SEC. 361. INTERNAL REVENUE

SERVICE COLLECTION OF ARREARAGES.

(a) COLLECTION OF FEES.—Section 6305(a) of the Internal Revenue Code of

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“(1) IN GENERAL.—In the case of any taxable year beginning after 1996, each of the dolar amounts in subsections (b)(2) and (i)(1) shall be increased by an amount equal to—

‘‘(D) the capital gain net income (as defined in section 1222) of the taxpayer for such taxable year, and

termined without regard to the amounts described in subparagraph (B).

‘‘(B) CERTAIN AMOUNTS DISREGARDED.—An amount is described in this subparagraph if it is—

‘‘(i) the amount of losses from sales or exchanges of capital assets in excess of gains from such sales or exchanges to the extent such amount does not exceed the amount under section 1211(b)(1), ‘‘(ii) the net loss from estates and trusts,

‘‘(iii) the excess (if any) of amounts described in subsection (i)(2)(C)(ii) over the amounts described in subsection (i)(2)(C)(i) (relating to nonbusiness rents and royalties), and

‘‘(iv) 50 percent of the net loss from the carrying on of trades or businesses, computed separately with respect to—

“(A) such dollar amount, multiplied by

“(B) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting ‘calendar year 1995’ for ‘calendar year 1992’ in subparagraph (B) thereof. “(2) ROUNDING.—

“(A) IN GENERAL.—If any dollar amount in subsection (b)(2), after being increased under paragraph (1), is not a multiple of $10, such dollar amount shall be rounded to the nearest multiple of $10.

‘‘(ii) the aggregate losses from all passive activities for the taxable year (as so determined). For purposes of subparagraph (E), the term ‘passive activity’ has the meaning given such term by section 469.’’. (c) EFFECTIVE DATES.—

(1) IN GENERAL.—Except as provided in paragraph (2), the amendments made by this section shall apply to taxable years beginning after December 31, 1995.

(2) ADVANCE PAYMENT INDIVIDUALS.—In the case of any individual who on or before June 26, 1996, has in effect an earned income eligibility certificate for the individual’s taxable year beginning in 1996, the amendments made by this section shall apply to taxable years beginning after December 31, 1996.

‘‘(E) the excess (if any) of—

‘‘(i) the aggregate income from all passive activities for the taxable year (determined without regard to any amount included in earned income under subsection (c)(2) or described in a preceding subparagraph), over

‘‘(II) trades or businesses of farming conducted as sole proprietorships, and ‘‘(III) other trades or businesses. For purposes of clause (iv), there shall not be taken into account items which are attributable to a trade or business which consists of the performance of services by the taxpayer as an employee.’’. (c) EFFECTIVE DATES.—

“(B) DISQUALIFIED INCOME THRESHOLD AMOUNT.—If the dollar amount in subsection (i)(1), after being increased under paragraph (1), is not a multiple of $50, such amount shall be rounded to the next lowest multiple of $50.”. (3) CONFORMING AMENDMENT.—Paragraph (2) of section 32(b) of such Code is amended to read as follows:

‘‘(2) AMOUNTS.—The earned income amount and the phase-out amount shall be determined as follows:

‘‘(I) trades or businesses (other than farming) conducted as sole proprietorships,