AMENDMENTS RELATED TO TITLE I OF THE REFORM ACT.

SEC. 1001. AMENDMENTS RELATED TO TITLE I OF THE REFORM ACT. (a) Amendments Related to Section 101 of the Reform Act.— (1) Paragraph (2) of section 6867(b) of the 1986 Code is amended by striking out “at a 50-percent rate” and inserting in lieu thereof “at the highest rate of tax specified in section 1”. (2) (A) Section 531 of the 1986 Code is amended to read as follows: “SEC. 531. IMPOSITION OF ACCUMULATED EARNINGS TAX. “In addition to other taxes imposed by this chapter, there is hereby imposed for each taxable year on the accumulated taxable income (as defined in section 535) of each corporation described in section 532, an accumulated earnings tax equal to 28 percent of the accumulated taxable income.” (B) The amendment made by subparagraph (A) shall apply to taxable years beginning after December 31, 1987. Such amendment shall not be treated as a change in a rate of tax for purposes of section 15 of the 1986 Code. (3) The last sentence of section 1(g)(2) of the 1986 Code is amended by inserting before the period at the end thereof the following: “and subparagraph (B) shall be applied as if a deduction for a personal exemption were allowable under section 151 to such individual for such individual’s spouse.” (b) Amendments Related to Section 102 of the Reform Act.— (1) Paragraph (5) of section 63(c) of the 1986 Code is amended— (A) by striking out “the standard deduction applicable” and inserting in lieu thereof “the basic standard deduction applicable”, and (B) by striking out “standard deduction” in the paragraph heading and inserting in lieu thereof “basic standard deduction”. (2) Subclause (I) of section 6012(a)(1)(C)(i) of the 1986 Code is amended to read as follows: “(I) income (other than earned income) in excess of the sum of the amount in effect under section 63(c)(5)(A) plus the additional standard deduction (if any) to which the individual is entitled, or”. (3) (A) Subparagraph (A) of section 62(a)(2) of the 1986 Code is amended by adding at the end thereof the following new sentence: “The fact that the reimbursement may be provided by a third party shall not be determinative of whether or not the preceding sentence applies.” (B) Paragraph (2) of section 527(e) of the 1986 Code (defining exempt function) is amended by adding at the end thereof the following new sentence: “Such term includes the making of expenditures relating to an office described in the preceding sentence which, if incurred by the individual, would be allow-able as a deduction under section 162(a).” 102 STAT. 3350 (c) Amendment Related to Section 111 of the Reform Act.—Paragraph (3) of section 32(i) of the 1986 Code is amended to read as follows: “(3) Rounding.—If any dollar amount after being increased under paragraph (1) is not a multiple of $10, such dollar amount shall be rounded to the nearest multiple of $10 (or, if such dollar amount is a multiple of $5, such dollar amount shall be in-creased to the next higher multiple of $10).” (d) Amendments Related to Section 123 of the Reform Act.— (1) (A) Clause (ii) of section 4941(d)(2)(G) of the 1986 Code is amended to read as follows: “(ii) scholarships and fellowship grants which would be subject to the provisions of section 117(a) (as in effect on the day before the date of the enactment of the Tax Reform Act of 1986) and are to be used for study at an educational organization described in section 170(b)(1))(A)(ii),”. (B) Paragraph (1) of section 4945(g) of the 1986 Code is amended to read as follows: “(1) the grant constitutes a scholarship or fellowship grant which would be subject to the provisions of section 117(a) (as in effect on the day before the date of the enactment of the Tax Reform Act of 1986) and is to be used for study at an educational organization described in section 170(b)(1)(A)(ii),”. (2) (A) The second sentence of section 1441(b) of the 1986 Code is amended to read as follows: “The items of income referred to in subsection (a) from which tax shall be deducted and withheld at the rate of 14 percent are amounts which are received by a nonresident alien individual who is temporarily present in the United States as a nonimmigrant under subparagraph (F), (J), or (M) of section 101(a)(15) of the Immigration and Nationality Act and which are— “(1) incident to a qualified scholarship to which section 117(a) applies, but only to the extent includible in gross income; or “(2) in the case of an individual who is not a candidate for a degree at an educational organization described in 170(b)(1)(A)(ii), granted by— “(A) an organization described in section 501(c)(3) which is exempt from tax under section 501(a), “(B) a foreign government, “(C) an international organization, or a binational or multinational educational and cultural foundation or commission created or continued pursuant to the Mutual Educational and Cultural Exchange Act of 1961, or “(D) the United States, or an instrumentality or agency thereof, or a State, or a possession of the United States, or any political subdivision thereof, or the District of Columbia, as a scholarship or fellowship for study, training, or research in the United States.” (B) Subsection (c) of section 871 of the 1986 Code is amended— (i) by striking out “section 1441(b)(1) or (2)” and inserting in lieu thereof “the second sentence of section 1441(b)”; and (ii) by striking out “(F) or (J)” each place it appears and inserting in lieu thereof “(F), (J), or (M)”. 102 STAT. 3351 (C) The following provisions of the 1986 Code are each amended by striking out “(F) or (J)“ each place it appears and inserting in lieu thereof “(F), (J), or (M)”: (i) Section 3121(b)(19). (ii) Section 3231(e)(1). (iii) Section 3306(c)(19). (D) Clause (i)(1) of section 7701(b)(5)(D) of the 1986 Code is amended by striking out “subparagraph (F)” and inserting in lieu thereof “subparagraph (F) or (M)”. (E) Section 210(a)(19) of the Social Security Act is amended by striking out “(F) or (J)” each place it appears and inserting in lieu thereof “(F), (J), or (M)”. (e) Amendment Related to Section 131 of the Reform Act.—Subsection (D of section 86 of the 1986 Code is amended by inserting “and” at the end of paragraph (3), by striking out paragraph (4), and by redesignating paragraph (5) as paragraph (4). (f) Amendments Related to Section 132 of the Reform Act.— (1) Section 67 of the 1986 Code is amended by adding at the end thereof the following new subsection: “(f) Coordination With Other Limitation.—This section shall be applied before the application of the dollar limitation of the last sentence of section 162(a) (relating to trade or business expenses).” (2) Paragraph (4) of section 67(b) of the 1986 Code is amended— (A) by striking out “deduction” and inserting in lieu thereof “deductions”, and (B) by inserting before the comma at the end thereof “and section 642(c) (relating to deduction for amounts paid or permanently set aside for a charitable purpose)”. (3) Subsection (e) of section 67 of the 1986 Code is amended to read as follows: “(e) Determination of Adjusted Gross Income in Case of Estates and Trusts.—For purposes of this section, the adjusted gross income of an estate or trust shall be computed in the same manner as in the case of an individual, except that— “(1) the deductions for costs which are paid or incurred in connection with the administration of the estate or trust and which would not have been incurred if the property were not held in such trust or estate, and “(2) the deductions allowable under sections 642(b), 651, and 661, shall be treated as allowable in arriving at adjusted gross income. Under regulations, appropriate adjustments shall be made in the application of part I of subchapter J of this chapter to take into account the provisions of this section.” (4) Subsection (c) of section 67 of the 1986 Code is amended by striking out the last sentence and inserting in lieu thereof the following: “The preceding sentence shall not apply— (1) with respect to cooperatives and real estate investment trusts, and (2) except as provided in regulations, with respect to estates and trusts”. (g) Amendments Related to Section 142 of the Reform Act.— (1) Subparagraph (A) of section 274(n)(2) of the 1986 Code is amended to read as follows: “(A) such expense is described in paragraph (2), (3), (4), (7), (8), or (9) of subsection (e),”. 102 STAT. 3352 (2) Paragraph (2) of section 274(k) of the 1986 Code is amended to read as follows: “(2) Exceptions.— Paragraph (1) shall not apply to— “(A) any expense described in paragraph (2), (3), (4), (7), (8), or (9) of subsection (e), and “(B) any other expense to the extent provided in regulations.” (3) Clause (ii) of section 274(m)(1)(B) of the 1986 Code is amended to read as follows: “(ii) any expense described in paragraph (2), (3), (4), (7), (8), or (9) of subsection (e).”. (4) (A) Paragraph (2) of section 274(n) of the 1986 Code is amended— (i) by striking “or” at the end of subparagraph (C), (ii) by striking the period at the end of subparagraph (D) and inserting “, or”, and (iii) by adding at the end thereof the following: “(E) in the case of an employer who pays or reimburses moving expenses of an employee, such expenses are includible in the income of the employee under section 82. In the case of the employee, the exception of subparagraph (A) shall not apply to expenses described in subparagraph (E).” (B) The following provisions of the 1986 Code are each amended by striking out “section 217” and inserting in lieu thereof “section 217 (determined without regard to section 274(n))”: (i) Section 3121 (a)(11). (ii) Section 3306(b)(9). (iii) Section 3401(a)(15). (C) Section 209(k) of the Social Security Act is amended by striking out “section 217 of the Internal Revenue Code of 1954” and inserting in lieu thereof “section 217 of the Internal Revenue Code of 1986 (determined without regard to section 274(n) of such Code)”. (5) Paragraphs (1) and (2) of section 274(h) of the 1986 Code are each amended by striking out “trade or business that” and inserting in lieu thereof “trade or business and that”. (h) Amendments Related to Section 143 of the Reform Act.— (1) Paragraph (5) of section 280A(c) of the 1986 Code amended by adding at the end thereof the following new sentence: “Any amount taken into account for any taxable year under the preceding sentence shall be subject to the limitation of the 1st sentence of this paragraph whether or not the dwelling unit is used as a residence during such taxable year.” (2) Clause (ii) of section 280A(c)(5)(B) of the 1986 Code is amended by striking out “trade or business” and inserting lieu thereof “trade or business (or rental activity)”. (3) Section 183(e)(2) of the 1986 Code is amended by striking out “2” “2” “2” and inserting in lieu thereof “3 (or 2 if applicable)”.