Health Insurance Portability and Accountability Act of 1996

HR3103

TITLE V--REVENUE OFFSETS

SEC. 500. 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.

Subtitle A--Company-Owned Life Insurance

SEC. 501. DENIAL OF DEDUCTION FOR INTEREST ON LOANS WITH RESPECT TO COMPANY-OWNED LIFE INSURANCE.

(a) IN GENERAL- Paragraph (4) of section 264(a) is amended--

(1) by inserting `, or any endowment or annuity contracts owned by the taxpayer covering any individual,' after `the life of any individual', and

(2) by striking all that follows `carried on by the taxpayer' and inserting a period.

(b) EXCEPTION FOR CONTRACTS RELATING TO KEY PERSONS; PERMISSIBLE INTEREST RATES- Section 264 is amended--

(1) by striking `Any' in subsection (a)(4) and inserting `Except as provided in subsection (d), any', and

(2) by adding at the end the following new subsection:

`(d) SPECIAL RULES FOR APPLICATION OF SUBSECTION (a)(4)-

`(1) EXCEPTION FOR KEY PERSONS- Subsection (a)(4) shall not apply to any interest paid or accrued on any indebtedness with respect to policies or contracts covering an individual who is a key person to the extent that the aggregate amount of such indebtedness with respect to policies and contracts covering such individual does not exceed $50,000.

`(2) INTEREST RATE CAP ON KEY PERSONS AND PRE-1986 CONTRACTS-

`(A) IN GENERAL- No deduction shall be allowed by reason of paragraph (1) or the last sentence of subsection (a) with respect to interest paid or accrued for any month beginning after December 31, 1995, to the extent the amount of such interest exceeds the amount which would have been determined if the applicable rate of interest were used for such month.

`(B) APPLICABLE RATE OF INTEREST- For purposes of subparagraph (A)--

`(i) IN GENERAL- The applicable rate of interest for any month is the rate of interest described as Moody's Corporate Bond Yield Average-Monthly Average Corporates as published by Moody's Investors Service, Inc., or any successor thereto, for such month.

`(ii) PRE-1986 CONTRACTS- In the case of indebtedness on a contract purchased on or before June 20, 1986--

`(I) which is a contract providing a fixed rate of interest, the applicable rate of interest for any month shall be the Moody's rate described in clause (i) for the month in which the contract was purchased, or

`(II) which is a contract providing a variable rate of interest, the applicable rate of interest for any month in an applicable period shall be such Moody's rate for the third month preceding the first month in such period.

For purposes of subclause (II), the taxpayer shall elect an applicable period for such contract on its return of tax imposed by this chapter for its first taxable year ending on or after October 13, 1995. Such applicable period shall be for any number of months (not greater than 12) specified in the election and may not be changed by the taxpayer without the consent of the Secretary.

`(3) KEY PERSON- For purposes of paragraph (1), the term `key person' means an officer or 20-percent owner, except that the number of individuals who may be treated as key persons with respect to any taxpayer shall not exceed the greater of--

`(A) 5 individuals, or

`(B) the lesser of 5 percent of the total officers and employees of the taxpayer or 20 individuals.

`(4) 20-PERCENT OWNER- For purposes of this subsection, the term `20-percent owner' means--

`(A) if the taxpayer is a corporation, any person who owns directly 20 percent or more of the outstanding stock of the corporation or stock possessing 20 percent or more of the total combined voting power of all stock of the corporation, or

`(B) if the taxpayer is not a corporation, any person who owns 20 percent or more of the capital or profits interest in the employer.

`(5) AGGREGATION RULES-

`(A) IN GENERAL- For purposes of paragraph (4)(A) and applying the $50,000 limitation in paragraph (1)--

`(i) all members of a controlled group shall be treated as one taxpayer, and

`(ii) such limitation shall be allocated among the members of such group in such manner as the Secretary may prescribe.

`(B) CONTROLLED GROUP- For purposes of this paragraph, all persons treated as a single employer under subsection (a) or (b) of section 52 or subsection (m) or (o) of section 414 shall be treated as members of a controlled group.'.

(c) EFFECTIVE DATES-

(1) IN GENERAL- The amendments made by this section shall apply to interest paid or accrued after October 13, 1995.

(2) TRANSITION RULE FOR EXISTING INDEBTEDNESS-

(A) IN GENERAL- In the case of--

(i) indebtedness incurred before January 1, 1996, or

(ii) indebtedness incurred before January 1, 1997 with respect to any contract or policy entered into in 1994 or 1995,

the amendments made by this section shall not apply to qualified interest paid or accrued on such indebtedness after October 13, 1995, and before January 1, 1999.

(B) QUALIFIED INTEREST- For purposes of subparagraph (A), the qualified interest with respect to any indebtedness for any month is the amount of interest (otherwise deductible) which would be paid or accrued for such month on such indebtedness if--

(i) in the case of any interest paid or accrued after December 31, 1995, indebtedness with respect to no more than 20,000 insured individuals were taken into account, and

(ii) the lesser of the following rates of interest were used for such month:

(I) The rate of interest specified under the terms of the indebtedness as in effect on October 13, 1995 (and without regard to modification of such terms after such date).

(II) The applicable percentage of the rate of interest described as Moody's Corporate Bond Yield Average-Monthly Average Corporates as published by Moody's Investors Service, Inc., or any successor thereto, for such month.

For purposes of clause (i), all persons treated as a single employer under subsection (a) or (b) of section 52 of the Internal Revenue Code of 1986 or subsection (m) or (o) of section 414 of such Code shall be treated as 1 person. Subclause (II) of clause (ii) shall not apply to any month before January 1, 1996.

(C) APPLICABLE PERCENTAGE- For purposes of sub-paragraph (B), the applicable percentage is as follows:

For calendar year:

-- The percentage is:

1996

--100 percent

1997

--90 percent

1998

--80 percent.

(3) SPECIAL RULE FOR GRANDFATHERED CONTRACTS- This section shall not apply to any contract purchased on or before June 20, 1986, except that section 264(d)(2) of the Internal Revenue Code of 1986 shall apply to interest paid or accrued after October 13, 1995.

(d) SPREAD OF INCOME INCLUSION ON SURRENDER, ETC. OF CONTRACTS-

(1) IN GENERAL- If any amount is received under any life insurance policy or endowment or annuity contract described in paragraph (4) of section 264(a) of the Internal Revenue Code of 1986--

(A) on the complete surrender, redemption, or maturity of such policy or contract during calendar year 1996, 1997, or 1998, or

(B) in full discharge during any such calendar year of the obligation under the policy or contract which is in the nature of a refund of the consideration paid for the policy or contract,

then (in lieu of any other inclusion in gross income) such amount shall be includible in gross income ratably over the 4-taxable year period beginning with the taxable year such amount would (but for this paragraph) be includible. The preceding sentence shall only apply to the extent the amount is includible in gross income for the taxable year in which the event described in subparagraph (A) or (B) occurs.

(2) SPECIAL RULES FOR APPLYING SECTION 264- A contract shall not be treated as--

(A) failing to meet the requirement of section 264(c)(1) of the Internal Revenue Code of 1986, or

(B) a single premium contract under section 264(b)(1) of such Code,

solely by reason of an occurrence described in subparagraph (A) or (B) of paragraph (1) of this subsection or solely by reason of no additional premiums being received under the contract by reason of a lapse occurring after October 13, 1995.

(3) SPECIAL RULE FOR DEFERRED ACQUISITION COSTS- In the case of the occurrence of any event described in subparagraph (A) or (B) of paragraph (1) of this subsection with respect to any policy or contract--

(A) section 848 of the Internal Revenue Code of 1986 shall not apply to the unamortized balance (if any) of the specified policy acquisition expenses attributable to such policy or contract immediately before the insurance company's taxable year in which such event occurs, and

(B) there shall be allowed as a deduction to such company for such taxable year under chapter 1 of such Code an amount equal to such unamortized balance.

Subtitle B--Treatment of Individuals Who Lose United States Citizenship

SEC. 511. REVISION OF INCOME, ESTATE, AND GIFT TAXES ON INDIVIDUALS WHO LOSE UNITED STATES CITIZENSHIP.

(a) IN GENERAL- Subsection (a) of section 877 is amended to read as follows:

`(a) TREATMENT OF EXPATRIATES-

`(1) IN GENERAL- Every nonresident alien individual who, within the 10-year period immediately preceding the close of the taxable year, lost United States citizenship, unless such loss did not have for one of its principal purposes the avoidance of taxes under this subtitle or subtitle B, shall be taxable for such taxable year in the manner provided in subsection (b) if the tax imposed pursuant to such subsection exceeds the tax which, without regard to this section, is imposed pursuant to section 871.

`(2) CERTAIN INDIVIDUALS TREATED AS HAVING TAX AVOIDANCE PURPOSE- For purposes of paragraph (1), an individual shall be treated as having a principal purpose to avoid such taxes if--

`(A) the average annual net income tax (as defined in section 38(c)(1)) of such individual for the period of 5 taxable years ending before the date of the loss of United States citizenship is greater than $100,000, or

`(B) the net worth of the individual as of such date is $500,000 or more.

In the case of the loss of United States citizenship in any calendar year after 1996, such $100,000 and $500,000 amounts shall be increased by an amount equal to such dollar amount multiplied by the cost-of-living adjustment determined under section 1(f)(3) for such calendar year by substituting `1994' for `1992' in subparagraph (B) thereof. Any increase under the preceding sentence shall be rounded to the nearest multiple of $1,000.'.

(b) EXCEPTIONS-

(1) IN GENERAL- Section 877 is amended by striking subsection (d), by redesignating subsection (c) as subsection (d), and by inserting after subsection (b) the following new subsection:

`(c) TAX AVOIDANCE NOT PRESUMED IN CERTAIN CASES-

`(1) IN GENERAL- Subsection (a)(2) shall not apply to an individual if--

`(A) such individual is described in a subparagraph of paragraph (2) of this subsection, and

`(B) within the 1-year period beginning on the date of the loss of United States citizenship, such individual submits a ruling request for the Secretary's determination as to whether such loss has for one of its principal purposes the avoidance of taxes under this subtitle or subtitle B.

`(2) INDIVIDUALS DESCRIBED-

`(A) DUAL CITIZENSHIP, ETC- An individual is described in this subparagraph if--

`(i) the individual became at birth a citizen of the United States and a citizen of another country and continues to be a citizen of such other country, or

`(ii) the individual becomes (not later than the close of a reasonable period after loss of United States citizenship) a citizen of the country in which--

`(I) such individual was born,

`(II) if such individual is married, such indi-vidual's spouse was born, or

`(III) either of such individual's parents were born.

`(B) LONG-TERM FOREIGN RESIDENTS- An individual is described in this subparagraph if, for each year in the 10-year period ending on the date of loss of United States citizenship, the individual was present in the United States for 30 days or less. The rule of section 7701(b)(3)(D)(ii) shall apply for purposes of this subparagraph.

`(C) RENUNCIATION UPON REACHING AGE OF MAJORITY- An individual is described in this subparagraph if the individual's loss of United States citizenship occurs before such individual attains age 18 1/2 .

`(D) INDIVIDUALS SPECIFIED IN REGULATIONS- An individual is described in this subparagraph if the indi-vidual is described in a category of individuals prescribed by regulation by the Secretary.'.

(2) TECHNICAL AMENDMENT- Paragraph (1) of section 877(b) of such Code is amended by striking `subsection (c)' and inserting `subsection (d)'.

(c) TREATMENT OF PROPERTY DISPOSED OF IN NONRECOGNITION TRANSACTIONS; TREATMENT OF DISTRIBUTIONS FROM CERTAIN CONTROLLED FOREIGN CORPORATIONS- Subsection (d) of section 877, as redesignated by subsection (b), is amended to read as follows:

`(d) SPECIAL RULES FOR SOURCE, ETC- For purposes of subsection (b)--

`(1) SOURCE RULES- The following items of gross income shall be treated as income from sources within the United States:

`(A) SALE OF PROPERTY- Gains on the sale or exchange of property (other than stock or debt obligations) located in the United States.

`(B) STOCK OR DEBT OBLIGATIONS- Gains on the sale or exchange of stock issued by a domestic corporation or debt obligations of United States persons or of the United States, a State or political subdivision thereof, or the District of Columbia.

`(C) INCOME OR GAIN DERIVED FROM CONTROLLED FOREIGN CORPORATION- Any income or gain derived from stock in a foreign corporation but only--

`(i) if the individual losing United States citizenship owned (within the meaning of section 958(a)), or is considered as owning (by applying the ownership rules of section 958(b)), at any time during the 2-year period ending on the date of the loss of United States citizenship, more than 50 percent of--

`(I) the total combined voting power of all classes of stock entitled to vote of such corpora-tion, or

`(II) the total value of the stock of such corporation, and

`(ii) to the extent such income or gain does not exceed the earnings and profits attributable to such stock which were earned or accumulated before the loss of citizenship and during periods that the ownership requirements of clause (i) are met.

`(2) GAIN RECOGNITION ON CERTAIN EXCHANGES-

`(A) IN GENERAL- In the case of any exchange of property to which this paragraph applies, notwithstanding any other provision of this title, such property shall be treated as sold for its fair market value on the date of such exchange, and any gain shall be recognized for the taxable year which includes such date.

`(B) EXCHANGES TO WHICH PARAGRAPH APPLIES- This paragraph shall apply to any exchange during the 10-year period described in subsection (a) if--

`(i) gain would not (but for this paragraph) be recognized on such exchange in whole or in part for purposes of this subtitle,

`(ii) income derived from such property was from sources within the United States (or, if no income was so derived, would have been from such sources), and

`(iii) income derived from the property acquired in the exchange would be from sources outside the United States.

`(C) EXCEPTION- Subparagraph (A) shall not apply if the individual enters into an agreement with the Secretary which specifies that any income or gain derived from the property acquired in the exchange (or any other property which has a basis determined in whole or part by reference to such property) during such 10-year period shall be treated as from sources within the United States. If the property transferred in the exchange is disposed of by the person acquiring such property, such agreement shall terminate and any gain which was not recognized by reason of such agreement shall be recognized as of the date of such disposition.

`(D) SECRETARY MAY EXTEND PERIOD- To the extent provided in regulations prescribed by the Secretary, subparagraph (B) shall be applied by substituting the 15-year period beginning 5 years before the loss of United States citizenship for the 10-year period referred to therein.

`(E) SECRETARY MAY REQUIRE RECOGNITION OF GAIN IN CERTAIN CASES- To the extent provided in regulations prescribed by the Secretary--

`(i) the removal of appreciated tangible personal property from the United States, and

`(ii) any other occurrence which (without recognition of gain) results in a change in the source of the income or gain from property from sources within the United States to sources outside the United States,

shall be treated as an exchange to which this paragraph applies.

`(3) SUBSTANTIAL DIMINISHING OF RISKS OF OWNERSHIP- For purposes of determining whether this section applies to any gain on the sale or exchange of any property, the running of the 10-year period described in subsection (a) shall be suspended for any period during which the individual's risk of loss with respect to the property is substantially diminished by--

`(A) the holding of a put with respect to such property (or similar property),

`(B) the holding by another person of a right to acquire the property, or

`(C) a short sale or any other transaction.

`(4) TREATMENT OF PROPERTY CONTRIBUTED TO CONTROLLED FOREIGN CORPORATIONS-

`(A) IN GENERAL- If--

`(i) an individual losing United States citizenship contributes property to any corporation which, at the time of the contribution, is described in subparagraph (B), and

`(ii) income derived from such property was from sources within the United States (or, if no income was so derived, would have been from such sources),

during the 10-year period referred to in subsection (a), any income or gain on such property (or any other property which has a basis determined in whole or part by reference to such property) received or accrued by the corporation shall be treated as received or accrued directly by such individual and not by such corporation. The preceding sentence shall not apply to the extent the property has been treated under subparagraph (C) as having been sold by such corporation.

`(B) CORPORATION DESCRIBED- A corporation is described in this subparagraph with respect to an individual if, were such individual a United States citizen--

`(i) such corporation would be a controlled foreign corporation (as defined in 957), and

`(ii) such individual would be a United States shareholder (as defined in section 951(b)) with respect to such corporation.

`(C) DISPOSITION OF STOCK IN CORPORATION- If stock in the corporation referred to in subparagraph (A) (or any other stock which has a basis determined in whole or part by reference to such stock) is disposed of during the 10-year period referred to in subsection (a) and while the property referred to in subparagraph (A) is held by such corporation, a pro rata share of such property (determined on the basis of the value of such stock) shall be treated as sold by the corporation immediately before such disposition.

`(D) ANTI-ABUSE RULES- The Secretary shall prescribe such regulations as may be necessary to prevent the avoidance of the purposes of this paragraph, including where--

`(i) the property is sold to the corporation, and

`(ii) the property taken into account under subparagraph (A) is sold by the corporation.

`(E) INFORMATION REPORTING- The Secretary shall require such information reporting as is necessary to carry out the purposes of this paragraph.'.

(d) CREDIT FOR FOREIGN TAXES IMPOSED ON UNITED STATES SOURCE INCOME-

(1) Subsection (b) of section 877 is amended by adding at the end the following new sentence: `The tax imposed solely by reason of this section shall be reduced (but not below zero) by the amount of any income, war profits, and excess profits taxes (within the meaning of section 903) paid to any foreign country or possession of the United States on any income of the taxpayer on which tax is imposed solely by reason of this section.'

(2) Subsection (a) of section 877, as amended by subsection (a), is amended by inserting `(after any reduction in such tax under the last sentence of such subsection)' after `such subsection'.

(e) COMPARABLE ESTATE AND GIFT TAX TREATMENT-

(1) ESTATE TAX-

(A) IN GENERAL- Subsection (a) of section 2107 is amended to read as follows:

`(a) TREATMENT OF EXPATRIATES-

`(1) RATE OF TAX- A tax computed in accordance with the table contained in section 2001 is hereby imposed

on the transfer of the taxable estate, determined as provided in section 2106, of every decedent nonresident not a citizen of the United States if, within the 10-year period ending with the date of death, such decedent lost United States citizenship, unless such loss did not have for one of its principal purposes the avoidance of taxes under this subtitle or subtitle A.

`(2) CERTAIN INDIVIDUALS TREATED AS HAVING TAX AVOIDANCE PURPOSE-

`(A) IN GENERAL- For purposes of paragraph (1), an individual shall be treated as having a principal purpose to avoid such taxes if such individual is so treated under section 877(a)(2).

`(B) EXCEPTION- Subparagraph (A) shall not apply to a decedent meeting the requirements of section 877(c)(1).'.

(B) CREDIT FOR FOREIGN DEATH TAXES- Subsection (c) of section 2107 is amended by redesignating paragraph (2) as paragraph (3) and by inserting after paragraph (1) the following new paragraph:

`(2) CREDIT FOR FOREIGN DEATH TAXES-

`(A) IN GENERAL- The tax imposed by subsection (a) shall be credited with the amount of any estate, inheritance, legacy, or succession taxes actually paid to any foreign country in respect of any property which is included in the gross estate solely by reason of subsection (b).

`(B) LIMITATION ON CREDIT- The credit allowed by subparagraph (A) for such taxes paid to a foreign country shall not exceed the lesser of--

`(i) the amount which bears the same ratio to the amount of such taxes actually paid to such foreign country in respect of property included in the gross estate as the value of the property included in the gross estate solely by reason of subsection (b) bears to the value of all property subjected to such taxes by such foreign country, or

`(ii) such property's proportionate share of the excess of--

`(I) the tax imposed by subsection (a), over

`(II) the tax which would be imposed by section 2101 but for this section.

`(C) PROPORTIONATE SHARE- For purposes of subparagraph (B), a property's proportionate share is the percentage of the value of the property which is included in the gross estate solely by reason of subsection (b) bears to the total value of the gross estate.'.

(C) EXPANSION OF INCLUSION IN GROSS ESTATE OF STOCK OF FOREIGN CORPORATIONS- Paragraph (2) of section 2107(b) is amended by striking `more than 50 per-cent of' and all that follows and inserting `more than 50 percent of--

`(A) the total combined voting power of all classes of stock entitled to vote of such corporation, or

`(B) the total value of the stock of such corporation,'.

(2) GIFT TAX-

(A) IN GENERAL- Paragraph (3) of section 2501(a) is amended to read as follows:

`(3) EXCEPTION-

`(A) CERTAIN INDIVIDUALS- Paragraph (2) shall not apply in the case of a donor who, within the 10-year period ending with the date of transfer, lost United States citizenship, unless such loss did not have for one of its principal purposes the avoidance of taxes under this subtitle or subtitle A.

`(B) CERTAIN INDIVIDUALS TREATED AS HAVING TAX AVOIDANCE PURPOSE- For purposes of subparagraph (A), an individual shall be treated as having a

principal purpose to avoid such taxes if such individual is so treated under section 877(a)(2).

`(C) EXCEPTION FOR CERTAIN INDIVIDUALS- Subparagraph (B) shall not apply to a decedent meeting the requirements of section 877(c)(1).

`(D) CREDIT FOR FOREIGN GIFT TAXES- The tax imposed by this section solely by reason of this paragraph shall be credited with the amount of any gift tax actually paid to any foreign country in respect of any gift which is taxable under this section solely by reason of this paragraph.'.

(f) COMPARABLE TREATMENT OF LAWFUL PERMANENT RESIDENTS WHO CEASE TO BE TAXED AS RESIDENTS-

(1) IN GENERAL- Section 877 is amended by redesignating subsection (e) as subsection (f) and by inserting after subsection (d) the following new subsection:

`(e) COMPARABLE TREATMENT OF LAWFUL PERMANENT RESIDENTS WHO CEASE TO BE TAXED AS RESIDENTS-

`(1) IN GENERAL- Any long-term resident of the United States who--

`(A) ceases to be a lawful permanent resident of the United States (within the meaning of section 7701(b)(6)), or

`(B) commences to be treated as a resident of a foreign country under the provisions of a tax treaty between the United States and the foreign country and who does not waive the benefits of such treaty applicable to residents of the foreign country,

shall be treated for purposes of this section and sections 2107, 2501, and 6039F in the same manner as if such resident were a citizen of the United States who lost United States citizenship on the date of such cessation or commencement.

`(2) LONG-TERM RESIDENT- For purposes of this subsection, the term `long-term resident' means any individual (other than a citizen of the United States) who is a lawful permanent resident of the United States in at least 8 taxable years during the period of 15 taxable years ending with the taxable year during which the event described in subparagraph (A) or (B) of paragraph (1) occurs. For purposes of the preceding sentence, an individual shall not be treated as a lawful permanent resident for any taxable year if such individual is treated as a resident of a foreign country for the taxable year under the provisions of a tax treaty between the United States and the foreign country and does not waive the benefits of such treaty applicable to residents of the foreign country.

`(3) SPECIAL RULES-

`(A) EXCEPTIONS NOT TO APPLY- Subsection (c) shall not apply to an individual who is treated as provided in paragraph (1).

`(B) STEP-UP IN BASIS- Solely for purposes of determining any tax imposed by reason of this subsection, property which was held by the long-term resident on the date the individual first became a resident of the United States shall be treated as having a basis on such date of not less than the fair market value of such property on such date. The preceding sentence shall not apply if the individual elects not to have such sentence apply. Such an election, once made, shall be irrevocable.

`(4) AUTHORITY TO EXEMPT INDIVIDUALS- This subsection shall not apply to an individual who is described in a category of individuals prescribed by regulation by the Secretary.

`(5) REGULATIONS- The Secretary shall prescribe such regulations as may be appropriate to carry out this subsection, including regulations providing for the application of this subsection in cases where an alien individual becomes a resident of the United States during the 10-year period after being treated as provided in paragraph (1).'.

(2) CONFORMING AMENDMENTS-

(A) Section 2107 is amended by striking subsection (d), by redesignating subsection (e) as subsection (d), and by inserting after subsection (d) (as so redesignated) the following new subsection:

`(e) CROSS REFERENCE-

`For comparable treatment of long-term lawful permanent residents who ceased to be taxed as residents, see section 877(e).'.

(B) Paragraph (3) of section 2501(a) (as amended by subsection (e)) is amended by adding at the end the following new subparagraph:

`(E) CROSS REFERENCE-

`For comparable treatment of long-term lawful permanent residents who ceased to be taxed as residents, see section 877(e).'.

(g) EFFECTIVE DATE-

(1) IN GENERAL- The amendments made by this section shall apply to--

(A) individuals losing United States citizenship (within the meaning of section 877 of the Internal Revenue Code of 1986) on or after February 6, 1995, and

(B) long-term residents of the United States with respect to whom an event described in subparagraph (A) or (B) of section 877(e)(1) of such Code occurs on or after February 6, 1995.

(2) RULING REQUESTS- In no event shall the 1-year period referred to in section 877(c)(1)(B) of such Code, as amended by this section, expire before the date which is 90 days after the date of the enactment of this Act.

(3) SPECIAL RULE-

(A) IN GENERAL- In the case of an individual who performed an act of expatriation specified in paragraph (1), (2), (3), or (4) of section 349(a) of the Immigration and Nationality Act (8 U.S.C. 1481(a)(1)-(4)) before February 6, 1995, but who did not, on or before such date, furnish to the United States Department of State a signed statement of voluntary relinquishment of United States nationality confirming the performance of such act, the amendments made by this section and section 512 shall apply to such individual except that the 10-year period described in section 877(a) of such Code shall not expire before the end of the 10-year period beginning on the date such statement is so furnished.

(B) EXCEPTION- Subparagraph (A) shall not apply if the individual establishes to the satisfaction of the Secretary of the Treasury that such loss of United States citizenship occurred before February 6, 1994.

SEC. 512. INFORMATION ON INDIVIDUALS LOSING UNITED STATES CITIZENSHIP.

(a) IN GENERAL- Subpart A of part III of subchapter A of chapter 61 is amended by inserting after section 6039E the following new section:

`SEC. 6039F. INFORMATION ON INDIVIDUALS LOSING UNITED STATES CITIZENSHIP.

`(a) IN GENERAL- Notwithstanding any other provision of law, any individual who loses United States citizenship (within the meaning of section 877(a)) shall provide a statement which includes the information described in subsection (b). Such statement shall be--

`(1) provided not later than the earliest date of any act referred to in subsection (c), and

`(2) provided to the person or court referred to in subsection (c) with respect to such act.

`(b) INFORMATION TO BE PROVIDED- Information required under subsection (a) shall include--

`(1) the taxpayer's TIN,

`(2) the mailing address of such individual's principal foreign residence,

`(3) the foreign country in which such individual is residing,

`(4) the foreign country of which such individual is a citizen,

`(5) in the case of an individual having a net worth of at least the dollar amount applicable under section 877(a)(2)(B), information detailing the assets and liabilities of such individual, and

`(6) such other information as the Secretary may prescribe.

`(c) ACTS DESCRIBED- For purposes of this section, the acts referred to in this subsection are--

`(1) the individual's renunciation of his United States nationality before a diplomatic or consular officer of the United States pursuant to paragraph (5) of section 349(a) of the Immigration and Nationality Act (8 U.S.C. 1481(a)(5)),

`(2) the individual's furnishing to the United States Department of State a signed statement of voluntary relinquishment of United States nationality confirming the performance of an act of expatriation specified in paragraph (1), (2), (3), or (4) of section 349(a) of the Immigration and Nationality Act (8 U.S.C. 1481(a)(1)-(4)),

`(3) the issuance by the United States Department of State of a certificate of loss of nationality to the individual, or

`(4) the cancellation by a court of the United States of a naturalized citizen's certificate of naturalization.

`(d) PENALTY- Any individual failing to provide a statement required under subsection (a) shall be subject to a penalty for each year (of the 10-year period beginning on the date of loss of United States citizenship) during any portion of which such failure continues in an amount equal to the greater of--

`(1) 5 percent of the tax required to be paid under section 877 for the taxable year ending during such year, or

`(2) $1,000,

unless it is shown that such failure is due to reasonable cause and not to willful neglect.

`(e) INFORMATION TO BE PROVIDED TO SECRETARY- Notwithstanding any other provision of law--

`(1) any Federal agency or court which collects (or is required to collect) the statement under subsection (a) shall provide to the Secretary--

`(A) a copy of any such statement, and

`(B) the name (and any other identifying information) of any individual refusing to comply with the provisions of subsection (a),

`(2) the Secretary of State shall provide to the Secretary a copy of each certificate as to the loss of American nationality under section 358 of the Immigration and Nationality Act which is approved by the Secretary of State, and

`(3) the Federal agency primarily responsible for administering the immigration laws shall provide to the Secretary the name of each lawful permanent resident of the United States (within the meaning of section 7701(b)(6)) whose status as such has been revoked or has been administratively or judicially determined to have been abandoned.

Notwithstanding any other provision of law, not later than 30 days after the close of each calendar quarter, the Secretary shall publish in the Federal Register the name of each individual losing United States citizenship (within the meaning of section 877(a)) with respect to whom the Secretary receives information under the preceding sentence during such quarter.

`(f) REPORTING BY LONG-TERM LAWFUL PERMANENT RESIDENTS WHO CEASE TO BE TAXED AS RESIDENTS- In lieu of applying the last sentence of subsection (a), any individual who is required to provide a statement under this section by reason of section 877(e)(1) shall provide such statement with the return of tax imposed by chapter 1 for the taxable year during which the event described in such section occurs.

`(g) EXEMPTION- The Secretary may by regulations exempt any class of individuals from the requirements of this section if he determines that applying this section to such individuals is not necessary to carry out the purposes of this section.'.

(b) CLERICAL AMENDMENT- The table of sections for such subpart A is amended by inserting after the item relating to section 6039E the following new item:

`Sec. 6039F. Information on individuals losing United States citizenship.'.

(c) EFFECTIVE DATE- The amendments made by this section shall apply to--

(1) individuals losing United States citizenship (within the meaning of section 877 of the Internal Revenue Code of 1986) on or after February 6, 1995, and

(2) long-term residents of the United States with respect to whom an event described in subparagraph (A) or (B) of section 877(e)(1) of such Code occurs on or after such date.

In no event shall any statement required by such amendments be due before the 90th day after the date of the enactment of this Act.

SEC. 513. REPORT ON TAX COMPLIANCE BY UNITED STATES CITIZENS AND RESIDENTS LIVING ABROAD.

Not later than 90 days after the date of the enactment of this Act, the Secretary of the Treasury shall prepare and submit to the Committee on Ways and Means of the House of Representatives and the Committee on Finance of the Senate a report--

(1) describing the compliance with subtitle A of the Internal Revenue Code of 1986 by citizens and lawful permanent residents of the United States (within the meaning of section 7701(b)(6) of such Code) residing outside the United States, and

(2) recommending measures to improve such compliance (including improved coordination between executive branch agencies).

Subtitle C--Repeal of Financial Institution Transition Rule to Interest Allocation Rules

SEC. 521. REPEAL OF FINANCIAL INSTITUTION TRANSITION RULE TO INTEREST ALLOCATION RULES.

(a) IN GENERAL- Paragraph (5) of section 1215(c) of the Tax Reform Act of 1986 (Public Law 99-514, 100 Stat. 2548) is hereby repealed.

(b) EFFECTIVE DATE-

(1) IN GENERAL- The amendment made by this section shall apply to taxable years beginning after December 31, 1995.

(2) SPECIAL RULE- In the case of the first taxable year beginning after December 31, 1995, the pre-effective date portion of the interest expense of the corporation referred to in such paragraph (5) of such section 1215(c) for such taxable year shall be allocated and apportioned without regard to such amendment. For purposes of the preceding sentence, the pre-effective date portion is the amount which bears the same ratio to the interest expense for such taxable year as the number of days during such taxable year before the date of the enactment of this Act bears to 366.

Speaker of the House of Representatives.

Vice President of the United States and

President of the Senate.

Back to beginning of HR3103