between employee representatives and one or more employers which the Secretary finds to be a collective bargaining agreement, if accident and health benefits were the subject of good faith bargaining between such employee representatives and such employer or employers; and

"(v) employees who are nonresident aliens and who receive no earned income (within the meaning of section 911(b)) from the employer which constitutes income from sources within the United States (within the meaning of section 861(a)(3)).

"(4) NONDISCRIMINATORY BENEFITS.-A self-insured medical reimbursement plan does not meet the requirements of subparagraph (B) of paragraph (2) unless all benefits provided for participants who are highly compensated individuals are provided for all other participants.

“(5) HIGHLY COMPENSATED INDIVIDUAL DEFINED.-For purposes of this subsection, the term 'highly compensated individual' means an individual who is

"(A) one of the 5 highest paid officers,

"(B) a shareholder who owns (with the application of section 318) more than 10 percent in value of the stock of the employer, or

"(C) among the highest paid 25 percent of all employees (other than employees described in paragraph (3)(B) who are not participants).

"(6) SELF-INSURED MEDICAL REIMBURSEMENT PLAN.-The term 'self-insured medical reimbursement plan' means a plan of an employer to reimburse employees for expenses referred to in subsection (b) for which reimbursement is not provided under a policy of accident and health insurance.

“(7) EXCESS REIMBURSEMENT OF HIGHLY COMPENSATED INDIVIDUAL.-For purposes of this section, the excess reimbursement of a highly compensated individual which is attributable to a selfinsured medical reimbursement plan is

"(A) in the case of a benefit available to a highly compensated individual but not to a broad cross-section of employees, the amount reimbursed under the plan to the employee with respect to such benefit, and

"(B) in the case of benefits (other than benefits described in subparagraph (A) paid to a highly compensated individual by a plan which fails to satisfy the requirements of paragraph (2), the total amount reimbursed to the highly compensated individual for the plan year multiplied by a fraction

"(i) the numerator of which is the total amount reimbursed to all participants who are highly compensated individuals under the plan for the plan year, and "(ii) the denominator of which is the total amount reimbursed to all employees under the plan for such plan year.

In determining the fraction under subparagraph (B), there shall not be taken into account any reimbursement which is attributable to a benefit described in subparagraph (A).

"(8) CERTAIN CONTROLLED GROUPS.-All employees who are treated as employed by a single employer under subsection (b) or

(c) of section 414 shall be treated as employed by a single employer for purposes of this section.

"(9) REGULATIONS.-The Secretary shall prescribe such regulations as may be necessary to carry out the provisions of this section.

"(10) TIME OF INCLUSION.-Any amount paid for a plan year that is included in income by reason of this subsection shall be treated as received or accrued in the taxable year of the participant in which the plan year ends."

(b) EFFECTIVE DATE.-The amendments made by this section shall apply to taxable years beginning after December 31, 1979.

SEC. 367. THREE-YEAR EXTENSION OF PROVISION FOR 60-MONTH DEPRECIATION OF EXPENDITURES TO REHABILITATE LOWINCOME RENTAL HOUSING.

Subsection (k) of section 167 (relating to depreciation of expenditures to rehabilitate low-income rental housing) is amended by striking out "January 1, 1979" each place it appears and inserting in lieu thereof "January 1, 1982".

SEC. 368. DELAY IN APPLICATION OF NEW NET OPERATING LOSS RULES. (a) IN GENERAL.-Except as provided in subsection (b), paragraphs (2) and (3) of section 806(g) of the Tax Reform Act of 1976 (relating to effective dates for the amendments to sections 382 and 383 of the Code) are amended by striking out "1978" each place it appears and inserting in lieu thereof "1980".

(b) ELECTION OF PRIOR LAW.

(1) A taxpayer may elect not to have the amendment made by subsection (a) apply with respect to any acquisition or reorganization occurring before the end of the taxpayer's first taxable year beginning after June 30, 1978, where such acquisition or reorganization occurs pursuant to a written binding contract or option to acquire stock or assets which was entered into before September 27, 1978.

(2) An election under this subsection shall be filed with a taxpayer's timely filed return for the first taxable year in which a reorganization or acquisition described in paragraph (1) occurs, or, if later, within 90 days after the date of enactment of this Act. Such election shall apply to all acquisitions and reorganizations to which, but for such election, subsection (a) would apply. SEC. 369. USE OF CERTAIN EXPIRED NET OPERATING LOSS CARRYOVERS.

(a) IN GENERAL.-Clause (iv) of section 374(e)(1)(A) (relating to use of expired net operating loss carryovers to offset income arising from certain railroad reorganization proceedings) is amended to read as follows:

"(iv) a redemption of a certificate of value of the United States Railway Association issued under section 306 of such Act to such corporation (or issued to another member of the same affiliated group (within the meaning of section 1504) as such corporation for their taxable years which included March 31, 1967),".

(b) EFFECTIVE DATE.-The amendment made by subsection (a) shall apply to taxable years ending after March 31, 1976.

SEC. 370. INCOME FROM CERTAIN RAILROAD ROLLING STOCK TREATED AS INCOME FROM SOURCES WITHIN THE UNITED STATES.

(a) GENERAL RULE.-Section 861 (relating to income from sources within the United States) is amended by adding at the end thereof the following new subsection:

"(f) INCOME FROM CERTAIN RAILROAD ROLLING STOCK TREATED AS INCOME FROM SOURCES WITHIN THE UNITED STATES.

“(1) GENERAL RULE.-For purposes of subsection (a) and section 826(a), if—

"(A) a taxpayer leases railroad rolling stock which is section 38 property (or would be section 38 property but for section 48(a)(5)) to a domestic common carrier by railroad or a corporation which is controlled, directly or indirectly, by one or more such common carriers, and

"(B) the use under such lease is expected to be use within the United States,

all amounts includible in gross income by the taxpayer with respect to such railroad rolling stock (including gain from sale or other disposition of such railroad rolling stock) shall be treated as income from sources within the United States. The requirements of subparagraph (B) of the preceding sentence shall be treated as satisfied if the only expected use outside the United States is use by a person (whether or not a United States person) in Canada or Mexico on a temporary basis which is not expected to exceed a total of 90 days in any taxable year.

"(2) PARAGRAPH (1) NOT TO APPLY WHERE LESSOR IS A MEMBER OF CONTROLLED GROUP WHICH INCLUDES A RAILROAD.-Paragraph (1) shall not apply to a lease between two members of the same controlled group of corporations (as defined in section 1563) if any member of such group is a domestic common carrier by railroad or a switching or terminal company referred to in subparagraph (B) of section 184(d)(1).

"(3) DENIAL OF FOREIGN TAX CREDIT.-No credit shall be allowed under section 901 for any payments to foreign countries with respect to any amount received by the taxpayer with respect to railroad rolling stock which is subject to paragraph (1).". (b) EFFECTIVE DATES.

(1) IN GENERAL.--The amendment made by subsection (a) shall apply to all railroad rolling stock placed in service with respect to the taxpayer after the date of the enactment of this Act. (2) ELECTION TO EXTEND SECTION 861(f) TO RAILROAD ROLLING STOCK PLACED IN SERVICE BEFORE DATE OF ENACTMENT.

(A) IN GENERAL.-At the election of the taxpayer, the amendment made by subsection (a) shall also apply, for taxable years beginning after the date of the enactment of this Act, to all railroad rolling stock placed in service with respect to the taxpayer on or before such date of enactment. Such an election may not be revoked except with the consent of the Secretary of the Treasury or his delegate.

(B) MANNER AND TIME OF ELECTION AND REVOCATION.-An election under subparagraph (A), and any revocation of such an election, shall be made in such manner and at such time as the Secretary of the Treasury or his delegate may by regulations prescribe.

SEC. 371. NET OPERATING LOSSES ATTRIBUTABLE TO PRODUCT LIABILITY LOSSES.

(a) 10-YEAR CARRYBACK.

(1) IN GENERAL.-Paragraph (1) of section 172(b) (relating to years to which loss may be carried) is amended by adding at the end thereof the following new subparagraph:

"(H) PRODUCT LIABILITY LOSSES.-In the case of a taxpayer which has a product liability loss (as defined in subsection (i)) for a taxable year beginning after September 30, 1979 (referred to in this subparagraph as the 'loss year'), the product liability loss shall be a net operating loss carryback to each of the 10 taxable years preceding the loss year." (2) CONFORMING AMENDMENT.-Clause (i) of section 172(b)1)A) is amended by striking out "and (G)" and inserting in lieu thereof “(G), and (H)”.

(b) RULES RELATING TO PRODUCT LIABILITY LOSSES.-Section 172 is amended by redesignating subsection (i) as subsection (j) and by inserting after subsection (h) the following new subsection:

"(i) RULES RELATING TO PRODUCT LIABILITY LOSSES.-For purposes of subsection (b)—

"(1) PRODUCT LIABILITY LOSS.-The term 'product liability loss' means, for any taxable year, the lesser of

"(A) the net operating loss for such year reduced by any portion thereof which is attributable to a foreign expropriation loss, or

"(B) the sum of the amounts allowable as deductions under sections 162 and 165 which are attributable to—

"(i) product liability, or

"(ii) expenses incurred in the investigation or settlement of, or opposition to, claims against the taxpayer on account of product liability.

“(2) PRODUCT LIABILITY.-The term 'product liability' means— "(A) liability of the taxpayer for damages on account of physical injury or emotional harm to individuals, or damage to or loss of the use of property, on account of any defect in any product which is manufactured, leased, or sold by the taxpayer, but only if

"(B) such injury, harm, or damage arises after the taxpayer has completed or terminated operations with respect to, and has relinquished possession of, such product.

"(3) ELECTION.-Any taxpayer entitled to a 10-year carryback under subsection (b)(1)(H) from any loss year may elect to have the carryback period with respect to such loss year determined without regard to subsection (b)(1)(H). Such election shall be made in such manner as may be prescribed by the Secretary and shall be made by the due date (including extensions of time) for filing the taxpayer's return for the taxable year of the net operating loss. Such election, once made for any taxable year, shall be irrevocable for that taxable year.'

(c) APPLICATION OF ACCUMULATED EARNINGS TAX TO PRODUCT LIABILITY LOSS RESERVES.-Subsection (b) of section 537 (relating to special rules) is amended by redesignating paragraph (4) as paragraph (5) and by inserting after paragraph (3) the following new paragraph:

"(4) PRODUCT LIABILITY LOSS RESERVES.-The accumulation of reasonable amounts for the payment of reasonably anticipated product liability losses (as defined in section 172(i)), as deter

mined under regulations prescribed by the Secretary, shall be treated as accumulated for the reasonably anticipated needs of the business."

(d) EFFECTIVE DATE.-The amendments made by this section shall apply with respect to taxable years beginning after September 30, 1979.

SEC. 372. EXCLUSION FROM GROSS INCOME WITH RESPECT TO MAGAZINES, PAPERBACKS, AND RECORDS RETURNED AFTER THE CLOSE OF THE TAXABLE YEAR.

(a) IN GENERAL.-Subpart B of part II of subchapter E of chapter 1 (relating to taxable year for which items of gross income included) is amended by adding at the end thereof the following new section: "SEC. 458. MAGAZINES, PAPERBACKS, AND RECORDS RETURNED AFTER THE CLOSE OF THE TAXABLE YEAR.

"(a) EXCLUSION FROM GROSS INCOME.-A taxpayer who is on an accrual method of accounting may elect not to include in the gross income for the taxable year the income attributable to the qualified sale of any magazine, paperback, or record which is returned to the taxpayer before the close of the merchandise return period. "(b) DEFINITIONS AND SPECIAL RULES.-For purposes of this section

"(1) MAGAZINE.-The term 'magazine' includes any other periodical.

“(2) PAPERBACK.—The term 'paperback' means any book which has a flexible outer cover and the pages of which are affixed directly to such outer cover. Such term does not include a magazine.

"(3) RECORD.-The term 'record' means a disc, tape, or similar object on which musical, spoken, or other sounds are recorded.

"(4) SEPARATE APPLICATION WITH RESPECT TO MAGAZINES, PAPERBACKS, AND RECORDS.-If a taxpayer makes qualified sales of more than one category of merchandise in connection with the same trade or business, this section shall be applied as if the qualified sales of each such category were made in connection with a separate trade or business. For purposes of the preceding sentence, magazines, paperbacks, and records shall each be treated as a separate category of merchandise.

"(5) QUALIFIED SALE.-A sale of a magazine, paperback, or record is a qualified sale if—

"(A) at the time of sale, the taxpayer has a legal obligation to adjust the sales price of such magazine, paperback, or record if it is not resold, and

"(B) the sales price of such magazine, paperback, or record is adjusted by the taxpayer because of a failure to resell it. "(6) AMOUNT EXCLUDED.-The amount excluded under this section with respect to any qualified sale shall be the lesser of— "(A) the amount covered by the legal obligation described in paragraph (5)(A), or

"(B) the amount of the adjustment agreed to by the taxpayer before the close of the merchandise return period. "(7) MERCHANDISE RETURN PERIOD.—

"(A) Except as provided in subparagraph (B), the term 'merchandise return period' means, with respect to any taxable year