So the resolution was agreed to. A motion to reconsider the vote whereby said resolution was agreed to was, by unanimous consent, laid on the table. 162.24 PERMISSION TO FILE REPORT On motion of Mrs. VUCANOVICH, by unanimous consent, the Committee on Appropriations was granted permission until midnight Thursday, May 23, 1996, to file a privileged report on a bill making appropriations for military construction for the Department of Defense for the fiscal year ending September 30, 1997, and for other purposes. Pursuant to clause 8 of rule XXI, all points of order were reserved. 162.25 SMALL BUSINESS JOB PROTECTION Mr. ARCHER, pursuant to House Resolution 440, called up the bill (H.R. 3448) to provide tax relief for small businesses, to protect jobs, to create opportunities, to increase the take home pay of workers, and for other purposes. When said bill was considered and read twice. After debate, Pursuant to House Resolution 440, the previous question was ordered on the committee amendment in the nature of a substitute and the bill. The following committee amendment in the nature of a substitute was agreed to: Strike out all after the enacting clause and insert: SECTION 1. SHORT TITLE; TABLE OF CONTENTS. (a) SHORT TITLE.-This Act may be cited as the "Small Business Job Protection Act of 1996'. (b) TABLE OF CONTENTS.- Sec. 1101. Amendment of 1986 Code. Sec. 1111. Increase in expense treatment for small businesses. Sec. 1112. Treatment of employee tips. Sec. 1113. Treatment of storage of product samples. Sec. 1114. Treatment of certain charitable risk pools. Sec. 1115. Treatment of dues paid to agricultural or horticultural organizations. Sec. 1116. Clarification of employment tax status of certain fishermen; information reporting. Subtitle B-Extension of Certain Expiring Provisions Sec. 1201. Work opportunity tax credit. Subtitle C-Provisions Relating to S Sec. 1301. S corporations permitted to have 75 shareholders. Sec. 1302. Electing small business trusts. Sec. 1303. Expansion of post-death qualification for certain trusts. Sec. 1304. Financial institutions permitted to hold safe harbor debt. Sec. 1305. Rules relating to inadvertent terminations and invalid elections. Sec. 1306. Agreement to terminate year. Sec. 1307. Expansion of post-termination transition period. Sec. 1308. S corporations permitted to hold subsidiaries. Sec. 1309. Treatment of distributions during loss years. Sec. 1310. Treatment of S corporations under subchapter C. Sec. 1311. Elimination of certain earnings and profits. Sec. 1312. Carryover of disallowed losses and deductions under at-risk rules allowed. Sec. 1313. Adjustments to basis of inherited S stock to reflect certain items of income. Sec. 1314. S corporations eligible for rules. applicable to real property subdivided for sale by noncorporate taxpayers. Sec. 1315. Effective date. Subtitle D-Pension Simplification CHAPTER 1-SIMPLIFIED DISTRIBUTION RULES Sec. 1401. Repeal of 5-year income averaging for lump-sum distributions. Sec. 1402. Repeal of $5,000 exclusion of employees' death benefits. Sec. 1403. Simplified method for taxing annuity distributions under certain employer plans. Sec. 1404. Required distributions. PLANS SUBCHAPTER A-SIMPLE SAVINGS PLANS Sec. 1421. Establishment of savings incentive match plans for employees of small employers. Sec. 1422. Extension of simple plan to 401(k) arrangements. SUBCHAPTER B-OTHER PROVISIONS Sec. 1426. Tax-exempt organizations eligible under section 401(k). CHAPTER 3-NONDISCRIMINATION PROVISIONS Sec. 1431. Definition of highly compensated employees; repeal of family aggregation. Sec. 1432. Modification of additional participation requirements. Sec. 1433. Nondiscrimination rules for qualified cash or deferred arrangements and matching contributions. Sec. 1434. Definition of compensation for section 415 purposes. CHAPTER 4-MISCELLANEOUS PROVISIONS Sec. 1441. Plans covering self-employed individuals. Sec. 1442. Elimination of special vesting rule for multiemployer plans. Sec. 1443. Distributions under rural cooperative plans. Sec. 1444. Treatment of governmental plans under section 415. Sec. 1445. Uniform retirement age. Sec. 1446. Contributions on behalf of disabled employees. Sec. 1447. Treatment of deferred compensation plans of State and local governments and tax-exempt organizations. Sec. 1448. Trust requirement for deferred compensation plans of State and local governments. Sec. 1449. Transition rule for computing maximum benefits under section 415 limitations. Sec. 1450. Modifications of section 403(b). Sec. 1451. Waiver of minimum period for joint and survivor annuity explanation before annuity starting date. Sec. 1452. Repeal of limitation in case of defined benefit plan and defined contribution plan for same employee; excess distributions. Sec. 1453. Tax on prohibited transactions. Sec. 1454. Treatment of leased employees. Sec. 1455. Uniform penalty provisions apply to certain pension reporting requirements. Sec. 1456. Retirement benefits of ministers not subject to tax on net earnings from self-employment. Sec. 1457. Date for adoption of plan amendments. Subtitle E-Foreign Simplification Sec. 1501. Repeal of inclusion of certain earnings invested in excess passive assets. Subtitle F-Revenue Offsets Sec. 1601. Termination of Puerto Rico and possession tax credit. Sec. 1602. Repeal of exclusion for interest on loans used to acquire employer securities. Sec. 1603. Certain amounts derived from foreign corporations treated as unrelated business taxable income. Sec. 1604. Depreciation under income forecast method. Sec. 1605. Repeal of exclusion for punitive damages and for damages not attributable to physical injuries or sickness. Sec. 1606. Repeal of diesel fuel tax rebate to TITLE II-PAYMENT OF WAGES Sec. 2. Proper compensation for use of employer vehicles. Sec. 3. Effective date. Sec. 4. Minimum wage increase. Sec. 5. Fair Labor Standards Act Amendments. TITLE I-SMALL BUSINESS AND OTHER TAX PROVISIONS SEC. 1101. AMENDMENT OF 1986 CODE. Except as otherwise expressly provided, whenever in this title an amendment or repeal is expressed in terms of an amendment to, or repeal of, a section or other provision, the reference shall be considered to be made to a section or other provision of the Internal Revenue Code of 1986. SEC. 1102. UNDERPAYMENTS OF ESTIMATED TAX. No addition to the tax shall be made under section 6654 or 6655 of the Internal Revenue Code of 1986 (relating to failure to pay estimated tax) with respect to any underpayment of an installment required to be paid before the date of the enactment of this Act to the extent such underpayment was created or increased by any provision of this title. Subtitle A-Expensing; Etc. SEC. 1111. INCREASE IN EXPENSE TREATMENT FOR SMALL BUSINESSES. (a) GENERAL RULE.-Paragraph (1) of section 179(b) (relating to dollar limitation) is amended to read as follows: "(1) DOLLAR LIMITATION. The aggregate cost which may be taken into account under subsection (a) for any taxable year shall not exceed the following applicable amount: (b) EFFECTIVE DATE.-The amendment made by subsection (a) shall apply to taxable years beginning after December 31, 1995. SEC. 1112. TREATMENT OF EMPLOYEE TIPS. (a) EMPLOYEE CASH TIPS. (1) REPORTING REQUIREMENT NOT CONSIDERED. Subparagraph (A) of section 45B(b)(1) (relating to excess employer social security tax) is amended by inserting "(without regard to whether such tips are reported under section 6053)" after "section 3121(q)". (2) TAXES PAID.-Subsection (d) of section 13443 of the Revenue Reconciliation Act of 1993 is amended by inserting ", with respect to services performed before, on, or after such date" after "1993". (3) EFFECTIVE DATE.-The amendments made by this subsection shall take effect as if included in the amendments made by, and the provisions of, section 13443 of the Revenue Reconciliation Act of 1993. (b) TIPS FOR EMPLOYEES DELIVERING FOOD OR BEVERAGES. (1) IN GENERAL.-Paragraph (2) of section 45B(b) is amended to read as follows: "(2) ONLY TIPS RECEIVED FOR FOOD OR BEVERAGES TAKEN INTO ACCOUNT.-In applying paragraph (1), there shall be taken into account only tips received from customers in connection with the delivering or serving of food or beverages for consumption if the tipping of employees delivering or serving food or beverages by customers is customary." (2) EFFECTIVE DATE.-The amendment made by paragraph (1) shall apply to tips received for services performed after December 31, 1996. SEC. 1113. TREATMENT OF STORAGE OF PRODUCT SAMPLES. (a) IN GENERAL.-Paragraph (2) of section 280A(c) is amended by striking "inventory" and inserting "inventory or product samples". (b) EFFECTIVE DATE.-The amendment made by subsection (a) shall apply to taxable years beginning after December 31, 1995. SEC. 1114. TREATMENT OF CERTAIN CHARITABLE RISK POOLS. (a) GENERAL RULE.-Section 501 (relating to exemption from tax on corporations, certain trusts, etc.) is amended by redesignating subsection (n) as subsection (0) and by inserting after subsection (m) the following new subsection: "(n) CHARITABLE RISK POOLS. "(1) IN GENERAL.-For purposes of this title "(A) a qualified charitable risk pool shall be treated as an organization organized and operated exclusively for charitable purposes, and "(B) subsection (m) shall not apply to a qualified charitable risk pool. "(2) QUALIFIED CHARITABLE RISK POOL.-For purposes of this subsection, the term 'qualified charitable risk pool' means any organization— "(A) which is organized and operated solely to pool insurable risks of its members (other than risks related to medical malpractice) and to provide information to its members with respect to loss control and risk management, "(B) which is comprised solely of members that are organizations described in subsection (c)(3) and exempt from tax under subsection (a), and "(C) which meets the organizational requirements of paragraph (3). "(3) ORGANIZATIONAL REQUIREMENTS.—An organization (hereinafter in this subsection referred to as the 'risk pool') meets the organizational requirements of this paragraph if “(A) such risk pool is organized as a nonprofit organization under State law provisions authorizing risk pooling arrangements for charitable organizations, "(B) such risk pool is exempt from any income tax imposed by the State (or will be so exempt after such pool qualifies as an organization exempt from tax under this title), "(C) such risk pool has obtained at least $1,000,000 in startup capital from nonmember charitable organizations, "(D) such risk pool is controlled by a board of directors elected by its members, and "(E) the organizational documents of such risk pool require that "(i) each member of such pool shall at all times be an organization described in subsection (c)(3) and exempt from tax under subsection (a), "(ii) any member which receives a final determination that it no longer qualifies as an organization described in subsection (c)(3) shall immediately notify the pool of such determination and the effective date of such determination, and "(iii) each policy of insurance issued by the risk pool shall provide that such policy will not cover the insured with respect to events occurring after the date such final determination was issued to the insured. An organization shall not cease to qualify as a qualified charitable risk pool solely by reason of the failure of any of its members to continue to be an organization described in subsection (c)(3) if, within a reasonable period of time after such pool is notified as required under subparagraph (C)(ii), such pool takes such action as may be reasonably necessary to remove such member from such pool. "(4) OTHER DEFINITIONS.-For purposes of this subsection "(A) STARTUP CAPITAL.-The term 'startup capital' means any capital contributed to, and any program-related investments (within the meaning of section 4944(c)) made in, the risk pool before such pool commences operations. "(B) NONMEMBER CHARITABLE ORGANIZATION. The term 'nonmember charitable organization' means any organization which is described in subsection (c)(3) and exempt from tax under subsection (a) and which is not a member of the risk pool and does not benefit (directly or indirectly) from the insurance coverage provided by the pool to its members." (b) EFFECTIVE DATE. The amendment made by subsection (a) shall apply to taxable years beginning after the date of the enactment of this Act. SEC. 1115. TREATMENT OF DUES PAID TO AGRICULTURAL OR HORTICULTURAL ORGANIZATIONS. (a) GENERAL RULE.-Section 512 (defining unrelated business taxable income) is amended by adding at the end thereof the following new subsection: "(d) TREATMENT OF DUES OF AGRICULTURAL OR HORTICULTURAL ORGANIZATIONS. "(1) IN GENERAL.-If "(A) an agricultural or horticultural organization described in section 501(c)(5) requires annual dues to be paid in order to be a member of such organization, and "(B) the amount of such required annual dues does not exceed $100, in no event shall any portion of such dues be treated as derived by such organization from an unrelated trade or business by reason of any benefits or privileges to which members of such organization are entitled. "(2) INDEXATION OF $100 AMOUNT.-In the case of any taxable year beginning in a calendar year after 1995, the $100 amount in paragraph (1) shall be increased by an amount equal to "(A) $100, multiplied by "(B) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, by substituting 'calendar year 1994' for 'calendar year 1992' in subparagraph (B) thereof. "(3) DUES.-For purposes of this subsection, the term 'dues' includes any payment required to be made in order to be recognized by the organization as a member of the organization.". (b) EFFECTIVE DATE. The amendment made by subsection (a) shall apply to taxable years beginning after December 31, 1994. SEC. 1116. CLARIFICATION OF EMPLOYMENT TAX STATUS OF CERTAIN FISHERMEN; INFORMATION REPORTING. (a) CLARIFICATION OF EMPLOYMENT TAX STATUS. (1) AMENDMENTS OF INTERNAL REVENUE CODE OF 1986. (A) DETERMINATION OF SIZE OF CREW.-Subsection (b) of section 3121 (defining employment) is amended by adding at the end thereof the following new sentence: "For purposes of paragraph (20), the operating crew of a boat shall be treated as normally made up of fewer than 10 individuals if the average size of the operating crew on trips made during the preceding 4 calendar quarters consisted of fewer than 10 individuals.". REMUNERATION PER (B) CERTAIN CASH MITTED.-Subparagraph (A) of section 3121(b)(20) is amended to read as follows: "(A) such individual does not receive any cash remuneration other than as provided in subparagraph (B) and other than cash remuneration "(i) which does not exceed $100 per trip; "(ii) which is contingent on a minimum catch; and "(iii) which is paid solely for additional duties (such as mate, engineer, or cook) for which additional cash remuneration is traditional in the industry,". (C) CONFORMING AMENDMENT.-Section 6050A(a) is amended by striking "and" at the end of paragraph (3), by striking the period at the end of paragraph (4) and inserting "; and", and by adding at the end thereof the following new paragraph: "(5) any cash remuneration described in section 3121(b)(20)(A).”. (2) AMENDMENT OF SOCIAL SECURITY ACT.— (A) DETERMINATION OF SIZE OF CREW.-Subsection (a) of section 210 of the Social Security Act is amended by adding at the end thereof the following new sentence: "For purposes of paragraph (20), the operating crew of a boat shall be treated as nor granted permission to sit today during the 5-minute rule: the Committee on Agriculture, the Committee on Commerce, the Committee on Government Reform and Oversight, the Committee on International Relations, the Committee on National Security, the Committee on Resources, the Committee on Veterans' Affairs, and the Permanent Select Committee on Intelligence. ¶62.5 PRAIRIE ISLAND INDIAN COMMUNITY CHARTER REVOCATION On motion of Mr. HASTINGS of Washington, by unanimous consent, the Committee of the Whole House on the state of the Union was discharged from further consideration of the bill (H.R. 3068) to accept the request of the Prairie Island Indian Community to revoke their charter of incorporation issued under the Indian Reorganization Act. When said bill was considered and read twice. The bill was ordered to be engrossed and read a third time, was read a third time by title, and passed. A motion to reconsider the vote whereby the bill was passed was, by unanimous consent, laid on the table. Ordered, That the Clerk request the concurrence of the Senate in said bill. 162.6 INTELLIGENCE AUTHORIZATION The SPEAKER pro tempore, Mr. LATHAM, pursuant to House Resolution 437 and rule XXIII, declared the House resolved into the Committee of the Whole House on the state of the Union for the consideration of the bill (H.R. 3259) to authorize appropriations for fiscal year 1997 for intelligence and intellegence-related activities of the United States Government, the Community Management Account, and the Central Intelligence Agency Retirement and Disability System, and for other purposes. The SPEAKER pro tempore, Mr. LATHAM, by unanimous consent, designated Mr. DICKEY as Chairman of the Committee of the Whole; and after some time spent therein, 162.7 RECORDED VOTE A recorded vote by electronic device was ordered in the Committee of the Whole on the following amendment, as amended, submitted by Mr. RICHARDSON: At the end of title III, insert the following new section: SEC. 306. PROHIBITION ON USING JOURNALISTS AS AGENTS OR ASSETS. (a) POLICY.-It is the policy of the United States that an element of the Intelligence Community may not use as an agent or asset for the purposes of collecting intelligence any individual who (1) is authorized by contract or by the issuance of press credentials to represent himself or herself, either in the United States or abroad, as a correspondent of a United States news media organization; or (2) is officially recognized by a foreign government as a representative of a United States media organization. (b) WAIVER.-The President may waive subsection (a) in the case of an individual if the President certifies in writing that the waiver Bass Bateman Bilirakis Bono Brown (CA) Brown (FL) Brown (OH) Brownback Bryant (TN) Bryant (TX) Bunn Bunning Burr Burton Cardin Fields (LA) Fields (TX) Filner Flanagan Foglietta Foley Forbes Ford Franks (NJ) Jacobs Jones Kanjorski Kaptur Kingston Kleczka Knollenberg Lantos Largent Latham La Tourette Laughlin Lazio Leach Levin Lewis (CA) Lewis (GA) Lewis (KY) Lightfoot Lincoln Linder Lipinski Livingston LoBiondo Lofgren Green (TX) Greene (UT) Cramer Crane Greenwood Gunderson Longley Lowey Lucas So the amendment, as amended, was agreed to. 162.9 RECORDED VOTE A recorded vote by electronic device was ordered in the Committee of the Whole on the following amendment submitted by Mr. SANDERS: At the end of title I, add the following new section: SEC. 105. LIMITATION ON AMOUNTS AUTHORIZED TO BE APPROPRIATED. (a) LIMITATION.-Except as provided in subsection (b), notwithstanding the total amount of the individual authorizations of appropriations contained in this Act, including the amounts specified in the classified Schedule of Authorizations referred to in section 102, there is authorized to be appropriated for fiscal year 1997 to carry out this Act not more than 90 percent of the total amount authorized to be appropriated by the Intelligence Authorization Act for Fiscal Year 1996. (b) EXCEPTION.-Subsection (a) does not apply to amounts authorized to be appro Boehlert Boehner Bonilla Bono Deutsch Diaz-Balart Dickey Dicks Dingell Dixon Doggett Gunderson Gutknecht Hall (OH) Hall (TX) Hamilton So the amendment was not agreed to. 162.11 RECORDED VOTE A recorded vote by electronic device was ordered in the Committee of the Whole on the following amendment submitted by Mr. CONYERS: SEC. 306. ANNUAL STATEMENT OF THE TOTAL AMOUNT OF INTELLIGENCE EXPENDITURES FOR THE CURRENT AND SUCCEEDING FISCAL YEARS. At the time of submission of the budget of the United States Government submitted for fiscal year 1998 under section 1105(a) of title 31, United States Code, and for each fiscal year thereafter, the President shall submit to Congress a separate, unclassified statement of the appropriations and proposed appropriations for the current fiscal year, and the amount of appropriations requested for the fiscal year for which the budget is submitted, for national and tactical intelligence activities, including activities carried out under the budget of the Department Of Defense to collect, analyze, produce, disseminate, or support the collection of intelligence. Baesler Baker (CA) Baker (LA) Ballenger Bartlett Barton Bass Bateman Bereuter Bilbray Bilirakis Bishop Blute Boehlert Burr Camp Allard Archer Armey Bachus Dooley Barcia Barr Coburn Ewing Coleman Fawell Fields (TX) Combest Flanagan Fazio Fields (LA) Filner McKinney Menendez Metcalf MillenderMcDonald Miller (CA) Minge Stupak Thompson Torres Velazquez Watt (NC) Waxman McDermott Vento Volkmer Ward Waters Moran Morella "(2) MODIFICATIONS.-For purposes of paragraph (1), the modifications of this paragraph are the following: "(A) Except as provided in section 1(h), the amount of the tax imposed by section 1(e) shall be determined by using the highest rate of tax set forth in section 1(e). "(B) The exemption amount under section 55(d) shall be zero. "(C) The only items of income, loss, deduction, or credit to be taken into account are the following: "(i) The items required to be taken into account under section 1366. "(ii) Any gain or loss from the disposition of stock in an S corporation. "(iii) To the extent provided in regulations, State or local income taxes or administrative expenses to the extent allocable to items described in clauses (i) and (ii). No deduction or credit shall be allowed for any amount not described in this paragraph, and no item described in this paragraph shall be apportioned to any beneficiary. "(D) No amount shall be allowed under paragraph (1) or (2) of section 1211(b). "(3) TREATMENT OF REMAINDER OF TRUST AND DISTRIBUTIONS.-For purposes of determining "(A) the amount of the tax imposed by this chapter on the portion of any electing small business trust not treated as a separate trust under paragraph (1), and "(B) the distributable net income of the entire trust, the items referred to in paragraph (2)(C) shall be excluded. Except as provided in the preceding sentence, this subsection shall not affect the taxation of any distribution from the trust. "(4) TREATMENT OF UNUSED DEDUCTIONS WHERE TERMINATION OF SEPARATE TRUST.—If a portion of an electing small business trust ceases to be treated as a separate trust under paragraph (1), any carryover or excess deduction of the separate trust which is referred to in section 642(h) shall be taken into account by the entire trust. "(5) ELECTING SMALL BUSINESS TRUST.-For purposes of this subsection, the term 'electing small business trust' has the meaning given such term by section 1361(e)(1).". (e) TECHNICAL AMENDMENT.-Paragraph (1) of section 1366(a) is amended by inserting ", or of a trust or estate which terminates," after "who dies". SEC. 1303. EXPANSION OF POST-DEATH QUALIFICATION FOR CERTAIN TRUSTS. Subparagraph (A) of section 1361(c)(2) (relating to certain trusts permitted as shareholders) is amended (1) by striking "60-day period" each place it appears in clauses (ii) and (iii) and inserting "2-year period", and (2) by striking the last sentence in clause (ii). SEC. 1304. FINANCIAL INSTITUTIONS PERMITTED TO HOLD SAFE HARBOR DEBT. Clause (iii) of section 1361(c)(5)(B) (defining straight debt) is amended by striking "or a trust described in paragraph (2)" and inserting "a trust described in paragraph (2), or a person which is actively and regularly engaged in the business of lending money". SEC. 1305. RULES RELATING TO INADVERTENT TERMINATIONS AND INVALID ELEC TIONS. (a) GENERAL RULE.-Subsection (f) of section 1362 (relating to inadvertent terminations) is amended to read as follows: "(f) INADVERTENT INVALID ELECTIONS OR TERMINATIONS.—If— "(1) an election under subsection (a) by any corporation "(A) was not effective for the taxable year for which made (determined without regard to subsection (b)(2)) by reason of a failure to meet the requirements of section 1361(b) or to obtain shareholder consents, or "(B) was terminated under paragraph (2) or (3) of subsection (d), "(2) the Secretary determines that the circumstances resulting in such ineffectiveness or termination were inadvertent, "(3) no later than a reasonable period of time after discovery of the circumstances resulting in such ineffectiveness or termination, steps were taken "(A) so that the corporation is a small business corporation, or "(B) to acquire the required shareholder consents, and "(4) the corporation, and each person who was a shareholder in the corporation at any time during the period specified pursuant to this subsection, agrees to make such adjustments (consistent with the treatment of the corporation as an S corporation) as may be required by the Secretary with respect to such period, then, notwithstanding the circumstances resulting in such ineffectiveness or termination, such corporation shall be treated as an S corporation during the period specified by the Secretary.". (b) LATE ELECTIONS, ETC.-Subsection (b) of section 1362 is amended by adding at the end the following new paragraph: "(5) AUTHORITY TO TREAT LATE ELECTIONS, ETC., AS TIMELY.-If "(A) an election under subsection (a) is made for any taxable year (determined without regard to paragraph (3)) after the date prescribed by this subsection for making such election for such taxable year or no such election is made for any taxable year, and "(B) the Secretary determines that there was reasonable cause for the failure to timely make such election, the Secretary may treat such an election as timely made for such taxable year (and paragraph (3) shall not apply).". (c) EFFECTIVE DATE.-The amendments made by subsection (a) and (b) shall apply with respect to elections for taxable years beginning after December 31, 1982. SEC. 1306. AGREEMENT TO TERMINATE YEAR. Paragraph (2) of section 1377(a) (relating to pro rata share) is amended to read as follows: "(2) ELECTION TO TERMINATE YEAR. "(A) IN GENERAL.-Under regulations prescribed by the Secretary, if any shareholder terminates the shareholder's interest in the corporation during the taxable year and all affected shareholders and the corporation agree to the application of this paragraph, paragraph (1) shall be applied to the affected shareholders as if the taxable year consisted of 2 taxable years the first of which ends on the date of the termination. "(B) AFFECTED SHAREHOLDERS.-For purposes of subparagraph (A), the term 'affected shareholders' means the shareholder whose interest is terminated and all shareholders to whom such shareholder has transferred shares during the taxable year. If such shareholder has transferred shares to the corporation, the term 'affected shareholders' shall include all persons who are shareholders during the taxable year.". SEC. 1307. EXPANSION OF POST-TERMINATION TRANSITION PERIOD. (a) IN GENERAL.-Paragraph (1) of section 1377(b) (relating to post-termination transition period) is amended by striking "and" at the end of subparagraph (A), by redesignating subparagraph (B) as subparagraph (C), and by inserting after subparagraph (A) the following new subparagraph: "(B) the 120-day period beginning on the date of any determination pursuant to an audit of the taxpayer which follows the termination of the corporation's election and which adjusts a subchapter S item of income, loss, or deduction of the corporation arising during the S period (as defined in section 1368(e)(2)), and". (b) DETERMINATION DEFINED.-Paragraph (2) of section 1377(b) is amended by striking subparagraphs (A) and (B), by redesignating subparagraph (C) as subparagraph (B), and by inserting before subparagraph (B) (as so redesignated) the following new subparagraph: "(A) a determination as defined in section 1313(a), or". (c) REPEAL OF SPECIAL AUDIT PROVISIONS FOR SUBCHAPTER S ITEMS. (1) GENERAL RULE.-Subchapter D of chapter 63 (relating to tax treatment of subchapter S items) is hereby repealed. (2) CONSISTENT TREATMENT REQUIRED.-Section 6037 (relating to return of S corporation) is amended by adding at the end the following new subsection: "(c) SHAREHOLDER'S RETURN MUST BE CONSISTENT WITH CORPORATE RETURN OR SECRETARY NOTIFIED OF INCONSISTENCY.— "(1) IN GENERAL.-A shareholder of an S corporation shall, on such shareholder's return, treat a subchapter S item in a manner which is consistent with the treatment of such item on the corporate return. "(2) NOTIFICATION OF INCONSISTENT TREATMENT. “(A) IN GENERAL.-In the case of any subchapter S item, if "(i)(I) the corporation has filed a return but the shareholder's treatment on his return is (or may be) inconsistent with the treatment of the item on the corporate return, or "(II) the corporation has not filed a return, and "(ii) the shareholder files with the Secretary a statement identifying the inconsistency, paragraph (1) shall not apply to such item. "(B) SHAREHOLDER RECEIVING INCORRECT INFORMATION.-A shareholder shall be treated as having complied with clause (ii) of subparagraph (A) with respect to a subchapter S item if the shareholder "(i) demonstrates to the satisfaction of the Secretary that the treatment of the subchapter S item on the shareholder's return is consistent with the treatment of the item on the schedule furnished to the shareholder by the corporation, and "(ii) elects to have this paragraph apply with respect to that item. "(3) EFFECT OF FAILURE TO NOTIFY.-In any case "(A) described in subparagraph (A)(i)(I) of paragraph (2), and "(B) in which the shareholder does not comply with subparagraph (A)(ii) of paragraph (2), any adjustment required to make the treatment of the items by such shareholder consistent with the treatment of the items on the corporate return shall be treated as arising out of mathematical or clerical errors and assessed according to section 6213(b)(1). Paragraph (2) of section 6213(b) shall not apply to any assessment referred to in the preceding sentence. "(4) SUBCHAPTER S ITEM.-For purposes of this subsection, the term 'subchapter S item' means any item of an S corporation to the extent that regulations prescribed by the Secretary provide that, for purposes of this subtitle, such item is more appropriately determined at the corporation level than at the shareholder level. "(5) ADDITION TO TAX FOR FAILURE TO COMPLY WITH SECTION. "For addition to tax in the case of a shareholder's negligence in connection with, or disregard of, the requirements of this section, see part II of subchapter A of chapter 68.". (3) CONFORMING AMENDMENTS.— (A) Section 1366 is amended by striking subsection (g). (B) Subsection (b) of section 6233 is amended to read as follows: |