset is qualified small 
     business stock (as defined in sec. 1202), the exclusion under 
     section 1202 would not apply to gain accrued on the original 
     zone asset.\14\ A ``qualified empowerment zone asset'' means 
     an asset that would be a qualified community asset if the 
     empowerment zone were a renewal community (and the asset is 
     acquired after the date of enactment of the bill). Assets in 
     the D.C. Enterprise Zone are not eligible for the tax-free 
     rollover treatment.\15\
---------------------------------------------------------------------------
     \14\ See section 1045 for rollover of qualified small 
     business stock to other small business stock.
     \15\ However, a qualifying D.C. Zone asset held for more than 
     five years is eligible for a 100-percent capital gains 
     exclusion (sec. 1400B).
---------------------------------------------------------------------------
       Effective date.--The provision is effective for qualifying 
     assets purchased after the date of enactment.


                            senate amendment

       No provision.


                          conference agreement

       The conference agreement follows H.R. 5542.
     3. Increased exclusion of gain from the sale of qualifying 
         empowerment zone stock (sec. 117 of the bill and sec. 
         1202 of the Code)


                              Present Law

       Under present law, an individual, subject to limitations, 
     may exclude 50 percent of the gain \16\ from the sale of 
     qualifying small business stock held for more than five years 
     (sec. 1202).
---------------------------------------------------------------------------
     \16\ The portion of the capital gain included in income is 
     subject to a maximum regular tax rate of 28 percent, and 42 
     percent of the excluded gain is a minimum tax preference.
---------------------------------------------------------------------------


                               House Bill

       No provision. However, H.R. 5542 increases the exclusion 
     for small business stock to 60 percent for stock purchased 
     after the date of enactment in a corporation that is a 
     qualified business entity and that is held for more than five 
     years. A ``qualified business entity'' means a corporation 
     that satisfies the requirements of a qualifying business 
     under the empowerment zone rules during substantially all the 
     taxpayer's holding period.
       Effective Date.--The provision is effective for qualified 
     stock purchased after the date of enactment.


                            Senate Amendment

       No provision.


                          Conference Agreement

       The conference agreement follows H.R. 5542.

[[Page H12407]]

C. New Markets Tax Credit (sec. 121 of the bill and new sec. 45D of the 
                                 Code)


                              present law

       Tax incentives are available to taxpayers making 
     investments and loans in low-income communities. For example, 
     tax incentives are available to taxpayers that invest in 
     specialized small business investment companies licensed by 
     the SBA to make loans to, or equity investments in, small 
     businesses owned by persons who are socially or economically 
     disadvantaged.


                               house bill

       No provision. However, H.R. 5542 includes a provision that 
     creates a new tax credit for qualified equity investments 
     made to acquire stock in a selected community development 
     entity (``CDE''). The maximum annual amount of qualifying 
     equity investments is capped as follows:

------------------------------------------------------------------------
                                            Maximum qualifying equity
             Calendar year                         investment
------------------------------------------------------------------------
2001..................................  $1.0 billion
2002-2003.............................  $1.5 billion per year
2004-2005.............................  $2.0 billion per year
2006-2007.............................  $3.5 billion per year
------------------------------------------------------------------------

       The amount of the new tax credit to the investor (either 
     the original purchaser or a subsequent holder) is (1) a five-
     percent credit for the year in which the equity interest is 
     purchased from the CDE and the first two anniversary dates 
     after the interest is purchased from the CDE, and (2) a six 
     percent credit on each anniversary date thereafter for the 
     following four years.\7\ The taxpayer's basis in the 
     investment is reduced by the amount of the credit (other than 
     for purposes of calculating the capital gain exclusion under 
     sections 1202, 1400B, and 1400F). The credit is subject to 
     the general business credit rules.
---------------------------------------------------------------------------
     \17\ Thus, a credit would be available on the date on which 
     the investment is made and for each of the six anniversary 
     dates thereafter.
---------------------------------------------------------------------------
       A CDE is any domestic corporation or partnership (1) whose 
     primary mission is serving or providing investment capital 
     for low-income communities or low-income persons, (2) that 
     maintains accountability to residents of low-income 
     communities by their representation on any governing board or 
     on any advisory board of the CDE, and (3) is certified by the 
     Treasury Department as an eligible CDE.\18\ No later than 120 
     days after enactment, the Treasury Department shall issue 
     regulations that specify objective criteria to be used by the 
     Treasury to allocate the credits among eligible CDEs. In 
     allocating the credits, the Treasury Department will give 
     priority to entities with records of having successfully 
     provided capital or technical assistance to disadvantaged 
     businesses or communities,\19\ as well as to entities that 
     intend to invest substantially all of the proceeds from their 
     investors in businesses in which persons unrelated to the CDE 
     hold the majority of the equity interest.
---------------------------------------------------------------------------
     \18\ A specialized small business investment company and a 
     community development financial institution are treated as 
     satisfying the requirements for a CDE.
     \19\ A record of having successfully provided capital or 
     technical assistance to disadvantaged businesses or 
     communities could be demonstrated by the past actions of the 
     CDE itself or an affiliate (e.g., in the case where a new CDE 
     is established by a nonprofit organization with a history of 
     providing assistance to disadvantaged communities).
---------------------------------------------------------------------------
       If a CDE fails to sell equity interests to investors up to 
     the amount authorized within five years of the authorization, 
     then the remaining authorization is canceled. The Treasury 
     Department can authorize another CDE to issue equity 
     interests for the unused portion. No authorization can be 
     made after 2014.
       A ``qualified equity investment'' is defined as stock or a 
     similar equity interest acquired directly from a CDE in 
     exchange for cash. Substantially all of the investment 
     proceeds must be used by the CDE to make ``qualified low-
     income community investments.'' Qualified low-income 
     community investments include: (1) capital or equity 
     investments in, or loans to, qualified active businesses 
     located in low-income communities,\20\ (2) certain financial 
     counseling and other services specified in regulations to 
     businesses and residents in low-income communities, (3) the 
     purchase from another CDE of any loan made by such entity 
     that is a qualified low income community investment, or (4) 
     an equity investment in, or loans to, another CDE.\21\ 
     Treasury Department regulations will provide guidance with 
     respect to the ``substantially all'' standard.
---------------------------------------------------------------------------
     \20\ Thus, a qualified low-income community investment may 
     include an investment in a qualifying business in which the 
     CDE (or a related party) holds a significant interest. 
     However, as previously mentioned, in allocating the credits 
     among eligible CDEs, the Treasury Department will give 
     priority to CDEs that intend to invest substantially all of 
     the proceeds from their investors in businesses in which 
     persons unrelated to the CDE hold the majority of the equity 
     interest. Persons are related to each other if they are 
     described in sections 267(b) or 707(b)(1).
     \21\ If at least 85 percent of the aggregate gross assets of 
     the CDE are invested (directly or indirectly) in equity 
     interest in, or loans to, qualified active businesses located 
     in low-income communities, then there would be no need to 
     trace the use of the proceeds from the particular stock (or 
     other equity ownership) issuance with respect to which the 
     credit is claimed.
---------------------------------------------------------------------------
       The stock or equity interest cannot be redeemed (or 
     otherwise cashed out) by the CDE for at least seven years. If 
     an entity fails to be a CDE during the seven-year period 
     following the taxpayer's investment, or if the equity 
     interest is redeemed by the issuing CDE during that seven-
     year period, then any credits claimed with respect to the 
     equity interest are recaptured (with interest) and no further 
     credits are allowed.
       A ``low-income community'' is defined as census tracts with 
     either (1) poverty rates of at least 20 percent (based on the 
     most recent census data), or (2) median family income which 
     does not exceed 80 percent of the greater of metropolitan 
     area income or statewide median family income (for a non-
     metropolitan census tract, 80 percent of non-metropolitan 
     statewide median family income). In addition, the Secretary 
     may designate any area within any census tract as a ``low 
     income community'' provided that (1) the boundary of the area 
     is continuous,\22\ (2) the area (if it were a census tract) 
     would satisfy the poverty rate or median income requirements 
     within the targeted area, and (3) an inadequate access to 
     investment capital exists in the area.
---------------------------------------------------------------------------
     \22\ It is intended that the continuous boundary that 
     delineate the portion of the census tract as a ``low-income 
     community'' should be a pre-existing boundary (such as an 
     established neighborhood, political, or geographic boundary).
---------------------------------------------------------------------------
       A ``qualified active business'' is defined as a business 
     which satisfies the following requirements: (1) at least 50 
     percent of the total gross income of the business is derived 
     from the active conduct of trade or business activities in 
     low-income communities; (2) a substantial portion of the use 
     of the tangible property of such business is used in low-
     income communities; (3) a substantial portion of the services 
     performed for such business by its employees is performed in 
     low-income communities; and (4) less than 5 percent of the 
     average aggregate of unadjusted bases of the property of such 
     business is attributable to certain financial property or to 
     collectibles (other than collectibles held for sale to 
     customers). There is no requirement that employees of the 
     business be residents of the low-income community.
       Rental of improved commercial real estate located in a low-
     income community is a qualified active business, regardless 
     of the characteristics of the commercial tenants of the 
     property. The purchase and holding of unimproved real estate 
     is not a qualified active business. In addition, a qualified 
     active business does not include (a) any business consisting 
     predominantly of the development or holding of intangibles 
     for sale or license; or (b) operation of any facility 
     described in sec. 144(c)(6)(B). A qualified active business 
     can include an organization that is organized on a non-profit 
     basis.
       The GAO will audit and report to Congress by January 31, 
     2004, and again in 2007 and 2010, on the new markets tax 
     credit program, including on all qualified community 
     development entities that receive an allocation under the new 
     markets tax credit program.
       Effective date.--The provision is effective for qualified 
     investments made after December 31, 2000.


                            senate amendment

       No provision. However, S. 3152 includes a provision that 
     creates a new markets tax credit is similar to the provision 
     in H.R. 5542. However, under S. 3152, the maximum annual 
     amount of qualifying equity investments is capped as follows:

------------------------------------------------------------------------
                                            Maximum qualifying equity
             Calendar year                         investment
------------------------------------------------------------------------
2002..................................  $1.0 billion
2003-2006.............................  $1.5 billion per year
------------------------------------------------------------------------

       Under S. 3152, if a CDE fails to sell equity interests to 
     investors up to the amount authorized within five years of 
     the authorization, then the remaining authorization is 
     canceled. The Treasury Department can authorize another CDE 
     to issue equity interests for the unused portion. No 
     authorization can be made after 2013.
       Effective date.--The provision is effective for qualified 
     investments made after December 31, 2000.


                          conference Agreement

       The conference agreement follows H.R. 5542. The conference 
     agreement also clarifies that a low-income community can 
     include a possession of the United States \23\ (and thus 
     investments in a U.S. possession may qualify for the new 
     markets tax credit).
---------------------------------------------------------------------------
     \23\ For this purpose, a U.S. possession means Puerto Rico, 
     the Virgin Islands, Guam, the Northern Mariana Islands, and 
     American Samoa.
---------------------------------------------------------------------------

   D. Increase the Low-Income Housing Tax Credit Cap and Make Other 
   Modifications (secs. 131-137 of the bill and sec. 42 of the Code)


                              Present Law

     In general
       The low-income housing tax credit may be claimed over a 10-
     year period for the cost of rental housing occupied by 
     tenants having incomes below specified levels. The credit 
     percentage for newly constructed or substantially 
     rehabilitated housing that is not Federally subsidized is 
     adjusted monthly by the Internal Revenue Service so that the 
     10 annual installments have a present value of 70 percent of 
     the total qualified expenditures. The credit percentage for 
     new substantially rehabilitated housing that is Federally 
     subsidized and for existing housing that is substantially 
     rehabilitated is calculated to have a present value of 30 
     percent qualified expenditures.
     Credit cap
       The aggregate credit authority provided annually to each 
     State is $1.25 per resident,

[[Page H12408]]

     except in the case of projects that also receive financing 
     with proceeds of tax-exempt bonds issued subject to the 
     private activity bond volume limit and certain carry-over 
     amounts.
     Expenditure test
       Generally, the building must be placed in service in the 
     year in which it receives an allocation to qualify for the 
     credit. An exception is provided in the case where the 
     taxpayer has expended an amount equal to 10-percent or more 
     of the taxpayer's reasonably expected basis in the building 
     by the end of the calendar year in which the allocation is 
     received and certain other requirements are met.
     Basis of building eligible for the credit
       Buildings receiving assistance under the HOME investment 
     partnerships act (``HOME'') are not eligible for the enhanced 
     credit for buildings located in high cost areas (i.e., 
     qualified census tracts and difficult development areas). 
     Under the enhanced credit, the 70-percent and 30-percent 
     credit are increased to a 91-percent and 39-percent credit, 
     respectfully.
       Eligible basis is generally limited to the portion of the 
     building used by qualified low-income tenants for residential 
     living and some common areas.
     State allocation plan
       Each State must develop a plan for allocating credits and 
     such plan must include certain allocation criteria including: 
     (1) project location; (2) housing needs characteristics; (3) 
     project characteristics; (4) sponsor characteristics; (5) 
     participation of local tax-exempts; (6) tenant populations 
     with special needs; and (7) public housing waiting lists. The 
     State allocation plan must also give preference to housing 
     projects: (1) that serve the lowest income tenants; and (2) 
     that are obligated to serve qualified tenants for the longest 
     periods.
     Credit administration
       There are no explicit requirements that housing credit 
     agencies perform a comprehensive market study of the housing 
     needs of the low-income individuals in the area to be served 
     by the project, nor that such agency conduct site visits to 
     monitor for compliance with habitability standards.
     Stacking rule
       Authority to allocate credits remains at the State (as 
     opposed to local) government level unless State law provides 
     otherwise.\24\ Generally, credits may be allocated only from 
     volume authority arising during the calendar year in which 
     the building is placed in service, except in the case of: (1) 
     credits claimed on additions to qualified basis; (2) credits 
     allocated in a later year pursuant to an earlier binding 
     commitment made no later than the year in which the building 
     is placed in service; and (3) carryover allocations.
---------------------------------------------------------------------------
     \24\For example, constitutional home rule cities in Illinois 
     are guaranteed their proportionate share of the $1.25 amount, 
     based on their population relative to that of the State as a 
     whole.
---------------------------------------------------------------------------
       Each State annually receives low-income housing credit 
     authority equal to $1.25 per State resident for allocation to 
     qualified low-income projects.\25\ In addition to this $1.25 
     per resident amount, each State's ``housing credit ceiling'' 
     includes the following amounts: (1) the unused State housing 
     credit ceiling (if any) of such State for the preceding 
     calendar year; \26\ (2) the amount of the State housing 
     credit ceiling (if any) returned in the calendar year; \27\ 
     and (3) the amount of the national pool (if any) allocated to 
     such State by the Treasury Department.
---------------------------------------------------------------------------
     \25\A State's population, for these purposes, is the most 
     recent estimate of the State's population released by the 
     Bureau of the Census before the beginning of the year to 
     which the limitation applies. Also, for these purposes, the 
     District of Columbia and the U.S. possessions (i.e., Puerto 
     Rico, the Virgin Islands, Guam, the Northern Marianas and 
     American Samoa) are treated as States.
     \26\ The unused State housing credit ceiling is the amount 
     (if positive) of the previous year's annual credit limitation 
     plus credit returns less the credit actually allocated in 
     that year.
     \27\ Credit returns are the sum of any amounts allocated to 
     projects within a State which fail to become a qualified low-
     income housing project within the allowable time period plus 
     any amounts allocated to a project within a State under an 
     allocation which is canceled by mutual consent of the housing 
     credit agency and the allocation recipient.
---------------------------------------------------------------------------
       The national pool consists of States' unused housing credit 
     carryovers. For each State, the unused housing credit 
     carryover for a calendar year consists of the excess (if any) 
     of the unused State housing credit ceiling for such year over 
     the excess (if any) of the aggregate housing credit dollar 
     amount allocated for such year over the sum of $1.25 per 
     resident and the credit returns for such year. The amounts in 
     the national pool are allocated only to a State which 
     allocated its entire housing credit ceiling for the preceding 
     calendar year, and requested a share in the national pool not 
     later than May 1 of the calendar year. The national pool 
     allocation to qualified States is made on a pro rata basis 
     equivalent to the fraction that a State's population enjoys 
     relative to the total population of all qualified States for 
     that year.
       The present-law stacking rule provides that a State is 
     treated as using its annual allocation of credit authority 
     ($1.25 per State resident) and any returns during the 
     calendar year followed by any unused credits carried forward 
     from the preceding year's credit ceiling and finally any 
     applicable allocations from the National pool.


                               house bill

       No provision. However, H.R. 5542 makes the following 
     changes in the low-income housing credit.
     Credit cap
       The bill increases the per-capita low-income housing credit 
     cap from $1.25 per capita to $1.50 per capita in calendar 
     year 2001 and to $1.75 per capita in calendar year 2002. 
     Beginning in calendar year 2003, the per-capita portion of 
     the credit cap will be adjusted annually for inflation. For 
     small States, a minimum annual cap of $2 million is provided 
     for calendar years 2001 and 2002. Beginning in calendar year 
     2003, the small State minimum is adjusted for inflation.
     Expenditure test
       The bill allows a building which receives an allocation in 
     the second half of a calendar to qualify under the 10-percent 
     test if the taxpayer expends an amount equal to 10-percent or 
     more of the taxpayer's reasonably expected basis in the 
     building within six months of receiving the allocation 
     regardless of whether the 10-percent test is met by the end 
     of the calendar year.
     Basis of building eligible for the credit
       The bill makes three changes to the basis rules of the 
     credit. First, the definition of qualified census tracts for 
     purposes of the enhanced credit is expanded to include any 
     census tracts with a poverty rate of 25 percent or more. 
     Second, the bill extends the credit to a portion of the 
     building used as a community service facility not in excess 
     of 10 percent of the total eligible basis in the building. A 
     community service facility is defined as any facility 
     designed to serve primarily individuals whose income is 60 
     percent or less of area median income. Third, the bill 
     provides that assistance received under the Native American 
     Housing Assistance and Self-Determination Act of 1996 is not 
     taken into account in determining whether a building is 
     Federally subsidized for purposes of the credit. This allows 
     such buildings to qualify for something other than the 30-
     percent credit generally applicable to Federally subsidized 
     buildings.
     State allocation plans
       The bill strikes the plan criteria relating to 
     participation of local tax-exempts, replacing it with two 
     other criteria: tenant populations of individuals with 
     children and projects intended for eventual tenant ownership. 
     It also provides that the present-law criteria relating to 
     sponsor characteristics include whether the project involves 
     the use of existing housing as part of a community 
     revitalization plan. The bill adds a third category of 
     housing projects to the preferential list, for projects 
     located in qualified census tracts which contribute to a 
     concerted community revitalization plan.
     Credit administration
       The bill requires a comprehensive market study of the 
     housing needs of the low-income individuals in the area to be 
     served by the project and a written explanation available to 
     the general public for any allocation not made in accordance 
     with the established priorities and selection criteria of the 
     housing credit agency. They also require site inspections by 
     the housing credit agency to monitor compliance with 
     habitability standards applicable to the project.
     Stacking rule
       The bill modifies the stacking rule so that each State is 
     treated as using its allocation of the unused State housing 
     credit ceiling (if any) from the preceding calendar before 
     the current year's allocation of credit (including any 
     credits returned to the State) and then finally any National 
     pool allocations.
     Effective date
       The provision is generally effective for calendar years 
     beginning after December 31, 2000, and buildings placed-in-
     service after such date in the case of projects that also 
     receive financing with proceeds of tax-exempt bonds subject 
     to the private activity bond volume limit which are issued 
     after such date


                            Senate Amendment

     Credit cap
       No provision. However, S. 3152 increases the annual State 
     credit caps from $1.25 to $1.75 per resident beginning in 
     2001. Also, beginning in 2001 the per capita cap for each 
     State is modified so that small population States are given a 
     minimum of $2 million of annual credit cap. The $1.75 per 
     capita cap and the $2 million amount are indexed for 
     inflation beginning in calendar 2002.
     Expenditure test
       No provision.
     Basis of building eligible for the credit
       The provisions in S. 3152 relating to the treatment of 
     buildings receiving assistance under the Native American 
     Housing Assistance and Self-Determination Act of 1996 is the 
     same as one of the provisions in H.R. 5542.
     State allocation plans
       No provision.
     Credit administration
       No provision.
     Stacking rule
       Same as H.R. 5542.
     Effective date
       The provisions are effective for calendar years beginning 
     after December 31, 2000 and

[[Page H12409]]

     buildings placed-in-service after such date in the case of 
     projects that also receive financing with proceeds of tax-
     exempt bonds which are issued after such date subject to the 
     private activity bond volume limit.


                          Conference Agreement

       The conference agreement follows H.R. 5542.

 E. Accelerate Scheduled Increase in State Volume Limits on Tax-Exempt 
 Private Activity Bonds (sec. 151 of the bill and sec. 146 of the Code)


                              Present Law

       Interest on bonds issued by States and local governments is 
     excluded from income if the proceeds of the bonds are used to 
     finance activities conducted and paid for by the governmental 
     units (sec. 103). Interest on bonds issued by these 
     governmental units to finance activities carried out and paid 
     for by private persons (``private activity bonds'') is 
     taxable unless the activities are specified in the Internal 
     Revenue Code. Private activity bonds on which interest may be 
     tax-exempt include bonds for privately operated 
     transportation facilities (airports, docks and wharves, mass 
     transit, and high speed rail facilities), privately owned 
     and/or provided municipal services (water, sewer, solid waste 
     disposal, and certain electric and heating facilities), 
     economic development (small manufacturing facilities and 
     redevelopment in economically depressed areas), and certain 
     social programs (low-income rental housing, qualified 
     mortgage bonds, student loan bonds, and exempt activities of 
     charitable organizations described in sec. 501(c)(3)).
       The volume of tax-exempt private activity bonds that States 
     and local governments may issue for most of these purposes in 
     each calendar year is limited by State-wide volume limits. 
     The current annual volume limits are $50 per resident of the 
     State or $150 million if greater. The volume limits do not 
     apply to private activity bonds to finance airports, docks 
     and wharves, certain governmentally owned, but privately 
     operated solid waste disposal facilities, certain high speed 
     rail facilities, and to certain types of private activity 
     tax-exempt bonds that are subject to other limits on their 
     volume (qualified veterans' mortgage bonds and certain 
     ``new'' empowerment zone and enterprise community bonds).
       The current annual volume limits that apply to private 
     activity tax-exempt bonds increase to $75 per resident of 
     each State or $225 million, if greater, beginning in calendar 
     year 2007. The increase is, ratably phased in, beginning with 
     $55 per capita or $165 million, if greater, in calendar year 
     2003.


                               House Bill

       No provision. However, H.R. 5542 increases the State volume 
     limits from the greater of $50 per resident or $150 million 
     to the greater of $62.50 per resident or $187.5 million in 
     calendar year 2001. The volume limit will increase further, 
     to the greater of $75 per resident or $225 million in 
     calendar year 2002. Beginning in calendar year 2003, the 
     volume limit will be adjusted annually for inflation.
       Effective date.--The provision is effective beginning in 
     calendar year 2001.


                            Senate Amendment

       No provision. However, S. 3152 increases the present-law 
     annual State private activity bond volume limits to $75 per 
     resident of each State or $225 million (if greater) beginning 
     in calendar year 2001. In addition, the $75 per resident and 
     the $225 million State limit will be indexed for inflation 
     beginning in calendar year 2002.
       Effective date.--The provisions are effective beginning in 
     calendar year 2001.


                          Conference Agreement

       The conference agreement follows H.R. 5542.

F. Extension and Modification to Expensing of Environmental Remediation 
         Costs (sec. 152 of the bill and sec. 198 of the Code)


                              present law

       Taxpayers can elect to treat certain environmental 
     remediation expenditures that would otherwise be chargeable 
     to capital account as deductible in the year paid or incurred 
     (sec. 198). The deduction applies for both regular and 
     alternative minimum tax purposes. The expenditure must be 
     incurred in connection with the abatement or control of 
     hazardous substances at a qualified contaminated site.
       A ``qualified contaminated site'' generally is any property 
     that (1) is held for use in a trade or business, for the 
     production of income, or as inventory; (2) is certified by 
     the appropriate State environmental agency to be located 
     within a targeted area; and (3) contains (or potentially 
     contains) a hazardous substance (so-called ``brownfields''). 
     Targeted areas are defined as: (1) empowerment zones and 
     enterprise communities as designated under present law; (2) 
     sites announced before February 1997, as being subject to one 
     of the 76 Environmental Protection Agency (``EPA'') 
     Brownfields Pilots; (3) any population census tract with a 
     poverty rate of 20 percent or more; and (4) certain 
     industrial and commercial areas that are adjacent to tracts 
     described in (3) above. However, sites that are identified on 
     the national priorities list under the Comprehensive 
     Environmental Response, Compensation, and Liability Act of 
     1980 cannot qualify as targeted areas.
       Eligible expenditures are those paid or incurred before 
     January 1, 2002.


                               house bill

       No provision. However, H.R. 5542 extends the expiration 
     date for eligible expenditures to include those paid or 
     incurred before January 1, 2004.
       In addition, the bill eliminates the targeted area 
     requirement, thereby, expanding eligible sites to include any 
     site containing (or potentially containing) a hazardous 
     substance that is certified by the appropriate State 
     environmental agency. However, expenditures undertaken at 
     sites that are identified on the national priorities list 
     under the Comprehensive Environmental Response, Compensation, 
     and Liability Act of 1980 would continue to not qualify as 
     eligible expenditures.
       By extending and expanding section 198, the bill is not 
     intended to displace the general tax law principle regarding 
     expensing versus capitalization of expenditures which 
     continues to apply to environmental remediation efforts not 
     specifically covered under section 198.
       Effective date.--The provision to extend the expiration 
     date if effective upon the date of enactment. The provision 
     to expand the class of eligible sites is effective for 
     expenditures paid or incurred after the date of enactment.


                            senate amendment

       No provision. However, S. 3152 includes a provision 
     identical to that of the House bill provision.


                          conference agreement

       The conference agreement follows H.R. 5542.

G. Expansion of District of Columbia Homebuyer Tax Credit (sec. 153 of 
                  the bill and sec. 1400C of the Code)


                              present law

       First-time homebuyers of a principal residence in the 
     District of Columbia are eligible for a nonrefundable tax 
     credit of up to $5,000 of the amount of the purchase price. 
     The $5,000 maximum credit applies both to individuals and 
     married couples. Married individuals filing separately can 
     claim a maximum credit of $2,500 each. The credit phases out 
     for individual taxpayers with adjusted gross income between 
     $70,000 and $90,000 ($110,000-$130,000 for joint filers). For 
     purposes of eligibility, ``first-time homebuyer'' means any 
     individual if such individual did not have a present 
     ownership interest in a principal residence in the District 
     of Columbia in the one year period ending on the date of the 
     purchase of the residence to which the credit applies. The 
     credit is scheduled to expire for residences purchased after 
     December 31, 2001.


                               house bill

       No provision. However, H.R. 5542 extends the first-time 
     homebuyer credit for two years (through December 31, 2003).
       Effective date.--The provision is effective on the date of 
     enactment.


                            senate amendment

       No provision. However, S. 3152 includes a provision that 
     extends the first-time homebuyer credit for two years, 
     through December 31, 2003. The provision also extends the 
     phase-out range for married individuals filing a joint return 
     so that it is twice that of individuals. Thus, under the 
     provision, the District of Columbia homebuyer credit is 
     phased out for joint filers with adjusted gross income 
     between $140,000 and $180,000.
       Effective date.--The provision is effective for taxable 
     years beginning after December 31, 2000.


                          conference agreement

       The conference agreement follows H.R. 5542.

 H. Extension of D.C. Enterprise Zone (sec. 154 of the bill and secs. 
                   1400, 1400A and 1400B of the Code)


                              present law

       The Taxpayer Relief Act of 1997 designated certain 
     economically depressed census tracts within the District of 
     Columbia as the District of Columbia Enterprise Zone (the 
     ``D.C. Zone''), within which businesses and individual 
     residents are eligible for special tax incentives. The D.C. 
     Zone designation remains in effect for the period from 
     January 1, 1998, through December 31, 2002. In addition to 
     the tax incentives available with respect to a Round I 
     empowerment zone (including a 20-percent wage credit), the 
     D.C. Zone also has a zero-percent capital gains rate that 
     applies to gain from the sale of certain qualified D.C. Zones 
     assets acquired after December 31, 1997 and held for more 
     than five years.
       With respect to the tax-exempt financing incentives, the 
     D.C. Zone generally is treated like a Round I empowerment 
     zone; therefore, the issuance of such bonds is subject to the 
     District of Columbia's annual private activity bond volume 
     limitation. However, the aggregate face amount of all 
     outstanding qualified enterprise zone facility bonds per 
     qualified D.C. Zone business may not exceed $15 million 
     (rather than $3 million, as is the case for Round I 
     empowerment zones).\28\
---------------------------------------------------------------------------
     \28\ Section 1400A(a).
---------------------------------------------------------------------------


                               house bill

       No provision.


                            senate amendment

       No provision. However, S. 3152 includes a provision that 
     extends the D.C. Zone designation through December 31, 2006.


                          conference agreement

       The conference agreement follows S. 3152, except that the 
     D.C. Zone designation is extended for one year (through 
     December 31, 2003).

[[Page H12410]]

   I. Extension and Modification of Enhanced Deduction for Corporate 
    Donations of Computer Technology (sec. 155 of the bill and sec. 
                         170(e)(6) of the Code)


                              present law

       The maximum charitable contribution deduction that may be 
     claimed by a corporation for any one taxable year is limited 
     to 10 percent of the corporation's taxable income for that 
     year (disregarding charitable contributions and with certain 
     other modifications) (sec. 170(b)(2)). Corporations also are 
     subject to certain limitations based on the type of property 
     contributed. In the case of a charitable contribution of 
     short-term gain property, inventory, or other ordinary income 
     property, the amount of the deduction generally is limited to 
     the taxpayer's basis (generally, cost) in the property. 
     However, special rules in the Code provide an augmented 
     deduction for certain corporate contributions. Under these 
     special rules, the amount of the augmented deduction is equal 
     to the lesser of (1) the basis of the donated property plus 
     one-half of the amount of ordinary income that would have 
     been realized if the property had been sold, or (2) twice the 
     basis of the donated property.
       Section 170(e)(6) allows corporate taxpayers an augmented 
     deduction for qualified contributions of computer technology 
     and equipment (i.e., computer software, computer or 
     peripheral equipment, and fiber optic cable related to 
     computer use) to be used within the United States for 
     educational purposes in grades K-12. Eligible donees are: (1) 
     any educational organization that normally maintains a 
     regular faculty and curriculum and has a regularly enrolled 
     body of pupils in attendance at the place where its 
     educational activities are regularly carried on; and (2) tax-
     exempt charitable organizations that are organized primarily 
     for purposes of supporting elementary and secondary 
     education. A private foundation also is an eligible donee, 
     provided that, within 30 days after receipt of the 
     contribution, the private foundation contributes the property 
     to an eligible donee described above.
       Qualified contributions are limited to gifts made no later 
     than two years after the date the taxpayer acquired or 
     substantially completed the construction of the donated 
     property. In addition, the original use of the donated 
     property must commence with the donor or the donee. 
     Accordingly, qualified contributions generally are limited to 
     property that is no more than two years old. Such donated 
     property could be computer technology or equipment that is 
     inventory or depreciable trade or business property in the 
     hands of the donor.
       Donee organizations are not permitted to transfer the 
     donated property for money or services (e.g., a donee 
     organization cannot sell the computers). However, a donee 
     organization may transfer the donated property in furtherance 
     of its exempt purposes and be reimbursed for shipping, 
     installation, and transfer costs. For example, if a 
     corporation contributes computers to a charity that 
     subsequently distributes the computers to several elementary 
     schools in a given area, the charity could be reimbursed by 
     the elementary schools for shipping, transfer, and 
     installation costs.
       The special treatment applies only to donations made by C 
     corporations. S corporations, personal holding companies, and 
     service organizations are not eligible donors.
       The provision is scheduled to expire for contributions made 
     in taxable years beginning after December 31, 2000.


                               house bill

       No provision. However, H.R. 5542 includes a provision that 
     extends the current enhanced deduction for donations of 
     computer technology and equipment through December 31, 2003, 
     and expands the enhanced deduction to include donations to 
     public libraries. H.R. 5542 provides that qualified 
     contributions include gifts made no later than three years 
     after the date the taxpayer acquired or substantially 
     completed the construction of the donated property.
       Effective date.--The provision is effective for 
     contributions made after December 31, 2000.


                            senate amendment

       No provision. However, S. 3152 includes a provision that 
     extends the current enhanced deduction for donations of 
     computer technology and equipment through December 31, 2003. 
     In addition, S. 3152 expands the enhanced deduction to 
     include donations to public libraries.
       Effective date.--The provision is effective upon the date 
     of enactment.


                          conference agreement

       The conference agreement follows H.R. 5542 with a 
     modification that contributions may be made by a person that 
     has reacquired the property (i.e., if a computer manufacturer 
     reacquires the computer from the original user and then 
     contributes it). Such reacquired property must be contributed 
     within 3 years of the date the original construction of the 
     property was substantially completed. The conferees 
     anticipate that for purposes of computing the enhanced 
     deduction for a reacquirer, the Secretary will provide 
     guidance in determining the retail value of donated computers 
     (or other computer technology) in situations in which the 
     number of actual retail sales of used computers similar to 
     those donated is small in relation to the number of such 
     computers that are donated.
       In addition, the conference agreement provides that the 
     Secretary may prescribe by regulation standards to ensure 
     that the donations meet minimum functionality and suitability 
     standards for educational purposes.

J. Treatment of Indian Tribes as Non-Profit Organizations and State or 
    Local Governments For Purposes of the Federal Unemployment Tax 
      (``FUTA'') (sec. 156 of the bill and sec. 3306 of the Code)


                              present law

       Present law imposes a net tax on employers equal to 0.8 
     percent of the first $7,000 paid annually to each employee. 
     The current gross FUTA tax is 6.2 percent, but employers in 
     States meeting certain requirements and having no delinquent 
     loans are eligible for a 5.4 percent credit making the net 
     Federal tax rate 0.8 percent. Both non-profit organizations 
     and State and local governments are not required to pay FUTA 
     taxes. Instead they may elect to reimburse the unemployment 
     compensation system for unemployment compensation benefits 
     actually paid to their former employees. Generally, Indian 
     tribes are not eligible for the reimbursement treatment 
     allowable to non-profit organizations and State and local 
     governments.


                               house bill

       No provision. However, H.R. 5542 provides that an Indian 
     tribe (in including any subdivision, subsidiary, or business 
     enterprise chartered and wholly owned by an Indian tribe) is 
     treated like a non-profit organization or State or local 
     government for FUTA purposes (i.e., given an election to 
     choose the reimbursement treatment).
       Effective date.--The provision generally is effective with 
     respect to service performed beginning on or after the date 
     of enactment. Under a transition rule, service performed in 
     the employ of an Indian tribe is not treated as employment 
     for FUTA purposes if: (1) it is service which is performed 
     before the date of enactment and with respect to which FUTA 
     tax has not been paid; and (2) such Indian tribe reimburses a 
     State unemployment fund for unemployment benefits paid for 
     service attributable to such tribe for such period.


                            senate amendment

       No provision. However, S. 3152 is the same as H.R. 5542.


                          conference agreement

       The conference agreement follows H.R. 5542 and S. 3152.

             TITLE II. MEDICAL SAVINGS ACCOUNTS (``MSAs'')

            (Sec. 201 of the bill and Sec. 220 of the Code)


                              Present Law

       Within limits, contributions to a medical savings account 
     (``MSA'') \29\ are deductible in determining adjusted gross 
     income (``AGI'') if made by an eligible individual and are 
     excludable from gross income and wages for employment tax 
     purposes if made by the employer of an eligible individual. 
     Earnings on amounts in an MSA are not currently taxable. 
     Distributions from an MSA for medical expenses are not 
     taxable. Distributions not used for medical expenses are 
     taxable. In addition, distributions not used for medical 
     expenses are subject to an additional 15-percent tax unless 
     the distribution is made after age 65, death, or disability.
---------------------------------------------------------------------------
     \29\ In general, an MSA is a trust or custodial account 
     created exclusively for the benefit of the account holder and 
     is subject to rules similar to those applicable to individual 
     retirement arrangements. The trustee of an MSA can be a bank, 
     insurance company, or other person who demonstrates to the 
     satisfaction of the Secretary that the manner in which such 
     person will administer the trust will be consistent with 
     applicable requirements.
---------------------------------------------------------------------------
       MSAs are available to self-employed individuals \30\ and to 
     employees covered under an employer-sponsored high deductible 
     plan of a small employer. An employer is a small employer if 
     it employed, on average, no more than 50 employees on 
     business day during either the preceding or the second 
     preceding year.
---------------------------------------------------------------------------
     \30\ Self-employed individuals include more than 2-percent 
     shareholders of S corporations who are treated as partners 
     for purposes of fringe benefit rules pursuant to section 
     1372. Self-employed individuals are eligible for an MSA 
     regardless of the size of the entity for which the individual 
     performs services.
---------------------------------------------------------------------------
       In order for an employee of a small employer to be eligible 
     to make MSA contributions (or to have employer contributions 
     made on his or her behalf), the employee must be covered 
     under an employer-sponsored high deductible health plan (see 
     the definition below) and must not be covered under any other 
     health plan (other than a plan that provides certain 
     permitted coverage).
       Similarly, in order to be eligible to make contributions to 
     an MSA, a self-employed individual must be covered under a 
     high deductible health plan and no other health plan (other 
     than a plan that provides certain permitted coverage). A 
     self-employed individual is not an eligible individual (by 
     reason of being self-employed) if the high deductible plan 
     under which the individual is covered is established or 
     maintained by an employer of the individual (or the 
     individual's spouse).
       The maximum annual contribution that can be made to an MSA 
     for a year is 65 percent of the deductible under the high 
     deductible plan in the case of individual coverage and 75 
     percent of the deductible in the case of family coverage.
       A high deductible plan is a health plan with an annual 
     deductible of at least $1,550

[[Page H12411]]

     and no more than $2,350 in the case of individual coverage 
     and at least $3,100 and no more than $4,650 in the case of 
     family coverage. In addition, the maximum out-of-pocket 
     expenses with respect to allowed costs (including the 
     deductible) must be no more than $3,100 in the case of 
     individual coverage and no more than $5,700 in the case of 
     family coverage.\31\ A plan does not fail to qualify as a 
     high deductible plan merely because it does not have a 
     deductible for preventive care as required by State law. A 
     plan does not qualify as a high deductible health plan if 
     substantially all of the coverage under the plan is for 
     permitted coverage. In the case of a self-insured plan, the 
     plan must in fact be insurance (e.g., there must be 
     appropriate risk shifting) and not merely a reimbursement 
     arrangement.
---------------------------------------------------------------------------
     \31\ These dollar amounts are for 2000. These amounts are 
     indexed for inflation in $50 increments.
---------------------------------------------------------------------------
       The number of taxpayers benefiting annually from an MSA 
     contribution is limited to a threshold level (generally 
     750,000 taxpayers). If it is determined in a year that the 
     threshold level has been exceeded (called a ``cut-off'' year) 
     then, in general, for succeeding years during the 4-year 
     pilot period 1997-2000, only those individuals who (1) made 
     an MSA contribution or had an employer MSA contribution for 
     the year or a preceding year (i.e., are active MSA 
     participants) or (2) are employed by a participating 
     employer, is eligible for an MSA contribution. In determining 
     whether the threshold for any year has been exceeded. MSAs of 
     individuals who were not covered under a health insurance 
     plan for the six month period ending on the date on which 
     coverage under a high deductible plan commences would not be 
     taken into account.\32\ However, if the threshold level is 
     exceeded in a year, previously uninsured individuals are 
     subject to the same restriction on contributions in 
     succeeding years as other individuals. That is, they would 
     not be eligible for an MSA contribution for a year following 
     a cut-off year unless they are an active MSA participant 
     (i.e., had an MSA contribution for the year or a preceding 
     year) or are employed by a participating employer.
---------------------------------------------------------------------------
     \32\ permitted coverage does not constitute coverage under a 
     health insurance plan for this purpose.
---------------------------------------------------------------------------
       The number of MSAs established has not exceeded the 
     threshold level.
       After December 31, 2000, no new contributions may be made 
     to MSAs except by or on behalf of individuals who previously 
     had MSA contributions and employees who are employed by a 
     participating employer. An employer is a participating 
     employer if (1) the employer made any MSA contributions for 
     any year to an MSA on behalf of employees or (2) at least 20 
     percent of the employees covered under a high deductible plan 
     made MSA contributions of at least $100 in the year 2000.
       Self-employed individuals who made contributions to an MSA 
     during the period 1997-2000 also may continue to make 
     contributions after 2000.


                               House Bill

       No provision. However, H.R. 5542 extends the MSA program 
     through 2002. The same rules that apply to the limit on MSAs 
     for 1999 apply to 2000 and 2001. Thus, for example, the 
     threshold level in those years is 750,000 taxpayers.
       Effective date.--The provision is effective on the date of 
     enactment.


                            Senate Amendment

       No provision.


                          Conference Agreement

       The conference report follows H.R. 5542, except that MSAs 
     are renamed as Archer MSAs. The conference agreement 
     clarifies that, as under present law, the cap and reporting 
     requirements do not apply for 2000.

     TITLE III. ADMINISTRATIVE AND TECHNICAL CORRECTIONS PROVISIONS

                 Subtitle A. Administrative Provisions

 A. Exempt Certain Reports From Elimination Under the Federal Reports 
       Elimination and Sunset Act of 1995 (sec. 301 of the bill)


                              present law

       Section 303 of the Federal Reports Elimination and Sunset 
     Act of 1995 eliminates many periodic Federal reporting 
     requirements, effective May 15, 2000.


                               house bill

       No provision. However, H.R. 5542 exempts certain reports 
     from elimination and sunset pursuant to the Federal Reports 
     Elimination and Sunset Act of 1995.


                            senate amendment

       No provision.


                          conference agreement

       The conference agreement follows H.R. 5542.

   B. Extension of Deadlines for IRS Compliance With Certain Notice 
 Requirements (sec. 302 of the bill and secs. 6631 and 6751(a) of the 
                                 Code)


                              present law

       The Internal Revenue Service Restructuring and Reform Act 
     of 1998 (``IRS Restructing Act of 1998'') imposed several 
     notice requirements relating to penalties, interest and 
     installment agreements. Section 6715 of the Code, added by 
     section 3306 of the IRS Restructing Act of 1998, requires 
     that each notice imposing a penalty include the name of the 
     penalty, the Code section under which the penalty is imposed, 
     and a computation of the penalty,\33\ This requirement 
     applies to notices issued, and penalties assessed, after 
     December 31, 2000.\34\
---------------------------------------------------------------------------
     \33\ Sec. 6715(a).
     \34\ P.L. 105-206, sec. 3306.
---------------------------------------------------------------------------
       Section 6631 of the Code, added by section 3308 of the IRS 
     Restructuring Act of 1998, requires that every IRS notice 
     sent to an individual taxpayer that includes an amount of 
     interest required to be paid by the taxpayer also include a 
     detailed computation of the interest charged and a citation 
     of the Code section under which such interest is imposed. The 
     provision is effective for notices issued after December 31, 
     2000.
       Section 3506 of the IRS Restructuring Act of 1998 requires 
     the IRS to send every taxpayer in an installment agreement an 
     annual statement of the initial balance owed, the payments 
     made during the year, and the remaining balance. The 
     provision became effective on July 1, 2000.


                               house bill

       No provision. However, H.R. 5542 extend the deadlines for 
     complying with the penalty, interest, and installment 
     agreement notice requirements. Specifically, the annual 
     installment agreement notice requirement is extended from 
     July 1, 2000, to September 1, 2001. The deadlines for 
     complying with the notice requirements relating to the 
     computation of penalties and interest \35\ are both extended 
     to June 30, 2001. In addition, for penalty notices issued 
     after June 30, 2001, and before July 1, 2003, the notice 
     requirements will be treated as met if the notice contains a 
     telephone number at which the taxpayer can request a copy of 
     the taxpayer's assessment and payment history with respect to 
     such penalty. Similarly, for interest notices issued after 
     June 30, 2001, and before July 1, 2003, the notice 
     requirements will be treated as met if such notice contains a 
     telephone number at which the taxpayer can request a copy of 
     the taxpayer's payment history relating to interest amounts 
     included in such notice.
---------------------------------------------------------------------------
     \35\ Secs. 6715(a) and 6631.
---------------------------------------------------------------------------
       Effective date.--The provision is effective on the date of 
     enactment.


                            Senate amendment

       No provision.


                          Conference agreement

       The conference agreement follows H.R. 5542.

 C. Extension of Authority for Undercover Operations (sec. 303 of the 
                    bill and sec. 7608 of the Code)


                              present law

       The Anti-Drug Abuse Act of 1988 exempted IRS undercover 
     operations from the otherwise applicable statutory 
     restrictions controlling the use of Government funds (which 
     generally provide that all receipts must be deposited in the 
     general fund of the Treasury and all expenses be paid out of 
     appropriated funds). In general, the exemption permits the 
     IRS to ``churn'' the income earned by an undercover operation 
     to pay additional expenses incurred in the undercover 
     operation. The IRS is required to conduct a detailed 
     financial audit of large undercover operations in which the 
     IRS is churning funds and to provide an annual audit report 
     to the Congress on all such large undercover operations. The 
     exemption originally expired on December 31, 1989, and was 
     extended by the Comprehensive Crime Control Act of 1990 to 
     December 31, 1991. In the Taxpayer Bill of Rights II (Public 
     Law 104-168), the authority to churn funds from undercover 
     operations was extended for five years, through 2000.


                               house bill

       No provision. However, H.R. 5542 extends the authority of 
     the IRS to ``churn'' the income earned from undercover 
     operations for an additional five years, through 2005.
       Effective date.--The provision is effective on the date of 
     enactment.


                            Senate amendment

       No provision.


                          conference agreement

       The conference agreement follows H.R. 5542.

D. Competent Authority and Pre-Filing Agreements (sec. 304 of the bill 
          and secs. 6103, 6110, and new sec. 6105 of the Code)


                              present law

     Section 6103
       Section 6103 of the Code sets forth the general rule that 
     returns and return information are confidential. A return is 
     any tax return, information return, declaration of estimated 
     tax, or claim for refund filed under the Code on behalf of or 
     with respect to any person. The term return also includes any 
     amendment or supplement, including supporting schedules or 
     attachments or lists, which are supplemental to or are part 
     of a filed return. Return information is defined broadly. It 
     includes the following information:
       A taxpayer's identity, the nature, source or amount of 
     income, payments, receipts, deductions, exemptions, credits, 
     assets, liabilities, net worth, tax liability, tax withheld, 
     deficiencies, over assessments, or tax payments;
       Whther the taxpayer's return was, is being, or will be 
     examined or subject to other investigations or processing;
       Any other data, received by, recorded by, prepared by, 
     furnished to, or collected by the Secretary with respect to a 
     return or with respect to the determination of the existence, 
     or possible existence, of liability (or

[[Page H12412]]

     the amount thereof) of any person under this title for any 
     tax, penalty, interest, fine, forfeiture, or other 
     imposition, or offense;\36\
---------------------------------------------------------------------------
     \36\ Sec. 6103(b)(2)(A).
---------------------------------------------------------------------------
       Any part of any written determination or any background 
     file document relating to such written determination which is 
     not open to the public inspection under section 6110,\37\ and
---------------------------------------------------------------------------
     \37\ Sec. 6103(b)(2)(B).
---------------------------------------------------------------------------
       Any advance pricing agreement entered into by a taxpayer 
     and the Secretary and any background information related to 
     the agreement or any application for an advance pricing 
     agreement.
       The term ``return information'' does not include data in a 
     form that cannot be associated with or otherwise identify, 
     directly or indirectly, a particular taxpayer.
     Secrecy of information exchanged under tax treaties
       U.S. tax treaties typically contain articles governing the 
     exchange of information. These articles generally provide for 
     the exchange of information between the tax authorities 
     articles generally provide for the exchange of information 
     between the tax authorities of the two countries when such 
     information is necessary for carrying out provisions of the 
     treaty or of the countries' domestic tax laws. Individuals 
     referred to as ``competent authorities'' are designated by 
     each country to make written requests for information and to 
     receive information.\38\
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     \38\ The U.S. competent authority is the Secretary of the 
     Treasury or his delegate. The U.S. competent authority 
     function has been delegated to the Commissioner of Internal 
     Revenue, who has redelegate the authority to the Director, 
     International. On interpretive issues, the latter acts with 
     the concurrence of the Associate Chief Counsel 
     (International) of the IRS.
---------------------------------------------------------------------------
       The exchange of information articles typically cover 
     information relating to taxes to which the treaty applies, 
     but can also apply to other taxes( e.g., excise taxes) not 
     covered by the treaty. Many of the treaties permit the 
     exchange of information even if the taxpayer involved is not 
     a resident of one of the treaty countries. The exchange of 
     information articles may be similar to, or represent a 
     variation on, Article 26 of the 1996 U.S. model income tax 
     treaty.
       Information that is received under the exchange of 
     information articles is subject to secrecy clauses contained 
     in the treaties. In this regard, the country requesting 
     information under the treaties typically is require to treat 
     any information received as secret in the same manner as 
     information obtained under its domestic laws. In general, 
     disclosure is not permitted other than to persons or 
     authorities involved in the administration assessment 
     collection or enforcement of taxes to which the treaty 
     applies. For example, disclosure generally can be made to 
     legislative bodies, such as the tax-writing committees of the 
     Congress, and the General Accounting Officer for purposes of 
     overseeing the administration of U.S. tax laws.
       In addition to the exchange of information articles in U.S. 
     tax treaties, exchange of information provisions are 
     contained in tax information exchange agreements entered into 
     between the United States and another country.\39\ In 
     addition, information may be exchanged pursuant to the 
     Convention on Mutual Administrative Assistance in Tax Matters 
     developed by the Council of Europe and the Organization for 
     Economic Cooperation and Development (the ``Multilateral 
     Mutual Assistance Convention''), which limits the use of 
     exchanged information and permits disclosure of such 
     information only with the prior authorization of the 
     competent authority of the country providing the 
     information.\40\ The United States has also entered into a 
     number of implementation and coordination agreements with 
     possessions that provide for the exchange of tax information. 
     Moreover, the United States has entered into various mutual 
     legal assistance treaties with other countries, some of which 
     can be used to obtain tax information in criminal 
     investigations.
---------------------------------------------------------------------------
     \39\ Sections 274(h)(6)(C) and 927(e)(3) specifically provide 
     the Secretary of the Treasury the authority to enter into tax 
     information exchange agreements. This eliminates the need for 
     Senate ratification, which is required for a tax treaty. In 
     addition, all tax information exchange agreements are 
     required to include specific non-disclosure provisions which 
     provide that ``information received by either country will be 
     disclosed only to persons or authorities (including courts 
     and administrative bodies) involved in the administration or 
     oversight of, or in the determination of appeals in respect 
     of, taxes of the United States, or the beneficiary country 
     and will be used by such persons or authorities only for such 
     purposes.'' Sec. 274(h)(6)C)(i).
     \40\ The U.S. Senate ratified the Multilateral Mutual 
     Assistance Convention, subject to certain reservations, in 
     September 1990. The Multilateral Mutual Assistance Convention 
     entered into force on April 1, 1995, and has been signed by 
     the following countries: Denmark, Finland, Iceland, the 
     Netherlands, Norway, Sweden, and the United States.
---------------------------------------------------------------------------
       Both the confidentiality provisions of section 6103, as 
     well as treaty secrecy provisions can cover return 
     information.
     Section 6110 and section 7121
       Section 6110 of the Code provides for disclosure of written 
     determinations. With certain exceptions, section 6110 makes 
     the text of any written determination the Internal Revenue 
     Service (``IRS'') issues available for pubic inspection. A 
     written determination is any ruling, determination letter, 
     technical advice memorandum, or Chief Counsel advice. The IRS 
     is required to redact certain material before making these 
     documents publicly available.\41\ Among the information to be 
     redacted is information specifically exempted from disclosure 
     by any statute (other than Title 26) that is applicable to 
     the IRS. Once the IRS makes the written determination 
     publicly available, the background file documents associated 
     with such written determination are available for public 
     inspection upon written request. Section 6110 defines 
     ``background file documents'' as any written material 
     submitted by the taxpayer or other requester in support of 
     the request. Background file documents also include any 
     communications between the IRS and persons outside the IRS 
     concerning such written determination that occur before the 
     IRS issues the determination.
---------------------------------------------------------------------------
     \41\ For rulings, determination letters and technical advice 
     memorandum, section 6110(c) provides the following exemptions 
     from disclosure:
     (1) The names, address, and other identifying details of the 
     person to whom the written determination pertains and of any 
     other person, other than a person with respect to whom a 
     notation is made under subsection(d)(1) (relating to third 
     party contacts), identified in the written determination or 
     any background file document;
     (2) Information specifically authorized under criteria 
     established by an Executive order to be kept secret in the 
     interest of national defense or foreign policy, and which is 
     in fact properly classified pursuant to such Executive order;
     (3) Information specifically exempted from disclosure by any 
     statute (other than[Title 26] which is applicable to the 
     Internal Revenue Service;
     (4) Trade secrets and commercial or financial information 
     obtained from a person and privileges or confidential;
     (5) Information the disclosure or which would constitute a 
     clearly unwarranted invasion of personal privacy;
     (6) Information contained in or related to examination, 
     operating, or condition reports prepared by, or on behalf of, 
     or for use of an agency responsible for the regulation or 
     supervision of financial institutions; and
     (7) Geological and geophysical information and data, 
     including maps, concerning wells.
     For Chief Counsel Advice, paragraphs 2 through 7 do not 
     apply, however, material may be deleted in accordance with 
     subsections (b) and(c) of the FOIA (except that in applying 
     Exemption 3 of the FOIA, no statutory provision of the Code 
     is to be taken into account.) See sec. 6110(i)(3).
---------------------------------------------------------------------------
       Section 6110 was added to the Code in 1976. The legislative 
     history provided that a written determination would not be 
     considered a ruling, technical advice memorandum, or 
     determination letter, unless the document satisfies three 
     criteria:
       (1) The document recites the relevant facts;
       (2) The document explains the applicable provisions of law; 
     and
       (3) The document shows the application of law to the 
     facts.\42\
---------------------------------------------------------------------------
     \42\ H.R. Rep. 94-658, at 315 (1976).
---------------------------------------------------------------------------
       The legislative history further provided that section 6110 
     ``does not require public disclosure of a closing agreement 
     entered into between the IRS and a taxpayer which finally 
     determines the taxpayer's tax liability with respect to a 
     taxable year... Your committee understands that a closing 
     agreement is generally the result of a negotiated settlement 
     and, as such, does not necessarily represent the IRS view of 
     the law. Your committee intends, however, that the closing 
     agreement exception is not to be used as a means of avoiding 
     pubic disclosure of determinations which, under present 
     practice, would be issued in a form which would be open to 
     pubic inspection [under the bill].''\43\
---------------------------------------------------------------------------
     \43\ Id. at 316.
---------------------------------------------------------------------------
       Closing agreements are entered into under the authority of 
     section 7121. Closing agreements finally and conclusively 
     settle a tax between the IRS and a taxpayer. Closing 
     agreements may: (1) determine a taxpayer's entire tax 
     liability for a previous tax period; or (2) fix the tax 
     treatment of one or more specific items affecting tax 
     liability or any tax period. Thus, closing agreements may 
     settle the treatment of a specific item for periods ending 
     after the execution of the agreement. A single closing 
     agreement may cover both the determination of a taxpayer's 
     entire tax liability for a previous tax period and fix the 
     tax treatment of specific items for any tax period.
     Freedom of Information Act
       The Freedom of Information Act (``FOIA''), enacted in 1966, 
     established a statutory right to access government 
     information. While the purpose of section 6103 is to restrict 
     access to returns and return information, the basic purpose 
     of the FOIA is to ensure that the public has access to 
     government documents. In general, the FOIA provides that any 
     person has a right of access to Federal agency records, 
     except to the extent that such records (or portions thereof) 
     are protected from disclosure by one of nine exemptions or by 
     one of three special law enforcement record exclusions. 
     Exemption 3 of the FOIA allows the withholding of information 
     prohibited from disclosure by another statue if certain 
     requirements are met.\44\ The right of access is enforceable 
     in court.
---------------------------------------------------------------------------
     \44\ 5 U.S.C. sec. 552(b)(3).
---------------------------------------------------------------------------
     Pending FOIA requests and litigation involving IRS records
       Records covered by treaty secrecy clauses
       A publisher of tax related material and commentary has made 
     a FOIA request for the disclosure of competent authority 
     agreements. The request has been pending since March 14, 
     2000.\45\ The IRS has not denied the

[[Page H12413]]

     request, nor has it produced any documents responsive to the 
     request. At this time, no suit has been filed to compel 
     disclosure of these documents, although such a suit may be 
     brought in the future.
---------------------------------------------------------------------------
     \45\ The initial FOIA request of March 14, 2000, covered all 
     competent authority agreements executed for the United States 
     from January 1, 1990, to date. In response to a request from 
     the Department of Treasury, by letter dated April 17, 2000, 
     the FOIA request was narrowed to cover competent authority 
     agreements executed between 1997 and 1999. The right to 
     pursue the 1990 through 1996 agreements, however, was 
     reserved.
---------------------------------------------------------------------------
       In connection with a separate request, the IRS was sued 
     under the FOIA to compel disclosure of Field Service Advice 
     memoranda (``FSAs'').\46\ FSAs are prepared by attorneys in 
     the IRS National Office of the Office of Chief Counsel. They 
     are prepared in response to requests from IRS field personnel 
     for legal guidance, usually with respect to issues relating 
     to a particular taxpayer. FSAs usually contain a statement of 
     issues, facts, legal analysis and conclusions. The primary 
     purpose of FSAs is to ensure that IRS field personnel apply 
     the law correctly and uniformly. The D.C. Circuit determined 
     that FSAs are subject to disclosure. However, the court 
     remanded the case to district court to address assertions of 
     privilege, including those based on treaty secrecy. A 
     decision on this issue by the district court is still 
     pending.\47\
---------------------------------------------------------------------------
     \46\ Tax Analysts v. IRS, 117 F.3d 607 (D.C. Cir. 1997).
     \47\ Tax Analysts v. IRS, No. 94-CV-923 (GK) (D.D.C.).
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       Pre-filing agreements
       On February 11, 2000, the IRS issued Notice 2000-12, in 
     which the IRS established a pilot program for ``Pre-filing 
     Agreements.'' Under this program, large businesses may 
     request a review and resolution of specific issues relating 
     to tax returns they expect to file between September and 
     December of 2000. The purpose of the program is to enable 
     taxpayers and the IRS to resolve issues that are likely to be 
     dispusted in post-filing audits. Examples of such issues 
     include: (1) asset valuation and the allocation of a 
     business's purchase or sale price among the assets acquired 
     or sold; (2) the identification and documentation of hedging 
     transactions; and (3) the determination of ``market'' for 
     taxpayers using the lower of cost or market method of 
     inventory valuation in situations involving the inactive 
     markets. The program is intended to address issues for which 
     the law is settled.
       In Notice 2000-12, the IRS stated that pre-filing 
     agreements are closing agreements entered into pursuant to 
     section 7121. As such, the notice provides that the 
     information generated or received by the IRS during the pre-
     filing agreement process constitutes return information. The 
     notice further provides that pre-filing agreements are not 
     written determinations as defined in section 6110, nor are 
     they subject to disclosure under the FOIA.


                               House Bill

       No provision. However, H.R. 5542 affirms that closing and 
     similar agreements, and information exchanged and agreements 
     reached pursuant to a tax treaty, are confidential. Further, 
     the provision clarifies that such protected documents are not 
     to be disclosed under the FOIA or section 6110.
     Clarification that return information includes closing 
         agreements and similar dispute resolution agreements
       Protection for closing agreements, pre-filing agreements 
           and similar agreements not containing an exposition of 
           the tax law
       The bill provides that agreements entered into under 
     section 7121 or similar agreements are confidential return 
     information. Similar agreements are intended to include 
     negotiated agreements that (1) are the result of an 
     alternative dispute resolution or dispute avoidance process 
     relating to liability of any person under the Code for any 
     tax, penalty, interest, fine or forfeiture or other 
     imposition or offense and (2) do not establish, set forth, or 
     resolve the government's interpretation of the relevant tax 
     law. This is not meant to preclude citation, or repetition 
     of, the Code, Treasury regulations, or other published rules.
       It is intended that pre-filing agreements be covered by 
     this provision. It is the understanding of the conferees that 
     pre-filing agreements do not explain the applicable 
     provisions of law or otherwise contain any exposition of the 
     tax law or the position of the IRS. In addition, it is not 
     intended that the closing and similar agreement exception be 
     used as a means of avoiding public disclosure of 
     determinations that, under present law, would be issued in a 
     form that would be open to public inspection. Thus, technical 
     advice memoranda, chief counsel advice or other material 
     clearly available to the public under present law section 
     6110, would not be exempt from disclosure by virtue of the 
     fact that such material is contained in a background file for 
     a closing agreement. For example, if a revenue agent seeks 
     technical advice in connection with a pre-filing agreement, 
     such technical advice would remain subject to the 
     requirements of section 6110. Since the pre-filing agreement 
     program involves only settled issues of law, it is the 
     understanding of the conferees that documents of this nature 
     generally would not be generated in the pre-filing agreement 
     process.
       The provision is not intended to foreclose the disclosure 
     of tax-exempt organization closing agreements to the extent 
     such disclosure is authorized under section 6104.\48\ Since 
     section 6103 permits the disclosure of return information as 
     authorized by title 26, a disclosure authorized by section 
     6104 is permissible, notwithstanding the fact that a closing 
     agreement is return information.
---------------------------------------------------------------------------
     \48\ The D.C. Circuit recently remanded to the district court 
     for factual development the issue of whether the closing 
     agreement in that case was submitted in support of an 
     exemption application, and therefore, subject to disclosure 
     under section 6104. Tax Analysts v. IRS, 214 F.3d 179 (D.C. 
     Cir 2000), vacating and remanding 99-2 U.S.T.C. (CCH) 794 
     (D.D.C. 1999).
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       Report on pre-filing agreement program
       It is intended that the Secretary make publicly available 
     an annual report relating to the pre-filing agreement program 
     operations for the preceding calendar year. The annual 
     reporting requirement is for five years, or the duration of 
     the program, whichever is shorter. The report is to include 
     (1) the number of pre-filing agreements completed, (2) the 
     number of applications received, (3) the number of 
     applications withdrawn, (4) the types of issues which are 
     resolved by completed agreements, (5) whether the program is 
     being utilized by taxpayers who were previously subject to 
     audit by the IRS, (6) the average length of time required to 
     complete an agreement, (7) the number, if any, and subject of 
     technical advice and chief counsel advice memoranda issued to 
     address issues arising in connection with any pre-filing 
     agreement, (8) any model agreements,\49\ and (9) any other 
     information the Secretary deems appropriate. The first 
     report, covering the calendar year 2000, is to be issued no 
     later than March 30, 2001. The information required for the 
     annual report is subject to the restrictions of section 6103. 
     Therefore, the Secretary will disclose information only in a 
     form that cannot be associated with or otherwise identify, 
     directly or indirectly, a particular taxpayer. The Joint 
     Committee on Taxation periodically may review pre-filing 
     agreements to determine whether they contain legal 
     interpretations that should be disclosed to the public.
---------------------------------------------------------------------------
     \49\ See e.g., Appendix A of Rev. Proc. 2000-38 which is a 
     model ``Closing Agreement on Final Determination Covering 
     Specific Matters'' regarding method of accounting for 
     distributor commissions. Rev. Proc. 2000-38, 2000-40 I.R.B. 
     314-315 (October 2, 2000). That model agreement does not 
     identify any particular taxpayer but sets forth the substance 
     of the agreement.
---------------------------------------------------------------------------
     Clarification that information protected by treaty is 
         confidential
       Protection for agreements and information exchanged 
           pursuant to tax treaty
       The provision adds a new Code section 6105, which provides 
     that tax convention information, with limited exceptions, 
     cannot be disclosed. Thus, the provision confirms that 
     agreements concluded under, and information received pursuant 
     to, a tax convention are confidential and can only be 
     disclosed as provided in such tax convention.
       Under the provision, a tax convention is defined to include 
     any income tax or gift and estate tax convention, or any 
     other convention or bilateral agreement (including 
     multilateral conventions and agreements and any agreement 
     with a possession of the United States) providing for the 
     avoidance of double taxation, the prevention of fiscal 
     evasion, nondiscrimination with respect to taxes, the 
     exchange of tax relevant information with the United States, 
     or mutual assistance in tax matters.
       It is the understanding of the conferees that competent 
     authority agreements (also referred to as mutual agreements) 
     generally do not contain an explanation of the law or 
     application of law to facts. Instead, such agreements are 
     negotiated arrangements to resolve issues of double taxation. 
     Thus, the term tax convention information for purposes of the 
     provision includes: (1) any agreement entered into with the 
     competent authority of one or more foreign governments 
     pursuant to a tax convention; (2) an application for relief 
     under a tax convention (sought by either a taxpayer or 
     another competent authority); (3) any background information 
     related to such agreement or application; (4) documents 
     implementing such agreement; and (5) any other information 
     exchanged pursuant to a tax convention that is treated as 
     confidential or secret under such tax convention. The 
     conferees intend that tax convention information would 
     include documents and any other information that reflects tax 
     convention information, including the association of a 
     particular treaty partner with a specific issue or matter.
       The general rule that tax convention information cannot be 
     disclosed does not apply to the disclosure of tax convention 
     information to persons or authorities (including courts and 
     administrative bodies) that are entitled to disclosure under 
     the tax convention. It also does not apply to any generally 
     applicable procedural rules regarding applications for relief 
     under a tax convention. This exception is intended to ensure 
     that there is no restriction on the release by the Secretary 
     of publicly available procedural rules concerning matters 
     such as how or when to make a request for competent authority 
     assistance. Thus, certain material generated by IRS, i.e., 
     its Competent Authority procedures (primarily reflected in 
     Rev. Proc. 96-13), or similar material produced by a treaty 
     partner (for example, an Information Circular produced and 
     published by the Canadian tax authority) may be made 
     available to the public. The general rule does not apply to 
     the disclosure of information not relating to a particular 
     taxpayer if, after consultation with the parties to a tax 
     convention, the Secretary determines that such disclosure 
     would not impair tax administration. This is consistent with 
     current practice. An example of a general agreement that 
     could be disclosed under this provision is the agreement 
     between the competent authorities of Mexico and the United 
     States regarding the maquiladora industry. That agreement, 
     which was not taxpayer specific, was

[[Page H12414]]

     publicized by press release IR-INT-1999-13. The conferees 
     intend that the ``impairment of tax administration'' for 
     purposes of this provision include, but not be limited to, 
     the release of documents that would adversely affect the 
     working relationship of the treaty partners. Under the 
     provision, except as otherwise provided, taxpayer-specific 
     tax convention information could not be publicly disclosed, 
     even if it would not impair tax administration.
       A taxpayer-specific competent authority agreement that 
     relates to the existence or possible existence of liability 
     (or amount thereof) of any person for any tax, penalty, 
     interest, fine, forfeiture, or other imposition or offense 
     under the Code is return information under section 6103. It 
     is also an agreement pursuant to a tax convention under 
     section 6105. Return information, including taxpayer-specific 
     competent authority agreements, remains subject to the 
     confidentiality provisions of section 6103. Thus, civil and 
     criminal penalties for the unauthorized disclosure of returns 
     and return information continue to apply to return 
     information that is also covered by section 6105. However, 
     tax convention information that is return information may 
     only be disclosed to the extent provided in, and subject to 
     the terms and conditions of, the relevant tax convention.
     Interaction with FOIA and section 6110
       Under the provision, closing agreements and similar 
     agreements would not be considered written determinations for 
     purposes of section 6110 and, thus, would not be subject to 
     public disclosure. Such agreements would be defined as return 
     information under section 6103 and, therefore, such documents 
     would be protected from disclosure pursuant to Exemption 3 of 
     the FOIA in conjunction with section 6103.
       In addition, under the provision, section 6110 would not 
     apply to material covered by section 6105. In the litigation 
     over FSAs, there has been some dispute as to whether treaties 
     qualify as statutes for purposes of withholding information 
     pursuant to Exemption 3 of the FOIA. The conferees believe 
     that treaties are the equivalent of statutes for purposes of 
     Exemption 3 of the FOIA. Section 6105 satisfies Exemption 3 
     of the FOIA. Taxpayer-specific tax convention information 
     concerning a taxpayer's tax liability, such as taxpayer-
     specific competent authority agreements, would be exempt from 
     the FOIA as both return information under section 6103 and 
     information protected from disclosure by tax convention under 
     section 6105. Agreements not relating to a particular 
     taxpayer, and other tax convention information related to 
     such agreements, could be disclosed under FOIA if it is 
     determined that the disclosure would not impair tax 
     administration.
     Effective date
       The provision applies to disclosures on, or after, the date 
     of enactment, and thus, applies to all documents in existence 
     on, or created after, the date of enactment.


                            senate amendment

       No provision.


                          conference agreement

       The conference agreement follows H.R. 5542.

 E. Increase Joint Committee on Taxation Refund Review Threshold to $2 
        Million (sec. 305 of the bill and sec. 6405 of the Code)


                              Present Law

       No refund or credit in excess of $1,000,000 of any income 
     tax, estate or gift tax, or certain other specified taxes, 
     may be made until 30 days after the date a report on the 
     refund is provided to the Joint Committee on Taxation (sec. 
     6405). A report is also required in the case of certain 
     tentative refunds. Additionally, the staff of the Joint 
     Committee on Taxation conducts post-audit reviews of large 
     deficiency cases and other select issues.


                               House Bill

       No provision. However, H.R. 5542 increases the threshold 
     above which refunds must be submitted to the Joint Committee 
     on Taxation for review from $1,000,000 to $2,000,000. The 
     staff of the Joint Committee on Taxation would continue to 
     exercise its existing statutory authority to conduct a 
     program of expanded post-audit reviews of large deficiency 
     cases and other select issues, and the IRS is expected to 
     cooperate fully in this expanded program.
       Effective date.--The provision is effective on the date of 
     enactment, except that the higher threshold does not apply to 
     a refund or credit with respect to which a report was made 
     before the date of enactment.


                            Senate Amendment

       No provision.


                          Conference Agreement

       The conference agreement follows H.R. 5542.

  F. Clarifying the Allowance of Certain Tax Benefits with Respect to 
 Kidnapped Children (sec. 306 of the bill and secs. 2, 24, 32, and 151 
                              of the Code)


                              Present Law

       The Code generally requires that a taxpayer provide over 
     one-half of the support for each individual claimed as that 
     taxpayer's dependent. Similarly, the child credit, the 
     surviving spouse filing status, and the head of household 
     filing status require that a taxpayer satisfy certain 
     requirements with regard to individuals that qualify as the 
     taxpayer's dependent(s). Finally, the earned income credit 
     for taxpayers with qualifying children generally is available 
     only if the taxpayer has the same principal place of abode 
     for more than one-half the taxable year with an otherwise 
     qualifying child.
       Recently published IRS guidance first denied a dependency 
     exemption to certain taxpayers with kidnapped children (TAM 
     200034029), then allowed such tax benefits to such taxpayers 
     (TAM 200038059).


                               House Bill

       No provision. However, H.R. 5542 clarifies that the 
     dependency exemption, the child credit, the surviving spouse 
     filing status, the head of household filing status, and the 
     earned income credit are available to an otherwise qualifying 
     taxpayer with respect to a child who is presumed by law 
     enforcement authorities to have been kidnapped by someone who 
     is not a member of the family of such child or the taxpayer. 
     Generally, this treatment continues for all taxable years 
     ending during the period that the child is kidnapped. 
     However, this treatment ends for the taxable year ending 
     after the calendar year in which it is determined that the 
     child is dead (or, if earlier, in which the child would have 
     attained age 18).
       Effective date.--The provision is effective for taxable 
     years ending after the date of enactment.


                            Senate Amendment

       No provision.


                          Conference Agreement

       The conference agreement follows H.R. 5542.

   G. Conforming Changes To Accommodate Reduced Issuances of Certain 
  Treasury Securities (sec. 307 of the bill and sec. 995(f)(4) of the 
                                 Code)


                              Present Law

       Code section 995(f)(4) dealing with the interest charge on 
     the deferred tax liability of the shareholders of a domestic 
     international sales corporation provides that the interest 
     rate be determined by reference to the average investment 
     yield on United States Treasury bills with maturities of 52 
     weeks. In addition, provisions of Federal law relating to 
     interest on monetary judgments in civil cases recovered in 
     Federal district court and on a judgment against the United 
     States affirmed by the Supreme Court (Title 28), interest on 
     certain unpaid criminal fines and penalties (Title 18), and 
     interest on compensation for certain takings of property 
     (Title 40) determine the applicable interest rate by 
     reference to 52-week Treasury bills.
       As a result of prior Congressional efforts at budgetary 
     control, current and projected Federal budget surpluses are 
     reducing the need of the Treasury Department to issue certain 
     securities. The Treasury Department has informed the Congress 
     that on grounds of efficient debt management, and 
     predictability and liquidity for the financial markets, the 
     Treasury Department has announced it is likely to cease 
     issuing 52-week Treasury bills.


                               House Bill

       No provision. However, H.R. 5542 modifies the Code (sec. 
     995(f)(4)) and certain other parts of Federal law relating to 
     interest on monetary judgments in civil cases recovered in 
     Federal district court and on a judgment against the United 
     States affirmed by the Supreme Court (Title 28), interest on 
     certain unpaid criminal fines and penalties (Title 18), and 
     interest on compensation for certain takings of property 
     (Title 40) that make specific reference to yields on 52-week 
     Treasury bills. H.R. 5542 generally replaces the reference to 
     52-week Treasury bills with a reference to the weekly average 
     one-year constant maturity Treasury yield, as published by 
     the Board of Governors of the Federal Reserve System.
       Effective date.--The provision is effective upon the date 
     of enactment.


                            Senate Amendment

       No provision.


                          Conference Agreement

       The conference agreement follows H.R. 5542.

  H. Authorization of Agencies to Use Corrected Consumer Price Index 
                         (sec. 308 of the bill)


                              present law

       Code section 1(f) provides for adjustments in the tax 
     tables so that inflation will not result in tax increases. 
     Numerous other provisions of the Code are indexed as well. 
     Section 1(f) provides that inflation is measured by changes 
     in the consumer price index (``CPI'') for the preceding year 
     as published by the Department of Labor compared to the CPI 
     for the calendar year 1992. Section 1(f) directs the 
     Secretary to publish tables with applicable tax rates based 
     upon calculated inflation adjustments by December 15 of the 
     year before the year to which the tables are to apply.
       In addition, payments made under Social Security, certain 
     Federal employee retirement programs, and certain payments to 
     individuals under various welfare and income support programs 
     are adjusted annually by changes in the CPI.
       On September 28, 2000, the Bureau of Labor Statistics 
     (``BLS'') announced that the agency had discovered a 
     computational error in quality adjustments of air 
     conditioning as a part of the cost of housing resulting in 
     errors in the reported CPI between January 1999 and August 
     2000. The BLS reported that the CPI levels starting in 
     January 1999 have been either 0.0, 0.1, or 0.2 index points 
     lower than the levels that would have been published

[[Page H12415]]

     without the error. Consistent with agency guidelines and past 
     practices, the BLS announced that it is revising the reported 
     CPI back to January 2000 to the fully correct levels. The BLS 
     will make no changes to reported levels for January through 
     December 1999. However, the BLS will make the corrected 
     levels of the CPI for 1999 available upon request.


                               house bill

       No provision. However, H.R. 5542 authorizes the Secretary 
     of the Treasury to use the corrected levels of the CPI for 
     1999 and 2000 for all purposes of the Code to which they 
     might apply. H.R. 5542 directs the Secretary to prescribe new 
     tables reflecting the correct levels of the 1999 CPI for the 
     2000 tax year.
       In addition, H.R. 5542 provides that the Director of the 
     Office of Management and Budget (``OMB'') shall assess 
     Federal benefit programs to ascertain the extent to which the 
     CPI error has or will result in a shortfall in program 
     payments to individuals for 2000 and future years. The 
     Director is directed to issue guidelines to agency 
     administrators to determine the extent, if any, of such 
     shortfalls in payments to individuals. The agency 
     administrators are to report their findings to the Director 
     and to Congress within 30 days. H.R. 5542 provides that, 
     within 60 days of the date of enactment, the Director 
     instruct the head of any Federal agency which administers an 
     affected program to make a payment or payments to compensate 
     for the shortfall and that such payments are targeted to the 
     amount of the shortfall experienced by individual 
     beneficiaries. Applicable Federal benefit programs include 
     the old-age and survivors insurance program, the disability 
     insurance program and the supplemental security income 
     program under the Social Security Act and other programs as 
     determined by the Director. H.R. 5542 directs the Director to 
     report to the Congress on the activities performed pursuant 
     to this provision by April 1, 2001.
       Effective date.--The provision is effective on the date of 
     enactment.


                              senate bill

       No provision.


                          conference agreement

       The conference agreement follows H.R. 5542, except that the 
     conference agreement directs the Secretary to prescribe new 
     tables reflecting the correct levels of the CPI for the 2001 
     tax year.
       The conferees note that error in the CPI was computational 
     in nature. The conferees support the BLS's policy to 
     incorporate methodological changes only on a prospective 
     basis. The conferees also understand that BLS policy provides 
     that published indices generally not be revised except for 
     those found to be in error for the year in which the error 
     was discovered or within the past twelve months. The 
     conferees recognize that the errors in the CPI date to as 
     long as 20 months prior to the announcement of the error. The 
     conferees recognize that the BLS's policy of not publishing 
     corrected index numbers, beyond those provided as described 
     above, has been applied in those rare cases where an error 
     has been discovered in the past. However, the conferees 
     understand that in the past 25 years the few errors that have 
     been discovered have involved sub-indices and have not 
     affected the level of the CPI itself. The last time the U.S. 
     City Average All Items CPI was revised was in December 1974, 
     when the values for the months of April through October 1974 
     were recalculated and released with issuance of the November 
     CPI. Therefore, past precedent does not strictly apply to the 
     present situation.
       The conferees believe that integrity of official government 
     data is vital to policymakers and private individuals and 
     businesses throughout the country. The conferees emphasize 
     that the CPI plays an important role in economic planning. 
     For this reason the conferees are concerned that, while the 
     BLS has published corrected CPI numbers for 2000, the BLS 
     does not intend to publish correct CPI numbers for 1999 as 
     part of the official CPI series. To its credit, the BLS 
     announced the error publicly. The national press reported the 
     error.\50\ In the absence of a correction to the official CPI 
     series, the Federal government will be left in the position 
     of maintaining, as an official data series, index numbers 
     that the Federal government has admitted are incorrect. The 
     conferees believe that the public's trust in the integrity of 
     official government data is a paramount goal and the 
     conferees strongly encourage the Commissioner of the Bureau 
     of Labor Statistics to review carefully the agency's current 
     policy with the respect to publishing as part of an official 
     series corrections to data found to be in error for reasons 
     of computational error. The conferees believe such a review 
     should be made both with respect of computational error. The 
     conferees believe such a review should be made both with 
     respect to the error announced on September 28, 2000, and as 
     a matter for the future for those rate circumstances when 
     such a similar computational error might once again arise.
---------------------------------------------------------------------------
     \50\ For example, John M. Berry, ``Inflation Higher Than 
     Reported,'' The Washington Post, September 27, 2000, p. E-1, 
     John M. Berry, ``Rent Error Leads to Revision Of the CPI,'' 
     The Washington Post, September 29, 2000, p. E-3, Nicholas 
     Kulish, ``Major Price Index Is Revised Upward As Result of 
     Error,'' The Wall Street Journal, September 28, 2000, p. A2, 
     and Nicholas Kulish, ``Second-Period GDP Rose at 5.6% Annual 
     Rate,'' The Wall Street Journal, September 29, 2000, p. A2. 
     The conferees observe that these press reports highlight the 
     potential confusion for the public regarding these data. The 
     Washington Post reported that ``the CPI figures for 1999 were 
     not revised'' (September 29, 2000 story) while The Wall 
     Street Journal reported that ``[t]he BLS said a complete 
     revision of all the data sets would be released'' (September 
     28, 2000 story) and ``it [BLS] announced that it would revise 
     the index'' (September 29, 2000 story.
---------------------------------------------------------------------------

 1. Prevent Duplication or Acceleration of Loss Through Assumption of 
  Certain Liabilities (sec. 309 of the bill and sec. 358 of the Code)


                              present law

       Generally, no gain or loss is recognized when one or more 
     persons transfer property to a corporation in exchange for 
     stock and immediately after the exchange such person or 
     persons control the corporation. However, a transfer 
     recognizes gain to the extent it receives money or other 
     property (``boot'') as part of the exchange (sec. 351).
       The assumption of liabilities by the controlled corporation 
     generally is not treated as boot received by the 
     transferor,\51\ except that the transferor recognizes gain to 
     the extent that the liabilities assumed exceed the total of 
     the adjusted basis of the property transferred to the 
     controlled corporation pursuant to the exchange (sec. 
     357(c)).
---------------------------------------------------------------------------
     \51\ The assumption of liabilities is treated as boot if it 
     can be shown that ``the principal purpose'' of the assumption 
     is tax avoidance on the exchange, or is a non-bona fide 
     business purpose (sec. 357(b)).
---------------------------------------------------------------------------
       The assumption of liabilities by the controlled corporation 
     generally reduces the transferor's basis in the stock of the 
     controlled corporation that assumed the liabilities. The 
     transferor's basis in the stock of the controlled corporation 
     is the same as the basis of the property contributed to the 
     controlled corporation, increased by the amount of any gain 
     (or dividend) recognized by the transferor on the exchange, 
     and reduced by the amount of any money or property received, 
     and by the amount of any loss recognized by the transferor 
     (sec. 358). For this purpose, the assumption of a liability 
     is treated as money received by the transferor.
       An exception to the general treatment of assumption of 
     liabilities applies to assumptions of liabilities that would 
     give rise to a deduction, provided the incurrence of such 
     liabilities did not result in the creation or increase of 
     basis of any property. The assumption of such liabilities is 
     not treated as money received by the transferor in 
     determining whether the transferor has gain on the exchange. 
     Similarly, the transferor's basis in the stock of the 
     controlled corporation is not reduced by the assumption of 
     such liabilities. The Internal Revenue Service has ruled that 
     the assumption by an accrual basis corporation of certain 
     contingent liabilities for soil and groundwater remediation 
     would be covered by this exception.\52\
---------------------------------------------------------------------------
     \52\ Rev. Rul. 95-74, 1995-2 C.B. 36. The ruling addressed a 
     parent corporation's transfer to a subsidiary of 
     substantially all the assets of a manufacturing business, in 
     exchange for stock and the assumption of liabilities 
     associated with the business, including certain contingent 
     environmental remediation liabilities. These liabilities 
     arose due to contamination of land during the parent 
     corporation's operation of the manufacturing business. The 
     transferor has no plan or intention to dispose of (or to have 
     the subsidiary issue) any subsidiary stock. The IRS ruled 
     that the contingent liabilities would not reduce the 
     transferor's basis in the stock of the subsidiary because the 
     liabilities would not reduce the transferor's basis in the 
     stock of the subsidiary because the liabilities had not been 
     taken into account by the transfer prior to the transfer and 
     had not given rise to deductions or basis for the transferor.
---------------------------------------------------------------------------


                               House Bill

       No provision. However, H.R. 5542 contains a provisions to 
     limit the acceleration or duplication of losses through 
     assumptions of liabilities.
       Under H.R. 5542, if the basis of stock (determined without 
     regard to this provision) received by a transferor as part of 
     a tax-free exchange with a controlled corporation exceeds the 
     fair market value of the stock, then the basis of the stock 
     received is reduced (but not below the fair market value) by 
     the amount (determined as of the date of the exchange) of any 
     liability that (1) is assumed in exchange for such stock, and 
     (2) did not otherwise reduced the transferor's basis of the 
     stock by reason on the assumption. Except as provided by the 
     Secretary of the Treasury, this provision does not apply 
     where the trade or business with which the liability is 
     associated is transferred to the corporation as part of the 
     exchange, or where substantially all the assets which the 
     liability is associated are transferred to the corporation as 
     part of the exchange.
       The exception for transfers of a trade or business, or 
     substantially all the assets with which a liability is 
     associated, are intended to obviate the need for valuation or 
     basis reduction in such cases. The exceptions are not 
     intended to apply to situation involving the selective 
     transfer of assets that may bear some relationship to the 
     liability, but that do not represent the full scope of the 
     trade or business, (or substantially all the assets) with 
     which the liability is associated.
       For purposes of the provision, the term ``liability'' 
     includes fixed or contingent obligation to make payments, 
     without regard to whether such obligation or potential 
     obligation is otherwise taken into account under the Code. 
     The determination whether a liability (as more broadly 
     defined for purposes of this provision) has been assumed is 
     made in accordance with the provisions of section 357(d)(1) 
     of the Code. Under the standard of 357(d)(1), a recourse 
     liability is treated as assumed if, based on all the facts 
     and circumstances, the transferee has agreed to and

[[Page H12416]]

     is expected to satisfy such liability (or portion thereof), 
     whether or not the transferor has been relieved of the 
     liability. For example, if a transferee corporation does not 
     formally assume a recourse obligation or potential obligation 
     of the transferor, but instead agrees and is expected to 
     indemnify the transferor with respect to all or a portion of 
     a such an obligation, then the amount that is agreed to be 
     indemnified is treated as assumed for purposes of the 
     provision, whether or not the transferor has been relieved of 
     such liability. Similarly, a nonrecourse liability is treated 
     as assumed by the transferee of any asset subject to such 
     liability.\53\
---------------------------------------------------------------------------
     \53\ Section 357(d)(2) contains a limitation in the case of 
     certain non recourse liabilities. Also, under section 357, 
     regulations if issued, may provide for different results.
---------------------------------------------------------------------------
       The application of the provision is illustrated in the 
     following example: Assume a taxpayer transfers assets with an 
     adjusted basis and fair market value of $100 to its wholly-
     owned corporation and the corporation assumes $40 of 
     liabilities (the payment of which would give rise to a 
     deduction). Thus, the value of the stock received by the 
     transferor is $60. Under present law, the basis of the stock 
     would be $100. The provision requires that the basis of the 
     stock be reduced to $60 (i.e., a reduction of $40). Except is 
     provided by the Secretary, no basis reduction is required if 
     the transferred assets consisted of the trade or business, or 
     substantially all the assets, with which the liability 
     associated.
       The provision does not change the tax treatment with 
     respect to the transferee corporation.
       The Secretary of the Treasury is directed to prescribe 
     rules providing appropriate adjustments to prevent the 
     acceleration or duplication of losses through the assumption 
     of liabilities (as defined in the provision) in transactions 
     involving partnerships. The Secretary may also provide 
     appropriate adjustments in the case of transactions involving 
     S. corporations. In the case of S corporations, such rules 
     may be applied instead of the otherwise applicable basis 
     reduction rules.
       Effective Date.--The provision is effective for assumption 
     of liabilities on or after October 19, 1999. Except as 
     provided by the Secretary, the rule addressing transactions 
     involving partnerships are effective with the same effective 
     date. Any rules addressing transactions involving S 
     corporations may likewise be effective for assumptions of 
     liabilities on or after October 19, 1999, or such later date 
     as may be prescribed in such rules.


                            senate amendment

       No provision. On April 4, 2000, Senators Roth and Moynihan 
     introduced a bill (S. 2354) that is the same as the provision 
     in H.R. 5542.


                          conference agreement

       The conference agreement follow H.R. 5542.

J. Disclosure of Return Information to the Congressional Budget Office 
       (sec. 310 of the bill and new sec. 6103(j)(6) of the Code)


                              present law

       Federal tax returns and return information are confidential 
     and cannot be disclosed unless authorized by the Code. 
     Section 6103 authorizes certain agencies to receive tax 
     returns and return information for statistical use and for 
     other specified purposes.\54\ Section 6103 also permits the 
     Secretary of the Treasury (``the Secretary'') to provide 
     return information to any person authorized to receive it by 
     any mode or means that the Secretary determines necessary or 
     appropriate.\55\ Persons making unauthorized disclosures or 
     inspections of tax returns and return information are subject 
     to criminal and civil penalties.\56\
---------------------------------------------------------------------------
     \54\ E.g., sec. 6103(j), and 6103(1)(1) and (5).
     \55\ Sec. 6103(p)(2)(B).
     \56\ Sec. secs. 7431, 7213, and 7213A.
---------------------------------------------------------------------------


                               House Bill

       No provision.


                            Senate Amendment

       No provision.


                          Conference Agreement

     Disclosure of return information
       The Congressional Budget Office (``CBO'') is in the process 
     of developing the capability to make projections of the 
     Social Security and Medicare programs over long periods of 
     time. To facilitate the development and operation of long-
     term models of Social Security and Medicare, CBO needs 
     continuing access to records from the IRS. Specifically, CBO 
     seeks two SSA files that contain return information--the 
     Social Security Earnings Record and the Master Beneficiary 
     Record. These files contain individual earnings data compiled 
     from tax returns (Forms W-2), which are protected from 
     disclosure by section 6103. In addition, CBO may request 
     other records, including those matched with survey data.
       The conference agreement amends section 6103 to permit the 
     Secretary to furnish to CBO return information to the extent 
     such information is necessary for purposes of CBO's long-term 
     models of Social Security and Medicare. This authority 
     extends to the development, operation, and maintenance by CBO 
     of its long-term models of Social Security and Medicare. It 
     is the intent of Congress that all requests for information 
     made by CBO under this provision be made to the Secretary and 
     that the Secretary use his authority under section 6103(p)(2) 
     such that the SSA or other agency can furnish directly to 
     CBO, for purposes of CBO's long-term models of Social 
     Security and Medicare, the files they possess that 
     incorporate return information. It is also the intent of 
     Congress that the Secretary furnish such other return 
     information under this provision as is necessary for purposes 
     of CBO's Social Security and Medicare long-term models.
       Under the provision, CBO is subject to the present-law 
     safeguard requirements for tax returns and return 
     information.\57\ Further, CBO is prohibited from disclosing 
     any tax returns and return information received under this 
     provision except in a form that cannot be associated with, or 
     otherwise identify, directly or indirectly a particular 
     taxpayer. Present-law civil and criminal penalties apply to 
     the unauthorized disclosure or inspection of tax returns or 
     return information.\58\
---------------------------------------------------------------------------
     \57\ Sec. 6103(p)(4).
     \58\ See secs. 7431, 7213, and 7213A.
---------------------------------------------------------------------------
     Addition of general CBO confidentiality provisions
       The conference agreement adds to the Congressional Budget 
     Act of 1974 \59\ additional confidentiality provisions which 
     would require CBO to provide the same level of 
     confidentiality to data it obtains from other agencies as 
     that to which the agencies themselves are subject. Officials 
     and employees of CBO would be subject to the same statutory 
     penalties for unauthorized disclosure as the employees of the 
     agencies from which CBO obtain the data.
---------------------------------------------------------------------------
     \59\ 2 U.S.C. sec. 601(d).
---------------------------------------------------------------------------

   Subtitle B.--Tax Technical Corrections (secs. 311-319 of the bill)


                               house bill

       No provision. However, H.R. 5542 includes tax technical 
     corrections.\60\ Except as otherwise provided, the technical 
     corrections contained in the bill generally are effective as 
     if included in the originally enacted related legislation. 
     The provisions under the IRS Restructuring Act of 1998 
     relating to innocent spouse and to procedural and 
     administrative issues (other than the provision relating to 
     clarification of Tax Court authority to issue appealable 
     decisions) are effective upon the date of enactment of the 
     bill.
---------------------------------------------------------------------------
     \60\ In addition to other tax technical corrections, the bill 
     contains the technical corrections contained in H.R. 2488, 
     the Financial Freedom Act of 1999 (106th Cong. 1st Sess., 
     reported by the House Committee on Ways and Means, H. Rept. 
     106-238, July 16, 1999, 393-397), as passed by the House, and 
     S. 1429, the Taxpayer Refund Act of 1999 (reported by the 
     Senate Committee on Finance, S. Rept. 106-120, July 23, 1999, 
     221-225), as passed by the Senate. (The technical corrections 
     were not included in the conference agreement to H.R. 2488, 
     the Taxpayer Refund and Relief Act of 1999 (106th Cong., 1st 
     Sess., H. Rept. 106-289, Aug. 4, 1999, 542-543). The Taxpayer 
     Refund and Relief Act of 1999 was vetoed by President 
     Clinton.) However, the bill does not include the following 
     provisions enacted in other legislation: sections 1601(b)(2) 
     and (c) of H.R. 2488 (and section 504(c) of S. 1429), 
     relating to the Vaccine Trust Fund, which were enacted in the 
     ``Ticket to Work and Work Incentives Improvement Act of 
     1999'' (P.L. 106-170, sec. 523(b)).
---------------------------------------------------------------------------


     Amendments relating to the Ticket to Work and Work Incentives 
                        Improvement Act of 1999

       Research credit.--The provision clarifies the anti-double 
     dip rule coordinating the research credit (sec. 41) and the 
     Puerto Rico economic activity credit (sec. 30A). It is 
     arguable that the present-law provisions could be construed 
     so that the amount of wages on which a taxpayer could claim 
     the section 30A credit is reduced only by the amount of 
     credit claimed under section 41, rather than by the amount of 
     wages upon which the section 41 credit is based. This result 
     is inconsistent with the legislative history of the original 
     provisions. The provision deletes the words ``or credit'' 
     after ``deduction'' in section 280C(c)(1), and adds a new 
     subsection in section 30A specifying that wages or other 
     expenses taken into account for section 30A may not be taken 
     into account for section 41.
       Taxable REIT subsidiaries.--The provision clarifies that a 
     REIT's redetermined rents (described in sec. 857(b)(7)(B)) 
     that are subject to tax under section 857(b)(7)(A) do not 
     include amounts received from a taxable REIT subsidiary that 
     would be excluded from unrelated business taxable income 
     (under sec. 512(b)(3), relating to certain rents, if received 
     by certain types of organizations described in sec. 
     511(a)(2)).
       Partnership basis adjustments.--The provision provides that 
     the rule in the consolidated return regulations (Treas. Reg. 
     sec. 1.1502-34) aggregating stock ownership for purposes of 
     section 332 (relating to complete liquidation of a subsidiary 
     that is a controlled corporation) also applies for purposes 
     of section 732(f) (relating to basis adjustments to assets of 
     a controlled corporation received in a partnership 
     distribution).
     Amendments related to the Tax and Trade Relief Extension Act 
         of 1998
       Exempt organizations.--The provision clarifies that 
     nonexempt charitable trusts and nonexempt private foundations 
     are subject to the public disclosure requirements of section 
     6104(d).
       Capital gains.--The provision clarifies that if (1) a 
     charitable remainder trust sold section 1250 property after 
     July 28, 1997, and before January 1, 1998, (2) the property 
     was held more than one year but not more than 18 months, and 
     (3) the capital gain is distributed after December 31, 1997, 
     then any capital gain attributable to depreciation will be 
     taxed at 25 percent (rather than 28 percent). Treasury has 
     published a notice (Notice 99-17, 1999-14 I.R.B., April 5, 
     1999) providing that the gain is taxed at 25 percent.

[[Page H12417]]

     Amendments related to the Internal Revenue Service 
         Restructuring and Reform Act of 1998
       Innocent spouse
       Timing of request for relief.--Confusion currently exists 
     as to the appropriate point at which a request for innocent 
     spouse relief should be made by the taxpayer and considered 
     by the IRS. Some have read the statute to prohibit 
     consideration by the IRS of requests for relief until after 
     an assessment has been made, i.e., after the examination has 
     been concluded, and if challenged, judicially determined. 
     Others have read the statute to permit claims for relief from 
     deficiencies to be made upon the filing of the return before 
     any preliminary determination as to whether a deficiency 
     exists or whether the return will be examined. The 
     consideration of innocent spouse relief requires that the IRS 
     focus on the particular items causing a deficiency; until 
     such items are identified, the IRS cannot consider these 
     claims. Congress did not intend that taxpayers be prohibited 
     from seeking innocent spouse relief until after an assessment 
     has been made; Congress intended the proper time to raise and 
     have the IRS consider a claim to be at the same point where a 
     deficiency is being considered and asserted by the IRS. This 
     is the least disruptive for both the taxpayer and the IRS 
     since it allows both to focus on the innocent spouse issue 
     while also focusing on the items that might cause a 
     deficiency. It also permits every issue, including the 
     innocent spouse issue, to be resolved in single 
     administrative and judicial process. The bill clarifies the 
     intended time by permitting the election under (b) and (c) to 
     be made at any point after a deficiency has been asserted by 
     the IRS. A deficiency is considered to have been asserted by 
     the IRS at the time the IRS states that additional taxes may 
     be owed. Most commonly, this occurs during the Examination 
     process. It does not require an assessment to have been made, 
     nor does it require the exhaustion of administrative remedies 
     in order for a taxpayer to be permitted to request innocent 
     spouse relief.
       Allowance of refunds.--The current placement in the statute 
     of the provision for allowance of refunds may inappropriately 
     suggest that the provision applies only to the United States 
     Tax Court, whereas it was intended to apply administratively 
     and in all courts. The bill clarifies this by moving the 
     provision to its own subsection.
       Non-exclusivity of judicial remedy.--Some have suggested 
     that the IRS Restructuring Act administrative and judicial 
     process for innocent spouse relief was intended to be the 
     exclusive avenue by which relief could be sought. The bill 
     clarifies Congressional intent that the procedures of section 
     6015(e) were intended to be additional, non-exclusive avenues 
     by which innocent spouse relief could be considered.
       Time for filing a petition with the Tax Court.--As enacted, 
     the time period for seeking a redetermination in the Tax 
     Court of innocent spouse relief begins on the date of the 
     determination as opposed to the day after the determination. 
     This period is one day shorter than that generally applicable 
     to petition the Tax Court with respect to a deficiency notice 
     (sec. 6213) and the period during which collection activities 
     are prohibited and the limitations period is suspended. The 
     bill clarifies the computation of this period and conforms it 
     to the generally applicable 90-day period for petitioning the 
     Tax Court. Conforming amendments are made as to the period 
     for which collection activities are prohibited and collection 
     limitations suspended.
       Waiver of final determination upon agreement as to 
     relief.--Congress intended in enacting section 6015 to 
     provide a simple and efficient procedure by which the IRS 
     could consider relief, and if relief was denied (in whole or 
     in part) and the spouse requesting such relief did not agree 
     with such denial, such issue could be considered by the Tax 
     Court. Congress did not intend to require a rigid formal 
     process when the IRS and the spouse requesting relief agreed 
     on the extent of relief to be granted. However, the 
     provisions of section 6015(e) have been interpreted as 
     requiring the issuance in all circumstances of a formal 
     ``Notice of Determination,'' which contains a statement of 
     the time period within which a petition may be filed with the 
     Tax Court and which delays final resolution of the request 
     for relief until the expiration of the period for filing a 
     petition with the Tax Court. The issuance of the Notice of 
     Determination is confusing to the taxpayer when the requested 
     relief was fully granted or when the IRS and the taxpayer 
     otherwise agreed on the application of the innocent spouse 
     provisions to the taxpayer's case. It also may cause 
     unnecessary filings with the Tax Court and delay the closing 
     of the case until the time for filing with the Tax Court 
     expires.
       Congress has addressed the analogous situation in the 
     deficiency context in section 6213(d). In such situations, 
     upon written agreement, the IRS may adjust the taxpayer's 
     liability as agreed, and no additional formal notice is 
     necessary. The bill reflects that an analogous waiver was 
     intended to apply in the innocent spouse context. The bill 
     consequently permits taxpayers and the IRS to enter into a 
     similar written agreement in innocent spouse cases, which 
     allows for the taxpayer's liability to be immediately 
     adjusted as agreed, and makes unnecessary a formal Notice of 
     Determination or Tax Court review. This written agreement is 
     to specify the details of the agreement between the IRS and 
     the taxpayer as to the nature and extent of innocent spouse 
     relief that will be provided. Conforming amendments are made 
     as to the period for which collection activities are 
     prohibited and collection limitations suspended.
       Procedural and administrative issues
       Disputes involving $50,000 or less.--The provision 
     clarifies that the small case procedures of the Tax Court are 
     available with respect to innocent spouse disputes and 
     disputes continuing from the pre-levy administrative due 
     process hearing. The small case procedures provide an 
     accessible forum for taxpayers who have small claims with 
     less formal rules of evidence and procedure. Use of the 
     procedure is optional to the taxpayer, with the concurrence 
     of the Tax Court. In view of the recent enactment of the 
     innocent spouse and pre-levy administrative due process 
     hearing provisions, it is anticipated that the Tax Court will 
     give careful consideration to (1) a motion by the 
     Commissioner of Internal Revenue to remove the small case 
     designation (as authorized by Rules 172 and 173 of the Tax 
     Court Rules) when the orderly conduct of the work of the 
     Court or the administration of the tax laws would be better 
     served by a regular trial of the case, as well as (2) the 
     financial impact upon the taxpayer, including additional 
     legal fees and costs, of not utilizing small case treatment. 
     For example, removing the small case designation may be 
     appropriate when a decision in the case will provide a 
     precedent for the disposition of a substantial number of 
     other cases. It is anticipated that motions by the 
     Commissioner to remove the small case designation will be 
     made infrequently.
       Authority to enjoin collection actions.--While a dispute is 
     pending under the pre-levy administrative due process hearing 
     procedures, levy action is statutorily suspended for that 
     period. The Tax Court and district courts are expressly 
     granted authority to enjoin improper levy action in general, 
     but that authority does not explicitly extend to improper 
     levy action that occurs during the period when levy action is 
     statutorily suspended under the administrative due process 
     provisions. The provision clarifies the ability of the courts 
     (including the Tax Court) to enjoin levy during the period 
     that levy is required to be suspended with respect to a 
     dispute under the pre-levy administrative due process hearing 
     procedures.
       Clarification of permissible extension of limitations 
     period for installment agreements.--Uncertainty exists as to 
     whether the permissible extension of the period of 
     limitations in the context of installment agreements is 
     governed by reference to an agreement of the parties pursuant 
     to section 6502 or by reference to the period of time during 
     which the installment agreement is in effect pursuant to 
     sections 6331(k)(3) and (i)(5). The provision clarifies that 
     the permissible extension of the period of limitations in the 
     context of installment agreements is governed by the 
     pertinent provisions of section 6502.
       Clarification of Tax Court authority to issue appealable 
     decisions.--The statutory provision for judicial review of a 
     dispute concerning the pre-levy administrative due process 
     hearing may be unclear as to whether a determination of the 
     Tax Court is an appealable decision. The provision clarifies 
     that the determination of the Tax Court (other than under the 
     small case procedures) in a dispute concerning the pre-levy 
     administrative due process hearing is a decision of the Tax 
     Court and would be reviewable as such.
       Other issues
       IRS restructuring.--When the Office of the Chief Inspector 
     was replaced by the Treasury Inspector General for Tax 
     Administration (TIGTA) under the IRS Restructuring and Reform 
     Act of 1998, Inspection's responsibilities were assigned to 
     the TIGTA. TIGTA personnel are Treasury, rather than IRS, 
     personnel. TIGTA personnel still need to make investigative 
     disclosures to carry out the duties they took over from 
     Inspection and their additional tax administration 
     responsibilities. However, section 6103(k)(6) refers only to 
     ``internal revenue'' personnel. The provision clarifies that 
     section 6103(k)(6) permits TIGTA personnel to make 
     investigative disclosures.
       Compliance.--Section 3509 of the IRS Restructuring and 
     Reform Act of 1998 expanded the disclosure rules of section 
     6110 to also cover Chief Counsel advice (sec. 6110(i)). This 
     is a conforming change related to ongoing investigations. The 
     provision adds to section 6110(g)(5)(A), after the words 
     technical advice memorandum, ``or Chief Counsel advice.''
     Amendments related to the Taxpayer Relief Act of 1997
       Deficiency created by overstatement of refundable child 
     credit.--The provision treats the refundable portion of the 
     child credit under section 24(d) as part of a ``deficiency.'' 
     Thus, the usual assessment procedures applicable to income 
     taxes will apply to both the nonrefundable and the refundable 
     portions of the child credit. (This will reverse the 
     conclusion reached by Internal Revenue Service Chief Counsel 
     Memorandum 199948027 interpreting present law.)
       Roth IRAs.--Code section 3405 provides for withholding with 
     respect to designated distributions from certain tax-favored 
     arrangements, including IRAs. In general, section 
     3405(e)(1)(B)(ii) excludes from the definition of a 
     designated distribution the portion of any distribution which 
     it is reasonable to believe is excludable from gross income. 
     However, all distributions from IRAs are treated

[[Page H12418]]

     as includible in income. The exception was consistent with 
     prior law when all IRA distributions were taxable, but does 
     not account for the tax-free nature of certain Roth IRA 
     distributions. The provision extends the exception to Roth 
     IRAs.
       Capital gain election.--The provision provides that an 
     election to recognize gain or loss made pursuant to section 
     311(e) of the Taxpayer Relief Act of 1997 does not apply to 
     assets disposed of in a recognition transaction within one 
     year of the date the election would otherwise have been 
     effective. Thus, for example, if an asset is sold in 2001, no 
     election may be made with respect to that asset. In addition, 
     it is clarified that the deemed sale and repurchase by reason 
     of the election is not taken into account in applying the 
     wash sales rules of section 1091.
       Straight-line depreciation under AMT.--The provision 
     clarifies that the Taxpayer Relief Act of 1997 did not change 
     the requirement that the straight-line method of depreciation 
     be used in computing the alternative minimum tax (``AMT'') 
     depreciation allowance for section 1250 property. It is 
     arguable that the changes made by that Act could be read as 
     inadvertently allowing accelerated depreciation under the AMT 
     for section 1250 property which is allowed accelerated 
     depreciation under the regular tax.
       Transportation benefits.--Under present law, salary 
     reduction amounts are generally treated as compensation for 
     purposes of the limits on contributions and benefits under 
     qualified plans. In addition, an employer can elect whether 
     or not to include such amounts for nondiscrimination testing 
     purposes. The IRS Reform Act permitted employers to offer a 
     cash option in lieu of qualified transportation benefits. The 
     provision treats salary reduction amounts used for qualified 
     transportation benefits the same as other salary reduction 
     amounts for purposes of defining compensation under the 
     qualified plan rules.
       Tax Court jurisdiction.--The Tax Court recently held that 
     its jurisdiction pursuant to section 7436 extends only to 
     employment status, not to be amount of employment tax in 
     dispute (Henry Randolph Consulting v. Comm'r, 112 T.C. #1. 
     Jan. 6, 1999). The provision provides that the Tax Court 
     also has jurisdiction over the amount.
     Amendments related to the Balanced Budget Act of 1997
       Tobacco floor stocks tax.--The provision clarifies that the 
     floor stocks taxes imposed on January 1, 2000, and January 1, 
     2002, apply only to cigarettes rather than to all tobacco 
     products. As enacted, the law could be construed as 
     ambiguous, referring to imposition on all tobacco products 
     but imposing liability only with respect to cigarettes.
       Tobacco excise tax.--Conforming amendments are provided to 
     two provisions to reflect the fact that the tax on cigarette 
     papers is not imposed on ``books'' or papers since January 1, 
     2000.
       Coordination of trade rules and tobacco excise tax.--
     Clarification is provided that the penalty on reimporting 
     cigarettes other than for return to a manufacturer (effective 
     January 1, 2000) does not apply to cigarettes re-imported by 
     individuals to the extent those cigarettes can be entered 
     into the U.S. without duty or tax under the Harmonized Tariff 
     Schedule.
     Amendment related to the Small Business Job Protection Act of 
         1996
       Work opportunity tax credit.--Section 51(d)(2) refers to 
     eligibility for the work opportunity tax credit with respect 
     to certain welfare recipients without taking into account the 
     enactment of the temporary assistance for needy families 
     (``TANF'') program. The provisions conform references in the 
     work opportunity tax credit to the operation of TANF.
       Electing small business trusts holding S corporation 
     stock.--The provision allows an electing small business trust 
     (sec. 1361(e)) to have an organization described in section 
     170(c)(1) (relating to State and local governments) as a 
     beneficiary if the organization holds a contingent interest 
     and is not a potential current beneficiary.
       Definition of lump-sum distribution.--Section 1401(b) of 
     the Small Business Job Protection Act of 1996 Act repealed 5-
     year averaging for lump-sum distributions. The definition of 
     lump-sum distribution was preserved for other provisions, 
     primarily those relating to NUA in employer securities. The 
     definition was moved from section 402(d)(4)(A) to section 
     402(e)(4)(D)(i). This definition included the following 
     sentence: ``A distribution of an annuity contract from a 
     trust or annuity plan referred to in the first sentence of 
     this subparagraph shall be treated as a lump sum 
     distribution.'' The provision adds this language back into 
     the definition of lump-sum distribution. The sentence is 
     relevant to section 401(k)(1)(B), which permits certain 
     distributions if made as a ``lump-sum distribution.''
       IRAs for nonworking spouses.--Section 1427 of the Small 
     Business Job Protection Act of 1996 expanded the IRA 
     deduction for nonworking spouses. The maximum permitted IRA 
     contributions is generally limited by the individual's earned 
     income. However, under present law, it is possible for a 
     nonworking (or lesser earning) spouse to make IRA 
     contributions in excess of the couple's combined earned 
     income. The following example illustrates present law.
       Example: Suppose H and W retire in the middle of January, 
     1999. In that year, H earns $1,000 and W earns $500. Both are 
     active participants in an employer-sponsored retirement plan. 
     Their modified AGI is $60,000. They make no Roth IRA 
     contributions. Before application of the income phase-out 
     rules, the maximum deductible IRA contribution that H can 
     make is $1,000 (sec. 219(b)(1)). After application of the 
     income phase-out rule in section 219(g), H's maximum 
     contribution is $200, and H contributes that amount to an 
     IRA. Under 408(o)(2)(B), H can make nondeductible 
     contributions of $800 ($1,000-$200).
       W's maximum permitted deductible contribution under section 
     219(c)(1)(B), before the income phase-out, is $1,300 (the sum 
     of H and W's earned income ($1,500), less H's deductible IRA 
     contribution ($200)). Under the income phase-out, W's 
     deductible contribution is limited to $200, and she can make 
     a nondeductible contribution of $1,000 ($1,300-$200).
       The total permitted contributions for H and W are $2,300 
     ($1,000 for H plus $1,300 for W). The combined contribution 
     should be limited to $1,500, their combined earned income of 
     the spouses.
       The provision provides that the contributions for the 
     spouse with the lesser income cannot exceed the combined 
     earned income of the spouses.
     Amendment related to the Revenue Reconciliation Act of 1990
       Qualified tertiary injectant expenses.--The provision 
     clarifies that the enhanced oil recovery credit (sec. 43) 
     applies with respect to qualified tertiary injectant expenses 
     described in section 193(b) that are paid or incurred in 
     connection with a qualified enhanced oil recovery project, 
     and that are deductible for the taxable year (regardless of 
     the provision allowing the deduction). Purchased and self-
     produced injectants are treated the same for purposes of the 
     section 43 credit.
     Amendments to other Acts (sec. 318 of the bill)
       Insurance.--The legislative history of section 7702A(a) 
     (enacted in the Technical and Miscellaneous Revenue Act of 
     1988) indicated that if a life insurance contract became a 
     modified endowment contract (``MEC''), then the MEC status 
     could not be eliminated by exchanging the MEC for another 
     contract. Section 7702A(a)(2), however, arguably might be 
     read to allow a policyholder to exchange a MEC for a contract 
     that does not fail the 7-pay test of section 7702A(b), then 
     exchange the second contract for a third contract, which 
     would not literally have been received in exchange for a 
     contract that failed to meet the 7-pay test. The provision 
     clarifies section 7702A(a)(2) to correspond to the 
     legislative history, effective as if enacted with the 
     Technical and Miscellaneous Revenue Act of 1988 (generally, 
     for contracts entered into on or after June 21, 1988).
       Insurance.--Under section 7702A, if a life insurance 
     contract that is not a modified endowment contract is 
     actually or deemed exchanged for a new life insurance 
     contract, then the 7-pay limit under the new contract is 
     first be computed without reference to the premium paid using 
     the cash surrender value of the old contract, and then would 
     be reduced by \1/7\ of the premium paid taking into account 
     the cash surrender value of the old contract. For example, if 
     the old contract had a cash surrender value of $14,000 and 
     the 7-pay premium on the new contract would equal $10,000 per 
     year but for the fact that there was an exchange, the 7-pay 
     premium on the new contract would equal $8,000 ($10,000-
     $14,000/7). However, section 7702A(c)(3)(A) arguably might be 
     read to suggest that if the cash surrender value on the new 
     contract was $0 in the first two years (due to surrender 
     charges), then the 7-pay premium might be $10,000 in this 
     example, unintentionally permitting policyholders to engage 
     in a series of ``material changes'' to circumvent the premium 
     limitations in section 7702A. The provision clarifies section 
     7702A(c)(3)(A) to refer to the cash surrender value of the 
     old contract, effective as if enacted with the Technical and 
     Miscellaneous Revenue Act of 1988 (generally, for contracts 
     entered into on or after June 21, 1988).
       Worthless securities.--Section 165(g)(3) provides a special 
     rule for worthless securities of an affiliated corporation. 
     The test for affiliation in section 165(g)(3)(A) is the 80-
     percent vote test for affiliated groups under section 1504(a) 
     that was in effect prior to 1984. When section 1504(a) was 
     amended in the Deficit Reduction Act of 1984 to adopt the 
     vote and value test of present law, no corresponding change 
     was made to section 165(g)(3)(A), even though the tests had 
     been identical until then. The provision conforms the 
     affiliation test of section 165(g)(3)(A) to the test in 
     section 1504(a)(2), effective for taxable years beginning 
     after December 31, 1984.
       Exception for certain annuities under OID rules.--The 
     Deficit Reduction Act of 1984 expanded the prior--law rules 
     for inclusion in income of original issue discount (``OID'') 
     on debt instruments. That Act provided an exception from the 
     definition of a debt instrument for certain annuity 
     contracts, including any annuity contract to which section 72 
     applies and that is issued by an insurance company subject to 
     tax under subchapter L of the Code (and meets certain other 
     requirements) (sec. 1275(a)(1)(B)(ii)). The provision 
     clarifies that an annuity contract otherwise meeting the 
     applicable requirements also comes within the exception of 
     section 1275(a)(1)(B)(ii) if it is issued by an entity 
     described in section 501(c) and exempt from tax under section 
     501(a), that would be subject to

[[Page H12419]]

     tax as an insurance company under subchapter L if it were not 
     exempt under section 501(a). For example, the provision 
     clarifies that an annuity contract otherwise meeting the 
     requirements that is issued by a fraternal beneficiary 
     society which is exempt from Federal income tax under section 
     501(a), and which is described in section 501(c)(8), comes 
     within the exception under section 1275(a)(1)(B)(ii). It is 
     understood that charitable gift annuities (as defined in sec. 
     501(m)) depend (in whole or in substantial part) on the life 
     expectancy of one or more individuals, and thus come within 
     the exception under section 1275(a)(1)(B)(i). The provision 
     is effective as if included with section 41 of the Deficit 
     Reduction Act of 1984 (i.e., for taxable years ending after 
     July 18, 1984).
       Losses from section 1256 contracts.--Section 6411 allows 
     tentative refunds for NOL carry-backs, business credit 
     carrybacks and, for corporations only, capital loss 
     carrybacks. Individuals normally cannot carry back a capital 
     loss. However, section 1212(c) does allow a carryback of 
     section 1256 losses, if elected by the taxpayer. The 
     provision amends section 6411(a) by including a reference to 
     section 1212(c), effective as if included with section 504 of 
     the Economic Recovery Tax Act of 1981.
       Highway Trust Fund.--The provision modifies administrative 
     procedures of the Highway Trust Fund to conform to the 1993 
     repeal of the special tax rate applicable to ethanol prior to 
     1994. The provision is effective for taxes received after the 
     date of enactment. This ensures that retroactive adjustments, 
     if any, are not made to the Highway Trust Fund.
       Conforming amendment for expenditures from Vaccine Injury 
     Compensation Trust Fund.--The provision makes a conforming 
     amendment to the expenditure purposes of the Vaccine Injury 
     Compensation Trust Fund to enable certain payments to be made 
     from the Trust Fund.
     Clerical changes
       The bill makes a number of clerical and typographical 
     amendments to the Code.


                            senate amendment

       No provision.


                          Conference Agreement

       The conference agreement follows H.R. 5542.

        TITLE IV. TAX TREATMENT OF SECURITIES FUTURES CONTRACTS

      (sec. 401 of the bill and secs. 1234B and 1256 of the Code)


                              present law

     In general
       Generally, gain or loss from the sale of property, 
     including stock, is recognized at the time of sale or other 
     disposition of the property, unless there is a specific 
     statutory provision of nonrecognition (sec. 1001).
       Gains and losses from the sale or exchange of capital 
     assets are subject to special rules. In the case of 
     individuals, net capital gain is generally subject to a 
     maximum tax rate of 20 percent (sec. 1(h)). Net capital gain 
     is the excess of net long-term capital gains over net short-
     term capital losses. Also, capital losses are allowed only to 
     the extent of capital gains plus, in the case of individuals, 
     $3,000 (sec. 1211). Capital losses of individuals may be 
     carried forward indefinitely and capital losses of 
     corporations may be carried back three years and forward five 
     years (sec. 1212).
       Generally, in order for gains or losses on a sale or 
     exchange of a capital asset to be long-term capital gains or 
     losses, the asset must be held for more than one year (sec. 
     1222).\61\ A capital asset generally includes all property 
     held by the taxpayer except certain enumerated types of 
     property such as inventory (sec. 1221).
---------------------------------------------------------------------------
     \61\ The holding period for futures transactions in a 
     commodity is 6 months. The 6-month holding period does not 
     apply to futures which are subject to the mark-to-market 
     rules of section 1256, discussed below.
---------------------------------------------------------------------------
     Section 1256 contracts
       Special rules apply to ``section 1256 contracts,'' which 
     include regulated futures contracts, certain foreign currency 
     contracts, nonequity options, and dealer equity options. Each 
     section 1256 contract is treated as if it were sold (and 
     repurchased) for its fair market value on the last business 
     day of the year (i.e., ``marked to market''). Any gain or 
     loss with respect to a section 1256 contract which is subject 
     to the mark-to-market rule is treated as if 40 percent of the 
     gain or loss were short-term capital gain or loss and 60 
     percent were long-term capital gain or loss. This results in 
     a maximum rate of 27.84 percent on any gain for taxpayers 
     other than corporations. The mark-to-market rule (and the 
     special 60/40 capital treatment) is inapplicable to hedging 
     transactions.
       A ``regulated futures contract'' is a contract (1) which is 
     traded on or subject to the rules of a national securities 
     exchange registered with the Securities Exchange Commission, 
     a domestic board of trade designated a contract market by the 
     Commodities Futures Trading Commission, or similar exchange, 
     board of trade, or market, and (2) with respect to which the 
     amount required to be deposited and which may be withdrawn 
     depends on a system of marking to market.
       A ``dealer equity option'' means, with respect to an 
     options dealer, an equity option purchased in the normal 
     course of the activity of dealing in options and listed on 
     the qualified board or exchange on which the options dealer 
     is registered. An equity option is an option to buy or sell 
     stock or an option the value of which is determined by 
     reference to any stock, group or stocks, or stock index, 
     other than an option on certain broad-based groups of stock 
     or stock index.\62\ An options dealer is any person who is 
     registered with an appropriate national securities exchange 
     as a market maker or specialist in listed options, or who the 
     Secretary of the Treasury determines performs functions 
     similar to market makers and specialists.\63\
---------------------------------------------------------------------------
     \62\ Rev. Rul. 94-63, 1994-2 C.B. 188, provides that the 
     determination made by the Securities and Exchange Commission 
     will determine whether or not an option is ``broad based''.
     \63\ A special rule provides that any gain or loss with 
     respect to dealer equity options, which are allocable to 
     limited partners or limited entrepreneurs are treated as 
     short-term capital gain or loss and do not qualify for the 60 
     percent long-term, 40 percent short-term capital gain or loss 
     treatment of section 1256(a)(3).
---------------------------------------------------------------------------
     Mark to market accounting for dealers in securities
       Under present law, a dealer in securities must compute its 
     income from dealer in securities pursuant to mark-to-market 
     of accounting (sec. 475). Gains and losses are treated as 
     ordinary income and loss. Traders in securities, and dealers 
     and traders in commodities may elect to use this method of 
     accounting, including the ordinary income treatment. Section 
     1256 contracts are not treated as securities for purposes of 
     section 475.\64\
---------------------------------------------------------------------------
     \64\ As discussed above, dealers in equity options are 
     subject to mark-to-market accounting and the special capital 
     gain rules of section 1256.
---------------------------------------------------------------------------
     Short sales
       In the case of a ``short sale'' (i.e., where he taxpayer 
     sells borrowed property and later closes the sale by repaying 
     the lender with substantially identical property), any gain 
     or loss on the closing transaction is considered gain or loss 
     from the sale or exchange of a capital asset if the property 
     used to close the short sale is a capital asset in the hands 
     of the taxpayer, but the gain is ordinarily treated as short-
     term gain (sec. 1233(a)).
       The Internal Revenue Code (the ``Code'') also contains 
     several rules intended to prevent the transformation of 
     short-term capital gain into long-term capital gain or long-
     term capital loss into short-term loss by simultaneously 
     holding property and selling short substantially identical 
     property (sec. 1233(b) and (d)). Under these rules, if 
     taxpayer holds property for less than the long-term holding 
     period and sells short substantially identical property, any 
     gain or loss upon the closing of the short sale is considered 
     short-term capital gain, and the holding period of the 
     substantially identical property is generally considered to 
     begin on the date of the closing of the short sale. Also, if 
     a taxpayer has held property for more than the long-term 
     holding period and sells short substantially identical 
     property, any loss on the closing of the short sale is 
     considered a long-term capital loss.
       For purposes of these short sale rules, property includes 
     stock, securities, and commodity futures, but commodity 
     futures are not considered substantially identical if they 
     call for delivery in different months.
       For purposes of the short-sale rules relating to short-term 
     gains, the acquisition of an option to sell at a fixed price 
     is treated as a short sale, and the exercise or failure to 
     exercise the option is considered a closing of the short 
     sale. \65\
---------------------------------------------------------------------------
     \65\ An exception applies to sell acquired on the same day as 
     the property identified as intended to be used (and is so 
     used) in exercising the option is acquired (sec. 1233(c)).
---------------------------------------------------------------------------
       The Code also treats a taxpayer as recognizing gain where 
     the taxpayer holds appreciated property and enters into a 
     short sale of the same or substantially identical property, 
     or enters into a contract to sell that same or substantially 
     identical property (sec. 1259).
     Wash sales
       The wash-sale rule (sec. 1091) disallows certain losses 
     from the disposition of stock or securities if substantially 
     identical stock or securities (or an option or contract to 
     acquire such property) are acquired by the taxpayer during 
     the period beginning 30 days before the date of sale and 
     ending 30 days after such date of sale. Commodity futures are 
     not treated as stock or securities for purposes of this rule. 
     The basis of the substantially identical stock or securities 
     is adjusted to include the disallowed loss.
       Similar rules apply to disallow any loss realized on the 
     closing of a short sale of stock or securities where 
     substantially identical stock or securities are sold (or a 
     short sale, option or contract to sell is entered into) 
     during the applicable period before and after the closing of 
     the short sale.
     Straddle rules
       If a taxpayer realizes a loss with respect to a position in 
     a straddle, the taxpayer may recognize that loss for the 
     taxable year only to the extent that the loss exceeds the 
     unrecognized gain (if any) with respect to offsetting 
     positions in the straddle (sec. 1092). Disallowed losses are 
     carried forward to the succeeding taxable year and are 
     subject to the same limitation in that taxable year.
       A ``straddle'' generally refers to offsetting positions 
     with respect to actively traded personal property. Positions 
     are offsetting if there is a substantial diminution of risk 
     of loss from holding one position by reason of

[[Page H12420]]

     holding one or more other positions in personal property. A 
     ``position'' in personal property is an interest (including a 
     futures or forward contract or option) in personal property.
       The straddle rules provide that the Secretary of the 
     Treasury may issue regulations applying the short sale 
     holding period rules to positions in a straddle. Temporary 
     regulations have been issued setting forth the holding period 
     rules applicable to positions in a straddle. \66\ To the 
     extent these rules apply to a position, the rules in section 
     1233(b) and (d) do not apply.
---------------------------------------------------------------------------
     \66\ Reg. sec. 1.1092(b)--2T.
---------------------------------------------------------------------------
       The straddle rules generally do not apply to positions in 
     stock. However the straddle rules apply if one of the 
     positions is stock and at least one of the offsetting 
     positions is either (1) an option with respect to stock or 
     (2) a position with respect to substantially similar or 
     related property (other than stock) as defined in Treasury 
     regulations. Under property Treasury regulations, a position 
     with respect to substantially similar or related property 
     does not include stock or a short sale of stock, but includes 
     any other position with respect to substantially similar or 
     related property. \67\
---------------------------------------------------------------------------
     \67\ Prop. Reg. sec. 1.1092(d)--2(c).
---------------------------------------------------------------------------
       If a straddle consists of both positions that are section 
     1256 contracts and positions that are not such contracts, the 
     taxpayer may designate the positions as a mixed straddle. 
     Positions in a mixed straddle are not subject to the mark-to-
     market rule of section 1256, but instead are subject to rules 
     written under regulations to prevent the deferral of tax or 
     the conversion of short-term capital gain to long-term 
     capital gain or long-term capital loss into short-term 
     capital loss.
     Transactions by a corporation in its own stock
       A corporation does not recognize gain or loss on the 
     receipt of money or other property in exchange for its own 
     stock. Likewise, a corporation does not recognize gain or 
     loss when it redeems its stock with cash, for less or more 
     than it received when the stock was issued. In addition, a 
     corporation does not recognize gain or loss on any lapse or 
     acquisition or an option to buy or sell its stock (sec. 
     1032).


                               House Bill

       No provision. However, section 124(c) and (d) of H.R. 4541 
     \68\ contained the following provisions:
---------------------------------------------------------------------------
     \68\ H.R. 4541 passed the House of Representatives on October 
     19, 2000.
---------------------------------------------------------------------------
     In general
       Except in the case of dealer securities futures contracts 
     described below, securities futures contracts are not treated 
     as section 1256 contracts. Thus, holders of these contracts 
     are not subject to the mark-to-market rules of section 1256 
     and are not eligible for 60-percent long-term capital gain 
     treatment under section 1256. Instead, gain or loss on these 
     contracts will be recognized under the general rules relating 
     to the disposition of property. \69\
---------------------------------------------------------------------------
     \69\ Any securities futures contract which is not a section 
     1256 contract will be treated as a ``security'' for purposes 
     of section 475. Thus, for example, traders in securities 
     futures contracts
---------------------------------------------------------------------------
       A securities futures contract is defined in section 
     3(a)(55)(A) of the Securities Exchange Act of 1934, as added 
     by the bill. In general, that definition provides that a 
     securities futures contract means a contract of sale for 
     future delivery of a single security or a narrow-based 
     security index. A securities futures contract will not be 
     treated as a commodities futures contract for purposes of the 
     Code.
     Treatment of gains and losses
       The bill provides that any gain or loss from the sale or 
     exchange of a securities futures contract (other than a 
     dealer securities futures contract) will be considered as 
     gain or loss from the sale or exchange of property which has 
     the same character as the property to which the contract 
     relates has (or would have) in the hands of the taxpayer. 
     Thus, if the underlying security would be a capital asset in 
     the taxpayer's hands, then gain or loss from the sale or 
     exchange of the securities futures contract would be capital 
     gain or loss. The bill also provides that the termination of 
     a securities futures contract which is a capital asset will 
     be treated as a sale or exchange of the contract.
       Capital gain treatment will not apply to contracts which 
     themselves are not capital assets because of the exceptions 
     to the definition of a capital asset relating to inventory 
     (sec. 1221(a)(1)) or hedging (sec. 1221(a)(7)), or to any 
     income derived in connection with a contract which would 
     otherwise be treated as ordinary income.
       Except as otherwise provided in regulations under section 
     1092(b) (which treats certain losses from a straddle as long-
     term capital losses) and section 1234B, as added by the bill, 
     any capital gain or loss from the sale or exchange of a 
     securities futures contract to sell property (i.e., the short 
     side of a securities futures contract) will be short-term 
     capital gain or loss. In other words, a securities futures 
     contract to sell property is treated as equivalent to a short 
     sale of the underlying property.
     Wash sale rules
       The bill clarifies that, under the ash sale rules, a 
     contract or option to acquire or sell stock or securities 
     shall include options and contracts that are (or may be) 
     settled in cash or property other than the stock or 
     securities to which the contract relates. Thus, for example, 
     the acquisition, within the period set forth in section 1091, 
     of a securities futures contract to acquire stock of a 
     corporation could cause the taxpayer's loss on the sale of 
     stock in that corporation to be disallowed, notwithstanding 
     that the contract may be settled in cash.
     Short sale rules
       In applying the short sale rules, a securities futures 
     contract to acquire property will be treated in manner 
     similar to the property itself. Thus, for example, the 
     holding of a securities futures contract to acquire property 
     and the short sale of property which is substantially 
     identical to the property under the contract will result in 
     the application of the rules of section 1233(b).\70\ In 
     addition, as stated above, a securities futures contract to 
     sell is treated in a manner similar to a short sale of the 
     property.
---------------------------------------------------------------------------
     \70\ Because securities futures contracts are not treated as 
     futures contracts with respect to commodities, the rule 
     providing that commodity futures are not substantially 
     identical if they call for delivery in different months does 
     not apply.
---------------------------------------------------------------------------
     Straddle rules
       Stock which is part of a straddle at least one of the 
     offsetting positions of which is a securities futures 
     contract with respect to the stock or substantially identical 
     stock will be subject to the straddle rules of section 1092. 
     Treasury regulations under section 1092 applying the 
     principles of the section 1233(b) and (d) short sale rules to 
     positions in a straddle will also apply.
       For example, assume a taxpayer holds a long-term position 
     in actively traded stock (which is a capital asset in the 
     taxpayer's hands) and enters into a securities futures 
     contract to sell substantially identical stock (at a time 
     when the position in the stock has not appreciated in value 
     so that the constructive sale rules of section 1259 do not 
     apply). The taxpayer has a straddle. Treasury regulations 
     prescribed under section 1092(b) applying the principles of 
     section 1233(d) will apply, so that any loss on closing the 
     securities futures contract will be a long-term capital loss.
     Section 1032
       A corporation will not recognize gain or loss on 
     transactions in securities futures contracts with respect to 
     its own stock.
     Holding period
       If property is delivered in satisfaction of a securities 
     futures contract to acquire property (other than a contract 
     to which section 1256 applies), the holding period for the 
     property will include the period the taxpayer held the 
     contract, provided that the contract was a capital asset in 
     the hands of the taxpayer.
     Regulations
       The Secretary of the Treasury or his delegate has the 
     authority to prescribe regulations to provide for the proper 
     treatment of securities futures contracts under provisions of 
     the Internal Revenue Code.
     Dealers in securities futures contracts
       In general, the bill provides that securities futures 
     contracts and options on such contracts are not section 1256 
     contracts. The bill provides, however, that ``dealer 
     securities futures contracts'' will be treated as section 
     1256 contracts.
       The term `'dealer securities futures contract'' means a 
     securities futures contract which is entered into by a dealer 
     in the normal course of his or her trade or business activity 
     of dealing in such contracts, and is traded on a qualified 
     board of trade or exchange. The term also includes any option 
     to enter into securities futures contracts purchased or 
     granted by a dealer in the normal course of his or her trade 
     or business activity of dealing in such options. The 
     determination of who is to be treated as a dealer in 
     securities futures contracts is to be made by the Secretary 
     of the Treasury or his delegate not later than July 1, 2001. 
     Accordingly, the bill authorizes the Secretary to treat a 
     person as a dealer in securities futures contracts or options 
     on such contracts if the Secretary determines that the person 
     performs, with respect to such contracts or options, 
     functions similar to an equity options dealer, as defined 
     under present law.
       The determination of who is a dealer in securities futures 
     contracts is to be made in a manner that is appropriate to 
     carry out the purposes of the provision, which generally is 
     to provide comparable tax treatment between dealers in 
     securities futures contracts, on the one hand, and dealers in 
     equity options, on the other. Although traders in securities 
     futures contracts (and options on such contracts) may not 
     have the same market-making obligations as market makers or 
     specialists in equity options, many traders are expected to 
     perform analogous functions to such market makers or 
     specialists by providing market liquidity for securities 
     futures contracts (and options) even in the absence of a 
     legal obligation to do so. Accordingly, the absence of 
     market-making obligations is not inconsistent with a 
     determination that a class of traders are dealers in 
     securities futures contracts (and options), if the relevant 
     factors, including providing market liquidity for such 
     contracts (and options), indicate that the market functions 
     of the traders is comparable to that of equity options 
     dealers.
       As in the case of dealer equity options, gains and losses 
     allocated to any limited partner or limited entrepreneur with 
     respect to a dealer securities futures contract will be 
     treated as short-term capital gain or loss.
     Treatment of options under section 1256
       The bill modifies the definition of ``equity option'' for 
     purposes of section 1256 to take

[[Page H12421]]

     into account changes made by the non-tax provisions of the 
     bill. Only options dealers are eligible for section 1256 with 
     respect to equity options. The term ``equity option'' is 
     modified to include an option to buy or sell stock, or an 
     option the value of which is determined, directly or 
     indirectly, by reference to any stock, or any ``narrow-based 
     security index,'' as defined in section 3(a)(55) of the 
     Securities Exchange Act of 1934 (as modified by the bill). An 
     equity option includes an option with respect to a group of 
     stocks only if the group meets the requirements for a narrow-
     based security index.
       As under present law, listed options that are not ``equity 
     options'' are considered ``nonequity options'' to which 
     section 1256 applies for all taxpayers. For example, options 
     relating to broad-based groups of stocks and broad based 
     stock indexes will continue to be treated as nonequity 
     options under section 1256.
     Definition of contract markets
       The non-tax provisions of the bill designate certain new 
     contract markets. The new contract markets will be contract 
     markets for purposes of the Code, except to the extent 
     provided in Treasury regulations.
     Effective Date
       These provisions will take effect on the date of enactment 
     of the bill.


                            Senate Amendment

       No provision.


                          Conference Agreement

       The conference agreement follows the tax provisions 
     contained in H.R. 4541.

                        TAX COMPLEXITY ANALYSIS

       Section 4022(b) of the Internal Revenue Service Reform and 
     Restructuring Act of 1998 (the ``IRS Reform Act'') requires 
     the Joint Committee on Taxation (in consultation with the 
     Internal Revenue Service and the Department of the Treasury) 
     to provide a tax complexity analysis. The complexity analysis 
     is required for all legislation reported by the House 
     Committee on Ways and Means, the Senate Committee on Finance, 
     or any committee of conference if the legislation includes a 
     provision that directly or indirectly amends the Internal 
     Revenue Code and has widespread applicability to individuals 
     or small businesses.
       The staff of the Joint Committee on Taxation has determined 
     that a complexity analysis is not required under section 
     4022(b) of the IRS Reform Act because the bill contains no 
     provisions that amend the Internal Revenue Code and that have 
     ``widespread applicability'' to individuals or small 
     businesses.

[[Page H12422]]

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[[Page H12425]]

            NEW MARKETS VENTURE CAPITAL PROGRAM ACT OF 2000

       The conference agreement would enact the provisions of H.R. 
     5663, as introduced on December 14, 2000. The text of that 
     bill follows:
     A BILL to provide for community renewal and new markets 
     initiatives
       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SEC. 101. NEW MARKETS VENTURE CAPITAL PROGRAM.

       (a) Short Title.--This section may be cited as the ``New 
     Markets Venture Capital Program Act of 2000''.
       (b) New Markets Venture Capital Program.--Title III of the 
     Small Business Investment Act of 1958 (15 U.S.C. 681 et seq.) 
     is amended--
       (1) in the heading for the title, by striking ``SMALL 
     BUSINESS INVESTMENT COMPANIES'' and inserting ``INVESTMENT 
     DIVISION PROGRAMS'';
       (2) by inserting before the heading for section 301 the 
     following:

            ``PART A--SMALL BUSINESS INVESTMENT COMPANIES'';

     and
       (3) by adding at the end the following:

             ``PART B--NEW MARKETS VENTURE CAPITAL PROGRAM

     ``SEC. 351. DEFINITIONS.

       ``In this part, the following definitions apply:
       ``(1) Developmental venture capital.--The term 
     `developmental venture capital' means capital in the form of 
     equity capital investments in businesses made with a primary 
     objective of fostering economic development in low-income 
     geographic areas. For the purposes of this paragraph, the 
     term `equity capital' has the same meaning given such term in 
     section 303(g)(4).
       ``(2) Low-income individual.--The term `low-income 
     individual' means an individual whose income (adjusted for 
     family size) does not exceed--
       ``(A) for metropolitan areas, 80 percent of the area median 
     income; and
       ``(B) for nonmetropolitan areas, the greater of--
       ``(i) 80 percent of the area median income; or
       ``(ii) 80 percent of the statewide nonmetropolitan area 
     median income.
       ``(3) Low-income geographic area--the term `low-income 
     geographic area' means--
       ``(A) any population census tract (or in the case of an 
     area that is not tracted for population census tracts, the 
     equivalent county division, as defined by the Bureau of the 
     Census of the Department of Commerce for purposes of defining 
     poverty areas), if--
       ``(i) the poverty rate for that census tract is not less 
     than 20 percent;
       ``(ii) in the case of a tract--

       ``(I) that is located within a metropolitan area, 50 
     percent or more of the households in that census tract have 
     an income equal to less than 60 percent of the area median 
     gross income; or
       ``(II) that is not located within a metropolitan area, the 
     median household income for such tract does not exceed 80 
     percent of the statewide median household income; or

       ``(iii) as determined by the Administrator based on 
     objective criteria, a substantial population of low-income 
     individuals reside, an inadequate access to investment 
     capital exists, or other indications of economic distress 
     exist in that census tract; or
       ``(B) any area located within--
       ``(i) a HUBZone (as defined in section 3(p) of the Small 
     Business Act and the implementing regulations issued under 
     that section);
       ``(ii) an urban empowerment zone or urban enterprise 
     community (as designated by the Secretary of Housing and 
     Urban Development); or
       ``(iii) a rural empowerment zone or rural enterprise 
     community (as designated by the Secretary of Agriculture).
       ``(4) New markets venture capital company.--The term `New 
     Markets Venture Capital company' means a company that--
       ``(A) has been granted final approval by the Administrator 
     under section 354(e); and
       ``(B) has entered into a participation agreement with the 
     Administrator.
       ``(5) Operational assistance.--The term `operational 
     assistance' means management, marketing, and other technical 
     assistance that assists a small business concern with 
     business development.
       ``(6) Participation agreement.--The term `participation 
     agreement' means an agreement, between the Administrator and 
     a company granted final approval under section 354(e), that--
       ``(A) details the company's operating plan and investment 
     criteria; and
       ``(B) requires the company to make investments in smaller 
     enterprises at least 80 percent of which are located in low-
     income geographic areas.
       ``(7) Specialized small business investment company.--The 
     term `specialized small business investment company' means 
     any small business investment company that--
       ``(A) invests solely in small business concerns that 
     contribute to a well-balanced national economy by 
     facilitating ownership in such concerns by persons whose 
     participation in the free enterprise system is hampered 
     because of social or economic disadvantages;
       ``(B) is organized or chartered under State business or 
     nonprofit corporations statutes, or formed as a limited 
     partnership; and
       ``(C) was licensed under section 301(d), as in effect 
     before September 30, 1996.
       ``(8) State.--The term `State' means such of the several 
     States, the District of Columbia, the Commonwealth of Puerto 
     Rico, the Virgin Islands, Guam, American Samoa, the 
     Commonwealth of the Northern Mariana Islands, and any other 
     commonwealth, territory, or possession of the United States;

     ``SEC. 352. PURPOSES.

       ``The purposes of the New Markets Venture Capital Program 
     established under this part are--
       ``(1) to promote economic development and the creation of 
     wealth and job opportunities in low-income geographic areas 
     and among individuals living in such areas by encouraging 
     developmental venture capital investments in smaller 
     enterprises primarily located in such areas; and
       ``(2) to establish a developmental venture capital program, 
     with the mission of addressing the unmet equity investment 
     needs of small enterprises located in low-income geographic 
     areas, to be administered by the Administrator--
       ``(A) to enter into participation agreements with New 
     Markets Venture Capital companies;
       ``(B) to guarantee debentures of New Markets Venture 
     Capital companies to enable each such company to make 
     developmental venture capital investments in smaller 
     enterprises in low-income geographic areas; and
       ``(C) to make grants to New Markets Venture Capital 
     companies, and to other entities, for the purpose of 
     providing operational assistance to smaller enterprises 
     financed, or expected to be financed, by such companies.

     ``SEC. 353. ESTABLISHMENT.

       ``In accordance with this part, the Administrator shall 
     establish a New Markets Venture Capital Program, under which 
     the Administrator may--
       ``(1) enter into participation agreements with companies 
     granted final approval under section 354(e) for the purposes 
     set forth in section 352;
       ``(2) guarantee the debentures issued by New Markets 
     Venture Capital companies as provided in section 355; and
       ``(3) make grants to New Markets Venture Capital companies, 
     and to other entities, under section 358.

     ``SEC. 354. SELECTION OF NEW MARKETS VENTURE CAPITAL 
                   COMPANIES.

       ``(a) Eligibility.--A company shall be eligible to apply to 
     participate, as a New Markets Venture Capital company, in the 
     program established under this part if--
       ``(1) the company is a newly formed for-profit entity or a 
     newly formed for-profit subsidiary of an existing entity;
       ``(2) the company has a management team with experience in 
     community development financing or relevant venture capital 
     financing; and
       ``(3) the company has a primary objective of economic 
     development of low-income geographic areas.
       ``(b) Application.--To participate, as a New Markets 
     Venture Capital company, in the program established under 
     this part a company meeting the eligibility requirements set 
     forth in subsection (a) shall submit an application to the 
     Administrator that includes--
       ``(1) a business plan describing how the company intends to 
     make successful developmental venture capital investments in 
     identified low-income geographic areas;
       ``(2) information regarding the community development 
     finance or relevant venture capital qualifications and 
     general reputation of the company's management;
       ``(3) a description of how the company intends to work with 
     community organizations and to seek to address the unmet 
     capital needs of the communities served;
       ``(4) a proposal describing how the company intends to use 
     the grant funds provided under this part to provide 
     operational assistance to smaller enterprises financed by the 
     company, including information regarding whether the company 
     intends to use licensed professionals, when necessary, on the 
     company's staff or from an outside entity;
       ``(5) with respect to binding commitments to be made to the 
     company under this part, an estimate of the ratio of cash to 
     in-kind contributions;
       ``(6) a description of the criteria to be used to evaluate 
     whether and to what extent the company meets the objectives 
     of the program established under this part;
       ``(7) information regarding the management and financial 
     strength of any parent firm, affiliated firm, or any other 
     firm essential to the success of the company's business plan; 
     and
       ``(8) such other information as the Administrator may 
     require.
       ``(c) Conditional Approval.--
       ``(1) In general.--From among companies submitting 
     applications under subsection (b), the Administrator shall, 
     in accordance with this subsection, conditionally approval 
     companies to participate in the New Markets Venture Capital 
     Program.
       ``(2) Selection criteria.--In selecting companies under 
     paragraph (1), the Administrator shall consider the 
     following:
       ``(A) The likelihood that the company will meet the goal of 
     its business plan.
       ``(B) The experience and background of the company's 
     management team.
       ``(C) The need for developmental venture capital 
     investments in the geographic areas in which the company 
     intends to invest.
       ``(D) The extent to which the company will concentrate its 
     activities on serving the geographic areas in which it 
     intends to invest.
      ``(E) The likelihood that the company will be able to 
     satisfy the conditions under subsection (d).
      ``(F) The extent to which the activities proposed by the 
     company will expand economic opportunities in the geographic 
     areas in which the company intends to invest.
      ``(G) The strength of the company's proposal to provide 
     operational assistance under this part as the proposal 
     relates to the ability of the applicant to meet applicable 
     cash requirements and properly utilize in-kind contributions, 
     including the use of resources for the services of

[[Page H12426]]

     licensed professionals, when necessary, whether provided by 
     persons on the company's staff or by persons outside of the 
     company.
      ``(H) Any other factors deemed appropriate by the 
     Administrator.
      ``(3) Nationwide distribution.--The Administrator shall 
     select companies under paragraph (1) in such a way that 
     promotes investment nationwide.
       ``(d) Requirements To Be Met for Final Approval--The 
     Administrator shall grant each conditionally approved company 
     a period of time, not to exceed 2 years, to satisfy the 
     following requirements:
      ``(1) Capital requirement.--Each conditionally approved 
     company shall raise not less than $5,000,000 of private 
     capital or binding capital commitments from one or more 
     investors (other than agencies or departments of the Federal 
     Government) who met criteria established by the 
     Administrator.
      ``(2) Nonadministration resources for operational 
     assistance.--
      ``(A) In general.--In order to provide operational 
     assistance to smaller enterprises expected to be financed by 
     the company, each conditionally approved company--
      ``(i) shall have binding commitments (for contribution in 
     cash or in kind)--

      ``(I) from any sources other than the Small Business 
     Administration that meet criteria established by the 
     Administrator;
      ``(II) payable or available over a multiyear period 
     acceptable to the Administrator (not to exceed 10 years); and
      ``(III) in an amount not less than 30 percent of the total 
     amount of capital and commitments raised under paragraph (1);

      ``(ii) shall have purchased an annuity--

      ``(I) from an insurance company acceptable to the 
     Administrator;
      ``(II) using funds (other than the funds raised under 
     paragraph (1)), from any source other than the Administrator; 
     and
      ``(III) that yields cash payments over a multiyear period 
     acceptable to the Administrator (not to exceed 10 years) in 
     an amount not less than 30 percent of the total amount of 
     capital and commitments raised under paragraph (1); or

      ``(iii) shall have binding commitments (for contributions in 
     cash or in kind) of the type described in clause (i) and 
     shall have purchased an annuity of the type described in 
     clause (ii), which in the aggregate make available, over a 
     multiyear period acceptable to the Administrator (not to 
     exceed 10 years), an amount not less than 30 percent of the 
     total amount of capital and commitments raised under 
     paragraph (1).
      ``(B) Exception.--The Administrator may, in the discretion 
     of the Administrator and based upon a showing of special 
     circumstances and good cause, consider an applicant to have 
     satisfied the requirements of subparagraph (A) if the 
     applicant has--
      ``(i) a viable plan that reasonably projects the capacity of 
     the applicant to raise the amount (in cash or in-kind) 
     required under subparagraph (A); and
      ``(ii) binding commitments in an amount equal to not less 
     than 20 percent of the total amount required under paragraph 
     (A).
      ``(C) Limitation.--In order to comply with the requirements 
     of subparagraphs (A) and (B), the total amount of a company's 
     in-kind contributions may not exceed 50 percent of the 
     company's total contributions.
       ``(e) Final Approval; Designation--The Administrator shall, 
     with respect to each applicant conditionally approved to 
     operate as a New Markets Venture Capital company under 
     subsection (c), either--
      ``(1) grant final approval to the applicant to operate as a 
     New Markets Venture Capital company under this part and 
     designate the applicant as such a company, if the applicant--
       ``(A) satisfies the requirements of subsection (d) on or 
     before the expiration of the time period described in that 
     subsection; and
       ``(B) enters into a participation agreement with the 
     Administrator; or
       ``(2) if the applicant fails to satisfy the requirements of 
     subsection (d) on or before the expiration of the time period 
     described in that subsection, revoke the conditional approval 
     granted under that subsection.

     ``SEC. 355. DEBENTURES.

       ``(a) In General.--The Administrator may guarantee the 
     timely payment of principal and interest, as scheduled, on 
     debentures issued by any New Markets Venture Capital company.
       ``(b) Terms and Conditions.--The Administrator may make 
     guarantees under this section on such terms and conditions as 
     it deems appropriate, except that the term of any debenture 
     guaranteed under this section shall not exceed 15 years.
       ``(c) Full Faith and Credit of the United States.--The full 
     faith and credit of the United States is pledged to pay all 
     amounts that may be required to be paid under any guarantee 
     under this part.
       ``(d) Maximum Guarantee.--
       ``(1) In general.--Under this section, the Administrator 
     may guarantee the debentures issued by a New Markets Venture 
     Capital company only to be extent that the total face amount 
     of outstanding guaranteed debentures of such company does not 
     exceed 150 percent of the private capital of the company, as 
     determined by the Administrator.
       ``(2) Treatment of certain federal funds.--For the purposes 
     of paragraph (1), private capital shall include capital that 
     is considered to be Federal funds, if such capital is 
     contributed by an investor other than an agency or department 
     of the Federal Government.

     ``SEC. 356. ISSUANCE AND GUARANTEE OF TRUST CERTIFICATES.

       ``(a) Issuance.--The Administrator may issue trust 
     certificates representing ownership of all or a fractional 
     part of debentures issued by a New Markets Venture Capital 
     company and guaranteed by the Administrator under this part, 
     if such certificates are based on and backed by a trust or 
     pool approved by the Administrator and composed solely of 
     guaranteed debentures.
       ``(b) Guarantee.--
       ``(1) In general.--The Administrator may, under such terms 
     and conditions as it deems appropriate, guarantee the timely 
     payment of the principal of and interest on trust 
     certificates issued by the Administrator or its agents for 
     purposes of this section.
       ``(2) Limitation.--Each guarantee under this subsection 
     shall be limited to the extent of principal and interest on 
     the guaranteed debentures that compose the trust or pool.
       ``(3) Prepayment or default.--In the event that a debenture 
     in a trust or pool is prepaid, or in the event of default of 
     such a debenture, the guarantee of timely payment of 
     principal and interest on the trust certificates shall be 
     reduced in proportion to the amount of principal and interest 
     such prepaid debenture represents in the trust or pool. 
     Interest on prepaid or defaulted debentures shall accrue and 
     be guaranteed by the Administrator only through the date of 
     payment of the guarantee. At any time during its term, a 
     trust certificate may be called for redemption due to 
     prepayment or default of all debentures.
       ``(c) Full Faith and Credit of the United States.--The full 
     faith and credit of the United States is pledged to pay all 
     amounts that may be required to be paid under any guarantee 
     of a trust certificate issued by the Administrator or its 
     agents under this section.
       ``(d) Fees.--The Administrator shall not collect a fee for 
     any guarantee of a trust certificate under this section, but 
     any agent of the Administrator may collect a fee approved by 
     the Administrator for the functions described in subsection 
     (f)(2).
       ``(e) Subrogation and Ownership Rights.--
       ``(1) Subrogation.--In the event the Administrator pays a 
     claim under a guarantee issued under this section, it shall 
     be subrogated fully to the rights satisfied by such payment.
       ``(2) Ownership rights.--No Federal, State, or local law 
     shall preclude or limit the exercise by the Administrator of 
     its ownership rights in the debentures residing in a trust or 
     pool against which trust certificates are issued under this 
     section.
       ``(f) Management and Administration.--
       ``(1) Registration.--The Administrator may provide for a 
     central registration of all trust certificates issued under 
     this section.
       ``(2) Contracting of functions.--
       ``(A) In general.--The Administrator may contract with an 
     agent or agents to carry out on behalf of the Administrator 
     the pooling and the central registration functions provided 
     for in this section including, notwithstanding any other 
     provision of law--
       ``(i) maintenance, on behalf of and under the direction of 
     the Administrator, of such commercial bank accounts or 
     investments in obligations of the United States as may be 
     necessary to facilitate the creation of trusts or pools 
     backed by debentures guaranteed under this part; and
       ``(ii) the issuance of trust certificates to facilitate the 
     creation of such trusts or pools.
       ``(B) Fidelity bond or insurance requirement.--Any agent 
     performing functions on behalf of the Administrator under 
     this paragraph shall provide a fidelity bond or insurance in 
     such amounts as the Administrator determines to be necessary 
     to fully protect the interests of the United States.
       ``(3) Regulation of brokers and dealers.--The Administrator 
     may regulate brokers and dealers in trust certificates issued 
     under this section.
       ``(4) Electronic registration.--Nothing in this subsection 
     may be construed to prohibit the use of a book-entry or other 
     electronic form of registration for trust certificates issued 
     under this section.

     ``SEC. 357. FEES.

       ``Except as provided in section 356(d), the Administrator 
     may charge such fees as it deems appropriate with respect to 
     any guarantee or grant issued under this part.

     ``SEC. 358. OPERATIONAL ASSISTANCE GRANTS.

         ``(a) In General.--
       ``(1) Authority.--In accordance with this section, the 
     Administrator may make grants to New Markets Venture Capital 
     companies and to other entities, as authorized by this part, 
     to provide operational assistance to smaller enterprises 
     financed, or expected to be financed, by such companies or 
     other entities.
       ``(2) Terms.--Grants made under this subsection shall be 
     made over a multiyear period not to exceed 10 years, under 
     such other terms as the Administrator may require.
       ``(3) Grants to specialized small business investment 
     companies.--
       ``(A) Authority.--In accordance with this section, the 
     Administrator may make grants to specialized small business 
     investment companies to provide operational assistance to 
     smaller enterprises financed, or expected to be financed, by 
     such companies after the effective date of the New Markets 
     Venture Capital Program Act of 2000.
       ``(B) Use of funds.--The proceeds of a grant made under 
     this paragraph may be used by the company receiving such 
     grant only to provide operational assistance in connection 
     with an equity investment (made with capital raised after the 
     effective date of the New Markets Venture Capital Program Act 
     of 2000) in a business located in a low-income geographic 
     area.
       ``(C) Submission of plans.--A specialized small business 
     investment company shall be eligible for a grant under this 
     section only if the company submits to the Administrator, in 
     such form and manner as the Administrator may require, a plan 
     for use of the grant.

[[Page H12427]]

       ``(4) Grant amount.--
       ``(A) New markets venture capital companies.--The amount of 
     a grant made under this subsection to a New Markets Venture 
     Capital company shall be equal to the resources (in cash or 
     in kind) raised by the company under section 354(d)(2).
       ``(B) Other entities.--The amount of a grant made under 
     this subsection to any entity other than a New Markets 
     Venture Capital company shall be equal to the resources (in 
     cash or in kind) raised by the entity in accordance with the 
     requirements applicable to New Market Venture Capital 
     companies set forth in section 354(d)(2).
       ``(5) Pro rata reductions.--If the amount made available to 
     carry out this section is insufficient for the Administrator 
     to provide grants in the amounts provided for in paragraph 
     (4), the Administrator shall make pro rata reductions in the 
     amounts otherwise payable to each company and entity under 
     such paragraph.
       ``(b) Supplemental Grants.--
       ``(1) In general.--The Administrator may make supplemental 
     grants to New Markets Venture Capital companies and to other 
     entities, as authorized by this part under such terms as the 
     Administrator may require, to provide additional operational 
     assistance to smaller enterprises financed, or expected to be 
     financed, by the companies.
       ``(2) Matching requirement.--The Administrator may require, 
     as a condition of any supplemental grant made under this 
     subsection, that the company or entity receiving the grant 
     provide from resources (in a cash or in kind), other then 
     those provided by the Administrator, a matching contribution 
     equal to the amount of the supplemental grant.
       ``(c) Limitation.--None of the assistance made available 
     under this section may be used for any overhead or general 
     and administrative expense of a New Markets Venture Capital 
     company or a specialized small business investment company.

     ``SEC. 359. BANK PARTICIPATION.

       ``(a) In General.--Except as provided in subsection (b), 
     any national bank, any member bank of the Federal Reserve 
     System, and (to the extent permitted under applicable State 
     law) any insured bank that is not a member of such system, 
     may invest in any New Markets Venture Capital company, or in 
     any entity established to invest solely in New Markets 
     Venture Capital companies.
       ``(b) Limitation.--No bank described in subsection (a) may 
     make investments described in such subsection that are 
     greater than 5 percent of the capital and surplus of the 
     bank.

     ``SEC. 360. FEDERAL FINANCING BANK.

       ``Section 318 shall not apply to any debenture issued by a 
     New Markets Venture Capital company under this part.

     ``SEC. 361. REPORTING REQUIREMENT.

       ``Each New Markets Venture Capital company that 
     participates in the program established under this part shall 
     provide to the Administrator such information as the 
     Administrator may require, including--
       ``(1) information related to the measurement criteria that 
     the company proposed in its program application; and
       ``(2) in each case in which the company under this part 
     makes an investment in, or a loan or grant to, a business 
     that is not located in a low-income geographic area, a report 
     on the number and percentage of employees of the business who 
     reside in such areas.

     ``SEC. 362. EXAMINATIONS.

       ``(a) In General.--Each New Markets Venture Capital company 
     that participates in the program established under this part 
     shall be subject to examinations made at the direction of the 
     Investment Division of the Small Business Administration in 
     accordance with this section.
       ``(b) Assistance of Private Sector Entities.--Examinations 
     under this section may be conducted with the assistance of a 
     private sector entity that has both the qualifications and 
     the expertise necessary to conduct such examinations.
       ``(c) Costs.--
       ``(1) Assessment.--
       ``(A) In general.--The Administrator may assess the cost of 
     examinations under this section, including compensation of 
     the examiners, against the company examined.
       ``(B) Payment.--Any company against which the Administrator 
     assesses costs under this paragraph shall pay such costs.
       ``(d)Deposit of Funds.--Funds collected under this section 
     shall be deposited in the account for salaries and expenses 
     of the Small Business Administration.

     ``SEC. 363. INJUNCTIONS AND OTHER ORDERS.

       ``(a) In General.--Whenever, in the judgment of the 
     Administrator, a New Markets Venture Capital company or any 
     other person has engaged or is about to engage in any acts or 
     practices which constitute or will constitute a violation of 
     any provision of this Act, or of any rule or regulation under 
     this Act, or of any order issued under this Act, the 
     Administrator may make application to the proper district 
     court of the United States or a United States court of any 
     place subject to the jurisdiction of the United States for an 
     order enjoining such acts or practices, or for an order 
     enforcing compliance with such provision, rule, regulation, 
     or order, and such courts shall have jurisdiction of such 
     actions and, upon a showing by the Administrator that such 
     New Markets Venture Capital company or other person has 
     engaged or is about to engage in any such acts or practices, 
     a permanent or temporary injunction, restraining order, or 
     other order, shall be granted without bond.
       ``(b) Jurisdiction.--In any proceeding under subsection 
     (a), the court as a court of equity may, to such extent as it 
     deems necessary, take exclusive jurisdiction of the New 
     Market Venture Capital company and the assets thereof, 
     wherever located, and the court shall have jurisdiction in 
     any such proceeding to appoint a trustee or receiver to hold 
     or administer under the direction of the court the assets so 
     possessed.
       ``(c) Administrator As Trustee or Receiver.--
       ``(1) Authority.--The Administrator may act as trustee or 
     receiver of a New Markets Venture Capital company.
       ``(2) Appointment.--Upon request of the Administrator, the 
     court may appoint the Administrator to act as a trustee or 
     receiver of a New Markets Venture Capital company unless the 
     court deems such appointment inequitable or otherwise 
     inappropriate by reason of the special circumstances 
     involved.

     ``SEC. 364. ADDITIONAL PENALTIES FOR NONCOMPLIANCE

       ``(a) In General.--With respect to any New Markets Venture 
     Capital company that violates or fails to comply with any of 
     the provisions of this Act, of any regulation issued under 
     this Act, or of any participation agreement entered into 
     under this Act, the Administrator may in accordance with this 
     section--
       ``(1) void the participation agreement between the 
     Administrator and the company; and
       (2) cause the company to forfeit all of the rights and 
     privileges derived by the company from this Act.
       ``(b) Adjudication of Noncompliance.--
       ``(1) In general.--Before the Administrator may cause a New 
     Markets Venture Capital company to forfeit rights or 
     privileges under subsection (a), a court of the United States 
     of competent jurisdiction must find that the company 
     committed a violation, or failed to comply, in a cause of 
     action brought for that purpose in the district, territory, 
     or other place subject to the jurisdiction of the United 
     States, in which the principal office of the company is 
     located.
       ``(2) Parties authorized to file causes of action.--Each 
     cause of action brought by the United States under this 
     subsection shall be brought by the Administrator or by the 
     Attorney General.

     ``SEC. 365. UNLAWFUL ACTS AND OMISSIONS; BREACH OF FIDUCIARY 
                   DUTY.

       ``(a) Parties Deemed To Commit a Violation.--Whenever any 
     New Markets Venture Capital company violates any provision of 
     this Act, of a regulation issued under this Act, or of a 
     participation agreement entered into under this Act, by 
     reason of its failure to comply with its terms or by reason 
     of its engaging in any act or practice that constitutes or 
     will constitute a violation thereof, such violation shall 
     also be deemed to be a violation and an unlawful act 
     committed by any person who, directly or indirectly, 
     authorizes, orders, participates in, causes, brings about, 
     counsels, aids, or abets in the commission of any acts, 
     practices, or transactions that constitute or will 
     constitute, in whole or in part, such violation.
       ``(b) Fiduciary Duties.--It shall be unlawful for any 
     officer, director, employee, agent, or other participant in 
     the management or conduct of the affairs of a New Markets 
     Venture Capital company to engage in any act or practice, or 
     to omit any act or practice, in breach of the person's 
     fiduciary duty as such officer, director, employee, agent, or 
     participant if, as a result thereof, the company suffers or 
     is in imminent danger of suffering financial loss or other 
     damage.
       ``(c) Unlawful Acts.--Except with the written consent of 
     the Administrator, it shall be unlawful--
       ``(1) for any person to take office as an officer, 
     director, or employee of any New Markets Venture Capital 
     company, or to become an agent or participant in the conduct 
     of the affairs or management of such a company, if the 
     person--
       ``(A) has been convicted of a felony, or any other criminal 
     offense involving dishonesty or breach of trust, or
       ``(B) has been found civilly liable in damages, or has been 
     permanently or temporarily enjoined by an order, judgment, or 
     decree of a court of competent jurisdiction, by reason of any 
     act or practice involving fraud, or breach of trust; and
       ``(2) for any person continue to serve in any of the 
     capacities described in paragraph (1), if--
       ``(A) the person is convicted of a felony, or any other 
     criminal offense involving dishonesty or breach of trust, or
       ``(B) the person is found civilly liable in damages, or is 
     permanently or temporarily enjoined by an order, judgment, or 
     decree of a court of competent jurisdiction, by reason of any 
     act or practice involving fraud or breach of trust.

     ``SEC. 366. REMOVAL OR SUSPENSION OF DIRECTORS OR OFFICERS.

       ``Using the procedures for removing or suspending a 
     director or an officer of a licensee set forth in section 313 
     (to the extent such procedures are not inconsistent with the 
     requirements of this part), the Administrator may remove or 
     suspend any director or officer of any New Markets Venture 
     Capital company.

     ``SEC. 367. REGULATIONS.

       ``The Administrator may issue such regulations as it deems 
     necessary to carry out the provisions of this part in 
     accordance with its purposes.

     ``SEC. 368. AUTHORIZATIONS OF APPROPRIATIONS.

       ``(a) In General.--There are authorized to be appropriated 
     for fiscal years 2001 through 2006, to remain available until 
     expended, the following sums:
       ``(1) Such subsidy budget authority as may be necessary to 
     guarantee $150,000,000 of debentures under this part.
       ``(2) $30,000,000 to make grants under this part.
       ``(b) Funds Collected for Examinations.--Funds deposited 
     under section 362(c)(2) are authorized to be appropriated 
     only for the costs of

[[Page H12428]]

     examinations under section 362 and for the costs of other 
     oversight activities with respect to the program established 
     under this part.''
       (c) Conforming Amendment.--Section 20(e)(1)(C) of the Small 
     Business Act (15 U.S.C. 631 note) is amended by inserting 
     `part A of' before ``title III''.
       (d) Calculation of Maximum Amount of SBIC Leverage.--
       (1) Maximum leverage.--Section 303(b)(2) of the Small 
     Business Investment Act of 1958 (15 U.S.C. 683(b)(2)) is 
     amended to read as follows:
       ``(2) Maximum leverage.--
       ``(A) In general.--After March 31, 1993, the maximum amount 
     of outstanding leverage made available to a company licensed 
     under section 301(c) of this Act shall be determined by the 
     amount of such company's private capital--
       ``(i) if the company has private capital of not more than 
     $15,000,000, the total amount of leverage shall not exceed 
     300 percent of private capital;
       ``(ii) if the company has private capital of more than 
     $15,000,000 but not more than $30,000,000, the total amount 
     of leverage shall not exceed $45,000,000 plus 200 percent of 
     the amount of private capital over $15,000,000; and
       ``(iii) if the company has private capital of more than 
     $30,000,000, the total amount of leverage shall not exceed 
     $75,000,000 plus 100 percent of the amount of private capital 
     over $30,000,000 but not to exceed an additional $15,000,000.
       ``(B) Adjustments.--
       ``(i) In general.--The dollar amounts in clauses (i), (ii), 
     and (iii) of subparagraph (A) shall be adjusted annually to 
     reflect increases in the Consumer Price Index established by 
     the Bureau of Labor Statistics of the Department of Labor.
       ``(ii) Initial adjustments.--The initial adjustments made 
     under this subparagraph after the date of the enactment of 
     the Small Business Reauthorization Act of 1937 shall reflect 
     only increases from March 31, 1993.
       ``(C) Investments in low-income geographic areas.--In 
     calculating the outstanding leverage of a company for the 
     purposes of subparagraph (A), the Administrator shall not 
     include the amount of the cost basis of any equity investment 
     made by the company in a smaller enterprise located in a low-
     income geographic area (as defined in section 351), to the 
     extent that the total of such amounts does not exceed 50 
     percent of the company's private capital.''.
        (2) Maximum aggregate leverage.--Section 303(b)(4) of the 
     Small Business Investment Act of 1958 (15 U.S.C. 683(b)(4)) 
     is amended by adding at the end the following new 
     subparagraph:
       ``(D) Investments in low-income geographic areas.--In 
     calculating the aggregate outstanding leverage of a company 
     for the purposes of subparagraph (A), the Administrator shall 
     not include the amount of the cost basis of any equity 
     investment made by the company in a smaller enterprise 
     located in a low-income geographic area (as defined in 
     section 351), to the extent that the total of such amounts 
     does not exceed 50 percent of the company's private 
     capital.''
       (e) Bankruptcy Exemption for New Markets Venture Capital 
     Companies.--Section 109(b)(2) of title 11, United States 
     Code, is amended by inserting ``a New Markets Venture Capital 
     company as defined in section 351 of the Small Business 
     Investment Act of 1958,'' after ``homestead association,''.
       (f) Federal Savings Associations.--Section 5(c)(4) of the 
     Home Owners' Loan Act (12 U.S.C. 1464(c)(4)) is amended by 
     adding at the end the following:
       ``(F) New markets venture capital companies.--A Federal 
     savings association may invest in stock, obligations, or 
     other securities of any New Markets Venture Capital company 
     as defined in section 351 of the Small Business Investment 
     Act of 1958, except that a Federal savings association may 
     not make any investment under this subparagraph if its 
     aggregate outstanding investment under this subparagraph 
     would exceed 5 percent of the capital and surplus of such 
     savings association.''.

     SEC. 102. BUSINESSLINC GRANTS AND COOPERATIVE AGREEMENTS.

       Section 8 of the Small Business Act (15 U.S.C. 637) is 
     amended by adding at the end the following:
       ``(n) Business Grants and Cooperative Agreements.--
       ``(1) In general.--In accordance with this subsection, the 
     Administrator may make grants to and enter into cooperative 
     agreements with any coalition of private entities, public 
     entities, or any combination of private and public entities--
       ``(A) to expand business-to-business relationships between 
     large and small businesses; and
       ``(B) to provide businesses, directly or indirectly, with 
     online information and a database of companies that are 
     interested in mentor-protege programs or community-based, 
     statewide, or local business development programs.
       ``(2) Matching requirement.--Subject to subparagraph (B), 
     the Administrator may make a grant to a coalition under 
     paragraph (1) only if the coalition provides for activities 
     described in paragraph (1)(A) or (1)(B) an amount, either in 
     kind or in cash, equal to the grant amount.
       ``(3) Authorization of appropriations.--There is authorized 
     to be appropriated to carry out this subsection $6,600,000, 
     to remain available until expended, for each of fiscal years 
     2001 through 2006.''.

               SMALL BUSINESS REAUTHORIZATION ACT OF 2000

       The conference agreement would enact the provisions of H.R. 
     5667, as introduced on December 15, 2000. The text of that 
     bill follows:
       To provide for reauthorization of small business loan and 
     other programs, and for other purposes.
       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

       (a) Short Title.--This Act may be cited as the ``Small 
     Business Reauthorization Act of 2000''.
       (b) Table of Contents.--The table of contents for this Act 
     is as follows:

Sec. 1. Short title; table of contents.

          TITLE I--SMALL BUSINESS INNOVATION RESEARCH PROGRAM

Sec. 101. Short title.
Sec. 102. Findings.
Sec. 103. Extension of SBIR program.
Sec. 104. Annual report.
Sec. 105. Third phase assistance.
Sec. 106. Report on programs for annual performance plan.
Sec. 107. Output and outcome data.
Sec. 108. National Research Council reports.
Sec. 109. Federal agency expenditures for the SBIR program.
Sec. 110. Policy directive modifications.
Sec. 111. Federal and State technology partnership program.
Sec. 112. Mentoring networks.
Sec. 113. Simplified reporting requirements.
Sec. 114. Rural outreach program extension.

                    TITLE II--BUSINESS LOAN PROGRAMS

Sec. 201. Short title.
Sec. 202. Levels of participation.
Sec. 203. Loan amounts.
Sec. 204. Interest on defaulted loans.
Sec. 205. Prepayment of loans.
Sec. 206. Guarantee fees.
Sec. 207. Lease terms.
Sec. 208. Appraisals for loans secured by real property.
Sec. 209. Sale of guaranteed loans made for export purposes.
Sec. 210. Microloan program.

            TITLE III--CERTIFIED DEVELOPMENT COMPANY PROGRAM

Sec. 301. Short title.
Sec. 302. Women-owned businesses.
Sec. 303. Maximum debenture size.
Sec. 304. Fees.
Sec. 305. Premier certified lenders program.
Sec. 306. Sale of certain defaulted loans.
Sec. 307. Loan liquidation.

   TITLE IV--CORRECTIONS TO THE SMALL BUSINESS INVESTMENT ACT OF 1958

Sec. 401. Short title.
Sec. 402. Definitions.
Sec. 403. Investment in small business investment companies.
Sec. 404. Subsidy fees.
Sec. 405. Distributions.
Sec. 406. Conforming amendment.

          TITLE V--REAUTHORIZATION OF SMALL BUSINESS PROGRAMS

Sec. 501. Short title.
Sec. 502. Reauthorization of small business programs.
Sec. 503. Additional reauthorizations.
Sec. 504. Cosponsorship.

                       TITLE VI--HUBZONE PROGRAM

                 Subtitle A--HUBZones in Native America

Sec. 601. Short title.
Sec. 602. HUBZone small business concern.
Sec. 603. Qualified HUBZone small business concern.
Sec. 604. Other definitions.

                  Subtitle B--Other HUBZone Provisions

Sec. 611. Definitions.
Sec. 612. Eligible contracts.
Sec. 613. HUBZone redesignated areas.
Sec. 614. Community development.
Sec. 615. Reference corrections.

      TITLE VII--NATIONAL WOMEN'S BUSINESS COUNCIL REAUTHORIZATION

Sec. 701. Short title.
Sec. 702. Membership of the Council.
Sec. 703. Repeal of procurement project.
Sec. 704. Studies and other research.
Sec. 705. Authorization of appropriations.

                  TITLE VIII--MISCELLANEOUS PROVISIONS

Sec. 801. Loan application processing.
Sec. 802. Application of ownership requirements.
Sec. 803. Subcontracting preference for veterans.
Sec. 804. Small Business Development Center Program funding.
Sec. 805. Surety bonds.
Sec. 806. Size standards.
Sec. 807. Native Hawaiian organizations under section 8(a).
Sec. 808. National Veterans Business Development Corporation 
              correction.
Sec. 809. Private sector resources for SCORE.
Sec. 810. Contract data collection.
Sec. 811. Procurement program for women-owned small business concerns.

          TITLE I--SMALL BUSINESS INNOVATION RESEARCH PROGRAM

     SECTION 101. SHORT TITLE.

       (a) Short Title.--This title may be cited as the ``Small 
     Business Innovation Research Program Reauthorization Act of 
     2000''.

     SEC. 102. FINDINGS.

       Congress finds that--
       (1) the small business innovation research program 
     established under the Small Business Innovation Development 
     Act of 1982, and reauthorized by the Small Business Research 
     and Development Enhancement Act of 1992 (in this title 
     referred to as the ``SBIR program'') is highly successful in 
     involving small businesses in federally funded research and 
     development;
       (2) the SBIR program made the cost-effective and unique 
     research and development capabilities possessed by the small 
     businesses of the Nation available to Federal agencies and 
     departments;
       (3) the innovative goods and services developed by small 
     businesses that participated in the SBIR program have 
     produced innovations of

[[Page H12429]]

     critical importance in a wide variety of high-technology 
     fields, including biology, medicine, education, and defense;
       (4) the SBIR program is a catalyst in the promotion of 
     research and development, the commercialization of innovative 
     technology, the development of new products and services, and 
     the continued excellence of this Nation's high-technology 
     industries; and
       (5) the continuation of the SBIR program will provide 
     expanded opportunities for one of the Nation's vital 
     resources, its small businesses, will foster invention, 
     research, and technology, will create jobs, and will increase 
     this Nation's competitiveness in international markets.

     SEC. 103. EXTENSION OF SBIR PROGRAM.

       Section 9(m) of the Small Business Act (15 U.S.C. 638(m)) 
     is amended to read as follows:
       ``(m) Termination.--The authorization to carry out the 
     Small Business Innovation Research Program established under 
     this section shall terminate on September 30, 2008.''.

     SEC. 104. ANNUAL REPORT.

       Section 9(b)(7) of the Small Business Act (15 U.S.C. 
     638(b)(7)) is amended by striking ``and the Committee on 
     Small Business of the House of Representatives'' and 
     inserting ``, and to the Committee on Science and the 
     Committee on Small Business of the House of 
     Representatives,''.

     SEC. 105. THIRD PHASE ASSISTANCE.

       Section 9(e)(4)(C)(i) of the Small Business Act (15 U.S.C. 
     638(e)(4)(C)(i)) is amended by striking ``; and'' and 
     inserting ``; or''.

     SEC. 106. REPORT ON PROGRAMS FOR ANNUAL PERFORMANCE PLAN.

       Section 9(g) of the Small Business Act (15 U.S.C. 638(g)) 
     is amended--
       (1) in paragraph (7), by striking ``and'' at the end;
       (2) in paragraph (8), by striking the period at the end and 
     inserting a semicolon; and
       (3) by adding at the end the following:
       ``(9) include, as part of its annual performance plan as 
     required by subsections (a) and (b) of section 1115 of title 
     31, United States Code, a section on its SBIR program, and 
     shall submit such section to the Committee on Small Business 
     of the Senate, and the Committee on Science and the Committee 
     on Small Business of the House of Representatives; and''.

     SEC. 107. OUTPUT AND OUTCOME DATA.

       (a) Collection.--Section 9(g) of the Small Business Act (15 
     U.S.C. 638(g)), as amended by section 106 of this Act, is 
     further amended by adding at the end the following:
       ``(10) collect, and maintain in a common format in 
     accordance with subsection (v), such information from 
     awardees as is necessary to assess the SBIR program, 
     including information necessary to maintain the database 
     described in subsection (k).''.
       (b) Report to Congress.--Section 9(b)(7) of the Small 
     Business Act (15 U.S.C. 638(b)(7)), as amended by section 104 
     of this Act, is further amended by inserting before the 
     period at the end ``, including the data on output and 
     outcomes collected pursuant to subsections (g)(10) and 
     (o)(9), and a description of the extent to which Federal 
     agencies are providing in a timely manner information needed 
     to maintain the database described in subsection (k)''.
       (c) Database.--Section 9(k) of the Small Business Act (15 
     U.S.C. 638(k)) is amended to read as follows:
       ``(k) Database.--
       ``(1) Public database.--Not later than 180 days after the 
     date of enactment of the Small Business Innovation Research 
     Program Reauthorization Act of 2000, the Administrator shall 
     develop, maintain, and make available to the public a 
     searchable, up-to-date, electronic database that includes--
       ``(A) the name, size, location, and an identifying number 
     assigned by the Administrator, of each small business concern 
     that has received a first phase or second phase SBIR award 
     from a Federal agency;
       ``(B) a description of each first phase or second phase 
     SBIR award received by that small business concern, 
     including--
       ``(i) an abstract of the project funded by the award, 
     excluding any proprietary information so identified by the 
     small business concern;
       ``(ii) the Federal agency making the award; and
       ``(iii) the date and amount of the award;
       ``(C) an identification of any business concern or 
     subsidiary established for the commercial application of a 
     product or service for which an SBIR award is made; and
       ``(D) information regarding mentors and Mentoring Networks, 
     as required by section 35(d).
       ``(2) Government database.--Not later than 180 days after 
     the date of enactment of the Small Business Innovation 
     Research Program Reauthorization Act of 2000, the 
     Administrator, in consultation with Federal agencies required 
     to have an SBIR program pursuant to subsection (f)(1), shall 
     develop and maintain a database to be used solely for SBIR 
     program evaluation that--
       ``(A) contains for each second phase award made by a 
     Federal agency--
       ``(i) information collected in accordance with paragraph 
     (3) on revenue from the sale of new products or services 
     resulting from the research conducted under the award;
       ``(ii) information collected in accordance with paragraph 
     (3) on additional investment from any source, other than 
     first phase or second phase SBIR or STTR awards, to further 
     the research and development conducted under the award; and
       ``(iii) any other information received in connection with 
     the award that the Administrator, in conjunction with the 
     SBIR program managers of Federal agencies, considers relevant 
     and appropriate;
       ``(B) includes any narrative information that a small 
     business concern receiving a second phase award voluntarily 
     submits to further describe the outputs and outcomes of its 
     awards;
       ``(C) includes for each applicant for a first phase or 
     second phase award that does not receive such an award--
       ``(i) the name, size, and location, and an identifying 
     number assigned by the Administration;
       ``(ii) an abstract of the project; and
       ``(iii) the Federal agency to which the application was 
     made;
       ``(D) includes any other data collected by or available to 
     any Federal agency that such agency considers may be useful 
     for SBIR program evaluation; and
       ``(E) is available for use solely for program evaluation 
     purposes by the Federal Government or, in accordance with 
     policy directives issued by the Administration, by other 
     authorized persons who are subject to a use and nondisclosure 
     agreement with the Federal Government covering the use of the 
     database.
       ``(3) Updating information for database.--
       ``(A) In general.--A small business concern applying for a 
     second phase award under this section shall be required to 
     update information in the database established under this 
     subsection for any prior second phase award received by that 
     small business concern. In complying with this paragraph, a 
     small business concern may apportion sales or additional 
     investment information relating to more than one second phase 
     award among those awards, if it notes the apportionment for 
     each award.
       ``(B) Annual updates upon termination.--A small business 
     concern receiving a second phase award under this section 
     shall--
       ``(i) update information in the database concerning that 
     award at the termination of the award period; and
       ``(ii) be requested to voluntarily update such information 
     annually thereafter for a period of 5 years.
       ``(4) Protection of information.--Information provided 
     under paragraph (2) shall be considered privileged and 
     confidential and not subject to disclosure pursuant to 
     section 552 of title 5, United States Code.
       ``(5) Rule of construction.--Inclusion of information in 
     the database under this subsection shall not be considered to 
     be publication for purposes of subsection (a) or (b) of 
     section 102 of title 35, United States Code.''.

     SEC. 108. NATIONAL RESEARCH COUNCIL REPORTS.

       (a) Study and Recommendations.--The head of each agency 
     with a budget of more than $50,000,000 for its SBIR program 
     for fiscal year 1999, in consultation with the Small Business 
     Administration, shall, not later than 6 months after the date 
     of enactment of this Act, cooperatively enter into an 
     agreement with the National Academy of Sciences for the 
     National Research Council to--
       (1) conduct a comprehensive study of how the SBIR program 
     has stimulated technological innovation and used small 
     businesses to meet Federal research and development needs, 
     including--
       (A) a review of the value to the Federal research agencies 
     of the research projects being conducted under the SBIR 
     program, and of the quality of research being conducted by 
     small businesses participating under the program, including a 
     comparison of the value of projects conducted under the SBIR 
     program to those funded by other Federal research and 
     development expenditures;
       (B) to the extent practicable, an evaluation of the 
     economic benefits achieved by the SBIR program, including the 
     economic rate of return, and a comparison of the economic 
     benefits, including the economic rate of return, achieved by 
     the SBIR program with the economic benefits, including the 
     economic rate of return, of other Federal research and 
     development expenditures;
       (C) an evaluation of the noneconomic benefits achieved by 
     the SBIR program over the life of the program;
       (D) a comparison of the allocation for fiscal year 2000 of 
     Federal research and development funds to small businesses 
     with such allocation for fiscal year 1983, and an analysis of 
     the factors that have contributed to such allocation; and
       (E) an analysis of whether Federal agencies, in fulfilling 
     their procurement needs, are making sufficient effort to use 
     small businesses that have completed a second phase award 
     under the SBIR program; and
       (2) make recommendations with respect to--
       (A) measures of outcomes for strategic plans submitted 
     under section 306 of title 5, United States Code, and 
     performance plans submitted under section 1115 of title 31, 
     United States Code, of each Federal agency participating in 
     the SBIR program;
       (B) whether companies who can demonstrate project 
     feasibility, but who have not received a first phase award, 
     should be eligible for second phase awards, and the potential 
     impact of such awards on the competitive selection process of 
     the program;
       (C) whether the Federal Government should be permitted to 
     recoup some or all of its expenses if a controlling interest 
     in a company receiving an SBIR award is sold to a foreign 
     company or to a company that is not a small business concern;
       (D) how to increase the use by the Federal Government in 
     its programs and procurements of technology-oriented small 
     businesses; and
       (E) improvements to the SBIR program, if any are considered 
     appropriate.
       (b) Participation by Small Business.--
       (1) In general.--In a manner consistent with law and with 
     National Research Council study guidelines and procedures, 
     knowledgeable individuals from the small business community 
     with experience in the SBIR program shall be included--
       (A) in any panel established by the National Research 
     Council for the purpose of performing the study conducted 
     under this section; and

[[Page H12430]]

       (B) among those who are asked by the National Research 
     Council to peer review the study.
       (2) Consultation.--To ensure that the concerns of small 
     business are appropriately considered under this subsection, 
     the National Research Council shall consult with and consider 
     the views of the Office of Technology and the Office of 
     Advocacy of the Small Business Administration and other 
     interested parties, including entities, organizations, and 
     individuals actively engaged in enhancing or developing the 
     technological capabilities of small business concerns.
       (c) Progress Reports.--The National Research Council shall 
     provide semiannual progress reports on the study conducted 
     under this section to the Committee on Science and the 
     Committee on Small Business of the House of Representatives, 
     and to the Committee on Small Business of the Senate.
       (d) Report.--The National Research Council shall transmit 
     to the heads of agencies entering into an agreement under 
     this section and to the Committee on Science and the 
     Committee on Small Business of the House of Representatives, 
     and to the Committee on Small Business of the Senate--
       (1) not later than 3 years after the date of enactment of 
     this Act, a report including the results of the study 
     conducted under subsection (a)(1) and recommendations made 
     under subsection (a)(2); and
       (2) not later than 6 years after that date of enactment, an 
     update of such report.

     SEC. 109. FEDERAL AGENCY EXPENDITURES FOR THE SBIR PROGRAM.

       Section 9(i) of the Small Business Act (15 U.S.C. 638(i)) 
     is amended--
       (1) by striking ``(i) Each Federal'' and inserting the 
     following:
       ``(i) Annual Reporting.--
       ``(1) In general.--Each Federal''; and
       (2) by adding at the end the following:
       ``(2) Calculation of extramural budget.--
       ``(A) Methodology.--Not later than 4 months after the date 
     of enactment of each appropriations Act for a Federal agency 
     required by this section to have an SBIR program, the Federal 
     agency shall submit to the Administrator a report, which 
     shall include a description of the methodology used for 
     calculating the amount of the extramural budget of that 
     Federal agency.
       ``(B) Administrator's analysis.--The Administrator shall 
     include an analysis of the methodology received from each 
     Federal agency referred to in subparagraph (A) in the report 
     required by subsection (b)(7).''.

     SEC. 110. POLICY DIRECTIVE MODIFICATIONS.

       Section 9(j) of the Small Business Act (15 U.S.C. 638(j)) 
     is amended by adding at the end the following:
       ``(3) Additional modifications.--Not later than 120 days 
     after the date of enactment of the Small Business Innovation 
     Research Program Reauthorization Act of 2000, the 
     Administrator shall modify the policy directives issued 
     pursuant to this subsection--
       ``(A) to clarify that the rights provided for under 
     paragraph (2)(A) apply to all Federal funding awards under 
     this section, including the first phase (as described in 
     subsection (e)(4)(A)), the second phase (as described in 
     subsection (e)(4)(B)), and the third phase (as described in 
     subsection (e)(4)(C));
       ``(B) to provide for the requirement of a succinct 
     commercialization plan with each application for a second 
     phase award that is moving toward commercialization;
       ``(C) to require agencies to report to the Administration, 
     not less frequently than annually, all instances in which an 
     agency pursued research, development, or production of a 
     technology developed by a small business concern using an 
     award made under the SBIR program of that agency, and 
     determined that it was not practicable to enter into a 
     follow-on non-SBIR program funding agreement with the small 
     business concern, which report shall include, at a minimum--
       ``(i) the reasons why the follow-on funding agreement with 
     the small business concern was not practicable;
       ``(ii) the identity of the entity with which the agency 
     contracted to perform the research, development, or 
     production; and
       ``(iii) a description of the type of funding agreement 
     under which the research, development, or production was 
     obtained; and
       ``(D) to implement subsection (v), including establishing 
     standardized procedures for the provision of information 
     pursuant to subsection (k)(3).''.

     SEC. 111. FEDERAL AND STATE TECHNOLOGY PARTNERSHIP PROGRAM.

       (a) Findings.--Congress finds that--
       (1) programs to foster economic development among small 
     high-technology firms vary widely among the States;
       (2) States that do not aggressively support the development 
     of small high-technology firms, including participation by 
     small business concerns in the SBIR program, are at a 
     competitive disadvantage in establishing a business climate 
     that is conducive to technology development; and
       (3) building stronger national, State, and local support 
     for science and technology research in these disadvantaged 
     States will expand economic opportunities in the United 
     States, create jobs, and increase the competitiveness of the 
     United States in the world market.
       (b) Federal and State Technology Partnership Program.--The 
     Small Business Act (15 U.S.C. 631 et seq.) is amended--
       (1) by redesignating section 34 as section 36; and
       (2) by inserting after section 33 the following:

     ``SEC. 34. FEDERAL AND STATE TECHNOLOGY PARTNERSHIP PROGRAM.

       ``(a) Definitions.--In this section and section 35, the 
     following definitions apply:
       ``(1) Applicant.--The term `applicant' means an entity, 
     organization, or individual that submits a proposal for an 
     award or a cooperative agreement under this section.
       ``(2) Business advice and counseling.--The term `business 
     advice and counseling' means providing advice and assistance 
     on matters described in section 35(c)(2)(B) to small business 
     concerns to guide them through the SBIR and STTR program 
     process, from application to award and successful completion 
     of each phase of the program.
       ``(3) FAST program.--The term `FAST program' means the 
     Federal and State Technology Partnership Program established 
     under this section.
       ``(4) Mentor.--The term `mentor' means an individual 
     described in section 35(c)(2).
       ``(5) Mentoring network.--The term `Mentoring Network' 
     means an association, organization, coalition, or other 
     entity (including an individual) that meets the requirements 
     of section 35(c).
       ``(6) Recipient.--The term `recipient' means a person that 
     receives an award or becomes party to a cooperative agreement 
     under this section.
       ``(7) SBIR program.--The term `SBIR program' has the same 
     meaning as in section 9(e)(4).
       ``(8) State.--The term `State' means each of the several 
     States, the District of Columbia, the Commonwealth of Puerto 
     Rico, the Virgin Islands, Guam, and American Samoa.
       ``(9) STTR program.--The term `STTR program' has the same 
     meaning as in section 9(e)(6).
       ``(b) Establishment of Program.--The Administrator shall 
     establish a program to be known as the Federal and State 
     Technology Partnership Program, the purpose of which shall be 
     to strengthen the technological competitiveness of small 
     business concerns in the States.
       ``(c) Grants and Cooperative Agreements.--
       ``(1) Joint review.--In carrying out the FAST program under 
     this section, the Administrator and the SBIR program managers 
     at the National Science Foundation and the Department of 
     Defense shall jointly review proposals submitted by 
     applicants and may make awards or enter into cooperative 
     agreements under this section based on the factors for 
     consideration set forth in paragraph (2), in order to enhance 
     or develop in a State--
       ``(A) technology research and development by small business 
     concerns;
       ``(B) technology transfer from university research to 
     technology-based small business concerns;
       ``(C) technology deployment and diffusion benefiting small 
     business concerns;
       ``(D) the technological capabilities of small business 
     concerns through the establishment or operation of consortia 
     comprised of entities, organizations, or individuals, 
     including--
       ``(i) State and local development agencies and entities;
       ``(ii) representatives of technology-based small business 
     concerns;
       ``(iii) industries and emerging companies;
       ``(iv) universities; and
       ``(v) small business development centers; and
       ``(E) outreach, financial support, and technical assistance 
     to technology-based small business concerns participating in 
     or interested in participating in an SBIR program, including 
     initiatives--
       ``(i) to make grants or loans to companies to pay a portion 
     or all of the cost of developing SBIR proposals;
       ``(ii) to establish or operate a Mentoring Network within 
     the FAST program to provide business advice and counseling 
     that will assist small business concerns that have been 
     identified by FAST program participants, program managers of 
     participating SBIR agencies, the Administration, or other 
     entities that are knowledgeable about the SBIR and STTR 
     programs as good candidates for the SBIR and STTR programs, 
     and that would benefit from mentoring, in accordance with 
     section 35;
       ``(iii) to create or participate in a training program for 
     individuals providing SBIR outreach and assistance at the 
     State and local levels; and
       ``(iv) to encourage the commercialization of technology 
     developed through SBIR program funding.
       ``(2) Selection considerations.--In making awards or 
     entering into cooperative agreements under this section, the 
     Administrator and the SBIR program managers referred to in 
     paragraph (1)--
       ``(A) may only consider proposals by applicants that intend 
     to use a portion of the Federal assistance provided under 
     this section to provide outreach, financial support, or 
     technical assistance to technology-based small business 
     concerns participating in or interested in participating in 
     the SBIR program; and
       ``(B) shall consider, at a minimum--
       ``(i) whether the applicant has demonstrated that the 
     assistance to be provided would address unmet needs of small 
     business concerns in the community, and whether it is 
     important to use Federal funding for the proposed activities;
       ``(ii) whether the applicant has demonstrated that a need 
     exists to increase the number or success of small high-
     technology businesses in the State, as measured by the number 
     of first phase and second phase SBIR awards that have 
     historically been received by small business concerns in the 
     State;
       ``(iii) whether the projected costs of the proposed 
     activities are reasonable;
       ``(iv) whether the proposal integrates and coordinates the 
     proposed activities with other State and local programs 
     assisting small high-technology firms in the State; and
       ``(v) the manner in which the applicant will measure the 
     results of the activities to be conducted.

[[Page H12431]]

       ``(3) Proposal limit.--Not more than 1 proposal may be 
     submitted for inclusion in the FAST program under this 
     section to provide services in any one State in any 1 fiscal 
     year.
       ``(4) Process.--Proposals and applications for assistance 
     under this section shall be in such form and subject to such 
     procedures as the Administrator shall establish.
       ``(d) Cooperation and Coordination.--In carrying out the 
     FAST program under this section, the Administrator shall 
     cooperate and coordinate with--
       ``(1) Federal agencies required by section 9 to have an 
     SBIR program; and
       ``(2) entities, organizations, and individuals actively 
     engaged in enhancing or developing the technological 
     capabilities of small business concerns, including--
       ``(A) State and local development agencies and entities;
       ``(B) State committees established under the Experimental 
     Program to Stimulate Competitive Research of the National 
     Science Foundation (as established under section 113 of the 
     National Science Foundation Authorization Act of 1988 (42 
     U.S.C. 1862g));
       ``(C) State science and technology councils; and
       ``(D) representatives of technology-based small business 
     concerns.
       ``(e) Administrative Requirements.--
       ``(1) Competitive basis.--Awards and cooperative agreements 
     under this section shall be made or entered into, as 
     applicable, on a competitive basis.
       ``(2) Matching requirements.--
       ``(A) In general.--The non-Federal share of the cost of an 
     activity (other than a planning activity) carried out using 
     an award or under a cooperative agreement under this section 
     shall be--
       ``(i) 50 cents for each Federal dollar, in the case of a 
     recipient that will serve small business concerns located in 
     one of the 18 States receiving the fewest SBIR first phase 
     awards (as described in section 9(e)(4)(A));
       ``(ii) except as provided in subparagraph (B), 1 dollar for 
     each Federal dollar, in the case of a recipient that will 
     serve small business concerns located in one of the 16 States 
     receiving the greatest number of such SBIR first phase 
     awards; and
       ``(iii) except as provided in subparagraph (B), 75 cents 
     for each Federal dollar, in the case of a recipient that will 
     serve small business concerns located in a State that is not 
     described in clause (i) or (ii) that is receiving such SBIR 
     first phase awards.
       ``(B) Low-income areas.--The non-Federal share of the cost 
     of the activity carried out using an award or under a 
     cooperative agreement under this section shall be 50 cents 
     for each Federal dollar that will be directly allocated by a 
     recipient described in subparagraph (A) to serve small 
     business concerns located in a qualified census tract, as 
     that term is defined in section 42(d)(5)(C)(ii) of the 
     Internal Revenue Code of 1986. Federal dollars not so 
     allocated by that recipient shall be subject to the matching 
     requirements of subparagraph (A).
       ``(C) Types of funding.--The non-Federal share of the cost 
     of an activity carried out by a recipient shall be comprised 
     of not less than 50 percent cash and not more than 50 percent 
     of indirect costs and in-kind contributions, except that no 
     such costs or contributions may be derived from funds from 
     any other Federal program.
       ``(D) Rankings.--For purposes of subparagraph (A), the 
     Administrator shall reevaluate the ranking of a State once 
     every 2 fiscal years, beginning with fiscal year 2001, based 
     on the most recent statistics compiled by the Administrator.
       ``(3) Duration.--Awards may be made or cooperative 
     agreements entered into under this section for multiple 
     years, not to exceed 5 years in total.
       ``(f) Reports.--
       ``(1) Initial report.--Not later than 120 days after the 
     date of enactment of the Small Business Innovation Research 
     Program Reauthorization Act of 2000, the Administrator shall 
     prepare and submit to the Committee on Small Business of the 
     Senate and the Committee on Science and the Committee on 
     Small Business of the House of Representatives a report, 
     which shall include, with respect to the FAST program, 
     including Mentoring Networks--
       ``(A) a description of the structure and procedures of the 
     program;
       ``(B) a management plan for the program; and
       ``(C) a description of the merit-based review process to be 
     used in the program.
       ``(2) Annual reports.--The Administrator shall submit an 
     annual report to the Committee on Small Business of the 
     Senate and the Committee on Science and the Committee on 
     Small Business of the House of Representatives regarding--
       ``(A) the number and amount of awards provided and 
     cooperative agreements entered into under the FAST program 
     during the preceding year;
       ``(B) a list of recipients under this section, including 
     their location and the activities being performed with the 
     awards made or under the cooperative agreements entered into; 
     and
       ``(C) the Mentoring Networks and the mentoring database, as 
     provided for under section 35, including--
       ``(i) the status of the inclusion of mentoring information 
     in the database required by section 9(k); and
       ``(ii) the status of the implementation and description of 
     the usage of the Mentoring Networks.
       ``(g) Reviews by Inspector General.--
       ``(1) In general.--The Inspector General of the 
     Administration shall conduct a review of--
       ``(A) the extent to which recipients under the FAST program 
     are measuring the performance of the activities being 
     conducted and the results of such measurements; and
       ``(B) the overall management and effectiveness of the FAST 
     program.
       ``(2) Report.--During the first quarter of fiscal year 
     2004, the Inspector General of the Administration shall 
     submit a report to the Committee on Small Business of the 
     Senate and the Committee on Science and the Committee on 
     Small Business of the House of Representatives on the review 
     conducted under paragraph (1).
       ``(h) Program Levels.--
       ``(1) In general.--There is authorized to be appropriated 
     to carry out the FAST program, including Mentoring Networks, 
     under this section and section 35, $10,000,000 for each of 
     fiscal years 2001 through 2005.
       ``(2) Mentoring database.--Of the total amount made 
     available under paragraph (1) for fiscal years 2001 through 
     2005, a reasonable amount, not to exceed a total of $500,000, 
     may be used by the Administration to carry out section 
     35(d).
       ``(i) Termination.--The authority to carry out the FAST 
     program under this section shall terminate on September 30, 
     2005.''.
       (c) Coordination of Technology Development Programs.--
     Section 9 of the Small Business Act (15 U.S.C. 638) is 
     amended by adding at the end the following:
       ``(u) Coordination of Technology Development Programs.--
       ``(1) Definition of technology development program.--In 
     this subsection, the term `technology development program' 
     means--
       ``(A) the Experimental Program to Stimulate Competitive 
     Research of the National Science Foundation, as established 
     under section 113 of the National Science Foundation 
     Authorization Act of 1988 (42 U.S.C. 1862g);
       ``(B) the Defense Experimental Program to Stimulate 
     Competitive Research of the Department of Defense;
       ``(C) the Experimental Program to Stimulate Competitive 
     Research of the Department of Energy;
       ``(D) the Experimental Program to Stimulate Competitive 
     Research of the Environmental Protection Agency;
       ``(E) the Experimental Program to Stimulate Competitive 
     Research of the National Aeronautics and Space 
     Administration;
       ``(F) the Institutional Development Award Program of the 
     National Institutes of Health; and
       ``(G) the National Research Initiative Competitive Grants 
     Program of the Department of Agriculture.
       ``(2) Coordination requirements.--Each Federal agency that 
     is subject to subsection (f) and that has established a 
     technology development program may, in each fiscal year, 
     review for funding under that technology development 
     program--
       ``(A) any proposal to provide outreach and assistance to 1 
     or more small business concerns interested in participating 
     in the SBIR program, including any proposal to make a grant 
     or loan to a company to pay a portion or all of the cost of 
     developing an SBIR proposal, from an entity, organization, or 
     individual located in--
       ``(i) a State that is eligible to participate in that 
     program; or
       ``(ii) a State described in paragraph (3); or
       ``(B) any proposal for the first phase of the SBIR program, 
     if the proposal, though meritorious, is not funded through 
     the SBIR program for that fiscal year due to funding 
     restraints, from a small business concern located in--
       ``(i) a State that is eligible to participate in a 
     technology development program; or
       ``(ii) a State described in paragraph (3).
       ``(3) Additionally eligible state.--A State referred to in 
     subparagraph (A)(ii) or (B)(ii) of paragraph (2) is a State 
     in which the total value of contracts awarded to small 
     business concerns under all SBIR programs is less than the 
     total value of contracts awarded to small business concerns 
     in a majority of other States, as determined by the 
     Administrator in biennial fiscal years, beginning with fiscal 
     year 2000, based on the most recent statistics compiled by 
     the Administrator.''.

     SEC. 112. MENTORING NETWORKS.

       The Small Business Act (15 U.S.C. 631 et seq.) is amended 
     by inserting after section 34, as added by section 111(b)(2) 
     of this Act, the following:

     ``SEC. 35. MENTORING NETWORKS.

       ``(a) Findings.--Congress finds that--
       ``(1) the SBIR and STTR programs create jobs, increase 
     capacity for technological innovation, and boost 
     international competitiveness;
       ``(2) increasing the quantity of applications from all 
     States to the SBIR and STTR programs would enhance 
     competition for such awards and the quality of the completed 
     projects; and
       ``(3) mentoring is a natural complement to the FAST program 
     of reaching out to new companies regarding the SBIR and STTR 
     programs as an effective and low-cost way to improve the 
     likelihood that such companies will succeed in such programs 
     in developing and commercializing their research.
       ``(b) Authorization for Mentoring Networks.--The recipient 
     of an award or participant in a cooperative agreement under 
     section 34 may use a reasonable amount of such assistance for 
     the establishment of a Mentoring Network under this section.
       ``(c) Criteria for Mentoring Networks.--A Mentoring Network 
     established using assistance under section 34 shall--
       ``(1) provide business advice and counseling to high 
     technology small business concerns located in the State or 
     region served by the Mentoring Network and identified under 
     section 34(c)(1)(E)(ii) as potential candidates for the SBIR 
     or STTR programs;
       ``(2) identify volunteer mentors who--
       ``(A) are persons associated with a small business concern 
     that has successfully completed

[[Page H12432]]

     one or more SBIR or STTR funding agreements; and
       ``(B) have agreed to guide small business concerns through 
     all stages of the SBIR or STTR program process, including 
     providing assistance relating to--
       ``(i) proposal writing;
       ``(ii) marketing;
       ``(iii) Government accounting;
       ``(iv) Government audits;
       ``(v) project facilities and equipment;
       ``(vi) human resources;
       ``(vii) third phase partners;
       ``(viii) commercialization;
       ``(ix) venture capital networking; and
       ``(x) other matters relevant to the SBIR and STTR programs;
       ``(3) have experience working with small business concerns 
     participating in the SBIR and STTR programs;
       ``(4) contribute information to the national database 
     referred to in subsection (d); and
       ``(5) agree to reimburse volunteer mentors for out-of-
     pocket expenses related to service as a mentor under this 
     section.
       ``(d) Mentoring Database.--The Administrator shall--
       ``(1) include in the database required by section 9(k)(1), 
     in cooperation with the SBIR, STTR, and FAST programs, 
     information on Mentoring Networks and mentors participating 
     under this section, including a description of their areas of 
     expertise;
       ``(2) work cooperatively with Mentoring Networks to 
     maintain and update the database;
       ``(3) take such action as may be necessary to aggressively 
     promote Mentoring Networks under this section; and
       ``(4) fulfill the requirements of this subsection either 
     directly or by contract.''.

     SEC. 113. SIMPLIFIED REPORTING REQUIREMENTS.

       Section 9 of the Small Business Act (15 U.S.C. 638), as 
     amended by this Act, is further amended by adding at the end 
     the following:
       ``(v) Simplified Reporting Requirements.--The Administrator 
     shall work with the Federal agencies required by this section 
     to have an SBIR program to standardize reporting requirements 
     for the collection of data from SBIR applicants and awardees, 
     including data for inclusion in the database under subsection 
     (k), taking into consideration the unique needs of each 
     agency, and to the extent possible, permitting the updating 
     of previously reported information by electronic means. Such 
     requirements shall be designed to minimize the burden on 
     small businesses.''.

     SEC. 114. RURAL OUTREACH PROGRAM EXTENSION.

       (a) Extension of Termination Date.--Section 501(b)(2) of 
     the Small Business Reauthorization Act of 1997 (15 U.S.C. 638 
     note; 111 Stat. 2622) is amended by striking ``2001'' and 
     inserting ``2005''.
       (b) Extension of Authorization of Appropriations.--Section 
     9(s)(2) of the Small Business Act (15 U.S.C. 638(s)(2)) is 
     amended by striking ``for fiscal year 1998, 1999, 2000, or 
     2001'' and inserting ``for each of the fiscal years 2000 
     through 2005,''.

                    TITLE II--BUSINESS LOAN PROGRAMS

     SEC. 201. SHORT TITLE.

       This title may be cited as the ``Small Business Loan 
     Improvement Act of 2000''.

     SEC. 202. LEVELS OF PARTICIPATION.

       Section 7(a)(2)(A) of the Small Business Act (15 U.S.C. 
     636(a)(2)(A)) is amended--
       (1) in paragraph (i) by striking ``$100,000'' and inserting 
     ``$150,000''; and
       (2) in paragraph (ii)--
       (A) by striking ``80 percent'' and inserting ``85 
     percent''; and
       (B) by striking ``$100,000'' and inserting ``$150,000''.

     SEC. 203. LOAN AMOUNTS.

       Section 7(a)(3)(A) of the Small Business Act (15 U.S.C. 
     636(a)(3)(A)) is amended by striking ``$750,000,'' and 
     inserting, ``$1,000,000 (or if the gross loan amount would 
     exceed $2,000,000),''.

     SEC. 204. INTEREST ON DEFAULTED LOANS.

       Section 7(a)(4)(B) of the Small Business Act (15 U.S.C. 
     636(a)(4)(B)) is amended by adding at the end the following:
       ``(iii) Applicability.--Clauses (i) and (ii) shall not 
     apply to loans made on or after October 1, 2000.''.

     SEC. 205. PREPAYMENT OF LOANS.

       Section 7(a)(4) of the Small Business Act (15 U.S.C. 
     636(a)(4)) is further amended--
       (1) by striking ``(4) Interest rates and fees.--'' and 
     inserting ``(4) Interest rates and prepayment charges.--''; 
     and
       (2) by adding at the end the following:
       ``(C) Prepayment charges.--
       ``(i) In general.--A borrower who prepays any loan 
     guaranteed under this subsection shall remit to the 
     Administration a subsidy recoupment fee calculated in 
     accordance with clause (ii) if--

       ``(I) the loan is for a term of not less than 15 years;
       ``(II) the prepayment is voluntary;
       ``(III) the amount of prepayment in any calendar year is 
     more than 25 percent of the outstanding balance of the loan; 
     and
       ``(IV) the prepayment is made within the first 3 years 
     after disbursement of the loan proceeds.

       ``(ii) Subsidy recoupment fee.--The subsidy recoupment fee 
     charged under clause (i) shall be--

       ``(I) 5 percent of the amount of prepayment, if the 
     borrower prepays during the first year after disbursement;
       ``(II) 3 percent of the amount of prepayment, if the 
     borrower prepays during the second year after disbursement; 
     and
       ``(III) 1 percent of the amount of prepayment, if the 
     borrower prepays during the third year after disbursement.''.

     SEC. 206. GUARANTEE FEES.

       Section 7(a)(18) of the Small Business Act (15 U.S.C. 
     636(a)(18)) is amended to read as follows:
       ``(18) Guarantee fees.--
       ``(A) In general.--With respect to each loan guaranteed 
     under this subsection (other than a loan that is repayable in 
     1 year or less), the Administration shall collect a guarantee 
     fee, which shall be payable by the participating lender, and 
     may be charged to the borrower, as follows:
       ``(i) A guarantee fee equal to 2 percent of the deferred 
     participation share of a total loan amount that is not more 
     than $150,000.
       ``(ii) A guarantee fee equal to 3 percent of the deferred 
     participation share of a total loan amount that is more than 
     $150,000, but not more than $700,000.
       ``(iii) A guarantee fee equal to 3.5 percent of the 
     deferred participation share of a total loan amount that is 
     more than $700,000.
       ``(B) Retention of certain fees.--Lenders participating in 
     the programs established under this subsection may retain not 
     more than 25 percent of a fee collected under subparagraph 
     (A)(i).''.

     SEC. 207. LEASE TERMS.

       Section 7(a) of the Small Business Act (15 U.S.C. 636(a)) 
     is further amended by adding at the end the following:
       ``(28) Leasing.--In addition to such other lease 
     arrangements as may be authorized by the Administration, a 
     borrower may permanently lease to one or more tenants not 
     more than 20 percent of any property constructed with the 
     proceeds of a loan guaranteed under this subsection, if the 
     borrower permanently occupies and uses not less than 60 
     percent of the total business space in the property.''.

     SEC. 208. APPRAISALS FOR LOANS SECURED BY REAL PROPERTY.

       (a) Small Business Act.--Section 7(a) of the Small Business 
     Act (15 U.S.C. 636(a)) is amended by adding at the end the 
     following:
       ``(29) Real estate appraisals.--With respect to a loan 
     under this subsection that is secured by commercial real 
     property, an appraisal of such property by a State licensed 
     or certified appraiser--
       ``(A) shall be required by the Administration in connection 
     with any such loan for more than $250,000; or
       ``(B) may be required by the Administration or the lender 
     in connection with any such loan for $250,000 or less, if 
     such appraisal is necessary for appropriate evaluation of 
     creditworthiness.''.
       (b) Small Business Investment Act of 1958.--Section 
     502(3)(E) of the Small Business Investment Act of 1958 (15 
     U.S.C. 696(3)(E)) is amended--
       (1) by striking ``The collateral'' and inserting the 
     following:
       ``(i) In general.--The collateral''; and
       (2) by adding at the end the following:
       ``(ii) Appraisals.--With respect to commercial real 
     property provided by the small business concern as 
     collateral, an appraisal of the property by a State licensed 
     or certified appraiser--

       ``(I) shall be required by the Administration before 
     disbursement of the loan if the estimated value of that 
     property is more than $250,000; or
       ``(II) may be required by the Administration or the lender 
     before disbursement of the loan if the estimated value of 
     that property is $250,000 or less, and such appraisal is 
     necessary for appropriate evaluation of creditworthiness.''.

     SEC. 209. SALE OF GUARANTEED LOANS MADE FOR EXPORT PURPOSES.

       Section 5(f)(1)(C) of the Small Business Act (15 U.S.C. 
     634(f)(1)(C)) is amended to read as follows:
       ``(C) each loan, except each loan made under section 
     7(a)(14), shall have been fully disbursed to the borrower 
     prior to any sale.''.

     SEC. 210. MICROLOAN PROGRAM.

       (a) In General.--Section 7(m) of the Small Business Act (15 
     U.S.C. 636(m)) is amended--
       (1) in paragraphs (1)(B)(iii) and (3)(E), by striking 
     ``$25,000'' each place it appears and inserting ``$35,000'';
       (2) in paragraphs (1)(A)(iii)(I), (3)(A)(ii), and 
     (4)(C)(i)(II), by striking ``$7,500'' each place it appears 
     and inserting ``$10,000'';
       (3) in paragraph (3)(E), by striking ``$15,000'' and 
     inserting ``$20,000'';
       (4) in paragraph (5)(A)--
       (A) by striking ``25 grants'' and inserting ``55 grants''; 
     and
       (B) by striking ``$125,000'' and inserting ``$200,000'';
       (5) in paragraph (6)(B), by striking ``$10,000'' and 
     inserting ``$15,000''; and
       (6) in paragraph (7), by striking subparagraph (A) and 
     inserting the following:
       ``(A) Number of participants.--Under the program authorized 
     by this subsection, the Administration may fund, on a 
     competitive basis, not more than 300 intermediaries.''.
       (b) Conforming Amendments.--Section 7(m)(11)(B) of the 
     Small Business Act (15 U.S.C. 636(m)(11)(B)) is amended by 
     striking ``$25,000'' and inserting ``$35,000''.

            TITLE III--CERTIFIED DEVELOPMENT COMPANY PROGRAM

     SEC. 301. SHORT TITLE.

       This title may be cited as the ``Certified Development 
     Company Program Improvements Act of 2000''.

     SEC. 302. WOMEN-OWNED BUSINESSES.

       Section 501(d)(3)(C) of the Small Business Investment Act 
     of 1958 (15 U.S.C. 695(d)(3)(C)) is amended by inserting 
     before the comma ``or women-owned business development''.

     SEC. 303. MAXIMUM DEBENTURE SIZE.

       Section 502(2) of the Small Business Investment Act of 1958 
     (15 U.S.C. 696(2)) is amended to read as follows:
       ``(2) Loans made by the Administration under this section 
     shall be limited to $1,000,000 for each such identifiable 
     small business concern, except loans meeting the criteria 
     specified in section

[[Page H12433]]

     501(d)(3), which shall be limited to $1,300,000 for each such 
     identifiable small business concern.''.

     SEC. 304. FEES.

       Section 503(f) of the Small Business Investment Act of 1958 
     (15 U.S.C. 697(f)) is amended to read as follows:
       ``(f) Effective Date.--The fees authorized by subsections 
     (b) and (d) shall apply to financings approved by the 
     Administration on or after October 1, 1996, but shall not 
     apply to financings approved by the Administration on or 
     after October 1, 2003.''.

     SEC. 305. PREMIER CERTIFIED LENDERS PROGRAM.

       Section 217(b) of the Small Business Administration 
     Reauthorization and Amendments Act of 1994 (Public Law 103-
     403, 15 U.S.C. 697 note) (relating to section 508 of the 
     Small Business Investment Act of 1958) is repealed.

     SEC. 306. SALE OF CERTAIN DEFAULTED LOANS.

       Section 508 of the Small Business Investment Act of 1958 
     (15 U.S.C. 697e) is amended--
       (1) in subsection (a), by striking ``On a pilot program 
     basis, the'' and inserting ``The'';
       (2) by redesignating subsections (d) through (i) as 
     subsections (e) through (j), respectively;
       (3) in subsection (f) (as redesignated by paragraph (2)), 
     by striking ``subsection (f)'' and inserting ``subsection 
     (g)'';
       (4) in subsection (h) (as redesignated by paragraph (2)), 
     by striking ``subsection (f)'' and inserting ``subsection 
     (g)''; and
       (5) by inserting after subsection (c) the following:
       ``(d) Sale of Certain Defaulted Loans.--
       ``(1) Notice.--If, upon default in repayment, the 
     Administration acquires a loan guaranteed under this section 
     and identifies such loan for inclusion in a bulk asset sale 
     of defaulted or repurchased loans or other financings, it 
     shall give prior notice thereof to any certified development 
     company which has a contingent liability under this section. 
     The notice shall be given to the company as soon as possible 
     after the financing is identified, but not less than 90 days 
     before the date the Administration first makes any records on 
     such financing available for examination by prospective 
     purchasers prior to its offering in a package of loans for 
     bulk sale.
       ``(2) Limitations.--The Administration shall not offer any 
     loan described in paragraph (1) as part of a bulk sale unless 
     it--
       ``(A) provides prospective purchasers with the opportunity 
     to examine the Administration's records with respect to such 
     loan; and
       ``(B) provides the notice required by paragraph (1).''.

     SEC. 307. LOAN LIQUIDATION.

       (a) Liquidation and Foreclosure.--Title V of the Small 
     Business Investment Act of 1958 (15 U.S.C. 695 et seq.) is 
     amended by adding at the end the following:

     ``SEC. 510. FORECLOSURE AND LIQUIDATION OF LOANS.

       ``(a) Delegation of Authority.--In accordance with this 
     section, the Administration shall delegate to any qualified 
     State or local development company (as defined in section 
     503(e)) that meets the eligibility requirements of subsection 
     (b)(1) the authority to foreclose and liquidate, or to 
     otherwise treat in accordance with this section, defaulted 
     loans in its portfolio that are funded with the proceeds of 
     debentures guaranteed by the Administration under section 
     503.
       ``(b) Eligibility for Delegation.--
       ``(1) Requirements.--A qualified State or local development 
     company shall be eligible for a delegation of authority under 
     subsection (a) if--
       ``(A) the company--
       ``(i) has participated in the loan liquidation pilot 
     program established by the Small Business Programs 
     Improvement Act of 1996 (15 U.S.C. 695 note), as in effect on 
     the day before promulgation of final regulations by the 
     Administration implementing this section;
       ``(ii) is participating in the Premier Certified Lenders 
     Program under section 508; or
       ``(iii) during the 3 fiscal years immediately prior to 
     seeking such a delegation, has made an average of not less 
     than 10 loans per year that are funded with the proceeds of 
     debentures guaranteed under section 503; and
       ``(B) the company--
       ``(i) has one or more employees--

       ``(I) with not less than 2 years of substantive, decision-
     making experience in administering the liquidation and 
     workout of problem loans secured in a manner substantially 
     similar to loans funded with the proceeds of debentures 
     guaranteed under section 503; and
       ``(II) who have completed a training program on loan 
     liquidation developed by the Administration in conjunction 
     with qualified State and local development companies that 
     meet the requirements of this paragraph; or

       ``(ii) submits to the Administration documentation 
     demonstrating that the company has contracted with a 
     qualified third-party to perform any liquidation activities 
     and secures the approval of the contract by the 
     Administration with respect to the qualifications of the 
     contractor and the terms and conditions of liquidation 
     activities.
       ``(2) Confirmation.--On request the Administration shall 
     examine the qualifications of any company described in 
     subsection (a) to determine if such company is eligible for 
     the delegation of authority under this section. If the 
     Administration determines that a company is not eligible, the 
     Administration shall provide the company with the reasons 
     for such ineligibility.
       ``(c) Scope of Delegated Authority.--
       ``(1) In general.--Each qualified State or local 
     development company to which the Administration delegates 
     authority under section (a) may with respect to any loan 
     described in subsection (a)--
       ``(A) perform all liquidation and foreclosure functions, 
     including the purchase in accordance with this subsection of 
     any other indebtedness secured by the property securing the 
     loan, in a reasonable and sound manner according to 
     commercially accepted practices, pursuant to a liquidation 
     plan approved in advance by the Administration under 
     paragraph (2)(A);
       ``(B) litigate any matter relating to the performance of 
     the functions described in subparagraph (A), except that the 
     Administration may--
       ``(i) defend or bring any claim if--

       ``(I) the outcome of the litigation may adversely affect 
     the Administration's management of the loan program 
     established under section 502; or
       ``(II) the Administration is entitled to legal remedies not 
     available to a qualified State or local development company 
     and such remedies will benefit either the Administration or 
     the qualified State or local development company; or

       ``(ii) oversee the conduct of any such litigation; and
       ``(C) take other appropriate actions to mitigate loan 
     losses in lieu of total liquidation or foreclosures, 
     including the restructuring of a loan in accordance with 
     prudent loan servicing practices and pursuant to a workout 
     plan approved in advance by the Administration under 
     paragraph (2)(C).
       ``(2) Administration approval.--
       ``(A) Liquidation plan.--
       ``(i) In general.--Before carrying out functions described 
     in paragraph (1)(A), a qualified State or local development 
     company shall submit to the Administration a proposed 
     liquidation plan.
       ``(ii) Administration action on plan.--

       ``(I) Timing.--Not later than 15 business days after a 
     liquidation plan is received by the Administration under 
     clause (i), the Administration shall approve or reject the 
     plan.
       ``(II) Notice of no decision.--With respect to any plan 
     that cannot be approved or denied within the 15-day period 
     required by subclause (I), the Administration shall within 
     such period provide in accordance with subparagraph (E) 
     notice to the company that submitted the plan.

       ``(iii) Routine actions.--In carrying out functions 
     described in paragraph (1)(A), a qualified State or local 
     development company may undertake routine actions not 
     addressed in a liquidation plan without obtaining additional 
     approval from the Administration.
       ``(B) Purchase of indebtedness.--
       ``(i) In general.--In carrying out functions described in 
     paragraph (1)(A), a qualified State or local development 
     company shall submit to the Administration a request for 
     written approval before committing the Administration to the 
     purchase of any other indebtedness secured by the property 
     securing a defaulted loan.
       ``(ii) Administration action on request.--

       ``(I) Timing.--Not later than 15 business days after 
     receiving a request under clause (i), the Administration 
     shall approve or deny the request.
       ``(II) Notice of no decision.--With respect to any request 
     that cannot be approved or denied within the 15-day period 
     required by subclause (I), the Administration shall within 
     such period provide in accordance with subparagraph (E) 
     notice to the company that submitted the request.

       ``(C) Workout plan.--
       ``(i) In general.--In carrying out functions described in 
     paragraph (1)(C), a qualified State or local development 
     company shall submit to the Administration a proposed workout 
     plan.
       ``(ii) Administration action on plan.--

       ``(I) Timing.--Not later than 15 business days after a 
     workout plan is received by the Administration under clause 
     (i), the Administration shall approve or reject the plan.
       ``(II) Notice of no decision.--With respect to any workout 
     plan that cannot be approved or denied within the 15-day 
     period required by subclause (I), the Administration shall 
     within such period provide in accordance with subparagraph 
     (E) notice to the company that submitted the plan.

       ``(D) Compromise of indebtedness.--In carrying out 
     functions described in paragraph (1)(A), a qualified State or 
     local development company may--
       ``(i) consider an offer made by an obligor to compromise 
     the debt for less than the full amount owing; and
       ``(ii) pursuant to such an offer, release any obligor or 
     other party contingently liable, if the company secures the 
     written approval of the Administration.
       ``(E) Contents of notice of no decision.--Any notice 
     provided by the Administration under subparagraph 
     (A)(ii)(II), (B)(ii)(II), or (C)(ii)(II)--
       ``(i) shall be in writing;
       ``(ii) shall state the specific reason for the 
     Administration's inability to act on a plan or request;
       ``(iii) shall include an estimate of the additional time 
     required by the Administration to act on the plan or request; 
     and
       ``(iv) if the Administration cannot act because 
     insufficient information or documentation was provided by the 
     company submitting the plan or request, shall specify the 
     nature of such additional information or documentation.
       ``(3) Conflict of interest.--In carrying out functions 
     described in paragraph (1), a qualified State or local 
     development company shall take no action that would result in 
     an actual or apparent conflict of interest between the 
     company (or any employee of the company) and any third party 
     lender, associate of a third party lender, or any other 
     person participating in a liquidation, foreclosure, or loss 
     mitigation action.
       ``(d) Suspension or Revocation of Authority.--The 
     Administration may revoke or suspend a delegation of 
     authority under this section to any qualified State or local 
     development company, if the Administration determines that 
     the company--
       ``(1) does not meet the requirements of subsection (b)(1);
       ``(2) has violated any applicable rule or regulation of the 
     Administration or any other applicable law; or

[[Page H12434]]

       ``(3) fails to comply with any reporting requirement that 
     may be established by the Administration relating to carrying 
     out of functions described in paragraph (1).
       ``(e) Report.--
       ``(1) In general.--Based on information provided by 
     qualified State and local development companies and the 
     Administration, the Administration shall annually submit to 
     the Committees on Small Business of the House of 
     Representatives and of the Senate a report on the results of 
     delegation of authority under this section.
       ``(2) Contents.--Each report submitted under paragraph (1) 
     shall include the following information:
       ``(A) With respect to each loan foreclosed or liquidated by 
     a qualified State or local development company under this 
     section, or for which losses were otherwise mitigated by the 
     company pursuant to a workout plan under this section--
       ``(i) the total cost of the project financed with the loan;
       ``(ii) the total original dollar amount guaranteed by the 
     Administration;
       ``(iii) the total dollar amount of the loan at the time of 
     liquidation, foreclosure, or mitigation of loss;
       ``(iv) the total dollar losses resulting from the 
     liquidation, foreclosure, or mitigation of loss; and
       ``(v) the total recoveries resulting from the liquidation, 
     foreclosure, or mitigation of loss, both as a percentage of 
     the amount guaranteed and the total cost of the project 
     financed.
       ``(B) With respect to each qualified State or local 
     development company to which authority is delegated under 
     this section, the totals of each of the amounts described in 
     clauses (i) through (v) of subparagraph (A).
       ``(C) With respect to all loans subject to foreclosure, 
     liquidation, or mitigation under this section, the totals of 
     each of the amounts described in clauses (i) through (v) of 
     subparagraph (A).
       ``(D) A comparison between--
       ``(i) the information provided under subparagraph (C) with 
     respect to the 12-month period preceding the date on which 
     the report is submitted; and
       ``(ii) the same information with respect to loans 
     foreclosed and liquidated, or otherwise treated, by the 
     Administration during the same period.
       ``(E) The number of times that the Administration has 
     failed to approve or reject a liquidation plan in accordance 
     with subparagraph (A)(i), a workout plan in accordance with 
     subparagraph (C)(i), or to approve or deny a request for 
     purchase of indebtedness under subparagraph (B)(i), including 
     specific information regarding the reasons for the 
     Administration's failure and any delays that resulted.''.
       (b) Regulations.--
       (1) In general.--Not later than 150 days after the date of 
     enactment of this Act, the Administrator shall issue such 
     regulations as may be necessary to carry out section 510 of 
     the Small Business Investment Act of 1958, as added by 
     subsection (a) of this section.
       (2) Termination of pilot program.--Beginning on the date on 
     which final regulations are issued under paragraph (1), 
     section 204 of the Small Business Programs Improvement Act of 
     1996 (15 U.S.C. 695 note) shall cease to have effect.

   TITLE IV--CORRECTIONS TO THE SMALL BUSINESS INVESTMENT ACT OF 1958

     SEC. 401. SHORT TITLE.

       This title may be cited as the ``Small Business Investment 
     Corrections Act of 2000''.

     SEC. 402. DEFINITIONS.

       (a) Small Business Concern.--Section 103(5)(A)(i) of the 
     Small Business Investment Act of 1958 (15 U.S.C. 
     662(5)(A)(i)) is amended by inserting before the semicolon at 
     the end the following: ``regardless of the allocation of 
     control during the investment period under any investment 
     agreement between the business concern and the entity making 
     the investment''.
       (b) Long Term.--Section 103 of the Small Business 
     Investment Act of 1958 (15 U.S.C. 662) is amended--
       (1) in paragraph (15), by striking ``and'' at the end;
       (2) in paragraph (16), by striking the period at the end 
     and inserting ``; and''; and
       (3) by adding at the end the following:
       ``(17) the term `long term', when used in connection with 
     equity capital or loan funds invested in any small business 
     concern or smaller enterprise, means any period of time not 
     less than 1 year.''.

     SEC. 403. INVESTMENT IN SMALL BUSINESS INVESTMENT COMPANIES.

       Section 302(b) of the Small Business Investment Act of 1958 
     (15 U.S.C. 682(b)) is amended--
       (1) by striking ``(b) Notwithstanding'' and inserting the 
     following:
       ``(b) Financial Institution Investments.--
       ``(1) Certain banks.--Notwithstanding''; and
       (2) by adding at the end the following:
       ``(2) Certain savings associations.--Notwithstanding any 
     other provision of law, any Federal savings association may 
     invest in any 1 or more small business investment companies, 
     or in any entity established to invest solely in small 
     business investment companies, except that in no event may 
     the total amount of such investments by any such Federal 
     savings association exceed 5 percent of the capital and 
     surplus of the Federal savings association.''.

     SEC. 404. SUBSIDY FEES.

       (a) Debentures.--Section 303(b) of the Small Business 
     Investment Act of 1958 (15 U.S.C. 683(b)) is amended by 
     striking ``plus an additional charge of 1 percent per annum 
     which shall be paid to and retained by the Administration'' 
     and inserting ``plus, for debentures obligated after 
     September 30, 2000, an additional charge, in an amount 
     established annually by the Administration, of not more than 
     1 percent per year as necessary to reduce to zero the cost 
     (as defined in section 502 of the Federal Credit Reform Act 
     of 1990 (2 U.S.C. 661a)) to the Administration of purchasing 
     and guaranteeing debentures under this Act, which shall be 
     paid to and retained by the Administration''.
       (b) Participating Securities.--Section 303(g)(2) of the 
     Small Business Investment Act of 1958 (15 U.S.C. 683(g)(2)) 
     is amended by striking ``plus an additional charge of 1 
     percent per annum which shall be paid to and retained by the 
     Administration'' and inserting ``plus, for participating 
     securities obligated after September 30, 2000, an additional 
     charge, in an amount established annually by the 
     Administration, of not more than 1 percent per year as 
     necessary to reduce to zero the cost (as defined in section 
     502 of the Federal Credit Reform Act of 1990 (2 U.S.C. 661a)) 
     to the Administration of purchasing and guaranteeing 
     participating securities under this Act, which shall be paid 
     to and retained by the Administration''.

     SEC. 405. DISTRIBUTIONS.

       Section 303(g)(8) of the Small Business Investment Act of 
     1958 (15 U.S.C. 683(g)(8)) is amended--
       (1) by striking ``subchapter s corporation'' and inserting 
     ``subchapter S corporation'';
       (2) by striking ``the end of any calendar quarter based on 
     a quarterly'' and inserting ``any time during any calendar 
     quarter based on an''; and
       (3) by striking ``quarterly distributions for a calendar 
     year,'' and inserting ``interim distributions for a calendar 
     year,''.

     SEC. 406. CONFORMING AMENDMENT.

       Section 310(c)(4) of the Small Business Investment Act of 
     1958 (15 U.S.C. 687b(c)(4)) is amended by striking ``five 
     years'' and inserting ``1 year''.

          TITLE V--REAUTHORIZATION OF SMALL BUSINESS PROGRAMS

     SEC. 501. SHORT TITLE.

       This title may be cited as the ``Small Business Programs 
     Reauthorization Act of 2000''.

     SEC. 502. REAUTHORIZATION OF SMALL BUSINESS PROGRAMS.

       Section 20 of the Small Business Act (15 U.S.C. 631 note) 
     is amended by adding at the end the following:
       ``(g) Fiscal Year 2001.--
       ``(1) Program levels.--The following program levels are 
     authorized for fiscal year 2001:
       ``(A) For the programs authorized by this Act, the 
     Administration is authorized to make--
       ``(i) $45,000,000 in technical assistance grants as 
     provided in section 7(m); and
       ``(ii) $60,000,000 in direct loans, as provided in 7(m).
       ``(B) For the programs authorized by this Act, the 
     Administration is authorized to make $19,050,000,000 in 
     deferred participation loans and other financings. Of such 
     sum, the Administration is authorized to make--
       ``(i) $14,500,000,000 in general business loans as provided 
     in section 7(a);
       ``(ii) $4,000,000,000 in financings as provided in section 
     7(a)(13) of this Act and section 504 of the Small Business 
     Investment Act of 1958;
       ``(iii) $500,000,000 in loans as provided in section 
     7(a)(21); and
       ``(iv) $50,000,000 in loans as provided in section 7(m).
       ``(C) For the programs authorized by title III of the Small 
     Business Investment Act of 1958, the Administration is 
     authorized to make--
       ``(i) $2,500,000,000 in purchases of participating 
     securities; and
       ``(ii) $1,500,000,000 in guarantees of debentures.
       ``(D) For the programs authorized by part B of title IV of 
     the Small Business Investment Act of 1958, the Administration 
     is authorized to enter into guarantees not to 
     exceed $4,000,000,000 of which not more than 50 percent 
     may be in bonds approved pursuant to section 411(a)(3) of 
     that Act.
       ``(E) The Administration is authorized to make grants or 
     enter cooperative agreements for a total amount of $5,000,000 
     for the Service Corps of Retired Executives program 
     authorized by section 8(b)(1).
       ``(2) Additional authorizations.--
       ``(A) There are authorized to be appropriated to the 
     Administration for fiscal year 2001 such sums as may be 
     necessary to carry out the provisions of this Act not 
     elsewhere provided for, including administrative expenses and 
     necessary loan capital for disaster loans pursuant to section 
     7(b), and to carry out title IV of the Small Business 
     Investment Act of 1958, including salaries and expenses of 
     the Administration.
       ``(B) Notwithstanding any other provision of this 
     paragraph, for fiscal year 2001--
       ``(i) no funds are authorized to be used as loan capital 
     for the loan program authorized by section 7(a)(21) except by 
     transfer from another Federal department or agency to the 
     Administration, unless the program level authorized for 
     general business loans under paragraph (1)(B)(i) is fully 
     funded; and
       ``(ii) the Administration may not approve loans on its own 
     behalf or on behalf of any other Federal department or 
     agency, by contract or otherwise, under terms and conditions 
     other than those specifically authorized under this Act or 
     the Small Business Investment Act of 1958, except that it may 
     approve loans under section 7(a)(21) of this Act in gross 
     amounts of not more than $1,250,000.
       ``(h) Fiscal Year 2002.--
       ``(1) Program levels.--The following program levels are 
     authorized for fiscal year 2002:
       ``(A) For the programs authorized by this Act, the 
     Administration is authorized to make--
       ``(i) $60,000,000 in technical assistance grants as 
     provided in section 7(m); and
       ``(ii) $80,000,000 in direct loans, as provided in 7(m).
       ``(B) For the programs authorized by this Act, the 
     Administration is authorized to make $20,050,000,000 in 
     deferred participation loans and other financings. Of such 
     sum, the Administration is authorized to make--

[[Page H12435]]

       ``(i) $15,000,000,000 in general business loans as provided 
     in section 7(a);
       ``(ii) $4,500,000,000 in financings as provided in section 
     7(a)(13) of this Act and section 504 of the Small Business 
     Investment Act of 1958;
       ``(iii) $500,000,000 in loans as provided in section 
     7(a)(21); and
       ``(iv) $50,000,000 in loans as provided in section 7(m).
       ``(C) For the programs authorized by title III of the Small 
     Business Investment Act of 1958, the Administration is 
     authorized to make--
       ``(i) $3,500,000,000 in purchases of participating 
     securities; and
       ``(ii) $2,500,000,000 in guarantees of debentures.
       ``(D) For the programs authorized by part B of title IV of 
     the Small Business Investment Act of 1958, the Administration 
     is authorized to enter into guarantees not to exceed 
     $5,000,000,000 of which not more than 50 percent may be in 
     bonds approved pursuant to section 411(a)(3) of that Act.
       ``(E) The Administration is authorized to make grants or 
     enter cooperative agreements for a total amount of $6,000,000 
     for the Service Corps of Retired Executives program 
     authorized by section 8(b)(1).
       ``(2) Additional authorizations.--
       ``(A) There are authorized to be appropriated to the 
     Administration for fiscal year 2002 such sums as may be 
     necessary to carry out the provisions of this Act not 
     elsewhere provided for, including administrative expenses and 
     necessary loan capital for disaster loans pursuant to section 
     7(b), and to carry out title IV of the Small Business 
     Investment Act of 1958, including salaries and expenses of 
     the Administration.
       ``(B) Notwithstanding any other provision of this 
     paragraph, for fiscal year 2002--
       ``(i) no funds are authorized to be used as loan capital 
     for the loan program authorized by section 7(a)(21) except by 
     transfer from another Federal department or agency to the 
     Administration, unless the program level authorized for 
     general business loans under paragraph (1)(B)(i) is fully 
     funded; and
       ``(ii) the Administration may not approve loans on its own 
     behalf or on behalf of any other Federal department or 
     agency, by contract or otherwise, under terms and conditions 
     other than those specifically authorized under this Act or 
     the Small Business Investment Act of 1958, except that it may 
     approve loans under section 7(a)(21) of this Act in gross 
     amounts of not more than $1,250,000.
       ``(i) Fiscal Year 2003.--
       ``(1) Program levels.--The following program levels are 
     authorized for fiscal year 2003:
       ``(A) For the programs authorized by this Act, the 
     Administration is authorized to make--
       ``(i) $70,000,000 in technical assistance grants as 
     provided in section 7(m); and
       ``(ii) $100,000,000 in direct loans, as provided in 7(m).
       ``(B) For the programs authorized by this Act, the 
     Administration is authorized to make $21,550,000,000 in 
     deferred participation loans and other financings. Of such 
     sum, the Administration is authorized to make--
       ``(i) $16,000,000,000 in general business loans as provided 
     in section 7(a);
       ``(ii) $5,000,000,000 in financings as provided in section 
     7(a)(13) of this Act and section 504 of the Small Business 
     Investment Act of 1958;
       ``(iii) $500,000,000 in loans as provided in section 
     7(a)(21); and
       ``(iv) $50,000,000 in loans as provided in section 7(m).
       ``(C) For the programs authorized by title III of the Small 
     Business Investment Act of 1958, the Administration is 
     authorized to make--
       ``(i) $4,000,000,000 in purchases of participating 
     securities; and
       ``(ii) $3,000,000,000 in guarantees of debentures.
       ``(D) For the programs authorized by part B of title IV of 
     the Small Business Investment Act of 1958, the Administration 
     is authorized to enter into guarantees not to exceed 
     $6,000,000,000 of which not more than 50 percent may be in 
     bonds approved pursuant to section 411(a)(3) of that Act.
       ``(E) The Administration is authorized to make grants or 
     enter into cooperative agreements for a total amount of 
     $7,000,000 for the Service Corps of Retired Executives 
     program authorized by section 8(b)(1).
       ``(2) Additional authorizations.--
       ``(A) There are authorized to be appropriated to the 
     Administration for fiscal year 2003 such sums as may be 
     necessary to carry out the provisions of this Act not 
     elsewhere provided for, including administrative expenses and 
     necessary loan capital for disaster loans pursuant to section 
     7(b), and to carry out title IV of the Small Business 
     Investment Act of 1958, including salaries and expenses of 
     the Administration.
       ``(B) Notwithstanding any other provision of this 
     paragraph, for fiscal year 2003--
       ``(i) no funds are authorized to be used as loan capital 
     for the loan program authorized by section 7(a)(21) except by 
     transfer from another Federal department or agency to the 
     Administration, unless the program level authorized for 
     general business loans under paragraph (1)(B)(i) is fully 
     funded; and
       ``(ii) the Administration may not approve loans on its own 
     behalf or on behalf of any other Federal department or 
     agency, by contract or otherwise, under terms and conditions 
     other than those specifically authorized under this Act or 
     the Small Business Investment Act of 1958, except that it may 
     approve loans under section 7(a)(21) of this Act in gross 
     amounts of not more than $1,250,000.''.

     SEC. 503. ADDITIONAL REAUTHORIZATIONS.

       (a) Drug-Free Workplace Program.--Section 27 of the Small 
     Business Act (15 U.S.C. 654) is amended--
       (1) in the section heading, by striking ``DRUG-FREE 
     WORKPLACE DEMONSTRATION PROGRAM'' and inserting ``PAUL D. 
     COVERDELL DRUG-FREE WORKPLACE PROGRAM''; and
       (2) in subsection (g)(1), by striking ``$10,000,000 for 
     fiscal years 1999 and 2000'' and inserting ``$5,000,000 for 
     each of fiscal years 2001 through 2003''.
       (b) HUBZone Program.--Section 31 of the Small Business Act 
     (15 U.S.C. 657a) is amended by adding at the end the 
     following:
       ``(d) Authorization of Appropriations.--There is authorized 
     to be appropriated to carry out the program established by 
     this section $10,000,000 for each of fiscal years 2001 
     through 2003.''.
       (c) Very Small Business Concerns Program.--Section 304(i) 
     of the Small Business Administration Reauthorization and 
     Amendments Act of 1994 (Public Law 103-403; 15 U.S.C. 644 
     note) is amended by striking ``September 30, 2000'' and 
     inserting ``September 30, 2003''.
       (d) Socially and Economically Disadvantaged Businesses 
     Program.--Section 7102(c) of the Federal Acquisition 
     Streamlining Act of 1994 (Public Law 103-355; 15 U.S.C. 644 
     note) is amended by striking ``September 30, 2000'' and 
     inserting ``September 30, 2003''.
       (e) SBDC Services.--Section 21(c)(3)(T) of the Small 
     Business Act (15 U.S.C. 648(c)(3)(T)) is amended by striking 
     ``2000'' and inserting ``2003''.

     SEC. 504. COSPONSORSHIP.

       (a) In General.--Section 8(b)(1)(A) of the Small Business 
     Act (15 U.S.C. 637(b)(1)(A)) is amended to read as follows:
       ``(1)(A) to provide--
       ``(i) technical, managerial, and informational aids to 
     small business concerns--
       ``(I) by advising and counseling on matters in connection 
     with Government procurement and policies, principles, and 
     practices of good management;
       ``(II) by cooperating and advising with--

       ``(aa) voluntary business, professional, educational, and 
     other nonprofit organizations, associations, and institutions 
     (except that the Administration shall take such actions as it 
     determines necessary to ensure that such cooperation does not 
     constitute or imply an endorsement by the Administration of 
     the organization or its products or services, and shall 
     ensure that it receives appropriate recognition in all 
     printed materials); and

       ``(bb) other Federal and State agencies;

       ``(III) by maintaining a clearinghouse for information on 
     managing, financing, and operating small business 
     enterprises; and
       ``(IV) by disseminating such information, including through 
     recognition events, and by other activities that the 
     Administration determines to be appropriate; and
       ``(ii) through cooperation with a profit-making concern 
     (referred to in this paragraph as a `cosponsor'), training, 
     information, and education to small business concerns, except 
     that the Administration shall--
       ``(I) take such actions as it determines to be appropriate 
     to ensure that--

       ``(aa) the Administration receives appropriate recognition 
     and publicity;
       ``(bb) the cooperation does not constitute or imply an 
     endorsement by the Administration of any product or service 
     of the cosponsor;
       ``(cc) unnecessary promotion of the products or services of 
     the cosponsor is avoided; and
       ``(dd) utilization of any 1 cosponsor in a marketing area 
     is minimized; and

       ``(II) develop an agreement, executed on behalf of the 
     Administration by an employee of the Administration in 
     Washington, the District of Columbia, that provides, at a 
     minimum, that--

       ``(aa) any printed material to announce the cosponsorship 
     or to be distributed at the cosponsored activity, shall be 
     approved in advance by the Administration;
       ``(bb) the terms and conditions of the cooperation shall be 
     specified;
       ``(cc) only minimal charges may be imposed on any small 
     business concern to cover the direct costs of providing the 
     assistance;
       ``(dd) the Administration may provide to the cosponsorship 
     mailing labels, but not lists of names and addresses of small 
     business concerns compiled by the Administration;
       ``(ee) all printed materials containing the names of both 
     the Administration and the cosponsor shall include a 
     prominent disclaimer that the cooperation does not constitute 
     or imply an endorsement by the Administration of any product 
     or service of the cosponsor; and
       ``(ff) the Administration shall ensure that it receives 
     appropriate recognition in all cosponsorship printed 
     materials.''.

       (b) Extension of Cosponsorship Authority.--Section 
     401(a)(2) of the Small Business Administration 
     Reauthorization and Amendments Act of 1994 (15 U.S.C. 637 
     note) is amended by striking ``September 30, 2000'' and 
     inserting ``September 30, 2003''.

                       TITLE VI--HUBZONE PROGRAM

                 Subtitle A--HUBZones in Native America

     SEC. 601. SHORT TITLE.

       This subtitle may be cited as the ``HUBZones in Native 
     America Act of 2000''.

     SEC. 602. HUBZONE SMALL BUSINESS CONCERN.

       Section 3(p)(3) of the Small Business Act (15 U.S.C. 
     632(p)(3)) is amended to read as follows:
       ``(3) Hubzone small business concern.--The term `HUBZone 
     small business concern' means--
       ``(A) a small business concern that is owned and controlled 
     by 1 or more persons, each of whom is a United States 
     citizen;
       ``(B) a small business concern that is--
       ``(i) an Alaska Native Corporation owned and controlled by 
     Natives (as determined pursuant to section 29(e)(1) of the 
     Alaska Native Claims Settlement Act (43 U.S.C. 1626(e)(1))); 
     or
       ``(ii) a direct or indirect subsidiary corporation, joint 
     venture, or partnership of an Alaska

[[Page H12436]]

     Native Corporation qualifying pursuant to section 29(e)(1) of 
     the Alaska Native Claims Settlement Act (43 U.S.C. 
     1626(e)(1)), if that subsidiary, joint venture, or 
     partnership is owned and controlled by Natives (as determined 
     pursuant to section 29(e)(2)) of the Alaska Native Claims 
     Settlement Act (43 U.S.C. 1626(e)(2))); or
       ``(C) a small business concern--
       ``(i) that is wholly owned by 1 or more Indian tribal 
     governments, or by a corporation that is wholly owned by 1 or 
     more Indian tribal governments; or
       ``(ii) that is owned in part by 1 or more Indian tribal 
     governments, or by a corporation that is wholly owned by 1 or 
     more Indian tribal governments, if all other owners are 
     either United States citizens or small business concerns.''.

     SEC. 603. QUALIFIED HUBZONE SMALL BUSINESS CONCERN.

       (a) In General.--Section 3(p)(5)(A)(i) of the Small 
     Business Act (15 U.S.C. 632(p)(5)(A)(i)) is amended by 
     striking subclauses (I) and (II) and inserting the following:

       ``(I) it is a HUBZone small business concern--

       ``(aa) pursuant to subparagraph (A) or (B) of paragraph 
     (3), and that its principal office is located in a HUBZone 
     and not fewer than 35 percent of its employees reside in a 
     HUBZone; or
       ``(bb) pursuant to paragraph (3)(C), and not fewer than 35 
     percent of its employees engaged in performing a contract 
     awarded to the small business concern on the basis of a 
     preference provided under section 31(b) reside within any 
     Indian reservation governed by 1 or more of the tribal 
     government owners, or reside within any HUBZone adjoining any 
     such Indian reservation;

       ``(II) the small business concern will attempt to maintain 
     the applicable employment percentage under subclause (I) 
     during the performance of any contract awarded to the small 
     business concern on the basis of a preference provided under 
     section 31(b); and''.

       (b) Clarifying Amendment.--Section 3(p)(5)(D)(i) of the 
     Small Business Act (15 U.S.C. 632(p)(5)(D)(i)) is amended by 
     inserting ``once the Administrator has made the certification 
     required by subparagraph (A)(i) regarding a qualified HUBZone 
     small business concern and has determined that subparagraph 
     (A)(ii) does not apply to that concern,'' before ``include''.

     SEC. 604. OTHER DEFINITIONS.

       Section 3(p) of the Small Business Act (15 U.S.C. 632(p)) 
     is amended by adding at the end the following:
       ``(6) Native american small business concerns.--
       ``(A) Alaska native corporation.--The term `Alaska Native 
     Corporation' has the same meaning as the term `Native 
     Corporation' in section 3 of the Alaska Native Claims 
     Settlement Act (43 U.S.C. 1602).
       ``(B) Alaska native village.--The term `Alaska Native 
     Village' has the same meaning as the term `Native village' in 
     section 3 of the Alaska Native Claims Settlement Act (43 
     U.S.C. 1602).
       ``(C) Indian reservation.--The term `Indian reservation'--
       ``(i) has the same meaning as the term `Indian country' in 
     section 1151 of title 18, United States Code, except that 
     such term does not include--

       ``(I) any lands that are located within a State in which a 
     tribe did not exercise governmental jurisdiction on the date 
     of enactment of this paragraph, unless that tribe is 
     recognized after that date of enactment by either an Act of 
     Congress or pursuant to regulations of the Secretary of the 
     Interior for the administrative recognition that an Indian 
     group exists as an Indian tribe (part 83 of title 25, Code of 
     Federal Regulations); and
       ``(II) lands taken into trust or acquired by an Indian 
     tribe after the date of enactment of this paragraph if such 
     lands are not located within the external boundaries of an 
     Indian reservation or former reservation or are not 
     contiguous to the lands held in trust or restricted status on 
     that date of enactment; and

       ``(ii) in the State of Oklahoma, means lands that--

       ``(I) are within the jurisdictional areas of an Oklahoma 
     Indian tribe (as determined by the Secretary of the 
     Interior); and
       ``(II) are recognized by the Secretary of the Interior as 
     eligible for trust land status under part 151 of title 25, 
     Code of Federal Regulations (as in effect on the date of 
     enactment of this paragraph).''.

                  Subtitle B--Other HUBZone Provisions

     SEC. 611. DEFINITIONS.

       (a) Qualified Census Tract.--Section 3(p)(4)(A) of the 
     Small Business Act (15 U.S.C. 632(p)(4)(A)) is amended by 
     striking ``(I)''.
       (b) Qualified Nonmetropolitan County.--Section 3(p)(4) of 
     the Small Business Act (15 U.S.C. 632(p)(4)) is amended by 
     striking subparagraph (B) and inserting the following:
       ``(B) Qualified nonmetropolitan county.--The term 
     `qualified nonmetropolitan county' means any county--
       ``(i) that was not located in a metropolitan statistical 
     area (as defined in section 143(k)(2)(B) of the Internal 
     Revenue Code of 1986) at the time of the most recent census 
     taken for purposes of selecting qualified census tracts under 
     section 42(d)(5)(C)(ii) of the Internal Revenue Code of 1986; 
     and
       ``(ii) in which--

       ``(I) the median household income is less than 80 percent 
     of the nonmetropolitan State median household income, based 
     on the most recent data available from the Bureau of the 
     Census of the Department of Commerce; or
       ``(II) the unemployment rate is not less than 140 percent 
     of the Statewide average unemployment rate for the State in 
     which the county is located, based on the most recent data 
     available from the Secretary of Labor.''.

     SEC. 612. ELIGIBLE CONTRACTS.

       (a) Commodities Contracts.--Section 31(b)(3) of the Small 
     Business Act (15 U.S.C. 657a(b)(3)) is amended--
       (1) by striking ``In any'' and inserting the following:
       ``(A) In general.--Subject to subparagraph (B), in any''; 
     and
       (2) by adding at the end the following:
       ``(B) Procurement of commodities.--For purchases by the 
     Secretary of Agriculture of agricultural commodities, the 
     price evaluation preference shall be--
       ``(i) 10 percent, for the portion of a contract to be 
     awarded that is not greater than 25 percent of the total 
     volume being procured for each commodity in a single 
     invitation;
       ``(ii) 5 percent, for the portion of a contract to be 
     awarded that is greater than 25 percent, but not greater than 
     40 percent, of the total volume being procured for each 
     commodity in a single invitation; and
       ``(iii) zero, for the portion of a contract to be awarded 
     that is greater than 40 percent of the total volume being 
     procured for each commodity in a single invitation.
       ``(C) Treatment of preference.--A contract awarded to a 
     HUBZone small business concern under a preference described 
     in subparagraph (B) shall not be counted toward the 
     fulfillment of any requirement partially set aside for 
     competition restricted to small business concerns.''.
       (b) Definitions.--Section 3(p) of the Small Business Act 
     (15 U.S.C. 632(p)), as amended by this Act, is amended--
       (1) in paragraph (5)(A)(i)(III)--
       (A) in item (aa), by striking ``and'' at the end; and
       (B) by adding at the end the following:
       ``(cc) in the case of a contract for the procurement by the 
     Secretary of Agriculture of agricultural commodities, none of 
     the commodity being procured will be obtained by the prime 
     contractor through a subcontract for the purchase of the 
     commodity in substantially the final form in which it is to 
     be supplied to the Government; and''; and
       (2) by adding at the end the following:
       ``(7) Agricultural commodity.--The term `agricultural 
     commodity' has the same meaning as in section 102 of the 
     Agricultural Trade Act of 1978 (7 U.S.C. 5602).''.

     SEC. 613. HUBZONE REDESIGNATED AREAS.

       Section 3(p) of the Small Business Act (15 U.S.C. 632(p)) 
     is amended--
       (1) in paragraph (1)--
       (A) in subparagraph (B), by striking ``or'' at the end;
       (B) in subparagraph (C), by striking the period at the end 
     and inserting ``; or''; and
       (C) by adding at the end the following:
       ``(D) redesignated areas.''; and
       (2) in paragraph (4), by adding at the end the following:
       ``(C) Redesignated area.--The term `redesignated area' 
     means any census tract that ceases to be qualified under 
     subparagraph (A) and any nonmetropolitan county that ceases 
     to be qualified under subparagraph (B), except that a census 
     tract or a nonmetropolitan county may be a `redesignated 
     area' only for the 3-year period following the date on which 
     the census tract or nonmetropolitan county ceased to be so 
     qualified.''.

     SEC. 614. COMMUNITY DEVELOPMENT.

       Section 3(p) of the Small Business Act (15 U.S.C. 632(p)), 
     as amended by this Act, is amended--
       (1) in paragraph (3)--
       (A) in subparagraph (B), by striking ``or'' at the end;
       (B) in subparagraph (C), by striking the period at the end 
     and inserting ``; or''; and
       (C) by adding at the end the following:
       ``(D) a small business concern that is--
       ``(i) wholly owned by a community development corporation 
     that has received financial assistance under Part 1 of 
     Subchapter A of the Community Economic Development Act of 
     1981 (42 U.S.C. 9805 et seq.); or
       ``(ii) owned in part by 1 or more community development 
     corporations, if all other owners are either United States 
     citizens or small business concerns.''; and
       (2) in paragraph (5)(A)(i)(I)(aa), by striking 
     ``subparagraph (A) or (B)'' and inserting ``subparagraph (A), 
     (B), or (D)''.

     SEC. 615. REFERENCE CORRECTIONS.

       (a) Section 3.--Section 3(p)(5)(C) of the Small Business 
     Act (15 U.S.C. 632(p)(5)(C)) is amended by striking 
     ``subclause (IV) and (V) of subparagraph (A)(i)'' and 
     inserting ``items (aa) and (bb) of subparagraph 
     (A)(i)(III)''.
       (b) Section 8.--Section 8(d)(4)(D) of the Small Business 
     Act (15 U.S.C. 637(d)(4)(D)) is amended by inserting 
     ``qualified HUBZone small business concerns,'' after ``small 
     business concerns,''.

      TITLE VII--NATIONAL WOMEN'S BUSINESS COUNCIL REAUTHORIZATION

     SEC. 701. SHORT TITLE.

       This title may be cited as the ``National Women's Business 
     Council Reauthorization Act of 2000''.

     SEC. 702. MEMBERSHIP OF THE COUNCIL.

       Section 407 of the Women's Business Ownership Act of 1988 
     (15 U.S.C. 631 note) is amended--
       (1) in subsection (a), by striking ``Not later'' and all 
     that follows through ``the President'' and inserting ``The 
     President'';
       (2) in subsection (b)--
       (A) by striking ``Not later'' and all that follows through 
     ``the Administrator'' and inserting ``The Administrator''; 
     and
       (B) by striking ``the Assistant Administrator of the Office 
     of Women's Business Ownership and'';
       (3) in subsection (d), by striking ``, except that'' and 
     all that follows through the end of the subsection and 
     inserting a period; and

[[Page H12437]]

       (4) in subsection (h), by striking ``Not later'' and all 
     that follows through ``the Administrator'' and inserting 
     ``The Administrator''.

     SEC. 703. REPEAL OF PROCUREMENT PROJECT.

       Section 409 of the Women's Business Ownership Act of 1988 
     (15 U.S.C. 631 note) is repealed.

     SEC. 704. STUDIES AND OTHER RESEARCH.

       Section 410 of the Women's Business Ownership Act of 1988 
     (15 U.S.C. 631 note) is amended to read as follows:

     ``SEC. 409. STUDIES AND OTHER RESEARCH.

       ``(a) In General.--The Council may conduct such studies and 
     other research relating to the award of Federal prime 
     contracts and subcontracts to women-owned businesses, to 
     access to credit and investment capital by women 
     entrepreneurs, or to other issues relating to women-owned 
     businesses, as the Council determines to be appropriate.
       ``(b) Contract Authority.--In conducting any study or other 
     research under this section, the Council may contract with 1 
     or more public or private entities.''.

     SEC. 705. AUTHORIZATION OF APPROPRIATIONS.

       Section 411 of the Women's Business Ownership Act of 1988 
     (15 U.S.C. 631 note) is amended to read as follows:

     ``SEC. 410. AUTHORIZATION OF APPROPRIATIONS.

       ``(a) In General.--There is authorized to be appropriated 
     to carry out this title $1,000,000, for each of fiscal years 
     2001 through 2003, of which $550,000 shall be available in 
     each such fiscal year to carry out section 409.
       ``(b) Budget Review.--No amount made available under this 
     section for any fiscal year may be obligated or expended by 
     the Council before the date on which the Council reviews and 
     approves the operating budget of the Council to carry out the 
     responsibilities of the Council for that fiscal year.''.

                  TITLE VIII--MISCELLANEOUS PROVISIONS

     SEC. 801. LOAN APPLICATION PROCESSING.

       (a) Study.--The Administrator of the Small Business 
     Administration shall conduct a study to determine the average 
     time that the Administration requires to process an 
     application for each type of loan or loan guarantee made 
     under the Small Business Act (15 U.S.C. 631 et seq.).
       (b) Transmittal.--Not later than 1 year after the date of 
     enactment of this Act, the Administrator shall transmit to 
     Congress the results of the study conducted under subsection 
     (a).

     SEC. 802. APPLICATION OF OWNERSHIP REQUIREMENTS.

       (a) Small Business Act.--Section 7(a) of the Small Business 
     Act (15 U.S.C. 636(a)) is amended by adding at the end the 
     following:
       ``(30) Ownership requirements.--Ownership requirements to 
     determine the eligibility of a small business concern that 
     applies for assistance under any credit program under this 
     Act shall be determined without regard to any ownership 
     interest of a spouse arising solely from the application of 
     the community property laws of a State for purposes of 
     determining marital interests.''.
       (b) Small Business Investment Act of 1958.--Section 502 of 
     the Small Business Investment Act of 1958 (15 U.S.C. 696) is 
     amended by adding at the end the following:
       ``(6) Ownership requirements.--Ownership requirements to 
     determine the eligibility of a small business concern that 
     applies for assistance under any credit program under this 
     title shall be determined without regard to any ownership 
     interest of a spouse arising solely from the application of 
     the community property laws of a State for purposes of 
     determining marital interests.''.

     SEC. 803. SUBCONTRACTING PREFERENCE FOR VETERANS.

       Section 8(d) of the Small Business Act (15 U.S.C. 637(d)) 
     is amended--
       (1) in paragraph (1), by inserting ``small business 
     concerns owned and controlled by veterans,'' after ``small 
     business concerns,'' the first place that term appears in 
     each of the first and second sentences;
       (2) in paragraph (3)--
       (A) in subparagraph (A), by inserting ``small business 
     concerns owned and controlled by service-disabled veterans,'' 
     after ``small business concerns owned and controlled by 
     veterans,'' in each of the first and second sentences; and
       (B) in subparagraph (F), by inserting ``small business 
     concern owned and controlled by service-disabled veterans,'' 
     after ``small business concern owned and controlled by 
     veterans,''; and
       (3) in each of paragraphs (4)(D), (4)(E), (6)(A), (6)(C), 
     (6)(F), and (10)(B), by inserting ``small business concerns 
     owned and controlled by service-disabled veterans,'' after 
     ``small business concerns owned and controlled by 
     veterans,''.

     SEC. 804. SMALL BUSINESS DEVELOPMENT CENTER PROGRAM FUNDING.

       (a) Authorization.--
       (1) In general.--Section 20(a)(1) of the Small Business Act 
     (15 U.S.C. 631 note) is amended by striking ``For fiscal year 
     1985'' and all that follows through ``expended.'' and 
     inserting the following: ``For fiscal year 2000 and each 
     fiscal year thereafter, there are authorized to be 
     appropriated such sums as may be necessary and appropriate, 
     to remain available until expended, and to be available 
     solely--
       ``(A) to carry out the Small Business Development Center 
     Program under section 21, but not to exceed the annual 
     funding level, as specified in section 21(a);
       ``(B) to pay the expenses of the National Small Business 
     Development Center Advisory Board, as provided in section 
     21(i);
       ``(C) to pay the expenses of the information sharing 
     system, as provided in section 21(c)(8);
       ``(D) to pay the expenses of the association referred to in 
     section 21(a)(3)(A) for conducting the certification program, 
     as provided in section 21(k)(2); and
       ``(E) to pay the expenses of the Administration, including 
     salaries of examiners, for conducting examinations as part of 
     the certification program conducted by the association 
     referred to in section 21(a)(3)(A).''.
       (2) Technical amendment.--Section 20(a) of the Small 
     Business Act (15 U.S.C. 631 note) is amended by moving the 
     margins of paragraphs (3) and (4), including subparagraphs 
     (A) and (B) of paragraph (4), 2 ems to the left.
       (b) Funding Formula.--Section 21(a)(4)(C) of the Small 
     Business Act (15 U.S.C. 648(a)(4)(C)) is amended to read as 
     follows:
       ``(C) Funding formula.--
       ``(i) In general.--Subject to clause (iii), the amount of a 
     formula grant received by a State under this subparagraph 
     shall be equal to an amount determined in accordance with the 
     following formula:
       ``(I) The annual amount made available under section 20(a) 
     for the Small Business Development Center Program, less any 
     reductions made for expenses authorized by clause (v) of this 
     subparagraph, shall be divided on a pro rata basis, based on 
     the percentage of the population of each State, as compared 
     to the population of the United States.
       ``(II) If the pro rata amount calculated under subclause 
     (I) for any State is less than the minimum funding level 
     under clause (iii), the Administration shall determine the 
     aggregate amount necessary to achieve that minimum funding 
     level for each such State.
       ``(III) The aggregate amount calculated under subclause 
     (II) shall be deducted from the amount calculated under 
     subclause (I) for States eligible to receive more than the 
     minimum funding level. The deductions shall be made on a pro 
     rata basis, based on the population of each such State, as 
     compared to the total population of all such States.
       ``(IV) The aggregate amount deducted under subclause (III) 
     shall be added to the grants of those States that are not 
     eligible to receive more than the minimum funding level in 
     order to achieve the minimum funding level for each such 
     State, except that the eligible amount of a grant to any 
     State shall not be reduced to an amount below the minimum 
     funding level.
       ``(ii) Grant determination.--The amount of a grant that a 
     State is eligible to apply for under this subparagraph shall 
     be the amount determined under clause (i), subject to any 
     modifications required under clause (iii), and shall be based 
     on the amount available for the fiscal year in which 
     performance of the grant commences, but not including amounts 
     distributed in accordance with clause (iv). The amount of a 
     grant received by a State under any provision of this 
     subparagraph shall not exceed the amount of matching funds 
     from sources other than the Federal Government, as required 
     under subparagraph (A).
       ``(iii) Minimum funding level.--The amount of the minimum 
     funding level for each State shall be determined for each 
     fiscal year based on the amount made available for that 
     fiscal year to carry out this section, as follows:
       ``(I) If the amount made available is not less than 
     $81,500,000 and not more than $90,000,000, the minimum 
     funding level shall be $500,000.
       ``(II) If the amount made available is less than 
     $81,500,000, the minimum funding level shall be the remainder 
     of $500,000 minus a percentage of $500,000 equal to the 
     percentage amount by which the amount made available is less 
     than $81,500,000.
       ``(III) If the amount made available is more than 
     $90,000,000, the minimum funding level shall be the sum of 
     $500,000 plus a percentage of $500,000 equal to the 
     percentage amount by which the amount made available exceeds 
     $90,000,000.
       ``(iv) Distributions.--Subject to clause (iii), if any 
     State does not apply for, or use, its full funding 
     eligibility for a fiscal year, the Administration shall 
     distribute the remaining funds as follows:
       ``(I) If the grant to any State is less than the amount 
     received by that State in fiscal year 2000, the 
     Administration shall distribute such remaining funds, on a 
     pro rata basis, based on the percentage of shortage of 
     each such State, as compared to the total amount of such 
     remaining funds available, to the extent necessary in 
     order to increase the amount of the grant to the amount 
     received by that State in fiscal year 2000, or until such 
     funds are exhausted, whichever first occurs.
       ``(II) If any funds remain after the application of 
     subclause (I), the remaining amount may be distributed as 
     supplemental grants to any State, as the Administration 
     determines, in its discretion, to be appropriate, after 
     consultation with the association referred to in subsection 
     (a)(3)(A).
       ``(v) Use of amounts.--
       ``(I) In general.--Of the amounts made available in any 
     fiscal year to carry out this section--

       ``(aa) not more than $500,000 may be used by the 
     Administration to pay expenses enumerated in subparagraphs 
     (B) through (D) of section 20(a)(1); and
       ``(bb) not more than $500,000 may be used by the 
     Administration to pay the examination expenses enumerated in 
     section 20(a)(1)(E).

       ``(II) Limitation.--No funds described in subclause (I) may 
     be used for examination expenses under section 20(a)(1)(E) if 
     the usage would reduce the amount of grants made available 
     under clause (i)(I) of this subparagraph to less than 
     $85,000,000 (after excluding any amounts provided in 
     appropriations Acts for specific institutions or for purposes 
     other than the general small business development center 
     program) or would further reduce the amount of such grants 
     below such amount.
       ``(vi) Exclusions.--Grants provided to a State by the 
     Administration or another Federal agency to carry out 
     subsection (a)(6) or (c)(3)(G), or for supplemental grants 
     set forth in clause

[[Page H12438]]

     (iv)(II) of this subparagraph, shall not be included in the 
     calculation of maximum funding for a State under clause (ii) 
     of this subparagraph.
       ``(vii) Authorization of appropriations.--There is 
     authorized to be appropriated to carry out this subparagraph 
     $125,000,000 for each of fiscal years 2001, 2002, and 2003.
       ``(viii) State defined.--In this subparagraph, the term 
     `State' means each of the several States, the District of 
     Columbia, the Commonwealth of Puerto Rico, the Virgin 
     Islands, Guam, and American Samoa.''.

     SEC. 805. SURETY BONDS.

       (a) Contract Amounts.--Section 411 of the Small Business 
     Investment Act of 1958 (15 U.S.C. 694b) is amended--
       (1) in subsection (a)(1), by striking ``$1,250,000'' and 
     inserting ``$2,000,000''; and
       (2) in subsection (e)(2), by striking ``$1,250,000'' and 
     inserting ``$2,000,000''.
       (b) Extension of Certain Authority.--Section 207 of the 
     Small Business Administration Reauthorization and Amendment 
     Act of 1988 (15 U.S.C. 694b note) is amended by striking 
     ``2000'' and inserting ``2003''.

     SEC. 806. SIZE STANDARDS.

       (a) Industry Classifications.--Section 15(a) of the Small 
     Business Act (15 U.S.C. 644(a)) is amended in the eighth 
     sentence, by striking ``four-digit standard'' and all that 
     follows through ``published'' and inserting ``definition of a 
     `United States industry' under the North American Industry 
     Classification System, as established''.
       (b) Annual Receipts.--Section 3(a)(1) of the Small Business 
     Act (15 U.S.C. 632(a)(1)) is amended by striking ``$500,000'' 
     and inserting ``$750,000''.

     SEC. 807. NATIVE HAWAIIAN ORGANIZATIONS UNDER SECTION 8(A).

       Section 8(a)(15)(A) of the Small Business Act (15 U.S.C. 
     637(a)(15)(A)) is amended to read as follows:
       ``(A) is a nonprofit corporation that has filed articles of 
     incorporation with the director (or the designee thereof) of 
     the Hawaii Department of Commerce and Consumer Affairs, or 
     any successor agency,''.

     SEC. 808. NATIONAL VETERANS BUSINESS DEVELOPMENT CORPORATION 
                   CORRECTION.

       Section 33(k) of the Small Business Act (15 U.S.C. 657c(k)) 
     is amended--
       (1) by striking paragraph (1) and inserting the following:
       ``(1) In general.--Subject to paragraph (2), there are 
     authorized to be appropriated to the Corporation to carry out 
     this section--
       ``(A) $4,000,000 for fiscal year 2001;
       ``(B) $4,000,000 for fiscal year 2002;
       ``(C) $2,000,000 for fiscal year 2003; and
       ``(D) $2,000,000 for fiscal year 2004.'';
       (2) in paragraph (2)(A), by striking ``2001'' each place it 
     appears and inserting ``2002''; and
       (3) in paragraph (2)(B), by striking ``2002 or 2003'' and 
     inserting ``2003 or 2004''.

     SEC. 809. PRIVATE SECTOR RESOURCES FOR SCORE.

       Section 8(b)(1)(B) of the Small Business Act (15 U.S.C. 
     637(b)(1)(B)) is amended by adding at the end the following: 
     ``Notwithstanding any other provision of law, SCORE may 
     solicit cash and in-kind contributions from the private 
     sector to be used to carry out its functions under this Act, 
     and may use payments made by the Administration pursuant to 
     this subparagraph for such solicitation.''.

     SEC. 810. CONTRACT DATA COLLECTION.

       Section 15 of the Small Business Act (15 U.S.C. 644) is 
     amended by adding at the end the following new subsection:
       ``(p) Database, Analysis, and Annual Report With Respect to 
     Bundled Contracts.--
       ``(1) Bundled contract defined.--In this subsection, the 
     term `bundled contract' has the meaning given such term in 
     section 3(o)(1).
       ``(2) Database.--
       ``(A) In general.--Not later than 180 days after the date 
     of the enactment of this subsection, the Administrator of the 
     Small Business Administration shall develop and shall 
     thereafter maintain a database containing data and 
     information regarding--
       ``(i) each bundled contract awarded by a Federal agency; 
     and
       ``(ii) each small business concern that has been displaced 
     as a prime contractor as a result of the award of such a 
     contract.
       ``(3) Analysis.--For each bundled contract that is to be 
     recompeted as a bundled contract, the Administrator shall 
     determine--
       ``(A) the amount of savings and benefits (in accordance 
     with subsection (e)) achieved under the bundling of contract 
     requirements; and
       ``(B) whether such savings and benefits will continue to be 
     realized if the contract remains bundled, and whether such 
     savings and benefits would be greater if the procurement 
     requirements were divided into separate solicitations 
     suitable for award to small business concerns.
       ``(4) Annual report on contract bundling.--
       ``(A) In general.--Not later than 1 year after the date of 
     the enactment of this paragraph, and annually in March 
     thereafter, the Administration shall transmit a report on 
     contract bundling to the Committees on Small Business of the 
     House of Representatives and the Senate.
       ``(B) Contents.--Each report transmitted under subparagraph 
     (A) shall include--
       ``(i) data on the number, arranged by industrial 
     classification, of small business concerns displaced as prime 
     contractors as a result of the award of bundled contracts by 
     Federal agencies; and
       ``(ii) a description of the activities with respect to 
     previously bundled contracts of each Federal agency during 
     the preceding year, including--

       ``(I) data on the number and total dollar amount of all 
     contract requirements that were bundled; and
       ``(II) with respect to each bundled contract, data or 
     information on--

       ``(aa) the justification for the bundling of contract 
     requirements;
       ``(bb) the cost savings realized by bundling the contract 
     requirements over the life of the contract;
       ``(cc) the extent to which maintaining the bundled status 
     of contract requirements is projected to result in continued 
     cost savings;
       ``(dd) the extent to which the bundling of contract 
     requirements complied with the contracting agency's small 
     business subcontracting plan, including the total dollar 
     value awarded to small business concerns as subcontractors 
     and the total dollar value previously awarded to small 
     business concerns as prime contractors; and
       ``(ee) the impact of the bundling of contract requirements 
     on small business concerns unable to compete as prime 
     contractors for the consolidated requirements and on the 
     industries of such small business concerns, including a 
     description of any changes to the proportion of any such 
     industry that is composed of small business concerns.
       ``(5) Access to data.--
       ``(A) Federal procurement data system.--To assist in the 
     implementation of this section, the Administration shall have 
     access to information collected through the Federal 
     Procurement Data System.
       ``(B) Agency procurement data sources.--To assist in the 
     implementation of this section, the head of each contracting 
     agency shall provide, upon request of the Administration, 
     procurement information collected through existing agency 
     data collection sources.''.

     SEC. 811. PROCUREMENT PROGRAM FOR WOMEN-OWNED SMALL BUSINESS 
                   CONCERNS.

       Section 8 of the Small Business Act (15 U.S.C. 637) is 
     amended by adding at the end the following:
       ``(m) Procurement Program for Women-owned Small Business 
     Concerns.--
       ``(1) Definitions.--In this subsection, the following 
     definitions apply:
       ``(A) Contracting officer.--The term `contracting officer' 
     has the meaning given such term in section 27(f)(5) of the 
     Office of Federal Procurement Policy Act (41 U.S.C. 
     423(f)(5)).
       ``(B) Small business concern owned and controlled by 
     women.--The term `small business concern owned and controlled 
     by women' has the meaning given such term in section 3(n), 
     except that ownership shall be determined without regard to 
     any community property law.
       ``(2) Authority to restrict competition.--In accordance 
     with this subsection, a contracting officer may restrict 
     competition for any contract for the procurement of goods or 
     services by the Federal Government to small business concerns 
     owned and controlled by women, if--
       ``(A) each of the concerns is not less than 51 percent 
     owned by 1 or more women who are economically disadvantaged 
     (and such ownership is determined without regard to any 
     community property law);
       ``(B) the contracting officer has a reasonable expectation 
     that 2 or more small business concerns owned and controlled 
     by women will submit offers for the contract;
       ``(C) the contract is for the procurement of goods or 
     services with respect to an industry identified by the 
     Administrator pursuant to paragraph (3);
       ``(D) the anticipated award price of the contract 
     (including options) does not exceed--
       ``(i) $5,000,000, in the case of a contract assigned an 
     industrial classification code for manufacturing; or
       ``(ii) $3,000,000, in the case of all other contracts;
       ``(E) in the estimation of the contracting officer, the 
     contract award can be made at a fair and reasonable price; 
     and
       ``(F) each of the concerns--
       ``(i) is certified by a Federal agency, a State government, 
     or a national certifying entity approved by the 
     Administrator, as a small business concern owned and 
     controlled by women; or
       ``(ii) certifies to the contracting officer that it is a 
     small business concern owned and controlled by women and 
     provides adequate documentation, in accordance with standards 
     established by the Administration, to support such 
     certification.
       ``(3) Waiver.--With respect to a small business concern 
     owned and controlled by women, the Administrator may waive 
     subparagraph (2)(A) if the Administrator determines that the 
     concern is in an industry in which small business concerns 
     owned and controlled by women are substantially 
     underrepresented.
       ``(4) Identification of industries.--The Administrator 
     shall conduct a study to identify industries in which small 
     business concerns owned and controlled by women are 
     underrepresented with respect to Federal procurement 
     contracting.
       ``(5) Enforcement; penalties.--
       ``(A) Verification of eligibility.--In carrying out this 
     subsection, the Administrator shall establish procedures 
     relating to--
       ``(i) the filing, investigation, and disposition by the 
     Administration of any challenge to the eligibility of a small 
     business concern to receive assistance under this subsection 
     (including a challenge, filed by an interested party, 
     relating to the veracity of a certification made or 
     information provided to the Administration by a small 
     business concern under paragraph (2)(F)); and
       ``(ii) verification by the Administrator of the accuracy of 
     any certification made or information provided to the 
     Administration by a small business concern under paragraph 
     (2)(F).
       ``(B) Examinations.--The procedures established under 
     subparagraph (A) may provide for program examinations 
     (including random program examinations) by the Administrator 
     of any

[[Page H12439]]

     small business concern making a certification or providing 
     information to the Administrator under paragraph (2)(F).
       ``(C) Penalties.--In addition to the penalties described in 
     section 16(d), any small business concern that is determined 
     by the Administrator to have misrepresented the status of 
     that concern as a small business concern owned and controlled 
     by women for purposes of this subsection, shall be subject 
     to--
       ``(i) section 1001 of title 18, United States Code; and
       ``(ii) sections 3729 through 3733 of title 31, United 
     States Code.
       ``(6) Provision of data.--Upon the request of the 
     Administrator, the head of any Federal department or agency 
     shall promptly provide to the Administrator such information 
     as the Administrator determines to be necessary to carry out 
     this subsection.''.
     John Edward Porter,
     C.W. Bill Young,
     Henry Bonilla,
     Ernest J. Istook, Jr.,
     Dan Miller,
     Jay Dickey,
     Roger F. Wicker,
     Anne M. Northup,
     Randy ``Duke'' Cunningham,
     David R. Obey,
     Steny H. Hoyer,
     Nancy Pelosi,
     Nita M. Lowey,
     Rosa L. DeLauro,
     Jesse L. Jackson, Jr.,
       (Except elimination of LIHEAP and CCDBG advanced funding; 
     immigration and charitable choice provisions),
                                Managers on the Part of the House.

     Arlen Specter,
     Thad Cochran,
     Slade Gorton,
     Judd Gregg,
     Kay Bailey Hutchison,
     Ted Stevens,
     Pete V. Domenici,
     Tom Harkin,
     Ernest F. Hollings,
     Daniel K. Inouye,
     Harry Reid,
     Herb Kohl,
     Patty Murray,
     Dianne Feinstein,
     Robert C. Byrd
                               Managers on the Part of the Senate.




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