1 318 1 (f), and by inserting after subsection (a) the following new 2 subsection: 3 4 5 6 7 8 9 10 "(b) ELECTION TO ISSUE TAXABLE BONDS. "(1) SUBSECTION (a) (1) NOT TO APPLY.-The issuer of obligations described in subsection (a) (1) may elect to issue obligations to which subsection (a) (1) does not apply. "(2) ELECTION.-The election described in paragraph (1) shall be made (at such time, in such manner, and subject to such conditions as the Secretary or his 11 delegate by regulation prescribes) with respect to each 15 issue of obligations to which it is to apply. An election with respect to any issue once made shall be irrevocable. "(3) CROSS REFERENCE.— "For provisions relating to the payment by the United States of a portion of the interest cost of an obligation which is part of an issue for which the election described in this subsection has been made, see section 602 of the Tax Reform Act of 1969." (b) ARBITRAGE OBLIGATIONS.-Section 103 16 amended by inserting after subsection (c) the followin 17 18 new subsection: "(d) ARBITRAGE OBLIGATIONS.-Under regulation 19 prescribed by the Secretary or his delegate, any arbitra 20 obligation shall be treated as an 21 subsection (a) (1)." obligation not described (c) CLERICAL AMENDMENT.-The heading of subs 319 1 tion (e) of section 103 (as redesignated by subsection (a) 2 of this section) is amended to read as follows: 3 "(e) CERTAIN OBLIGATIONS OF THE UNITED scr of H 1 4 STATES.-". 5 (d) EFFECTIVE DATES.-The amendments made by 6 subsection (a) shall apply to obligations issued in calendar 7 quarters beginning after the date of the enactment of this 8 section. The amendment made by subsection (b) shall apply 9 to obligations issued after July 11, 1969. 10 SEC. 602. UNITED STATES TO PAY FIXED PERCENTAGE OF 11 121 INTEREST YIELD ON TAXABLE ISSUES. (a) PERMANENT APPROPRIATION.-There are appro13 priated, out of any moneys in the Treasury not otherwise ap14 propriated, such sums as may be necessary to carry out the 15 provisions of this section; and such appropriations shall be deemed permanent annual appropriations. 16 17 (b) PAYMENT OF FIXED PERCENTAGE OF INTEREST 18 YIELD. (1) IN GENERAL.-The Secretary of the Treasury or his delegate shall pay a fixed percentage of the interest yield on each issue of obligations to which an election under section 103 (b) of the Internal Revenue Code of 1954 applies. Before the first day of each calendar quarter, the Secretary or his delegate shall determine -69-pt. 1-29 314 1 ❝SEC. 1379. CERTAIN QUALIFIED PENSION, ETC., PLANS. 2 5 "(a) ADDITIONAL REQUIREMENT FOR QUALIFICA 3 TION. A trust forming part of a stock bonus or profit-shar4 ing plan which provides contributions or benefits for employees some or all of whom are shareholder-employees shall 6 not constitute a qualified trust under section 401 (relating 7 to qualified pension, profit-sharing, and stock bonus plans) 8 unless the plan of which such trust is a part provides that 9 forfeitures attributable to contributions deductible under sec10 tion 404 (a) (3) for any taxable year (beginning after De11 cember 31, 1969) of the employer with respect to which it 12 is an electing small business corporation may not inure to 13 the benefit of any individual who is a shareholder-employee 14 for such taxable year. A plan shall be considered as satisfy15 ing the requirement of this subsection for the period begin16 ning with the first day of a taxable year and ending with 17 the 15th day of the third month following the close of such 18 taxable year, if all the provisions of the plan which are 19 necessary to satisfy this requirement are in effect by the end 20 of such period and have been made effective for all purposes 21 with respect to the whole of such period. "(b) TAXABILITY OF 23 BENEFICIARIES.— 24 SHAREHOLDER-EMPLOYEE "(1) INCLUSION OF EXCESS CONTRIBUTIONS IN GROSS INCOME.-Notwithstanding the provisions of sec 315 1 tion 402 (relating to taxability of beneficiary of em 2 ployees' trust), section 403 (relating to taxation of 3 employee annuities), or section 405 (d) (relating to 4 taxability of beneficiaries under qualified bond purchase plans), an individual who is a shareholder-employee of an electing small business corporation shall include in gross income, for his taxable year in which or with which the taxable year of the corporation ends, the excess of the amount of contributions paid on his behalf which is deductible under section 404 (a) (1), (2), or (3) by the corporation for its taxable year over the lesser of "(A) 10 percent of the compensation received or accrued by him from such corporation during its taxable year, or "(B) $2,500. "(2) TREATMENT OF AMOUNTS INCLUDED IN GROSS INCOME.-Any amount included in the gross income of a shareholder-employee under paragraph (1) shall be treated as consideration for the contract contributed by the shareholder-employee for purposes of section 72 (relating to annuities), "(3) DEDUCTION FOR AMOUNTS NOT RECEIVED AS BENEFITS.-If— 1 2 3 4 5 6 7 8 9 10 11 12 316 "(A) amounts are included in the gross income of an individual under paragraph (1), and "(B) the rights of such individual (or his beneficiaries) under the plan terminate before payments under the plan which are excluded from gross income equal the amounts included in gross income under paragraph (1), then there shall be allowed as a deduction, for the taxable year in which such rights terminate, an amount equal to the excess of the amounts included in gross income under paragraph (1) over such payments. "(c) CARRYOVER OF AMOUNTS DEDUCTIBLE.-No 13 amount deductible shall be carried forward under the second 14 sentence of section 404 (a) (3) (A) (relating to limits on 15 deductible contributions under stock bonus and profit-sharing 16 trusts) to a taxable year of a corporation with respect to 17 which it is not an electing small business corporation from a 18 taxable year with respect to which it is an electing small 19 business corporation. 20 "(d) SHAREHOLDER-EMPLOYEE.-For purposes of this 21 section, the term 'shareholder-employee' means an employee 22 or officer of an electing small business corporation who owns 23 (or is considered as owning within the meaning of section 24 318 (a) (1)), on any day during the taxable year of such |