PUBLIC LAW 105-34—AUG. 5, 1997 111 STAT. 955 (B) Subparagraph (B) of section 807(b)(1) is amended by striking "interest," and inserting "interest and the amount of the policyholder's share of the increase for the tsixable year in policy cash values (within the meaning of section 805(a)(4)(F)) of life insurance policies and annuity and endowment contracts to which section 264(f) applies,". (3) Paragraph (1) of section 812(d) is amended by striking "and" at the end of subparagraph (B), by striking the period at the end of subparagraph (C) and inserting ", and", and by adding at the end the following new subparagraph: "(D) the increase for any taxable year in the policy cash values (within the meaning of section 805(a)(4)(F)) of life insurance policies and annuity and endowment contracts to which section 264(f) applies.". (4) Subparagraph (B) of section 832(b)(5) is amended by striking "and" at the end of clause (i), by striking the period at the end of clause (ii) and inserting ", and", and by adding at the end the following new clause: "(iii) the increase for the taxable year in policy cash values (within the meaning of section 805(a)(4)(F)) of life insur£ince policies and annuity and endowment contracts to which section 264(f) applies.". (c) CONFORMING AMENDMENT. — Subparagraph (A) of section 265(b)(4) is amended by inserting ", section 264," before "and section 291". (d) EFFECTIVE DATE.— The amendments made by this section 26 USC loi note, shall apply to contracts issued after June 8, 1997, in taxable years ending after such date. For purposes of the preceding sentence, any material increase in the death benefit or other material change in the contract shall be treated as a new contract but the addition of covered lives shall be treated as a new contract only with respect to such additional covered lives. For purposes of this subsection, an increase in the death benefit under a policy or contract issued in connection with a lapse described in section 501(d)(2) of the Health Insurance Portability and Accountability Act of 1996 shall not be treated as a new contract. SEC. 1085. IMPROVED ENFORCEMENT OF THE APPLICATION OF THE EARNED INCOME CREDIT. (a) RESTRICTIONS ON AVAILABILITY OF EARNED INCOME CREDIT FOR TAXPAYERS WHO IMPROPERLY CLAIMED CREDIT IN PRIOR YEAR. — (1) IN GENERAL.— Section 32 is amended by redesignating subsections (k) and (1) as subsections (1) and (m), respectively, and by inserting after subsection (j) the following new subsection: " (k) RESTRICTIONS ON TAXPAYERS WHO IMPROPERLY CLAIMED CREDIT IN PRIOR YEAR.— " (1) TAXPAYERS MAKING PRIOR FRAUDULENT OR RECKLESS CLAIMS. — "(A) IN GENERAL.—No credit shall be allowed under this section for any teixable year in the disallowance period. "(B) DISALLOWANCE PERIOD. — For purposes of paragraph (1), the disallowance period is— "(i) the period of 10 taxable years after the most recent taxable year for which there was a final determination that the taxpayer's claim of credit under this section was due to fraud, and
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