AMENDMENTS RELATED TO THE REVENUE ACT OF 1987.

SEC. 2004. AMENDMENTS RELATED TO THE REVENUE ACT OF 1987. (a) Amendment Related to Section 10101 of the Act.— Section 10101(b) of the Revenue Act of 1987 is amended to read as follows: “(b) Effective Date.— “(1) In general.— The amendment made by subsection (a) shall apply to expenses paid in taxable years beginning after December 31, 1987. “(2) Special rule for cafeteria plans.— For purposes of section 125 of the Internal Revenue Code of 1986, a plan shall not be treated as failing to be a cafeteria plan solely because under the plan a participant elected before January 1, 1988, to receive reimbursement under the plan for dependent care assistance for periods after December 31, 1987, and such assistance included reimbursement for expenses at a camp where the dependent stays overnight.” (b) Amendments Related to Section 10102 of the Act.— 102 STAT. 3599 (1) Subsection (h) of section 163 of the 1986 Code is amended by redesignating paragraph (6) as paragraph (5). (2) Clause (ii) of section 56(b)(1)(C) of the 1986 Code is amended by striking out “163(h)(6)” and inserting in lieu thereof “163(h)(5)”. (3) Paragraph (1) of section 56(e) of the 1986 Code is amended— (A) by striking out “substantially rehabilitating” and inserting in lieu thereof “substantially improving”, and (B) by striking out “or is paid” in subparagraph (A). (c) Amendment Related to Section 10103.— Paragraph (1) of section 10103(a) of the Revenue Act of 1987 is amended by inserting “in a plan established for its employees by the United States” after “participant”. (d) Amendments Related to Section 10202 of the Act.— (1) Subparagraph (A) of section 453(l)(1) of the 1986 Code, is amended by striking out “disposes of personal property” and inserting in lieu thereof “disposes of personal property of the same type”. (2) Section 453A of the 1986 Code is amended by adding at the end thereof the following new subsection: “(e) Regulations.— The Secretary shall prescribe such regulations as may be necessary to carry out the purposes of this section, including regulations— “(1) disallowing the use of the installment method in whole or in part for transactions in which the rules of this section otherwise would be avoided through the use of related persons, pass-thru entities, or intermediaries, and “(2) providing that the sale of an interest in a partnership or other pass-thru entity will be treated as a sale of the proportionate share of the assets of the partnership or other entity.” (3) Paragraph (3) of section 10202(e) of the Revenue Act of 1987 is amended by adding at the end thereof the following new subparagraph: “(C) Certain dispositions deemed made on 1st day of taxable year.— If the taxpayer makes an election under subparagraph (A), in the case of the taxpayer’s 1st taxable year ending after December 31, 1986— “(i) dispositions after August 16, 1986, and before the 1st day of such taxable year shall be treated as made on such 1st day, and “(ii) subsections (b)(2)(B) and (c)(4) of section 453A of such Code shall be applied separately with respect to such dispositions by substituting for ‘$5,000,000’ the amount which bears the same ratio to $5,000,000 as the number of days after August 16, 1986, and before such 1st day bears to 365.” (4) Paragraph (2) of section 10202(e) of the Revenue Act of 1987 is amended by adding at the end thereof the following new subparagraph: “(C) Certain rules made applicable.— For purposes of this paragraph, rules similar to the rules of paragraphs (4) and (5) of section 812(c) of the Tax Reform Act of 1986 (as added by the Technical and Miscellaneous Revenue Act of 1988) shall apply.” (5) Subsection (k) of section 453 of the 1986 Code is amended by striking out “and section 453A”. 102 STAT. 3600 (6) Subparagraph (A) of section 10202(e)(2) of the Revenue Act of 1987 is amended by striking out “section 453A of the Internal Revenue Code of 1986” and inserting in lieu thereof “section 453(1)(1) of the Internal Revenue Code of 1986 as added by this section”. (7) Paragraph (2) of section 453A(b) of the 1986 Code is amended by striking out “for purposes of this paragraph” and inserting in lieu thereof “for purposes of this paragraph and subsection (c)(4)”. (8) Paragraph (3) of section 453A(b) of the 1986 Code is amended to read as follows: “(3) Exception for farm property.— An installment obligation shall not be treated as described in paragraph (1) if it arises from the disposition of any property used or produced in the trade or business of farming (within the meaning of section 2032A(e)(4)or (5).” (e) Amendments Related to Section 10206 of the Act.— (1) (A) Subsection (a) of section 444 of the 1986 Code is amended by striking out “as provided in subsections (b) and (c)” and inserting in lieu thereof “as otherwise provided in this section”, (B) Paragraph (3) of section 444(d) of the 1986 Code is amended to read as follows: “(3) Tiered structures, etc.— “(A) In general.— Except as otherwise provided in this paragraph— “(i) no election may be under subsection (a) with respect to any entity which is part of a tiered structure, and “(ii) an election under subsection (a) with respect to any entity shall be terminated if such entity becomes part of a tiered structure. “(B) Exceptions for structures consisting of certain entities with same taxable year.— Subparagraph (A) shall not apply to any tiered structure which consists only of partnerships or S corporations (or both) all of which have the same taxable year.” (C) Subparagraph (B) of section 444(d)(2) of the 1986 Code is amended by striking out “under subparagraph (A)” and inserting in lieu thereof “under subparagraph (A) or paragraph (3)(A)”. (2) (A) Section 444 of the 1986 Code is amended by redesignating subsection (f) as subsection (g) and inserting after subsection (e) the following new subsection: “(f) Personal Service Corporation.— For purposes of this section, the term ‘personal service corporation’ has the meaning given to such term by section 441(1)(2).” (B) Subsection (f) of section 280H of the 1986 Code is amended by adding at the end thereof the following new paragraph: “(5) “Personal service corporation.— The term ‘personal service corporation’ has the meaning given to such term by section 441(i)(2).” (3) Paragraph (2) of section 280H(f) of the 1986 Code is amended by striking out “section 296A(b)(2)” and inserting in lieu thereof “section 269A(b)(2) (as modified by section 441(i)(2))”. 102 STAT. 3601 (4) (A) Paragraph (2) of section 7519(b) of the 1986 Code is amended to read as follows: “(2) the net required payment balance.” (B) Subsection (e) of section 7519 of the 1986 Code is amended by adding at the end thereof the following new paragraph: “(4) Net required payment balance.— The term ‘net required payment balance’ means the excess (if any) of— “(A) the aggregate of the required payments under this section for all preceding applicable election years, over “(B) the aggregate amount allowable as a refund to the entity under subsection (c) for all preceding applicable election years.” (5) Subsection (c) of section 7519 of the 1986 Code is amended to read as follows: “(c) Refund of Payments.— “(1) In general.— If, for any applicable election year, the amount determined under subsection (b)(2) exceeds the amount determined under subsection (b)(1), the entity shall be entitled to a refund of such excess for such year. “(2) Termination of elections, etc.— If— “(A) an election under section 444 is terminated effective with respect to any year, or “(B) the entity is liquidated during any year, the entity shall be entitled to a refund of the net required payment balance. “(3) Date on which refund payable.— Any refund under this subsection shall be payable on later of— “(A) April 15 of the calendar year following— “(i) in the case of the year referred to in paragraph (1), the calendar year in which it begins, “(ii) in the case of the year referred to in paragraph (2), the calendar year in which it ends, or “(B) the day 90 days after the day on which claim therefor is filed with the Secretary.” (6) Subsection (g) of section 7519 of the 1986 Code is amended by striking out “including regulations” and all that follows down through the period at the end thereof and inserting in lieu thereof “including regulations providing for appropriate adjustments in the application of this section and sections 280H and 444 in cases where— “(1) 2 or more applicable election years begin in the same calendar year, or “(2) the base year is a taxable year of less than 12 months.” (7) Subparagraph (B) of section 7519(d)(2) of the 1986 Code is amended by inserting before the period at the end thereof the following: “(and such corporation shall be treated as an S corporation for such taxable year for purposes of paragraph (3))”. (8) Subsection (d) of section 7519 of the 1986 Code is amended by adding at the end thereof the following new paragraph: “(5) Treatment of guaranteed payments.— “(A) In general.— Any guaranteed payment by a partnership shall not be treated as an applicable payment, and the amount of the net income of the partnership shall be determined by not taking such guaranteed payment into account. 102 STAT. 3602 “(B) Guaranteed payment.— For purposes of subparagraph (A), the term ‘guaranteed payment’ means any payment referred to in section 707(c).” (9) Paragraph (4) of section 7519(d) of the 1986 Code is amended by adding at the end thereof the following new sentence: “Notwithstanding the preceding provisions of this paragraph, for taxable years beginning after 1987, the applicable percentage for any partnership or S corporation shall be 100 percent if more than 50 percent of such entity’s net income for the short taxable year which would have resulted if the entity had not made an election under section 444 would have been allocated to partners or shareholders who would not have been entitled to the benefits of section 806(e)(2)(C) of the Tax Reform Act of 1986 with respect to such income.” (10) Subparagraphs (A) and (B) of section 7519(d)(2) of the 1986 Code are each amended by striking out “(other than credits)” and inserting in lieu thereof “(other than credits and tax-exempt income)”. (11) Paragraph (4) of section 10206(d) of the Revenue Act of 1987 is amended by adding at the end thereof the following new sentence: “The preceding sentence shall apply only in the case of an election under section 444 of such Code made for a taxable year beginning before 1989.” (12) Subparagraph (A) of section 444(d)(2) of the 1986 Code is amended by inserting “or otherwise terminates such election” before the period at the end of the first sentence thereof. (13) Paragraph (4) of section 444(b) of the 1986 Code is amended by striking out “the term” and inserting in lieu thereof “except as provided in regulations, the term”. (14) (A) Paragraph (4) of section 280H(f) of the 1986 Code is amended to read as follows: “(4) Adjusted taxable income.— The term ‘adjusted taxable income’ means taxable income determined without regard to— “(A) any amount paid to an employee-owner which is includible in the gross income of such employee-owner, and “(B) any net operating loss carryover to the extent such carryover is attributable to amounts described in subparagraph (A).” (B) Subparagraph (A) of section 7519(d)(3) of the 1986 Code is amended by striking out “or incurred”. (C) Subsections (c)(1)(A)(i) and (d)(1) of section 280H of the 1986 Code are each amended by striking out “or incurred”. (f) Amendments Related to Section 10211 of the Act.— (1) Paragraph (4) of section 7704(e) of the 1986 Code is amended by striking out “as may be required” and inserting in lieu thereof “or to pay such amounts as may be required”. (2) Paragraph (2) of section 10211(c) of the Revenue Act of 1987 is amended by adding at the end thereof the following new subparagraph: “(C) Coordination with passive-type income requirements.— In the case of an existing partnership, paragraph (1) of section 7704(c) of the Internal Revenue Code of 1986 (as added by this section) shall be applied by substituting for ‘December 31, 1987’ the earlier of— “(i) December 31, 1997, or 102 STAT. 3603 “(ii) the day (if any) as of which such partnership ceases to be treated as an existing partnership by reason of subparagraph (B).” (3) Paragraph (1) of section 7704(c) of the 1986 Code is amended by adding at the end thereof the following new sentence: “For purposes of the preceding sentence, a partnership shall not be treated as being in existence during any period before the 1st taxable year in which such partnership (or a predecessor) was a publicly traded partnership.” (4) Paragraph (1) of section 7704(d) of the 1986 Code is amended by adding at the end thereof the following new sentence: “For purposes of subparagraph (E), the term ‘mineral or natural resource’ means any product of a character with respect to which a deduction for depletion is allowable under section 611; except that such term shall not include any product described in subparagraph (A) or (B) of section 613(b)(7).” (5) Paragraph (3) of section 7704(d) of the 1986 Code is amended to read as follows: “(3) Real property rent.— The term ‘real property rent’ means amounts which would qualify as rent from real property under section 856(d) if— “(A) such section were applied without regard to paragraph (2)(C) thereof (relating to independent contractor requirements), and “(B) stock owned, directly or indirectly, by or for a partner would not be considered as owned under section 318(a)(3)(A) by the partnership unless 5 percent or more (by value) of the interests in such partnership are owned, directly or indirectly, by or for such partner.” (g) Amendment Related to Section 10212 of the Act.— Subsection (k) of section 469 of the 1986 Code is amended by adding at the end thereof the following new paragraph: “(3) Coordination with subsection (g).— For purposes of subsection (g), a taxpayer shall not be treated as having disposed of his entire interest in an activity of a publicly traded partnership until he disposes of his entire interest in such partnership.” (h) Amendments Related to Section 10214 of the Act.— (1) Subparagraph (E) of section 514(c)(9) of the 1986 Code is amended by adding at the end thereof the following new clause: “(iii) Regulations.— The Secretary shall prescribe such regulations as may be necessary to carry out the purposes of this subparagraph, including regulations which may provide for exclusion or segregation of items.” (2) Clause (i) of section 514(c)(9)(E) of the 1986 Code is amended by strikingout subclause (I) and by redesignating subclauses (II) and (III) as subclauses (I) and (ft), respectively. (i) Amendments Related to Section 10221 of the Act.— (1) Paragraph (2) of section 10221(e) of the Revenue Act of 1987 is amended by striking out “amendments made by subsection (b)” and inserting in lieu thereof “amendments made by subsection (c)”. (2) Subsection (b) of section 244 of the 1986 Code is amended by striking out “section 243(c)(4)” and inserting in lieu thereof “section 243(d)(4)”. (j) Amendments Related to Section 10222 of the Act.— 102 STAT. 3604 (1) (A) Paragraph (1) of section 1503(e) of the 1986 Code is amended by striking out so much of such paragraph as precedes subparagraph (A) thereof and inserting in lieu thereof the following: “(1) In general.— Solely for purposes of determining gain or loss on the disposition of intragroup stock and the amount of any inclusion by reason of an excess loss account, in determining the adjustments to the basis of such intragroup stock on account of the earnings and profits of any member of an affiliated group for any consolidated year (and in determining the amount in such account)—” (B) Paragraph (2) of section 10222(a) of the Revenue Act of 1987 is amended by adding at the end thereof the following new subparagraph: “(C) Treatment of certain excess loss accounts.— “(i) In general.— If— “(I) any disposition on or before December 15, 1987, of stock resulted in an inclusion of an excess loss account (or would have so resulted if the amendments made by paragraph (1) had applied to such disposition), and “(II) there is an unrecaptured amount with respect to such disposition, the portion of such unrecaptured amount allocable to stock disposed of in a disposition to which the amendment made by paragraph (1) applies shall be taken into account as negative basis. To the extent permitted by the Secretary of the Treasury or his delegate, the preceding sentence shall not apply to the extent the taxpayer elects to reduce its basis in indebtedness of the corporation with respect to which there would have been an excess loss account. “(ii) Special rules.— For purposes of this subparagraph— “(I) Unrecaptured amount.— The term ‘unrecaptured amount’ means the amount by which the inclusion referred to in clause (i)(I) would have been increased if the amendment made by paragraph (1) and applied to the disposition. “(II) Coordination with binding contract exception.— A disposition shall be treated as occurring on or before December 15, 1987, if the amendment made by paragraph (1) does not apply to such disposition by reason of subparagraph (B).” (2) Subsection (e) of section 1503 of the 1986 Code is amended by adding at the end thereof the following new paragraph: “(3) Adjustments.— Under regulations prescribed by the Secretary, proper adjustments shall be made in the application of paragraph (1)— “(A) in the case of any property acquired by the corporation before consolidation, for the difference between the adjusted basis of such property for purposes of computing taxable income and its adjusted basis for purposes of computing earnings and profits, and “(B) in the case of any property, for any basis adjustment under section 48(q).” 102 STAT. 3605 (3) (A) Paragraph (2) of section 1503(e) of the 1986 Code is amended by adding at the end thereof the following new subparagraph: “(C) Application of section 312(n) (7) not affected.— The reference in paragraph (1) to subsection (n) of section 312 shall be treated as not including a reference to paragraph (7) of such subsection.” (B) Subsection (e) of section 301 of the 1986 Code (as redesignated by section 106(e)(12) of this Act) is amended by redesignating paragraph (3) as paragraph (4) and by inserting after paragraph (2) the following new paragraph: “(3) Application of section 312(n) (7) not affected.— The reference in paragraph (1) to subsection (n) of section 312 shall be treated as not including a reference to paragraph (7) of such subsection ” (4) Subparagraph (B) of section 10222(b)(2) of the Revenue Act of 1987 is amended to read as follows: “(B) Exception.— The amendment made by paragraph (1) shall not apply for purposes of determining gain or loss on any disposition of stock after December 15, 1987, and before January 1, 1989, if such disposition is pursuant to a written binding contract, governmental order, letter of intent or preliminary agreement, or stock acquisition agreement, in effect on or before December 15, 1987.” (k) Amendments Related to Section 10223 of the Act.— (1) Subparagraph (D) of section 355(b)(2) of the 1986 Code is amended by striking out clauses (i) and (ii) and inserting in lieu thereof the following: “(i) was not acquired by any distributee corporation directly (or through 1 or more corporations, whether through the distributing corporation or otherwise) within the period described in subparagraph (B) and was not acquired by the distributing corporation directly (or through 1 or more corporations) within such period, or “(ii) was so acquired by any such corporation within such period, but, in each case in which such control was so acquired, it was so acquired, only by reason of transactions in which gain or loss was not recognized in whole or in part, or only by reason of such transactions combined with acquisitions before the beginning of such period.” (2) Subparagraph (A) of section 304(b)(4) of the 1986 Code is amended by striking out “stock of 1 member” and Inserting in lieu thereof “stock from 1 member”. (3) Paragraph (2) of section 10223(d) of the Revenue Act of 1987 is amended by adding at the end thereof the following new subparagraph: “(D) Treatment of certain members of affiliated group.— “(i) In general.— For purposes of subparagraph (A), all corporations which were in existence on the designated date and were members of the same affiliated group which included the distributees on such date shall be treated as 1 distributee. “(ii) Limitation to stock held on designated date.— Clause (i) shall not exempt any distribution102 STAT. 3606from the amendments made by this section if such distribution is with respect to stock not held by the distributee (determined without regard to clause (i)) on the designated date directly or indirectly through a corporation which goes out of existence in the transaction. “(iii) Designated date.—For purposes of this subparagraph, the term ‘designated date’ means the later of— “(I) December 15, 1987, or “(II) the date on which the acquisition meeting the requirements of subparagraph (A) occurred. (4) Subparagraph (B) of section 10223(d)(2) of the Revenue Act of 1987 is amended— (A) by striking out “before January 1, 1993” and inserting in lieu thereof “on or before March 31, 1988”, and (B) by striking out “before January 1, 1989,”. (l) Amendment Related to Section 10224 of the Act.— Sections 1201(a) and 1561(a) of the 1986 Code, and section 904(b)(3)(D)(ii) of the 1986 Code (as amended by section 106(b)(2) of this Act), are each amended by striking out “section 11(b)” and inserting in lieu thereof “section 11(b)(1)”. (m) Amendments Related to Section 10226 of the Act.— (1) (A) Subsection (a) of section 384 of the 1986 Code is amended to read as follows: “(a) General Rule.— If— “(1) (A) a corporation acquires directly (or through 1 or more other corporations) control of another corporation, or “(B) the assets of a corporation are acquired by another corporation in a reorganization described in subparagraph (A), (C), or (D) of section 368(a)(1), and “(2) either of such corporations is a gain corporation, income for any recognition period taxable year (to the extent attributable to recognized built-in gains) shall not be offset by any preacquisition loss (other than a preacquisition loss of the gain corporation).” (B) Subsection (c) of section 384 of the 1986 Code is amended by redesignating paragraph (4) as paragraph (8) and by inserting after paragraph (3) the following new paragraphs: “(4) Gain corporation.— The term ‘gain corporation’ means any corporation with a net unrealized built-in gain, “(5) Control.— The term ‘control’ means ownership of stock in a corporation which meets the requirements of section 1504(a)(2). “(6) Treatment of members of same group.— Except as provided in regulations and except for purposes of subsection (b), all corporations which are members of the same affiliated group immediately before the acquisition date shall be treated as 1 corporation. To the extent provided in regulations, section 1504 shall be applied without regard to subsection (b) thereof for purposes of the preceding sentence. “(7) Treatment of predecessors and successors.— Any reference in this section to a corporation shall include a reference to any predecessor or successor thereof.” (C) Paragraph (2) of section 384(c) of the 1986 Code is amended to read as follows: “(2) Acquisition date.— The term ‘acquisition date’ means 102 STAT. 3607 “(A) in any case described in subsection (a)(1)(A), the date on which the acquisition of control occurs, or “(B) in any case described in subsection (a)(1)(B), the date of the transfer in the reorganization.” (D) Paragraph (1) of section 384(c) of the 1986 Code is amended by striking out “subsection (a)(2)” and inserting in lieu thereof “subsection (a)(1)(B)”. (2) Paragraph (2) of section 384(e) of the 1986 Code is amended by striking out “the gain corporation” and inserting in lieu thereof “a corporation”. (3) Subsection (b) of section 384 of the 1986 Code is amended to read as follows: “(b) Exception Where Corporations Under Common Control.— “(1) In general.— Subsection (a) shall not apply to the preacquisition loss of any corporation if such corporation and the gain corporation were members of the same controlled group at all times during the 5-year period ending on the acquisition date. “(2) Controlled group.— For purposes of this subsection, the term ‘controlled group’ means a controlled group of corporations (as defined in section 1563(a)); except that— “(A) ‘more than 50 percent’ shall be substituted for ‘at least 80 percent’ each place it appears, “(B) the ownership requirements of section 1563(a) must be met both with respect to voting power and value, and “(C) the determination shall be made without regard to subsection (a)(4) of section 1563. “(3) Shorter period where corporations not in existence for 5 years.— If either of the corporations referred to in paragraph (1) was not in existence throughout the 5-year period referred to in paragraph (1), the period during which such corporation was in existence (or if both, the shorter of such periods) shall be substituted for such 5-year period.” (4) Section 384 of the 1986 Code is amended by redesignating subsection (e) as subsection (f) and by inserting after subsection (d) the following new subsection: “(e) Ordering Rules for Net Operating Losses, Etc.— “(1) Carryover rules.— If any preacquisition loss may not offset a recognized build-in gain by reason of this section, such gain shall not be taken into account in determining under section 172(b)(2) the amount of such loss which may be carried to other taxable years. A similar rule shall apply in the case of any excess credit or net capital loss limited by reason of subsection (d). “(2) Ordering rule for losses carried from same taxable year.— In any case in which— “(A) a preacquisition loss for any taxable year is subject to limitation under subsection (a), and “(B) a net operating loss from such taxable year is not subject to such limitation, taxable income shall be treated as having been offset 1st by the loss subject to such limitation.” (5) In any case where the acquisition date (as defined in section 384(c)(2) of the 1986 Code as amended by this subsection) is before March 31, 1988, the acquiring corporation may elect to have the amendments made by this subsection not apply. Such an election shall be made in such manner as the Secretary of102 STAT. 3608 the Treasury or his delegate shall prescribe and shall be made not later than the later of the due date (including extensions) for filing the return for the taxable year of the acquiring corporation in which the acquisition date occurs or the date 120 days after the date of the enactment of this Act. Such an election, once made, shall be irrevocable. (n) Amendments Related to Section 10227 of the Act.— Paragraph (4) of section 1363(d) of the 1986 Code (relating to recapture of LIFO benefits) is amended by adding at the end thereof the following new subparagraph: “(D) Not treated as member of affiliated group.— Except as provided in regulations, the corporation referred to in paragraph (1) shall not be treated as a member of an affiliated group with respect to the amount included in gross income under paragraph (1).” (o) Amendments Related to Section 10228 of the Act.— (1) (A) Subsection (a) of section 5881 of the 1986 Code is amended by striking out “gain realized by such person on such receipt” and inserting in lieu thereof “gain or other income of such person by reason of such receipt”. (B) (i) Subsection (b) of section 5881 of the 1986 Code is amended by striking out “a corporation to directly or indirectly acquire its stock” and inserting in lieu thereof “a corporation (or any person acting in concert with such corporation) to directly or indirectly acquire stock of such corporation”. (ii) The amendment made by clause (i) shall apply to transactions occurring on or after March 31, 1988. (C) Subsection (d) of section 5881 of the 1986 Code is amended— (i) by striking out “the gain” and inserting in lieu thereof “the gain or other income”, and (ii) by striking out “Gain Recognized” in the subsection heading and inserting in lieu thereof “Amount Recognized”. (2) Section 5881 of the 1986 Code is amended by adding at the end thereof the following new subsection: “(e) Administrative Provisions.— For purposes of the deficiency procedures of subtitle F, any tax imposed by this section shall be treated as a tax imposed by subtitle A.” (p) Amendments Related to Section 10241 of the Act.— (1) Paragraph (1) of section 811(d) of the 1986 Code is amended by striking out “the prevailing State assumed interest rate for the contract” and inserting in lieu thereof “the greater of the prevailing State assumed interest rate or applicable Federal interest rate in effect under section 807 for the contract”. (2) Paragraph (2) of section 812(b) of the 1986 Code is amended by striking out the last sentence and inserting in lieu thereof the following: “In any case where neither the prevailing State assumed interest rate nor the applicable Federal interest rate is used, another appropriate rate shall be used for purposes of subparagraph (A).” (q) Amendments Related to Section 10242 of the Act.— (1) Subsection (h) of section 816 of the 1986 Code is amended by striking out “section 842(c)(1)(A)” and inserting in lieu thereof “section 842(b)(2)(B)(i)”. 102 STAT. 3609 (2) (A) Subparagraph (B) of section 842(b)(3) of the 1986 Code is amended by striking out “held for the production of such income”. (B) Subparagraph (B) of section 842(b)(4) of the 1986 Code is amended by striking out “held for the production of investment income”. (3) Subparagraph (d) of section 842 of the 1986 Code is amended by striking out “and” at the end of paragraph (2), by striking out the period at the end of paragraph (3) and inserting in lieu thereof “, and”, and by adding at the end thereof the following new paragraph: “(4) which may provide that, in the case of companies taxable under part II of this subchapter, determinations under subsection (b) will be made separately for categories of such companies established in such regulations.” (r) Amendment Related to Section 10301 of the Act.— Paragraph (3) of section 6655(g) of the 1986 Code is amended by striking the sentence following subparagraph (C) and inserting in lieu thereof the following: “In the case of any organization described in subparagraph (A), subsection (b)(2)(A) shall be applied by substituting ‘5th month’ for ‘3rd month’, and subsection (e)(2)(A) shall be applied by substituting ‘2 months’ for ‘3 months’ and in clause (i)(I), by substituting ‘4 months’ for ‘5 months’ in clause (i)(II), by substituting ‘7 months’ for ‘8 months’ in clause (i)(III), and by substituting ‘10 months’ for T1 months’ in clause (i)(IV)”. (s) Amendments Related to Section 10502 of the Act.— (1) Section 4093 of the 1986 Code is amended by redesignating subsections (d) and (e) as subsections (e) and (f), respectively, and by inserting after subsection (c) the following new subsection: “(d) Certain Aviation Fuel Sales.— Under regulations prescribed by the Secretary, the Leaking Underground Storage Tank Trust Fund financing rate under section 4091 shall not apply to aviation fuel sold for use or used as supplies for vessels or aircraft (within the meaning of section 4221 (d)(3)).” (2) Subparagraph (B) of section 6427(1)(3) of the 1986 Code (relating to no refund of Leaking Underground Storage Tank Trust Fund financing tax) is amended by inserting “(except as supplies for vessels or aircraft within the meaning of section 4221(d)(3))” after “aircraft”. (3) Section 6427 of the 1986 Code is amended by redesignating the subsection (p) relating to gasoline used in noncommercial aviation during period rate reduction in effect and subsection (q) (relating to cross references) as subsections (q) and (r), respectively. (t) Amendments Related to Section 10512 of the Act.— (1) Section 5276 of the 1986 Code is amended by adding at the end thereof the following new subsection: “(c) Exception for United States.— Subsection (a) shall not apply to any permit issued to an agency or instrumentality of the United States.” (2) Subsection (a) of section 5113 of the 1986 Code is amended— (A) by inserting “taxpaid wine bottling house,” after “bonded wine cellar,” each place it appears, and 102 STAT. 3610 (B) by striking out “Distilled Spirits Plants, Bonded Wine Cellars, or Breweries” in the heading and inserting in lieu thereof “Controlled Premises”. (3) Section 5123 of the 1986 Code is amended by redesignating subsection (c) as subsection (d) and by inserting after subsection (b) the following new subsection: “(c) Coordination of Taxes Under Section 5121.— No tax shall be imposed by section 5121(a) with respect to a person’s activities at any place during a year if such person has paid the tax imposed by section 5121(b) with respect to such place for such year.” (4) Section 5113 of the 1986 Code is amended by adding at the end thereof the following new subsection: “(g) Coordination of Taxes Under Section 5111.— No tax shall be imposed by section 5111(a) with respect to a person’s activities at any place during a year if such person has paid the tax imposed by section 5111(b) with respect to such place for such year.” (u) Effective Date.— Except as otherwise provided in this section, any amendment made by this section shall take effect as if included in the provisions of the Revenue Act of 1987 to which such amendment relates.