Page:United States Statutes at Large Volume 110 Part 3.djvu/108

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110 STAT. 1838 PUBLIC LAW 104-188—AUG. 20, 1996 for any recomputation year shall be treated as an increase in the tax imposed by this chapter for such year. " (E) DETERMINATIONS. —For purposes of paragraph (2), determinations of the amount of income earned in connection with any property shall be made in the same manner as for purposes of applying the income forecast method; except that any income from the disposition of such property shall be taken into account. "(F) TREATMENT OF PASS-THRU ENTITIES.— Rules similar to the rules of section 460(b)(4) shall apply for purposes of this subsection." 26 USC 167 note. (b) EFFECTIVE DATE. — (1) IN GENERAL.—The amendment made by subsection (a) shall apply to property placed in service after September 13, 1995. (2) BINDING CONTRACTS. —The amendment made by subsection (a) shall not apply to any property produced or acquired by the taxpayer pursuant to a written contract which was binding on September 13, 1995, and at all times thereafter before such production or acquisition. (3) UNDERPAYMENTS OF INCOME TAX. —N O addition to tax shall be made under section 6662 of such Code as a result of the application of subsection (d) of that section (relating to substantial understatements of income tax) with respect to any underpa3anent of income tax for any taxable year ending before such date of enactment, to the extent such underpayment was created or increased by the amendments made by subsection (a). SEC. 1605. REPEAL OF EXCLUSION FOR PUNITIVE DAMAGES AND FOR DAMAGES NOT ATTRIBUTABLE TO PHYSICAL INJURIES OR SICKNESS, (a) IN GENERAL. — Paragraph (2) of section 104(a) (relating to compensation for injuries or sickness) is amended to read as follows: "(2) the amount of any damages (other than punitive damages) received (whether by suit or agreement and whether as lump sums or as periodic payments) on account of personal physical injuries or physical sickness;". (b) EMOTIONAL DISTRESS AS SUCH TREATED AS NOT PHYSICAL INJURY OR PHYSICAL SICKNESS.—Section 104(a) is amended by striking the last sentence and inserting the following new sentence: "For purposes of paragraph (2), emotional distress shall not be treated as a physical injury or physical sickness. The preceding sentence shall not apply to an amount of damages not in excess of the amount paid for medical care (described in subparagraph (A) or (B) of section 213(d)(1)) attributable to emotional distress.". (c) APPLICATION OF PRIOR LAW FOR STATES IN WHICH ONLY PUNITIVE DAMAGES MAY BE AWARDED IN WRONGFUL DEATH ACTIONS.—Section 104 is amended by redesignating subsection (c) as subsection (d) and by inserting after subsection (b) the following new subsection: "(c) APPLICATION OF PRIOR LAW IN CERTAIN CASES.—The phrase '(other than punitive damages)' shall not apply to punitive damages awarded in a civil action— "(1) which is a wrongful death action, and "(2) with respect to which applicable State law (as in effect on September 13, 1995 and without regard to any modification