,i #aacth ,,congress #b;d ,session ,h4 ,r4 #a ,,in ,,the ,,house ,,of ,,representatives ,december #aj1 #bjad ,mr4 ,camp introduced the following bill2 which was referred to the ,committee on ,ways and ,means ,a ,,bill ,to amend the ,internal ,revenue ,code of #aihf to provide for comprehensive tax reform4 #a4 ,short title2 etc 7a7 ,short title ,this ,act may be cited as the ,tax ,reform ,act of #bjad4 7b7 ,amendment of #aihf ,code ,except as otherwise expressly provided1 whenever in this ,act an amendment or repeal is expressed in terms of an amendment to1 or repeal of1 a section or other provision1 the reference shall be considered to be made to a section or other provision of the ,internal ,revenue ,code of #aihf4 7c7 ,table of contents ,the table of contents of this ,act is as follows3 ,sec4 #a4 ,short title2 etc4 ,title ,i--,tax ,reform for ,individuals ,subtitle ,a--,individual income tax rate reform ,sec4 #ajja4 ,simplification of individual income tax rates4 ,sec4 #ajjb4 ,deduction for adjusted net capital gain4 ,sec4 #ajjc4 ,conforming amendments related to simplification of individual income tax rates4 ,subtitle ,b--,simplification of tax benefits for families ,sec4 #aaja4 ,standard deduction4 ,sec4 #aajb4 ,increase and expansion of child tax credit4 ,sec4 #aajc4 ,modification of earned income tax credit4 ,sec4 #aajd4 ,repeal of deduction for personal exemptions4 ,subtitle ,c--,simplification of education incentives ,sec4 #abja4 ,american opportunity tax credit4 ,sec4 #abjb4 ,expansion of ,pell ,grant exclusion from gross income4 ,sec4 #abjc4 ,repeal of exclusion of income from ,united ,states savings bonds used to pay higher education tuition and fees4 ,sec4 #abjd4 ,repeal of deduction for interest on education loans4 ,sec4 #abje4 ,repeal of deduction for qualified tuition and related expenses4 ,sec4 #abjf4 ,no new contributions to ,coverdell education savings accounts4 ,sec4 #abjg4 ,repeal of exclusion for discharge of student loan indebtedness4 ,sec4 #abjh4 ,repeal of exclusion for qualified tuition reductions4 ,sec4 #abji4 ,repeal of exclusion for education assistance programs4 ,sec4 #abaj4 ,repeal of exception to #aj-percent penalty for higher education expenses4 ,subtitle ,d--,repeal of certain credits for individuals ,sec4 #acja4 ,repeal of dependent care credit4 ,sec4 #acjb4 ,repeal of credit for adoption expenses4 ,sec4 #acjc4 ,repeal of credit for nonbusiness energy property4 ,sec4 #acjd4 ,repeal of credit for residential energy efficient property4 ,sec4 #acje4 ,repeal of credit for qualified electric vehicles4 ,sec4 #acjf4 ,repeal of alternative motor vehicle credit4 ,sec4 #acjg4 ,repeal of alternative fuel vehicle refueling property credit4 ,sec4 #acjh4 ,repeal of credit for new qualified plug-in electric drive motor vehicles4 ,sec4 #acji4 ,repeal of credit for health insurance costs of eligible individuals4 ,sec4 #acaj4 ,repeal of first-time homebuyer credit4 ,subtitle ,e--,deductions1 exclusions1 and certain other provisions ,sec4 #adja4 ,exclusion of gain from sale of a principal residence4 ,sec4 #adjb4 ,mortgage interest4 ,sec4 #adjc4 ,charitable contributions4 ,sec4 #adjd4 ,denial of deduction for expenses attributable to the trade or business of being an employee4 ,sec4 #adje4 ,repeal of deduction for taxes not paid or accrued in a trade or business4 ,sec4 #adjf4 ,repeal of deduction for personal casualty losses4 ,sec4 #adjg4 ,limitation on wagering losses4 ,sec4 #adjh4 ,repeal of deduction for tax preparation expenses4 ,sec4 #adji4 ,repeal of deduction for medical expenses4 ,sec4 #adaj4 ,repeal of disqualification of expenses for over-the-counter drugs under certain accounts and arrangements4 ,sec4 #adaa4 ,repeal of deduction for alimony payments and corresponding inclusion in gross income4 ,sec4 #adab4 ,repeal of deduction for moving expenses4 ,sec4 #adac4 ,termination of deduction and exclusions for contributions to medical savings accounts4 ,sec4 #adad4 ,repeal of #b-percent floor on miscellaneous itemized deductions4 ,sec4 #adae4 ,repeal of overall limitation on itemized deductions4 ,sec4 #adaf4 ,deduction for amortizable bond premium allowed in determining adjusted gross income4 ,sec4 #adag4 ,repeal of exclusion1 etc41 for employee achievement awards4 ,sec4 #adah4 ,clarification of special rule for certain governmental plans4 ,sec4 #adai4 ,limitation on exclusion for employer-provided housing4 ,sec4 #adbj4 ,fringe benefits4 ,sec4 #adba4 ,repeal of exclusion of net unrealized appreciation in employer securities4 ,sec4 #adbb4 ,consistent basis reporting between estate and person acquiring property from decedent4 ,subtitle ,f--,employment tax modifications ,sec4 #aeja4 ,modifications of deduction for ,social ,security taxes in computing net earnings from self-employment4 ,sec4 #aejb4 ,determination of net earnings from self-employment4 ,sec4 #aejc4 ,repeal of exemption from ,,fica taxes for certain foreign workers4 ,sec4 #aejd4 ,repeal of exemption from ,,fica taxes for certain students4 ,sec4 #aeje4 ,override of ,treasury guidance providing that certain employer-provided supplemental unemployment benefits are not subject to employment taxes4 ,sec4 #aejf4 ,certified professional employer organizations4 ,subtitle ,g--,pensions and ,retirement ,part #a--;,individual ,retirement ,plans ,sec4 #afja4 ,elimination of income limits on contributions to ,roth ,i,r,as4 ,sec4 #afjb4 ,no new contributions to traditional ,i,r,as4 ,sec4 #afjc4 ,inflation adjustment for ,roth ,,ira contributions4 ,sec4 #afjd4 ,repeal of special rule permitting recharacterization of ,roth ,,ira contributions as traditional ,,ira contributions4 ,sec4 #afje4 ,repeal of exception to #aj-percent penalty for first home purchases4 ,part #b--;,employer-,provided ,plans ,sec4 #afaa4 ,termination for new ,s,e,ps4 ,sec4 #afab4 ,termination for new ,,simple #dja7k7s4 ,sec4 #afac4 ,rules related to designated ,roth contributions4 ,sec4 #afad4 ,modifications of required distribution rules for pension plans4 ,sec4 #afae4 ,reduction in minimum age for allowable in-service distributions4 ,sec4 #afaf4 ,modification of rules governing hardship distributions4 ,sec4 #afag4 ,extended rollover period for the rollover of plan loan offset amounts in certain cases4 ,sec4 #afah4 ,coordination of contribution limitations for #djc7;b7 plans and governmental #deg7;b7 plans4 ,sec4 #afai4 ,application of #aj-percent early distribution tax to governmental #deg plans4 ,sec4 #afbj4 ,inflation adjustments for qualified plan benefit and contribution limitations4 ,sec4 #afba4 ,inflation adjustments for qualified plan elective deferral limitations4 ,sec4 #afbb4 ,inflation adjustments for ,,simple retirement accounts4 ,sec4 #afbc4 ,inflation adjustments for catch-up contributions for certain employer plans4 ,sec4 #afbd4 ,inflation adjustments for governmental and tax-exempt organization plans4 ,subtitle ,h--,certain provisions related to members of ,indian tribes ,sec4 #agja4 ,indian general welfare benefits4 ,sec4 #agjb4 ,tribal ,advisory ,committee4 ,sec4 #agjc4 ,other relief for ,indian tribes4 ,title ,,ii--,alternative ,minimum ,tax ,repeal ,sec4 #bjja4 ,repeal of alternative minimum tax4 ,title ,,iii--,business ,tax ,reform ,subtitle ,a--,tax ,rates ,sec4 #cjja4 #be-percent corporate tax rate4 ,subtitle ,b--,reform of business-,related exclusions and deductions ,sec4 #caja4 ,revision of treatment of contributions to capital4 ,sec4 #cajb4 ,repeal of deduction for local lobbying expenses4 ,sec4 #cajc4 ,expenditures for repairs in connection with casualty losses4 ,sec4 #cajd4 ,reform of accelerated cost recovery system4 ,sec4 #caje4 ,repeal of amortization of pollution control facilities4 ,sec4 #cajf4 ,net operating loss deduction4 ,sec4 #cajg4 ,circulation expenditures4 ,sec4 #cajh4 ,amortization of research and experimental expenditures4 ,sec4 #caji4 ,repeal of deductions for soil and water conservation expenditures and endangered species recovery expenditures4 ,sec4 #caaj4 ,amortization of certain advertising expenses4 ,sec4 #caaa4 ,expensing certain depreciable business assets for small business4 ,sec4 #caab4 ,repeal of election to expense certain refineries4 ,sec4 #caac4 ,repeal of deduction for energy efficient commercial buildings4 ,sec4 #caad4 ,repeal of election to expense advanced mine safety equipment4 ,sec4 #caae4 ,repeal of deduction for expenditures by farmers for fertilizer1 etc4 ,sec4 #caaf4 ,repeal of special treatment of certain qualified film and television productions4 ,sec4 #caag4 ,repeal of special rules for recoveries of damages of antitrust violations1 etc4 ,sec4 #caah4 ,treatment of reforestation expenditures4 ,sec4 #caai4 #bj-year amortization of goodwill and certain other intangibles4 ,sec4 #cabj4 ,treatment of environmental remediation costs4 ,sec4 #caba4 ,repeal of expensing of qualified disaster expenses4 ,sec4 #cabb4 ,phaseout and repeal of deduction for income attributable to domestic production activities4 ,sec4 #cabc4 ,unification of deduction for organizational expenditures4 ,sec4 #cabd4 ,prevention of arbitrage of deductible interest expense and tax-exempt interest income4 ,sec4 #cabe4 ,prevention of transfer of certain losses from tax indifferent parties4 ,sec4 #cabf4 ,entertainment1 etc4 expenses4 ,sec4 #cabg4 ,repeal of limitation on corporate acquisition indebtedness4 ,sec4 #cabh4 ,denial of deductions and credits for expenditures in illegal businesses4 ,sec4 #cabi4 ,limitation on deduction for ,,fdic premiums4 ,sec4 #cacj4 ,repeal of percentage depletion4 ,sec4 #caca4 ,repeal of passive activity exception for working interests in oil and gas property4 ,sec4 #cacb4 ,repeal of special rules for gain or loss on timber1 coal1 or domestic iron ore4 ,sec4 #cacc4 ,repeal of like-kind exchanges4 ,sec4 #cacd4 ,restriction on trade or business property treated as similar or related in service to involuntarily converted property in disaster areas4 ,sec4 #cace4 ,repeal of rollover of publicly traded securities gain into specialized small business investment companies4 ,sec4 #cacf4 ,termination of special rules for gain from certain small business stock4 ,sec4 #cacg4 ,certain self-created property not treated as a capital asset4 ,sec4 #cach4 ,repeal of special rule for sale or exchange of patents4 ,sec4 #caci4 ,depreciation recapture on gain from disposition of certain depreciable realty4 ,sec4 #cadj4 ,common deduction conforming amendments4 ,subtitle ,c--,reform of business credits ,sec4 #cbja4 ,repeal of credit for alcohol1 etc41 used as fuel4 ,sec4 #cbjb4 ,repeal of credit for biodiesel and renewable diesel used as fuel4 ,sec4 #cbjc4 ,research credit modified and made permanent4 ,sec4 #cbjd4 ,low-income housing tax credit4 ,sec4 #cbje4 ,repeal of enhanced oil recovery credit4 ,sec4 #cbjf4 ,phaseout and repeal of credit for electricity produced from certain renewable resources4 ,sec4 #cbjg4 ,repeal of ,indian employment credit4 ,sec4 #cbjh4 ,repeal of credit for portion of employer ,social ,security taxes paid with respect to employee cash tips4 ,sec4 #cbji4 ,repeal of credit for clinical testing expenses for certain drugs for rare diseases or conditions4 ,sec4 #cbaj4 ,repeal of credit for small employer pension plan startup costs4 ,sec4 #cbaa4 ,repeal of employer-provided child care credit4 ,sec4 #cbab4 ,repeal of railroad track maintenance credit4 ,sec4 #cbac4 ,repeal of credit for production of low sulfur diesel fuel4 ,sec4 #cbad4 ,repeal of credit for producing oil and gas from marginal wells4 ,sec4 #cbae4 ,repeal of credit for production from advanced nuclear power facilities4 ,sec4 #cbaf4 ,repeal of credit for producing fuel from a nonconventional source4 ,sec4 #cbag4 ,repeal of new energy efficient home credit4 ,sec4 #cbah4 ,repeal of energy efficient appliance credit4 ,sec4 #cbai4 ,repeal of mine rescue team training credit4 ,sec4 #cbbj4 ,repeal of agricultural chemicals security credit4 ,sec4 #cbba4 ,repeal of credit for carbon dioxide sequestration4 ,sec4 #cbbb4 ,repeal of credit for employee health insurance expenses of small employers4 ,sec4 #cbbc4 ,repeal of rehabilitation credit4 ,sec4 #cbbd4 ,repeal of energy credit4 ,sec4 #cbbe4 ,repeal of qualifying advanced coal project credit4 ,sec4 #cbbf4 ,repeal of qualifying gasification project credit4 ,sec4 #cbbg4 ,repeal of qualifying advanced energy project credit4 ,sec4 #cbbh4 ,repeal of qualifying therapeutic discovery project credit4 ,sec4 #cbbi4 ,repeal of work opportunity tax credit4 ,sec4 #cbcj4 ,repeal of deduction for certain unused business credits4 ,subtitle ,d--,accounting methods ,sec4 #ccja4 ,limitation on use of cash method of accounting4 ,sec4 #ccjb4 ,rules for determining whether taxpayer has adopted a method of accounting4 ,sec4 #ccjc4 ,certain special rules for taxable year of inclusion4 ,sec4 #ccjd4 ,installment sales4 ,sec4 #ccje4 ,repeal of special rule for prepaid subscription income4 ,sec4 #ccjf4 ,repeal of special rule for prepaid dues income of certain membership organizations4 ,sec4 #ccjg4 ,repeal of special rule for magazines1 paperbacks1 and records returned after close of the taxable year4 ,sec4 #ccjh4 ,modification of rules for long-term contracts4 ,sec4 #ccji4 ,nuclear decommissioning reserve funds4 ,sec4 #ccaj4 ,repeal of last-in1 first-out method of inventory4 ,sec4 #ccaa4 ,repeal of lower of cost or market method of inventory4 ,sec4 #ccab4 ,modification of rules for capitalization and inclusion in inventory costs of certain expenses4 ,sec4 #ccac4 ,modification of income forecast method4 ,sec4 #ccad4 ,repeal of averaging of farm income4 ,sec4 #ccae4 ,treatment of patent or trademark infringement awards4 ,sec4 #ccaf4 ,repeal of redundant rules with respect to carrying charges4 ,sec4 #ccag4 ,repeal of recurring item exception for spudding of oil or gas wells4 ,subtitle ,e--,financial ,instruments ,part #a--;,derivatives and hedges ,sec4 #cdja4 ,treatment of certain derivatives4 ,sec4 #cdjb4 ,modification of certain rules related to hedges4 ,part #b--,treatment of debt instruments ,sec4 #cdaa4 ,current inclusion in income of market discount4 ,sec4 #cdab4 ,treatment of certain exchanges of debt instruments4 ,sec4 #cdac4 ,coordination with rules for inclusion not later than for financial accounting purposes4 ,sec4 #cdad4 ,rules regarding certain government debt4 ,part #c--;,certain rules for determining gain and loss ,sec4 #cdba4 ,cost basis of specified securities determined without regard to identification4 ,sec4 #cdbb4 ,wash sales by related parties4 ,sec4 #cdbc4 ,nonrecognition for derivative transactions by a corporation with respect to its stock4 ,part #d--,tax favored bonds ,sec4 #cdca4 ,termination of private activity bonds4 ,sec4 #cdcb4 ,termination of credit for interest on certain home mortgages4 ,sec4 #cdcc4 ,repeal of advance refunding bonds4 ,sec4 #cdcd4 ,repeal of tax credit bond rules4 ,subtitle ,f--,insurance reforms ,sec4 #ceja4 ,exception to pro rata interest expense disallowance for corporate-owned life insurance restricted to #bj-percent owners4 ,sec4 #cejb4 ,net operating losses of life insurance companies4 ,sec4 #cejc4 ,repeal of small life insurance company deduction4 ,sec4 #cejd4 ,computation of life insurance tax reserves4 ,sec4 #ceje4 ,adjustment for change in computing reserves4 ,sec4 #cejf4 ,modification of rules for life insurance proration for purposes of determining the dividends received deduction4 ,sec4 #cejg4 ,repeal of special rule for distributions to shareholders from pre-#aihd policyholders surplus account4 ,sec4 #cejh4 ,modification of proration rules for property and casualty insurance companies4 ,sec4 #ceji4 ,repeal of special treatment of ,blue ,cross and ,blue ,shield organizations1 etc4 ,sec4 #ceaj4 ,modification of discounting rules for property and casualty insurance companies4 ,sec4 #ceaa4 ,repeal of special estimated tax payments4 ,sec4 #ceab4 ,capitalization of certain policy acquisition expenses4 ,sec4 #ceac4 ,tax reporting for life settlement transactions4 ,sec4 #cead4 ,clarification of tax basis of life insurance contracts4 ,sec4 #ceae4 ,exception to transfer for valuable consideration rules4 ,subtitle ,g--,pass-,thru and certain other entities ,part #a--,s ,corporations ,sec4 #cfja4 ,reduced recognition period for built-in gains made permanent4 ,sec4 #cfjb4 ,modifications to ,s corporation passive investment income rules4 ,sec4 #cfjc4 ,expansion of qualifying beneficiaries of an electing small business trust4 ,sec4 #cfjd4 ,charitable contribution deduction for electing small business trusts4 ,sec4 #cfje4 ,permanent rule regarding basis adjustment to stock of ,s corporations making charitable contributions of property4 ,sec4 #cfjf4 ,extension of time for making ,s corporation elections4 ,sec4 #cfjg4 ,relocation of ,c corporation definition4 ,part #b--,partnerships ,sec4 #cfaa4 ,repeal of rules relating to guaranteed payments and liquidating distributions4 ,sec4 #cfab4 ,mandatory adjustments to basis of partnership property in case of transfer of partnership interests4 ,sec4 #cfac4 ,mandatory adjustments to basis of undistributed partnership property4 ,sec4 #cfad4 ,corresponding adjustments to basis of properties held by partnership where partnership basis adjusted4 ,sec4 #cfae4 ,charitable contributions and foreign taxes taken into account in determining limitation on allowance of partner's share of loss4 ,sec4 #cfaf4 ,revisions related to unrealized receivables and inventory items4 ,sec4 #cfag4 ,repeal of time limitation on taxing precontribution gain4 ,sec4 #cfah4 ,partnership interests created by gift4 ,sec4 #cfai4 ,repeal of technical termination4 ,sec4 #cfbj4 ,publicly traded partnership exception restricted to mining and natural resources partnerships4 ,sec4 #cfba4 ,ordinary income treatment in the case of partnership interests held in connection with performance of services4 ,sec4 #cfbb4 ,partnership audits and adjustments4 ,part #c--,r,e,i,ts and ,r,i,cs ,sec4 #cfca4 ,prevention of tax-free spinoffs involving ,r,e,i,ts4 ,sec4 #cfcb4 ,extension of period for prevention of ,,reit election following revocation or termination4 ,sec4 #cfcc4 ,certain short-life property not treated as real property for purposes of ,,reit provisions4 ,sec4 #cfcd4 ,repeal of special rules for timber held by ,r,e,i,ts4 ,sec4 #cfce4 ,limitation on fixed percentage rent and interest exceptions for ,,reit income tests4 ,sec4 #cfcf4 ,repeal of preferential dividend rule for publicly offered ,r,e,i,ts4 ,sec4 #cfcg4 ,authority for alternative remedies to address certain ,,reit distribution failures4 ,sec4 #cfch4 ,limitations on designation of dividends by ,r,e,i,ts4 ,sec4 #cfci4 ,non-,,reit earnings and profits required to be distributed by ,,reit in cash4 ,sec4 #cfdj4 ,debt instruments of publicly offered ,r,e,i,ts and mortgages treated as real estate assets4 ,sec4 #cfda4 ,asset and income test clarification regarding ancillary personal property4 ,sec4 #cfdb4 ,hedging provisions4 ,sec4 #cfdc4 ,modification of ,,reit earnings and profits calculation to avoid duplicate taxation4 ,sec4 #cfdd4 ,reduction in percentage limitation on assets of ,,reit which may be taxable ,,reit subsidiaries4 ,sec4 #cfde4 ,treatment of certain services provided by taxable ,,reit subsidiaries4 ,sec4 #cfdf4 ,study relating to taxable ,,reit subsidiaries4 ,sec4 #cfdg4 ,c corporation election to become1 or transfer assets to1 a ,,ric or ,,reit4 ,sec4 #cfdh4 ,interests in ,r,i,cs and ,r,e,i,ts not excluded from definition of ,united ,states real property interests4 ,sec4 #cfdi4 ,dividends derived from ,r,i,cs and ,r,e,i,ts ineligible for deduction for ,united ,states source portion of dividends from certain foreign corporations4 ,part #d--,personal holding companies ,sec4 #cffa4 ,exclusion of dividends from controlled foreign corporations from the definition of personal holding company income for purposes of the personal holding company rules4 ,subtitle ,h--,taxation of foreign persons ,sec4 #cgja4 ,prevention of avoidance of tax through reinsurance with non-taxed affiliates4 ,sec4 #cgjb4 ,taxation of passenger cruise gross income of foreign corporations and nonresident alien individuals4 ,sec4 #cgjc4 ,restriction on insurance business exception to passive foreign investment company rules4 ,sec4 #cgjd4 ,modification of limitation on earnings stripping4 ,sec4 #cgje4 ,limitation on treaty benefits for certain deductible payments4 ,subtitle ,i--,provisions related to compensation ,part #a--;,executive compensation ,sec4 #chja4 ,nonqualified deferred compensation4 ,sec4 #chjb4 ,modification of limitation on excessive employee remuneration4 ,sec4 #chjc4 ,excise tax on excess tax-exempt organization executive compensation4 ,sec4 #chjd4 ,denial of deduction as research expenditure for stock transferred pursuant to an incentive stock option4 ,part #b--,worker classification ,sec4 #chaa4 ,determination of worker classification4 ,subtitle ,j--,zones and ,short-,term ,regional ,benefits ,sec4 #chba4 ,repeal of provisions relating to ,empowerment ,zones and ,enterprise ,communities4 ,sec4 #chbb4 ,repeal of ,,dc ,zone provisions4 ,sec4 #chbc4 ,repeal of provisions relating to renewal communities4 ,sec4 #chbd4 ,repeal of various short-term regional benefits4 ,title ,,iv--,participation exemption system for the taxation of foreign income ,subtitle ,a--,establishment of exemption system ,sec4 #djja4 ,deduction for dividends received by domestic corporations from certain foreign corporations4 ,sec4 #djjb4 ,limitation on losses with respect to specified #aj-percent owned foreign corporations4 ,sec4 #djjc4 ,treatment of deferred foreign income upon transition to participation exemption system of taxation4 ,sec4 #djjd4 ,look-thru rule for related controlled foreign corporations made permanent4 ,subtitle ,b--,modifications related to foreign tax credit system ,sec4 #daja4 ,repeal of section #ijb indirect foreign tax credits2 determination of section #ifj credit on current year basis4 ,sec4 #dajb4 ,foreign tax credit limitation applied by allocating only directly allocable deductions to foreign source income4 ,sec4 #dajc4 ,passive category income expanded to include other mobile income4 ,sec4 #dajd4 ,source of income from sales of inventory determined solely on basis of production activities4 ,subtitle ,c--,rules related to passive and mobile income ,part #a--,modification of subpart ,f provisions ,sec4 #dbja4 ,subpart ,f income to only include low-taxed foreign income4 ,sec4 #dbjb4 ,foreign base company sales income4 ,sec4 #dbjc4 ,inflation adjustment of de minimis exception for foreign base company income4 ,sec4 #dbjd4 ,active financing exception extended with limitation for low-taxed foreign income4 ,sec4 #dbje4 ,repeal of inclusion based on withdrawal of previously excluded subpart ,f income from qualified investment4 ,part #b--,prevention of base erosion ,sec4 #dbaa4 ,foreign intangible income subject to taxation at reduced rate2 intangible income treated as subpart ,f income4 ,sec4 #dbab4 ,denial of deduction for interest expense of ,united ,states shareholders which are members of worldwide affiliated groups with excess domestic indebtedness4 ,title ,v--,tax ,exempt ,entities ,subtitle ,a--,unrelated ,business ,income ,tax ,sec4 #ejja4 ,clarification of unrelated business income tax treatment of entities treated as exempt from taxation under section #eja7;a74 ,sec4 #ejjb4 ,name and logo royalties treated as unrelated business taxable income4 ,sec4 #ejjc4 ,unrelated business taxable income separately computed for each trade or business activity4 ,sec4 #ejjd4 ,exclusion of research income limited to publicly available research4 ,sec4 #ejje4 ,parity of charitable contribution limitation between trusts and corporations4 ,sec4 #ejjf4 ,increased specific deduction4 ,sec4 #ejjg4 ,repeal of exclusion of gain or loss from disposition of distressed property4 ,sec4 #ejjh4 ,qualified sponsorship payments4 ,subtitle ,b--,penalties ,sec4 #eaja4 ,increase in information return penalties4 ,sec4 #eajb4 ,manager-level accuracy-related penalty on underpayment of unrelated business income tax4 ,subtitle ,c--,excise ,taxes ,sec4 #ebja4 ,modification of intermediate sanctions4 ,sec4 #ebjb4 ,modification of taxes on self-dealing4 ,sec4 #ebjc4 ,excise tax on failure to distribute within #e years contribution to donor advised fund4 ,sec4 #ebjd4 ,simplification of excise tax on private foundation investment income4 ,sec4 #ebje4 ,repeal of exception for private operating foundation failure to distribute income4 ,sec4 #ebjf4 ,excise tax based on investment income of private colleges and universities4 ,subtitle ,d--,requirements for ,organizations ,exempt ,from ,tax ,sec4 #ecja4 ,repeal of tax-exempt status for professional sports leagues4 ,sec4 #ecjb4 ,repeal of exemption from tax for certain insurance companies and co-op health insurance issuers4 ,sec4 #ecjc4 ,in-,state requirement for workmen's compensation insurance organization4 ,sec4 #ecjd4 ,repeal of ,type ,,ii and ,type ,,iii supporting organizations4 ,title ,,vi--,tax administration and compliance ,subtitle ,a--,,irs ,investigation-,related ,reforms ,sec4 #fjja4 ,organizations required to notify ,secretary of intent to operate as #eja7;c77#d74 ,sec4 #fjjb4 ,declaratory judgments for #eja7;c77#d7 organizations4 ,sec4 #fjjc4 ,restriction on donation reporting for certain #eja7;c77#d7 organizations4 ,sec4 #fjjd4 ,mandatory electronic filing for annual returns of exempt organizations4 ,sec4 #fjje4 ,duty to ensure that ,,irs employees are familiar with and act in accord with certain taxpayer rights4 ,sec4 #fjjf4 ,termination of employment of ,,irs employees for taking official actions for political purposes4 ,sec4 #fjjg4 ,release of information regarding the status of certain investigations4 ,sec4 #fjjh4 ,review of ,,irs examination selection procedures4 ,sec4 #fjji4 ,,irs employees prohibited from using personal email accounts for official business4 ,sec4 #fjaj4 ,moratorium on ,,irs conferences4 ,sec4 #fjaa4 ,applicable standard for determinations of whether an organization is operated exclusively for the promotion of social welfare4 ,subtitle ,b--,taxpayer ,protection and ,service ,reforms ,sec4 #faja4 ,extension of ,,irs authority to require truncated ,social ,security numbers on ,form ,w-#b4 ,sec4 #fajb4 ,free electronic filing4 ,sec4 #fajc4 ,pre-populated returns prohibited4 ,sec4 #fajd4 ,form #ajdj,,sr for seniors4 ,sec4 #faje4 ,increased refund and credit threshold for ,joint ,committee on ,taxation review of ,c corporation return4 ,subtitle ,c--,tax return due date simplification ,sec4 #fbja4 ,due dates for returns of partnerships1 ,s corporations1 and ,c corporations4 ,sec4 #fbjb4 ,modification of due dates by regulation4 ,sec4 #fbjc4 ,corporations permitted statutory automatic #f-month extension of income tax returns4 ,subtitle ,d--,compliance ,reforms ,sec4 #fcja4 ,penalty for failure to file4 ,sec4 #fcjb4 ,penalty for failure to file correct information returns and provide payee statements4 ,sec4 #fcjc4 ,clarification of #f-year statute of limitations in case of overstatement of basis4 ,sec4 #fcjd4 ,reform of rules related to qualified tax collection contracts4 ,sec4 #fcje4 #ajj percent continuous levy on payments to ,medicare providers and suppliers4 ,sec4 #fcjf4 ,treatment of refundable credits for purposes of certain penalties4 ,title ,,vii--,excise taxes ,sec4 #gjja4 ,repeal of medical device excise tax4 ,sec4 #gjjb4 ,modifications relating to oil spill liability trust fund4 ,sec4 #gjjc4 ,modification relating to inland waterways trust fund financing rate4 ,sec4 #gjjd4 ,excise tax on systemically important financial institutions4 ,sec4 #gjje4 ,clarification of orphan drug exception to annual fee on branded prescription pharmaceutical manufacturers and importers4 ,title ,,viii--,deadwood and technical provisions ,subtitle ,a--,repeal of ,deadwood ,sec4 #hjja4 ,repeal of ,puerto ,rico economic activity credit4 ,sec4 #hjjb4 ,repeal of making work pay credit4 ,sec4 #hjjc4 ,general business credit4 ,sec4 #hjjd4 ,environmental tax4 ,sec4 #hjje4 ,annuities2 certain proceeds of endowment and life insurance contracts4 ,sec4 #hjjf4 ,unemployment compensation4 ,sec4 #hjjg4 ,flexible spending arrangements4 ,sec4 #hjjh4 ,certain combat zone compensation of members of the armed forces4 ,sec4 #hjji4 ,qualified group legal services plans4 ,sec4 #hjaj4 ,certain reduced uniformed services retirement pay4 ,sec4 #hjaa4 ,great plains conservation program4 ,sec4 #hjab4 ,state legislators' travel expenses away from home4 ,sec4 #hjac4 ,treble damage payments under the antitrust law4 ,sec4 #hjad4 ,phase-in of limitation on investment interest4 ,sec4 #hjae4 ,charitable1 etc41 contributions and gifts4 ,sec4 #hjaf4 ,amortizable bond premium4 ,sec4 #hjag4 ,repeal of deduction for clean-fuel vehicles and certain refueling property4 ,sec4 #hjah4 ,repeal of deduction for capital costs incurred in complying with environmental protection agency sulfur regulations4 ,sec4 #hjai4 ,activities not engaged in for profit4 ,sec4 #hjbj4 ,dividends received on certain preferred stock2 and dividends paid on certain preferred stock of public utilities4 ,sec4 #hjba4 ,acquisitions made to evade or avoid income tax4 ,sec4 #hjbb4 ,distributions of property4 ,sec4 #hjbc4 ,effect on earnings and profits4 ,sec4 #hjbd4 ,basis to corporations4 ,sec4 #hjbe4 ,tax credit employee stock ownership plans4 ,sec4 #hjbf4 ,employee stock purchase plans4 ,sec4 #hjbg4 ,transition rules4 ,sec4 #hjbh4 ,limitation on deductions for certain farming4 ,sec4 #hjbi4 ,deductions limited to amount at risk4 ,sec4 #hjcj4 ,passive activity losses and credits limited4 ,sec4 #hjca4 ,adjustments required by changes in method of accounting4 ,sec4 #hjcb4 ,exemption from tax on corporations1 certain trusts1 etc4 ,sec4 #hjcc4 ,requirements for exemption4 ,sec4 #hjcd4 ,repeal of special treatment for religious broadcasting company4 ,sec4 #hjce4 ,repeal of exclusion of gain or loss from disposition of brownfield property4 ,sec4 #hjcf4 ,accumulated taxable income4 ,sec4 #hjcg4 ,certain provisions related to depletion4 ,sec4 #hjch4 ,amounts received by surviving annuitant under joint and survivor annuity contract4 ,sec4 #hjci4 ,income taxes of members of armed forces on death4 ,sec4 #hjdj4 ,special rules for computing reserves4 ,sec4 #hjda4 ,insurance company taxable income4 ,sec4 #hjdb4 ,capitalization of certain policy acquisition expenses4 ,sec4 #hjdc4 ,repeal of provision on expatriation to avoid tax4 ,sec4 #hjdd4 ,repeal of certain transition rules on income from sources without ,united ,states4 ,sec4 #hjde4 ,repeal of ,puerto ,rico and possession tax credit4 ,sec4 #hjdf4 ,basis of property acquired from decedent4 ,sec4 #hjdg4 ,property on which lessee has made improvements4 ,sec4 #hjdh4 ,involuntary conversion4 ,sec4 #hjdi4 ,property acquired during affiliation4 ,sec4 #hjej4 ,repeal of special holding period rules for certain commodity futures transactions4 ,sec4 #hjea4 ,holding period of property4 ,sec4 #hjeb4 ,property used in the trade or business and involuntary conversions4 ,sec4 #hjec4 ,sale of patents4 ,sec4 #hjed4 ,gain from disposition of farmland4 ,sec4 #hjee4 ,transition rules related to the treatment of amounts received on retirement or sale or exchange of debt instruments4 ,sec4 #hjef4 ,certain rules with respect to debt instruments issued before ,july #b1 #aihb4 ,sec4 #hjeg4 ,certain rules with respect to stripped bonds purchased before ,july #b1 #aihb4 ,sec4 #hjeh4 ,amount and method of adjustment4 ,sec4 #hjei4 ,old-age1 survivors1 and disability insurance4 ,sec4 #hjfj4 ,hospital insurance4 ,sec4 #hjfa4 ,ministers1 members of religious orders1 and christian science practitioners4 ,sec4 #hjfb4 ,affiliated group defined4 ,sec4 #hjfc4 ,credit for state death taxes4 ,sec4 #hjfd4 ,family-owned business interest4 ,sec4 #hjfe4 ,property within the united states4 ,sec4 #hjff4 ,repeal of deadwood provisions relating to employment taxes4 ,sec4 #hjfg4 ,luxury passenger automobiles4 ,sec4 #hjfh4 ,transportation by air4 ,sec4 #hjfi4 ,taxes on failure to distribute income4 ,sec4 #hjgj4 ,taxes on taxable expenditures4 ,sec4 #hjga4 ,definitions and special rules4 ,sec4 #hjgb4 ,returns4 ,sec4 #hjgc4 ,information returns4 ,sec4 #hjgd4 ,abatements4 ,sec4 #hjge4 ,failure by corporation to pay estimated income tax4 ,sec4 #hjgf4 ,repeal of #bjjh recovery rebates4 ,sec4 #hjgg4 ,repeal of advance payment of portion of increased child credit for #bjjc4 ,sec4 #hjgh4 ,repeal of provisions related to ,,cobra premium assistance4 ,sec4 #hjgi4 ,retirement4 ,sec4 #hjhj4 ,annuities to surviving spouses and dependent children of judges4 ,sec4 #hjha4 ,merchant marine capital construction funds4 ,sec4 #hjhb4 ,valuation tables4 ,sec4 #hjhc4 ,definition of employee4 ,sec4 #hjhd4 ,effective date4 ,subtitle ,b--,conforming ,amendments ,related to ,multiple ,sections ,sec4 #haja4 ,conforming amendments related to multiple sections4 ,i ,tax ,reform for ,individuals ,a ,individual income tax rate reform #ajja4 ,simplification of individual income tax rates 7a7 ,in general ,section #a is amended to read as follows3 #a4 ,tax imposed 7a7 ,in general ,there is hereby imposed on the income of every individual a tax equal to the sum of-- 7#a7 #aj percent bracket #aj percent of so much of the taxable income as does not exceed the #be-percent bracket threshold amount1 7#b7 #be percent bracket #be percent of so much of the taxable income as exceeds the #be-percent bracket threshold amount1 plus 7#c7 #ce percent bracket #aj percent of so much of the modified adjusted gross income 7as defined in section #b7 as exceeds the #ce-percent bracket threshold amount4 7b7 ,bracket threshold amounts ,for purposes of this section-- 7#a7 #be-percent bracket threshold amount ,the term #be-percent bracket threshold amount means-- 7,a7 in the case of a joint return or surviving spouse1 #ga1bjj1 7,b7 in the case of any other individual 7other than an estate or trust71 one-half of the dollar amount in effect under subparagraph 7,a71 and 7,c7 in the case of an estate or trust1 zero4 7#b7 #ce-percent bracket threshold amount ,the term #ce-percent bracket threshold amount means-- 7,a7 in the case of a joint return or surviving spouse1 #dej1jjj1 7,b7 in the case of any other individual 7other than an estate or trust71 #djj1jjj1 and 7,c7 in the case of an estate or trust1 #ab1jjj4 7c7 ,inflation adjustment 7#a7 ,in general ,in the case of any taxable year beginning after #bjad1 each dollar amount in subsections 7b77#a77;,a71 7b77#b77;,a71 7b77#b77;,b71 7b77#b77;,c71 7e77#c77;,a71 and 7e77#c77;,b7 shall be increased by an amount equal to-- 7,a7 such dollar amount1 multiplied by 7,b7 the cost-of-living adjustment determined under this subsection for the calendar year in which the taxable year begins4 ,if any increase determined under the preceding sentence is not a multiple of #ajj1 such increase shall be rounded to the next lowest multiple of #ajj4 7#b7 ,cost-of-living adjustment ,for purposes of this subsection-- 7,a7 ,in general ,the cost-of-living adjustment for any calendar year is the percentage 7if any7 by which-- 7i7 the ,c-,,cpi-,u for the preceding calendar year1 exceeds 7ii7 the normalized ,,cpi for calendar year #bjab4 7,b7 ,special rule for adjustments with a base year after #bjab ,for purposes of any provision which provides for the substitution of a year after #bjab for #bjab in subparagraph 7,a77ii71 subparagraph 7,a7 shall be applied by substituting ,c-,,cpi-,u for normalized ,,cpi in clause 7ii74 7#c7 ,normalized ,,cpi ,for purposes of this subsection1 the normalized ,,cpi for any calendar year is the product of-- 7,a7 the ,,cpi for such calendar year1 multiplied by 7,b7 the ,c-,,cpi-,u transition multiple4 7#d7 ,c-,,cpi-,u transition multiple ,for purposes of this subsection1 the term ,c-,,cpi-,u transition multiple means the amount obtained by dividing-- 7,a7 the ,c-,,cpi-,u for calendar year #bjac1 by 7,b7 the ,,cpi for calendar year #bjac4 7#e7 ,c-,,cpi-,u ,for purposes of this subsection-- 7,a7 ,in general ,the term ,c-,,cpi-,u means the ,chained ,consumer ,price ,index for ,all ,urban ,consumers 7as published by the ,bureau of ,labor ,statistics of the ,department of ,labor74 ,the values of the ,chained ,consumer ,price ,index for ,all ,urban ,consumers taken into account for purposes of determining the cost-of-living adjustment for any calendar year under this subsection shall be the latest values so published as of the date on which such ,bureau publishes the initial value of the ,chained ,consumer ,price ,index for ,all ,urban ,consumers for the month of ,august for the preceding calendar year4 7,b7 ,determination for calendar year ,the ,c-,,cpi-,u for any calendar year is the average of the ,c-,,cpi-,u as of the close of the #ab-month period ending on ,august #ca of such calendar year4 7#f7 ,,cpi ,for purposes of this subsection-- 7,a7 ,in general ,the term ,consumer ,price ,index means the last ,consumer ,price ,index for ,all ,urban ,consumers published by the ,department of ,labor4 ,for purposes of the preceding sentence1 the revision of the ,consumer ,price ,index which is most consistent with the ,consumer ,price ,index for calendar year #aihf shall be used4 7,b7 ,determination for calendar year ,the ,,cpi for any calendar year is the average of the ,consumer ,price ,index as of the close of the #ab-month period ending on ,august #ca of such calendar year4 7d7 ,special rules for certain children with unearned income 7#a7 ,in general ,in the case of any child to whom this subsection applies for any taxable year-- 7,a7 the #be-percent bracket threshold amount shall not be more than the taxable income of such child for the taxable year reduced by the net unearned income of such child1 and 7,b7 the #ce-percent bracket threshold amount shall not be more than the sum of-- 7i7 the taxable income of such child for the taxable year reduced by the net unearned income of such child1 plus 7ii7 the dollar amount in effect under subsection 7b77#b77;,c7 for the taxable year4 7#b7 ,child to whom subsection applies ,this subsection shall apply to any child for any taxable year if-- 7,a7 such child-- 7i7 has not attained age #ah before the close of the taxable year1 or 7ii7 has attained age #ah before the close of the taxable year and is described in paragraph 7#c71 7,b7 either parent of such child is alive at the close of the taxable year1 and 7,c7 such child does not file a joint return for the taxable year4 7#c7 ,certain children whose earned income does not exceed one-half of individual's support ,a child is described in this paragraph if-- 7,a7 such child-- 7i7 has not attained age #ai before the close of the taxable year1 or 7ii7 is a student 7within the meaning of section #ggje7;f77#b77 who has not attained age #bd before the close of the taxable year1 and 7,b7 such child's earned income 7as defined in section #iaa7;d77#b77 for such taxable year does not exceed one-half of the amount of the individual's support 7within the meaning of section #ggje7;c77#a77;,d7 after the application of section #ggje7;f77#e7 7without regard to subparagraph 7,a7 thereof77 for such taxable year4 7#d7 ,net unearned income ,for purposes of this subsection-- 7,a7 ,in general ,the term net unearned income means the excess of-- 7i7 the portion of the adjusted gross income for the taxable year which is not attributable to earned income 7as defined in section #iaa7;d77#b771 over 7ii7 the sum of-- 7,i7 the amount in effect for the taxable year under section #fc7;c77#d77;,a7 7relating to limitation on standard deduction in the case of certain dependents71 plus 7,,ii7 the greater of the amount described in subclause 7,i7 or1 if the child itemizes his deductions for the taxable year1 the amount of the itemized deductions allowed by this chapter for the taxable year which are directly connected with the production of the portion of adjusted gross income referred to in clause 7i74 7,b7 ,limitation based on taxable income ,the amount of the net unearned income for any taxable year shall not exceed the individual's taxable income for such taxable year4 7e7 ,phaseout of #aj-,percent rate 7#a7 ,in general ,the amount of tax imposed by this section 7determined without regard to this subsection7 shall be increased by #e percent of the excess 7if any7 of-- 7,a7 modified adjusted gross income1 over 7,b7 the applicable dollar amount4 7#b7 ,limitation ,the increase determined under paragraph 7#a7 with respect to any taxpayer for any taxable year shall not exceed #ae percent of the lesser of-- 7,a7 the taxpayer's taxable income for such taxable year1 or 7,b7 the #be-percent bracket threshold amount in effect with respect to the taxpayer for such taxable year4 7#c7 ,applicable dollar amount ,for purposes of this subsection1 the term applicable dollar amount means-- 7,a7 in the case of a joint return or a surviving spouse1 #cjj1jjj1 7,b7 in the case of any other individual1 #bej1jjj4 7#d7 ,estates and trusts ,paragraph 7#a7 shall not apply in the case of an estate or trust4 7f7 ,determination of highest rate ,for purposes of any provision of law which refers to the highest rate of tax specified in this section 7or any subsection of this section71 such highest rate shall be treated as being #ce percent4 4 7b7 ,modified adjusted gross income ,section #b is amended by striking subsection 7b71 by redesignating subsections 7c71 7d71 and 7e71 as subsections 7d71 7e71 and 7f71 respectively1 and by inserting after subsection 7a7 the following new subsections3 7b7 ,modified adjusted gross income ,for purposes of section #a-- 7#a7 ,in general ,the term modified adjusted gross income means adjusted gross income-- 7,a7 increased by-- 7i7 any amount excluded from gross income under sections #iaa1 #ica1 and #icc1 7ii7 the excess 7if any7 of-- 7,i7 amounts of interest received or accrued by the taxpayer during the taxable year which are exempt from tax1 over 7,,ii7 amounts disallowed as a deduction by reason of section #afc7;d77#a77;,a7 or #aga7;a77#b71 7iii7 any exclusion from gross income with respect to the cost described in section #fjea7;a77#ad7 7without regard to subparagraphs 7,a7 and 7,b7 thereof71 7iv7 any deduction allowable under section #afb7l7 7relating to special rules for health insurance costs of self-employed individuals71 7v7 any annual addition 7as defined in section #dae7;c77#b77 to a defined contribution plan which is not includible in1 or which is deductible from1 the gross income of the individual for the taxable year1 7vi7 any deduction allowable under section #bbc1 and 7vii7 the excess 7if any7 of-- 7,i7 the social security benefits of the individual for the taxable year 7as defined in section #hf7;d771 over 7,,ii7 the amount included in the gross income of such individual for such taxable year under section #hf1 and 7,b7 decreased by-- 7i7 any deduction allowed under section #agj 7and in the case of an estate or trust1 any deduction allowed under section #fdb7;c771 and 7ii7 qualified domestic manufacturing income4 7#b7 ,determination of adjusted gross income in case of estates and trusts ,for purposes of this subsection1 the adjusted gross income of an estate or trust shall be computed in the same manner as in the case of an individual1 except that-- 7,a7 the deductions for costs which are paid or incurred in connection with the administration of the estate or trust and which would not have been incurred if the property were not held in such trust or estate1 and 7,b7 the deductions allowable under sections #fdb7;b71 #fea1 and #ffa1 shall be treated as allowable in arriving at adjusted gross income4 ,under regulations1 appropriate adjustments shall be made in the application of part ,i of subchapter ,j of this chapter to take into account the application of this paragraph4 7c7 ,qualified domestic manufacturing income 7#a7 ,in general ,for purposes of subsection 7b71 the term qualified domestic manufacturing income for any taxable year means an amount equal to the excess 7if any7 of-- 7,a7 the taxpayer's domestic manufacturing gross receipts for such taxable year1 over 7,b7 the sum of-- 7i7 the cost of goods sold that are allocable to such receipts1 and 7ii7 other expenses1 losses1 or deductions1 which are properly allocable to such receipts4 7#b7 ,allocation method ,the ,secretary shall prescribe rules for the proper allocation of items described in paragraph 7#a7 for purposes of determining qualified domestic manufacturing income4 ,such rules shall provide for the proper allocation of items whether or not such items are directly allocable to domestic manufacturing gross receipts4 7#c7 ,special rules for determining costs 7,a7 ,in general ,for purposes of determining costs under clause 7i7 of paragraph 7#a77;,b71 any item or service brought into the ,united ,states shall be treated as acquired by purchase1 and its cost shall be treated as not less than its value immediately after it entered the ,united ,states4 ,a similar rule shall apply in determining the adjusted basis of leased or rented property where the lease or rental gives rise to domestic manufacturing gross receipts4 7,b7 ,exports for further manufacture ,in the case of any property described in subparagraph 7,a7 that had been exported by the taxpayer for further manufacture1 the increase in cost or adjusted basis under subparagraph 7,a7 shall not exceed the difference between the value of the property when exported and the value of the property when brought back into the ,united ,states after the further manufacture4 7#d7 ,domestic manufacturing gross receipts ,for purposes of this subsection-- 7,a7 ,in general ,the term domestic manufacturing gross receipts means the gross receipts of the taxpayer which are derived from-- 7i7 any lease1 rental1 license1 sale1 exchange1 or other disposition of tangible personal property which was manufactured1 produced1 grown1 or extracted by the taxpayer in whole or in significant part within the ,united ,states1 or 7ii7 in the case of a taxpayer engaged in the active conduct of a construction trade or business1 construction of real property performed in the ,united ,states by the taxpayer in the ordinary course of such trade or business if such real property is placed in service after ,december #ca1 #bjad4 7,b7 ,exceptions ,such term shall not include gross receipts of the taxpayer which are derived from-- 7i7 the sale of food and beverages prepared by the taxpayer at a retail establishment1 7ii7 the transmission or distribution of electricity1 natural gas1 or potable water1 and 7iii7 the lease1 rental1 license1 sale1 exchange1 or other disposition of land4 7,c7 ,special rule for certain government contracts ,gross receipts derived from the manufacture or production of any property described in subparagraph 7,a77i7 shall be treated as meeting the requirements of subparagraph 7,a77i7 if-- 7i7 such property is manufactured or produced by the taxpayer pursuant to a contract with the ,federal ,government1 and 7ii7 the ,federal ,acquisition ,regulation requires that title or risk of loss with respect to such property be transferred to the ,federal ,government before the manufacture or production of such property is complete4 7,d7 ,treatment of activities in ,puerto ,rico ,in the case of any taxpayer with gross receipts for any taxable year from sources within the ,commonwealth of ,puerto ,rico1 if all of such receipts are taxable under section #a for such taxable year1 then this paragraph shall be applied by treating each reference in subparagraph 7,a7 to the ,united ,states as including the ,commonwealth of ,puerto ,rico4 7,e7 ,tangible personal property ,the term tangible personal property shall not include computer software or any property described in paragraph 7#c7 or 7#d7 of section #afh7;f74 7,f7 ,related persons 7i7 ,in general ,the term domestic manufacturing gross receipts shall not include any gross receipts of the taxpayer derived from property leased1 licensed1 or rented by the taxpayer for use by any related person4 7ii7 ,related person ,for purposes of clause 7i71 a person shall be treated as related to another person if such persons are treated as a single employer under subsection 7a7 or 7b7 of section #eb or subsection 7m7 or 7o7 of section #dad1 except that determinations under subsections 7a7 and 7b7 of section #eb shall be made without regard to section #aefc7;b74 7#e7 ,certain income not qualified 7,a7 ,net earnings from self employment ,domestic manufacturing gross receipts shall not include any amount which is properly allocable to the taxpayer's net earnings from self employment 7determined after any reduction provided under section #adjb7m774 7,b7 ,certain accounting method adjustments ,domestic manufacturing gross receipts shall not include any amount attributable to-- 7i7 a qualified change in method of accounting 7as defined in section #ccja7;d77#b7 of the ,tax ,reform ,act of #bjad71 or 7ii7 any other change in method of accounting which is required by the amendments made by such ,act4 7#f7 ,application of section to pass-through entities 7,a7 ,partnerships and s corporations ,except as provided in subparagraph 7,b71 in the case of a partnership or ,s corporation1 each partner or shareholder shall take into account such person's allocable share of each item described in subparagraph 7,a7 or 7,b7 of paragraph 7#a7 7determined without regard to whether the items described in such subparagraph 7,a7 exceed the items described in such subparagraph 7,b774 7,b7 ,publicly traded partnerships ,in the case of a publicly traded partnership described in section #ggjd7;c71 each partner shall not take into account any allocable share of any item referred to in subparagraph 7,a74 7,c7 ,trusts and estates ,in the case of a trust or estate1 the items referred to in subparagraph 7,a7 7as determined therein7 shall be apportioned between the beneficiaries and the fiduciary 7and among the beneficiaries7 under regulations prescribed by the ,secretary4 7#g7 ,regulations ,the ,secretary shall prescribe such regulations or other guidance as may be necessary or appropriate to carry out the purposes of this section1 including regulations or other guidance-- 7,a7 which prevent more than #a taxpayer from taking into account the same qualified domestic manufacturing income1 and 7,b7 which require or restrict the allocation of items under paragraph 7#f7 and require such reporting for purposes of carrying out such paragraph as the ,secretary determines appropriate4 7#h7 ,phase-in of exclusion ,in the case of any taxable year beginning before ,january #a1 #bjag1 the term qualified domestic manufacturing income shall be an amount equal to the product of the qualified domestic manufacturing income determined without regard to this paragraph1 multiplied by-- 7,a7 in the case of any taxable year beginning in #bjae1 #cc percent1 and 7,b7 in the case of any taxable year beginning in #bjaf1 #fg percent4 4 7c7 ,application of section #ae 7#a7 ,in general ,subsection 7a7 of section #ae is amended by striking this chapter and inserting section #aa4 7#b7 ,conforming amendments 7,a7 ,section #ae is amended by striking subsections 7d7 and 7f7 and by redesignating subsection 7e7 as subsection 7d74 7,b7 ,section #ae7;d71 as redesignated by subparagraph 7,a71 is amended by striking section #a or #aa7;b7 and inserting section #aa7;b74 7,c7 ,subchapter ,a of chapter #a is amended-- 7i7 by redesignating section #ab as section #ac1 7ii7 by redesignating section #ae 7as amended by this subsection7 as section #ab and moving such section from part ,,iii of such subchapter to after section #aa in part ,,ii of such subchapter1 7iii7 by striking part ,,iii1 and 7iv7 by amending the table of sections for part ,,ii of such subchapter by redesignating the item relating to section #ab as an item relating to section #ac and by inserting after the item relating to section #aa the following new item3 ,sec4 #ab4 ,effect of changes4 4 7,d7 ,section #fjac7;c7 is amended by striking sections #ae1 #ddc1 and #ghea7;a77#a77;,a7 and inserting sections #ddc and #ghea7;a77#a77;,a74 7d7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 #ajjb4 ,deduction for adjusted net capital gain 7a7 ,in general ,part ,,vi of subchapter ,b of chapter #a1 as amended by section #caje1 is amended by inserting after section #afh the following new section3 #afi4 ,adjusted net capital gain 7a7 ,in general ,if for any taxable year a taxpayer other than a corporation has an adjusted net capital gain1 #dj percent of the amount of the adjusted net capital gain shall be allowed as a deduction from gross income4 7b7 ,adjusted net capital gain ,for purposes of this section1 the term adjusted net capital gain means the sum of-- 7#a7 net capital gain reduced 7but not below zero7 by the net collectibles gain1 plus 7#b7 qualified dividend income4 7c7 ,net capital gain reduced by amounts taken into account as investment income ,for purposes of this section1 the net capital gain for any taxable year shall be reduced 7but not below zero7 by the amount which the taxpayer takes into account as investment income under section #afc7;d77#d77;,b77iii74 7d7 ,net collectibles gain ,for purposes of this section-- 7#a7 ,in general ,the term net collectibles gain means the excess 7if any7 of-- 7,a7 collectibles gain1 over 7,b7 collectibles loss4 7#b7 ,collectibles gain and loss ,the terms collectibles gain and collectibles loss mean gain or loss 7respectively7 from the sale or exchange of a collectible 7as defined in section #djh7m7 without regard to paragraph 7#c7 thereof7 which is a capital asset held for more than #a year but only to the extent such gain is taken into account in computing gross income and such loss is taken into account in computing taxable income4 7#c7 ,partnerships1 etc ,for purposes of paragraph 7#b71 any gain from the sale of an interest in a partnership1 ,s corporation1 or trust which is attributable to unrealized appreciation in the value of collectibles shall be treated as gain from the sale or exchange of a collectible4 ,rules similar to the rules of section #gea shall apply for purposes of the preceding sentence4 7e7 ,qualified dividend income ,for purposes of this section-- 7#a7 ,in general ,the term qualified dividend income means dividends received during the taxable year from-- 7,a7 domestic corporations1 and 7,b7 qualified foreign corporations4 7#b7 ,certain dividends excluded ,such term shall not include-- 7,a7 any dividend from a corporation which for the taxable year of the corporation in which the distribution is made1 or the preceding taxable year1 is a corporation exempt from tax under section #eja or #eba1 7,b7 any amount allowed as a deduction under section #eia 7relating to deduction for dividends paid by mutual savings banks1 etc471 and 7,c7 any dividend described in section #djd7k74 7#c7 ,coordination with section #bdf7;c7 ,such term shall not include any dividend on any share of stock-- 7,a7 with respect to which the holding period requirements of section #bdf7;c7 are not met 7determined without regard to paragraph 7#e7 of section #bdf7;c7 and by substituting in section #bdf7;c7 #fj days for #de days each place it appears and by substituting #aba-;day period for #ia-;day period71 or 7,b7 to the extent that the taxpayer is under an obligation 7whether pursuant to a short sale or otherwise7 to make related payments with respect to positions in substantially similar or related property4 7#d7 ,qualified foreign corporations 7,a7 ,in general ,except as otherwise provided in this subparagraph1 the term qualified foreign corporation means any foreign corporation if-- 7i7 such corporation is incorporated in a possession of the ,united ,states1 or 7ii7 such corporation is eligible as a qualified resident for all of the benefits provided under a comprehensive income tax treaty with the ,united ,states which the ,secretary determines is satisfactory for purposes of this paragraph and which includes an exchange of information program4 7,b7 ,dividends on stock readily tradable on ,united ,states securities market ,a foreign corporation not otherwise treated as a qualified foreign corporation under subparagraph 7,a7 shall be so treated with respect to any dividend paid by such corporation if the stock with respect to which such dividend is paid is readily tradable on an established securities market in the ,united ,states4 7,c7 ,exclusion of dividends of certain foreign corporations ,the term qualified foreign corporation shall not include any foreign corporation which for the taxable year of the corporation in which the dividend was paid1 or the preceding taxable year1 is a passive foreign investment company 7as defined in section #abig74 7#e7 ,treatment of dividends from regulated investment companies and real estate investment trusts ,a dividend received from a regulated investment company or a real estate investment trust shall be subject to the limitations prescribed in sections #hed and #heg4 4 7b7 ,deduction allowed whether or not individual itemizes deductions ,section #fb7;a7 is amended by inserting after paragraph 7#g7 the following new paragraph3 7#h7 ,adjusted net capital gain ,the deduction allowed by section #afi4 4 7c7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 #ajjc4 ,conforming amendments related to simplification of individual income tax rates 7a7 ,amendments related to modification of inflation adjustment 7#a7 ,section #be;,b7b77#c77;,b7 is amended by striking section #a7;f77#c7 for the calendar year in which the taxable year begins1 determined by substituting calendar year #bjje for calendar year #aiib in subparagraph 7,b7 thereof and inserting section #a7;c77#b77;,a7 for the calendar year in which the taxable year begins1 determined by substituting calendar year #bjje for calendar year #bjab in clause 7ii7 thereof4 7#b7 ,subclause 7,,ii7 of section #cf;,b7b77#c77;,a77ii7 is amended by striking consumer price index and inserting ,c-,,cpi-,u 7as defined in section #a7;c774 7#c7 ,section #da7;e77#e77;,c7 is amended to read as follows3 7,c7 ,cost-of-living adjustment defined 7i7 ,in general ,the cost-of-living adjustment for any calendar year is the cost-of-living adjustment for such calendar year determined under section #a7;c77#b77;,a71 by substituting calendar year #aihg for calendar year #bjab in clause 7ii7 thereof4 7ii7 ,special rule where base period ends in a calendar year other than #aihc or #aihd ,if the base period of any taxpayer does not end in #aihc or #aihd1 clause 7i7 shall be applied by substituting the calendar year in which such base period ends for #aihg4 4 7#d7 ,section #abe7;i77#b7 is amended-- 7,a7 by striking section #a7;f77#c7 for the calendar year in which the taxable year begins by substituting calendar year #bjab for calendar year #aiib in subparagraph 7,b7 thereof in subparagraph 7,b7 and inserting section #a7;c77#b77;,a7 for the calendar year in which the taxable year begins1 and 7,b7 by striking #ej both places it appears in the last sentence and inserting #ajj4 7#e7 ,section #acg7;f7 is amended-- 7,a7 by striking section #a7;f77#c7 for the calendar year in which the taxable year begins1 determined by substituting calendar year #bjja for calendar year #aiib in subparagraph 7,b7 thereof in paragraph 7#b7 and inserting section #a7;c77#b77;,a7 for the calendar year in which the taxable year begins1 determined by substituting calendar year #bjja for calendar year #bjab in clause 7ii7 thereof1 and 7,b7 in the last sentence thereof-- 7i7 by striking #aj the first place it appears and inserting #ajj1 and 7ii7 by striking nearest multiple of #aj and inserting next lowest multiple of #ajj4 7#f7 ,section #afb7o77#c7 is amended by inserting as in effect before enactment of the ,tax ,reform ,act of #bjad after section #a7;f77#e74 7#g7 ,section #bbj7;g77#b7 is amended by striking section #a7;f77#c7 for the calendar year in which the taxable year begins by substituting calendar year #aiig for calendar year #aiib in subparagraph 7,b7 thereof and inserting section #a7;c77#b77;,a7 for the calendar year in which the taxable year begins1 determined by substituting calendar year #aiig for calendar year #bjab in clause 7ii7 thereof4 7#h7 ,section #bbc7;g77#a7 is amended by striking all that follows subparagraph 7,a7 and inserting the following3 7,b7 the cost-of-living adjustment determined under section #a7;c77#b77;,a7 for the calendar year in which the taxable year begins1 determined-- 7i7 by substituting for calendar year #bjab in clause 7ii7 thereof-- 7,i7 except as provided in clause 7ii71 calendar year #aiig1 and 7,,ii7 in the case of each dollar amount in subsection 7c77#b77;,a71 calendar year #bjjc1 and 7ii7 by substituting ,march #ca for ,august #ca in paragraphs 7#e77;,b7 and 7#f77;,b7 of section #a7;c74 ,the ,secretary shall publish the dollar amounts as adjusted under this subsection for taxable years beginning in any calendar year no later than ,june #a of the preceding calendar year4 4 7#i7 ,section #dcj7;c77#g77;,d77vii77,,ii7 is amended by striking section #a7;f77#c7 for the calendar year1 determined by substituting calendar year #bjji for calendar year #aiib in subparagraph 7,b7 thereof and inserting section #a7;c77#b77;,a7 for the calendar year1 determined by substituting calendar year #bjji for calendar year #bjab in clause 7ii7 thereof4 7#aj7 ,section #eab7;d77#b77;,b7 is amended by striking section #a7;f77#c7 for the calendar year in which the taxable year begins1 by substituting calendar year #aiid for calendar year #aiib in subparagraph 7,b7 thereofand inserting section #a7;c77#b77;,a7 for the calendar year in which the taxable year begins1 determined by substituting calendar year #aiid for calendar year #bjab in clause 7ii7 thereof4 7#aa7 ,section #eac7;h77#b77;,c77ii7 is amended by striking section #a7;f77#c7 for the calendar year in which the taxable year begins by substituting calendar year #aihg for calendar year #aiib in subparagraph 7,b7 thereof and inserting section #a7;c77#b77;,a7 for the calendar year in which the taxable year begins1 determined by substituting calendar year #aihg for calendar year #bjab in clause 7ii7 thereof4 7#ab7 ,section #hgg;,a7a77#c77;,b77i77,,ii7 is amended by striking section #a7;f77#c7 for the calendar year in which the taxable year begins1 by substituting calendar year #bjjg for calendar year #aiib in subparagraph 7,b7 thereof and inserting section #a7;c77#b77;,a7 for the calendar year in which the taxable year begins1 determined by substituting calendar year #bjjg for calendar year #bjab in clause 7ii7 thereof4 7#ac7 ,section #iaa7;b77#b77;,d77ii77,,ii7 is amended by striking section #a7;f77#c7 for the calendar year in which the taxable year begins1 determined by substituting #bjjd for #aiib in subparagraph 7,b7 thereof and inserting section #a7;c77#b77;,a7 for the calendar year in which the taxable year begins1 determined by substituting calendar year #bjjd for calendar year #bjab in clause 7ii7 thereof4 7#ad7 ,section #abgd;,a7d77#b7 is amended to read as follows3 7#b7 ,inflation adjustment 7,a7 ,in general ,in the case of any debt instrument arising out of a sale or exchange during any calendar year after #bjad1 each adjusted dollar amount shall be increased by an amount equal to-- 7i7 such adjusted dollar amount1 multiplied by 7ii7 the cost-of-living adjustment determined under section #a7;c77#b77;,a7 for such calendar year1 determined by substituting calendar year #bjac for calendar year #bjab in clause 7ii7 thereof4 7,b7 ,adjusted dollar amounts ,for purposes of this paragraph1 the term adjusted dollar amount means the dollar amounts in subsections 7b7 and 7c71 in each case as in effect for calendar year #bjad4 7,c7 ,rounding ,any increase under subparagraph 7,a7 shall be rounded to the nearest multiple of #ajj4 4 7#ae7 ,section #bjaj7;c77#c77;,b77ii7 is amended by striking section #a7;f77#c7 for such calendar year by substituting calendar year #bjaj for calendar year #aiib in subparagraph 7,b7 thereof and inserting section #a7;c77#b77;,a7 for such calendar year1 determined by substituting calendar year #bjaj for calendar year #bjab in clause 7ii7 thereof4 7#af7 ,section #bjcb;,a7a77#c77;,b7 is amended by striking section #a7;f77#c7 for such calendar year by substituting calendar year #aiig for calendar year #aiib in subparagraph 7,b7 thereof and inserting section #a7;c77#b77;,a7 for such calendar year1 determined by substituting calendar year #aiig for calendar year #bjab in clause 7ii7 thereof4 7#ag7 ,section #bejc7;b77#b77;,b7 is amended by striking section #a7;f77#c7 for such calendar year by substituting calendar year #aiig for calendar year #aiib in subparagraph 7,b7 thereof and inserting section #a7;c77#b77;,a7 for the calendar year1 determined by substituting calendar year #aiig for calendar year #bjab in clause 7ii7 thereof4 7#ah7 ,section #dafa7;b77#b77;,c77i77,,ii7 is amended by striking section #a7;f77#c7 for such calendar year1 determined by substituting #bjjd for #aiib in subparagraph 7,b7 thereof and inserting section #a7;c77#b77;,a7 for such calendar year1 determined by substituting calendar year #bjjd for calendar year #bjab in clause 7ii7 thereof4 7#ai7 ,section #dbfa7;e77#d77;,a77ii7 is amended by striking section #a7;f77#c7 for such calendar year by substituting the year before the last nonindexed year for calendar year #aiib in subparagraph 7,b7 thereof and inserting section #a7;c77#b77;,a7 for such calendar year1 determined by substituting the year before the last nonindexed year for calendar year #bjab in clause 7ii7 thereof4 7#bj7 ,section #dihj;,i7b77#c77;,c77v77,,ii7 is amended 7,a7 by striking section #a7;f77#c7 and inserting section #a7;c77#b77;,a71 7,b7 by striking subparagraph 7,b7 and inserting clause 7ii71 and 7,c7 by striking #aiib and inserting #bjab4 7#ba7 ,section #ejjj;,a7c77#c77;,d77ii7 is amended-- 7,a7 by striking section #a7;f77#c7 and inserting section #a7;c77#b77;,a71 7,b7 by striking subparagraph 7,b7 and inserting clause 7ii71 and 7,c7 by striking #aiib and inserting #bjab4 7#bb7 ,section #fjci;,f7d7 is amended by striking section #a7;f77#c71 except that subparagraph 7,b7 thereof and inserting section #a7;c77#b77;,a71 except that clause 7ii7 thereof 4 7#bc7 ,section #fcbc7;i77#d77;,b7 is amended by striking section #a7;f77#c7 for the calendar year1 determined by substituting calendar year #aiif for calendar year #aiib in subparagraph 7,b7 thereof and inserting section #a7;c77#b77;,a7 for the calendar year1 determined by substituting calendar year #aiif for calendar year #bjab in clause 7ii7 thereof4 7#bd7 ,section #fccd7;g77#a77;,b7 is amended by striking section #a7;f77#c7 for such calendar year1 by substituting calendar year #aiih for calendar year #aiib in subparagraph 7,b7 thereof and inserting section #a7;c77#b77;,a7 for such calendar year1 determined by substituting calendar year #aiii for calendar year #bjab in clause 7ii7 thereof4 7#be7 ,section #fgba7;f77#a7 is amended-- 7,a7 by striking section #a7;f77#c7 and inserting section #a7;c77#b77;,a71 7,b7 by striking subparagraph 7,b7 and inserting clause 7ii71 and 7,c7 by striking #aiib and inserting #bjab4 7#bf7 ,section #fgbb7;f77#a7 is amended-- 7,a7 by striking section #a7;f77#c7 and inserting section #a7;c77#b77;,a71 7,b7 by striking subparagraph 7,b7 and inserting clause 7ii71 and 7,c7 by striking #aiib and inserting #bjab4 7#bg7 ,section #gdcj7;c77#a7 is amended by striking section #a7;f77#c7 for such calendar year1 by substituting calendar year #aiie for calendar year #aiib in subparagraph 7,b7 thereof in the flush text at the end and inserting section #a7;c77#b77;,a7 for such calendar year1 determined by substituting calendar year #aiie for calendar year #bjab in clause 7ii7 thereof4 7#bh7 ,section #ghgb7;g77#e7 is amended to read as follows3 7#e7 ,inflation adjustment 7,a7 ,in general ,in the case of any loan made during any calendar year after #bjad to which paragraph 7#a7 applies1 the adjusted dollar amount shall be increased by an amount equal to-- 7i7 such adjusted dollar amount1 multiplied by 7ii7 the cost-of-living adjustment determined under section #a7;c77#b77;,a7 for such calendar year1 determined by substituting calendar year #bjac for calendar year #bjab in clause 7ii7 thereof4 7,b7 ,adjusted dollar amount ,for purposes of this paragraph1 the term adjusted dollar amount means the dollar amount in paragraph 7#b7 as in effect for calendar year #bjad4 7,c7 ,rounding ,any increase under subparagraph 7,a7 shall be rounded to the nearest multiple of #ajj4 4 7b7 ,amendments related to deduction for adjusted net capital gain 7#a7 ,section #afc7;d77#d77;,b7 is amended by striking section #a7;h77#aa77;,b7 and inserting section #afi7;e74 7#b7 ,section #agb7;d77#b77;,b7 is amended by inserting the deduction allowable under section #afi and before the exclusion4 7#c7 ,section #cja7;f77#d7 is amended by striking section #a7;h77#aa7 and inserting section #afi7;e74 7#d7 ,section #cjf7;a77#a77;,d7 is amended by striking section #a7;h77#aa7 and inserting section #afi7;e74 7#e7 ,the last sentence of section #dec;,a7c77#c7 is amended by striking capital gain and all that follows and inserting capital gain1 the deduction under section #afi shall be taken into account44 7#f7 ,sections #eca and #eda are each amended by striking #bj percent and inserting #ba percent4 7#g7 ,section #ehd7;c7 is amended by striking and to which section #a7;h77#aa7 applies in the last sentence and inserting which is qualified dividend income 7as defined in section #afi7;e77 in the hands of such common trust fund4 7#h7 ,section #fda7;c77#b77;,c7 7prior to redesignation by title ,,ii7 is amended by adding at the end the following new clause3 7v7 ,the deduction allowed by section #afi4 4 7#i7 ,the first sentence of section #fdb7;c77#d7 is amended by striking consists of and all that follows and inserting consists of long-term capital gain or gain described in section #abjb7;a71 proper adjustments shall be made for any deduction allowable to the trust or estate under section #afi and for any exclusion allowable under section #abjb44 7#aj7 ,the last sentence of section #fdc7;a77#c7 is amended to read as follows3 ,the deduction under section #afi and the exclusion under section #abjb shall not be taken into account44 7#aa7 ,section #fia7;c77#d7 is amended by striking #a7;h7 and inserting #afi4 7#ab7 ,section #gjb7;a77#e7 is amended by striking section #a7;h77#aa7 and inserting section #afi4 7#ac7 ,section #hed is amended-- 7,a7 by striking section #a7;h77#aa7 7relating to maximum rate of tax on dividends7 in subsection 7a7 and inserting section #afi 7relating to adjusted net capital gain71 7,b7 by striking ,maximum rate under section #a7;h7 in the heading of subsection 7b77#a77;,b7 and inserting ,determination of adjusted net capital gain1 and 7,c7 by striking section #a7;h77#aa77;,b7 in subsection 7b77#d7 and inserting section #afi7;e74 7#ad7 ,section #heg7;c77#b7 is amended-- 7,a7 by striking section #a7;h77#aa77;,b7 in subparagraph 7,d7 and inserting section #afi7;e71 and 7,b7 by striking ,section #a7;h77#aa7 in the heading and inserting ,section #afi7;e74 7#ae7 ,section #ijd7;b7 is amended-- 7,a7 by amending paragraph 7#b7 to read as follows3 7#b7 ,capital gains ,for purposes of this section1 taxable income from sources outside the ,united ,states shall include gain from the sale or exchange of capital assets 7including gain so treated under section #abca7 only to the extent of the lesser of-- 7,a7 capital gain net income from sources without the ,united ,states1 or 7,b7 capital gain net income4 1 and 7,b7 by striking paragraph 7#c74 7#af7 ,section #abfj7;a7 is amended by striking long-term capital gain the first place such term appears and all that follows and inserting long-term capital gain1 such gain shall be treated as ordinary income to the extent such gain exceeds the net underlying long-term capital gain44 7#ag7 ,section #adaa7;c77#a77;,b7 is amended by inserting 7other than section #afi7 after this subtitle4 7#ah7 ,section #dihe7;a77#a7 is amended by striking the rate of tax specified in section #a7;h77#a77;,c7 and inserting #ba percent4 7#ai7 ,section #geah7;g77#f77;,a7 is amended by striking all that follows clause 7i7 and inserting the following3 7ii7 by increasing the tax imposed by chapter #a by the product of the amount of such withdrawal1 multiplied by-- 7,i7 in the case of a taxpayer other than a corporation1 #fj percent of the highest rate of tax specified in section #a1 and 7,,ii7 in the case of a corporation1 the highest rate of tax specified in section #aa4 4 7#bj7 ,section #eceaa7;f7 of title #df1 ,united ,states ,code1 is amended by-- 7,a7 by amending paragraph 7#a77;,b7 to read as follows3 7,b7 increasing the tax imposed by chapter #a of such ,code by the product of the amount of such withdrawal1 multiplied by-- 7i7 in the case of a taxpayer other than a corporation1 the highest rate of tax specified in section #a 7#fj percent of such highest rate in the case of so much of such withdrawal as is made from the capital gain account71 and 7ii7 in the case of a corporation1 the highest rate of tax specified in section #aa4 1 and 7,b7 by striking paragraph 7#b7 and by redesignating paragraphs 7#c7 and 7#d7 as paragraphs 7#b7 and 7#c71 respectively4 7#ba7 ,the table of sections for part ,,vi of subchapter ,b of chapter #a is amended by inserting after the item relating to section #afh the following new item3 ,sec4 #afi4 ,adjusted net capital gain4 4 7c7 ,other conforming amendments 7#a7 ,section #be;,b7b77#b7 is amended by striking ,in the case of-- and all that follows through any taxpayer not described in paragraph 7#a7 or subparagraph 7,a71 and inserting ,in the case of any taxpayer not described in paragraph 7#a714 7#b7 ,section #cf;,b7b77#c77;,b77ii77,i77aa7 is amended to read as follows3 7aa7 who is described in section #a7;b77#a77;,b7 and who does not have any dependents for the taxable year1 4 7#c7 ,section #dhf;,b7b77#a7 is amended-- 7,a7 by striking maximum rate in effect and inserting highest rate specified1 and 7,b7 by striking section #a7;e7 and inserting section #a4 7#d7 ,section #eaa7;b77#a7 is amended to read as follows3 7#a7 ,imposition of tax ,there is hereby imposed for each taxable year on the unrelated business taxable income of every trust described in paragraph 7#b7 a tax computed as provided in section #a4 ,in making such computation for purposes of this section1 the terms taxable income and modified adjusted gross income as used in section #a shall both be read as unrelated business taxable income as defined in section #eab4 4 7#e7 ,section #fda7;a7 is amended by striking section #a7;e7 shall apply to the taxable income and inserting section #a shall apply to the income4 7#f7 ,section #fda7;c77#b77;,a7 is amended to read as follows3 7,a7 ,the dollar amount in effect under section #a7;b77#b77;,c7 shall be treated as being zero4 4 7#g7 ,section #fdf7;b7 is amended to read as follows3 7b7 ,taxation of income of trust ,except as provided in subsection 7f77#a77;,b77ii71 there is hereby imposed on the taxable income of an electing ,settlement ,trust a tax at the rate specified in section #a7;a77#a74 ,such tax shall be in lieu of the income tax otherwise imposed by this chapter on such income4 4 7#h7 ,section #fhe7;c7 is amended by striking ,section #a7;e7 and inserting ,section #a4 7#i7 ,section #acih7;c7 is amended by striking paragraphs 7#a7 and 7#b71 by redesignating paragraph 7#c7 as paragraph 7#b71 and by inserting before paragraph 7#b7 as so redesignated the following new paragraph3 7#a7 ,computation and payment of tax ,except as otherwise provided in this section or part ,i of subchapter ,a1 the taxable income and modified adjusted gross income of the estate shall be computed in the same manner as for an individual4 ,the tax shall be computed under section #a and shall be paid by the trustee4 4 7#aj7 ,section #cdjb7p77#a77;,b7 is amended by striking any percentage applicable to any of the #c lowest income brackets in the table under section #a7;c71 and inserting #aj percent1 #be percent1 #ce percent14 7#aa7 ,section #cdjb7q77#a7 is amended by striking the third lowest rate of tax applicable under section #a7;c7 and inserting the highest rate of tax specified in section #a4 7#ab7 ,section #cdjb7r77#c7 is amended by striking the amount of tax which would be imposed by section #a7;c7 7determined without regard to any rate of tax in excess of the fourth lowest rate of tax applicable under section #a7;c77 on an amount of taxable income equal to and inserting an amount equal to the product of the highest rate of tax specified in section #a multiplied by4 7#ac7 ,section #cdjf7;a77#a7 is amended by striking the fourth lowest rate of tax applicable under section #a7;c7 and inserting the highest rate of tax specified in section #a4 7#ad7 ,section #fajc7;e77#a77;,a77iii7 is amended by striking section #a7;g7 and inserting section #a7;d74 7d7 ,withholding from supplemental wage payments 7#a7 ,in general ,if an employer elects under ,treasury ,regulation section #ca4cdjb7;g7-#a to determine the amount to be deducted and withheld from any supplemental wage payment by using a flat percentage rate1 the rate to be used in determining such amount shall not be less than #ce percent4 7#b7 ,repeal of superceded provision ,the ,american ,jobs ,creation ,act of #bjjd is amended by striking section #ijd4 7e7 ,effective date 7#a7 ,in general ,except as otherwise provided in this subsection1 the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 7#b7 ,withholding from supplemental wage payments ,the provisions of1 and amendments made by1 subsection 7d7 shall apply to payments made after ,december #ca1 #bjad4 ,b ,simplification of tax benefits for families #aaja4 ,standard deduction 7a7 ,increase in standard deduction ,subsection 7c7 of section #fc is amended to read as follows3 7c7 ,standard deduction ,for purposes of this subtitle-- 7#a7 ,in general ,except as otherwise provided in this subsection1 the term standard deduction means-- 7,a7 #bb1jjj1 in the case of a joint return1 and 7,b7 one-half of the amount in effect under subparagraph 7,a7 for the taxable year1 in any other case4 7#b7 ,phaseout of standard deduction ,the amount of the standard deduction determined under this subsection 7without regard to this paragraph and after the application of paragraph 7#d77 shall be reduced 7but not below zero7 by an amount equal to #bj percent of the excess 7if any7 of-- 7,a7 the taxpayer's modified adjusted gross income 7as defined in section #b7;b77 for the taxable year1 over 7,b7 7i7 the joint return standard deduction phaseout threshold for the taxable year1 in the case of a taxpayer described in paragraph 7#a77;,a71 and 7ii7 the non-joint return standard deduction phaseout threshold for the taxable year1 in any other case4 7#c7 ,standard deduction phaseout thresholds 7,a7 ,joint return standard deduction phaseout threshold ,the term joint return standard deduction phaseout threshold means1 with respect to any taxable year-- 7i7 the dollar amount in effect under section #a7;e77#c77;,a7 for such taxable year1 plus 7ii7 the product of-- 7,i7 the dollar amount in effect under section #a7;b77#a77;,a7 for such taxable year1 multiplied by 7,,ii7 #c4 7,b7 ,non-joint return standard deduction phaseout threshold ,the term non-joint return standard deduction phaseout threshold means1 with respect to any taxable year-- 7i7 the dollar amount in effect under section #a7;e77#c77;,b7 for such taxable year1 plus 7ii7 the product of-- 7,i7 the dollar amount in effect under section #a7;b77#a77;,b7 for such taxable year1 multiplied by 7,,ii7 #c4 7#d7 ,limitation on standard deduction in the case of certain dependents ,in the case of an individual who is a dependent of another taxpayer for a taxable year beginning in the calendar year in which the individual's taxable year begins1 the standard deduction applicable to such individual for such individual's taxable year shall not exceed the greater of-- 7,a7 #ejj1 or 7,b7 the sum of #bej and such individual's earned income 7as defined in section #bd7;d77#b774 7#e7 ,certain individuals1 etc41 not eligible for standard deduction ,in the case of-- 7,a7 a married individual filing a separate return where such individual's spouse elects to itemize deductions1 7,b7 a nonresident alien individual1 7,c7 an individual making a return under section #ddc7;a77#a7 for a period of less than #ab months on account of a change in his annual accounting period1 or 7,d7 an estate or trust1 common trust fund1 or partnership1 the standard deduction shall be zero4 7#f7 ,inflation adjustments ,in the case of any taxable year beginning after #bjad1 each of the dollar amounts in paragraphs 7#a77;,a7 and 7#d7 shall be increased by an amount equal to-- 7,a7 such dollar amount1 multiplied by 7,b7 the cost-of-living adjustment determined-- 7i7 in the case of the dollar amount in paragraph 7#a77;,a71 under section #a7;c77#b77;,a7 for the calendar year in which the taxable year begins1 7ii7 in the case of the dollar amount in paragraph 7#d77;,a71 under section #a7;c77#b77;,a7 for the calendar year in which the taxable year begins determined by substituting calendar year #aihg for calendar year #bjab in clause 7ii7 thereof1 and 7iii7 in the case of the dollar amount in paragraph 7#d77;,b71 under section #a7;c77#b77;,a7 for the calendar year in which the taxable year begins determined by substituting calendar year #aiig for calendar year #bjab in clause 7ii7 thereof4 ,if any increase determined under the preceding sentence is not a multiple of #ajj1 such increase shall be rounded to the next lowest multiple of #ajj4 4 7b7 ,additional deduction for unmarried individuals with at least one qualifying child 7#a7 ,in general ,part ,,vii of subchapter ,b of chapter #a is amended by redesignating section #bbd as section #bbe and by inserting after section #bbc the following new section3 #bbd4 ,deduction for unmarried individuals with at least one qualifying child 7a7 ,in general ,in the case of an unmarried individual with at least one qualifying child 7within the meaning of section #ggje71 there shall be allowed as a deduction an amount equal to #e1ejj4 7b7 ,phaseout of deduction ,the amount of the deduction determined under subsection 7a7 7without regard to this subsection7 shall be reduced 7but not below zero7 by an amount equal to the excess 7if any7 of-- 7#a7 the taxpayer's adjusted gross income 7determined without regard to this section7 for the taxable year1 over 7#b7 #cj1jjj4 7c7 ,unmarried individual ,for purposes of this section1 the term unmarried individual means any individual who-- 7#a7 is not married as of the close of the taxable year 7as determined by applying section #ggjc71 7#b7 is not a surviving spouse 7as defined in section #b7;a77 for the taxable year1 and 7#c7 is not a dependent of another taxpayer for a taxable year beginning in the calendar year in which the individual's taxable year begins4 7d7 ,inflation adjustments 7#a7 ,deduction amount ,in the case of any taxable year beginning after #bjad1 the dollar amount in subsection 7a7 shall be increased by an amount equal to-- 7,a7 such dollar amount1 multiplied by 7,b7 the cost-of-living adjustment determined under section #a7;c77#b77;,a7 for the calendar year in which the taxable year begins4 7#b7 ,phaseout threshold ,in the case of any taxable year beginning after #bjae1 the dollar amount in subsection 7b77#b7 shall be increased by an amount equal to-- 7,a7 such dollar amount1 multiplied by 7,b7 the cost-of-living adjustment determined under section #a7;c77#b77;,a7 for the calendar year in which the taxable year begins determined by substituting calendar year #bjad for calendar year #bjab in clause 7ii7 thereof4 7#c7 ,rounding ,if any increase determined under paragraph 7#a7 or 7#b7 is not a multiple of #ajj1 such increase shall be rounded to the next lowest multiple of #ajj4 4 7#b7 ,deduction allowed whether or not taxpayer itemizes deductions ,section #fb7;a7 is amended by adding at the end the following new paragraph3 7#bb7 ,deduction for unmarried individuals with at least one qualifying child ,the deduction allowed by section #bbd4 4 7c7 ,application of standard deduction phaseout to itemized deductions ,subsection 7f7 of section #fc is amended to read as follows3 7f7 ,application of phaseout of standard deduction to itemized deductions 7#a7 ,in general ,in the case of an individual whose modified adjusted gross income 7as defined in section #b7;b77 exceeds the amount in effect under subsection 7c77#b77;,b7 with respect to the taxpayer for the taxable year1 the amount of the itemized deductions otherwise allowable for the taxable year shall be reduced by the lesser of-- 7,a7 #bj percent of the excess described in subsection 7c77#b7 with respect to such taxpayer for such taxable year1 or 7,b7 the amount of the taxpayer's standard deduction for such taxable year 7determined without regard to subsection 7c77#b7 and without regard to any election to itemize deductions74 7#b7 ,coordination with other limitations ,this subsection shall be applied after the application of any other limitation on the allowance of any itemized deduction4 7#c7 ,exception for estates and trusts ,this subsection shall not apply to any estate or trust4 4 7d7 ,conforming amendments 7#a7 ,sections #hf7;b77#b77;,a7 and #acg7;b77#c77;,a7 are each amended by inserting #bbd1 before #iaa14 7#b7 ,section #aii7;d77#b77;,b7 is amended by inserting section #bbd and before this section4 7#c7 ,section #dfi7;i77#c77;,f77iii7 is amended by inserting and #bbd after #bai14 7#d7 ,section #acih7;c71 as amended by section #ajjc7;c71 is amended-- 7,a7 by striking ,basic in the heading thereof1 7,b7 by striking ,basic standard in the heading of paragraph 7#b7 and inserting ,standard1 and 7,c7 by striking basic in paragraph 7#b74 7#e7 ,section #cdjb7m77#c7 is amended by striking 7including the additional standard deduction under section #fc7;c77#c7 for the aged and blind74 7#f7 ,section #fjad7;b77#d7 is amended by striking section #fc7;c77#e7 and inserting section #fc7;c77#d74 7#g7 ,the table of sections for part ,,vii of subchapter ,b of chapter #a is amended by redesignating the item relating to section #bbd as an item relating to section #bbe and by inserting after the item relating to section #bbc the following new item3 ,sec4 #bbd4 ,deduction for unmarried individuals with at least one qualifying child4 4 7e7 ,effective date ,the amendment made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 #aajb4 ,increase and expansion of child tax credit 7a7 ,in general ,section #bd is amended to read as follows3 #bd4 ,child and dependent tax credit 7a7 ,allowance of credit ,there shall be allowed as a credit against the tax imposed by this chapter for the taxable year with respect to each dependent of the taxpayer an amount equal to #ejj 7#a1ejj in the case of a qualifying child74 7b7 ,phaseout of credit 7#a7 ,in general ,the credit allowed under subsection 7a7 7determined without regard to this subsection7 shall be reduced 7but not below zero7 by #e percent of the excess 7if any7 of-- 7,a7 the taxpayer's modified adjusted gross income 7as defined in section #b7;b771 over 7,b7 7i7 the joint return child credit phaseout threshold1 in the case of a joint return or a surviving spouse 7as defined in section #b7;a771 or 7ii7 the non-joint return child credit phaseout threshold1 in any other case4 7#b7 ,joint return child credit phaseout threshold ,for purposes of this section1 the term joint return child credit phaseout threshold means1 with respect to any taxable year1 the sum of-- 7,a7 the joint return standard deduction phaseout threshold 7as defined in section #fc7;c77#c77;,a771 plus 7,b7 an amount equal to-- 7i7 the dollar amount in effect under section #fc7;c77#a77;,a7 for such taxable year1 divided by 7ii7 #j4b4 7#c7 ,non-joint return child credit phaseout threshold ,for purposes of this section1 the term non-joint return child credit phaseout threshold means1 with respect to any taxable year1 the sum of-- 7,a7 the non-joint return standard deduction phaseout threshold 7as defined in section #fc7;c77#c77;,b771 plus 7,b7 an amount equal to-- 7i7 the dollar amount in effect under section #fc7;c77#a77;,b7 for such taxable year1 divided by 7ii7 #j4b4 7c7 ,qualifying child ,for purposes of this section-- 7#a7 ,in general ,except as provided in paragraph 7#b71 the term qualifying child has the meaning given such term by section #ggje4 7#b7 ,exception for certain noncitizens ,the term qualifying child shall not include any individual who would not be a dependent if subparagraph 7,a7 of section #ggje7;b77#c7 were applied without regard to all that follows resident of the ,united ,states4 7d7 ,portion of credit refundable 7#a7 ,in general ,the aggregate credits allowed under subpart ,c shall be increased by the lesser of-- 7,a7 the credit which would be allowed under this section without regard to this subsection and the limitation under section #bf7;a71 or 7,b7 the amount by which the aggregate amount of credits allowed under the subpart 7determined without regard to this subsection7 would increase if the limitation under section #bf7;a7 were increased by #be percent of the taxpayer's earned income for the taxable year4 ,the amount of the credit allowed under this subsection shall not be treated as a credit allowed under this subpart and shall reduce the amount of credit otherwise allowable under subsection 7a7 without regard to section #bf7;a74 7#b7 ,earned income ,for purposes of this subsection-- 7,a7 ,in general ,the term earned income means-- 7i7 the taxpayer's wages1 salaries1 tips1 and other employee compensation1 but only if such amounts are includible in gross income for the taxable year1 plus 7ii7 the taxpayer's net earnings from self-employment for the taxable year 7within the meaning of section #adjb7;a77 determined with regard to the deduction allowed to the taxpayer by section #afd7;f74 7,b7 ,special rules ,for purposes of subparagraph 7,a7-- 7i7 the earned income of an individual shall be computed without regard to any community property laws1 7ii7 no amount received as a pension or annuity shall be taken into account1 7iii7 no amount to which section #hga7;a7 applies 7relating to income of nonresident alien individuals not connected with ,united ,states business7 shall be taken into account1 7iv7 no amount received for services provided by an individual while the individual is an inmate at a penal institution shall be taken into account1 7v7 no amount described in subparagraph 7,a7 received for service performed in work activities as defined in paragraph 7#d7 or 7#g7 of section #djg7;d7 of the ,social ,security ,act to which the taxpayer is assigned under any ,state program under part ,a of title ,,iv of such ,act shall be taken into account1 but only to the extent such amount is subsidized under such ,state program1 and 7vi7 amounts excluded from gross income by reason of section #aab shall be taken into account as earned income4 7,c7 ,special rule for taxable years beginning before #bjah ,in the case of any taxable year beginning before ,january #a1 #bjah1 the earned income of the taxpayer taken into account under paragraph 7#a7 shall be reduced 7but not below zero7 by #c1jjj4 7#c7 ,exception for taxpayers excluding foreign earned income ,paragraph 7#a7 shall not apply to any taxpayer for any taxable year if such taxpayer elects to exclude any amount from gross income under section #iaa for such taxable year4 7e7 ,inflation adjustment ,in the case of any taxable year beginning after #bjad1 each dollar amount in subsection 7a7 shall be increased by an amount equal to-- 7#a7 such dollar amount1 multiplied by 7#b7 the cost-of-living adjustment determined under section #a7;c77#b77;,a7 for the calendar year in which the taxable year begins4 ,if any increase determined under the preceding sentence is not a multiple of #ajj1 such increase shall be rounded to the next lowest multiple of #ajj4 7f7 ,identification requirements 7#a7 ,in general ,no credit shall be allowed under this section to a taxpayer with respect to any dependent unless the taxpayer includes the name and taxpayer identification number of such dependent on the return of tax for the taxable year4 7#b7 ,additional identification requirement with respect to refundable credit 7,a7 ,in general ,subsection 7d7 shall not apply to any taxpayer for any taxable year unless the taxpayer includes the taxpayer's ,social ,security number on the return of tax for such taxable year4 7,b7 ,joint returns ,in the case of a joint return1 the requirement of subparagraph 7,a7 shall be treated as met if the ,social ,security number of either spouse is included on such return4 7g7 ,taxable year must be full taxable year ,except in the case of a taxable year closed by reason of the death of the taxpayer1 no credit shall be allowable under this section in the case of a taxable year covering a period of less than #ab months4 4 7b7 ,omission of identification information treated as mathematical or clerical error ,subparagraph 7,i7 of section #fbac7;g77#b7 of such ,code is amended to read as follows3 7,i7 an omission of a correct ,,tin under section #bd7;f77#a7 7relating to the child and dependent tax credit71 or a correct ,social ,security number under section #bd7;f77#b7 7relating to the refundable portion of child and dependent tax credit71 to be included on a return1 4 7c7 ,application of rule for short taxable years ,section #ddc7;c7 is amended to read as follows3 7c7 ,adjustment in child and dependent tax credit ,if a return is made for a short period by reason of subsection 7a77#a7 and if the tax is not computed under subsection 7b77#b71 then the credit allowed under section #bd shall be reduced to an amount which bears the same ratio to the full amount of such credit as the number of months in the short period bears to #ab4 4 7d7 ,clerical amendment ,the table of sections for subpart ,a of part ,,iv of subchapter ,a of chapter #a is amended by striking the item relating to section #bd and inserting the following new item3 ,sec4 #bd4 ,child and dependent tax credit4 4 7e7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 #aajc4 ,modification of earned income tax credit 7a7 ,in general ,section #cb is amended to read as follows3 #cb4 ,earned income 7a7 ,in general ,in the case of an individual who is an eligible individual for any taxable year1 there shall be allowed as a credit against the tax imposed by this subtitle for such taxable year an amount equal to the taxpayer's employment-related taxes for such taxable year4 7b7 ,limitations 7#a7 ,dollar limitation ,the credit allowed under subsection 7a7 shall not exceed-- 7,a7 in the case of a taxpayer with #b or more qualifying children1 #c1jjj 7#d1jjj in the case of a joint return71 and 7,b7 in the case of a taxpayer with #a qualifying child1 #b1djj4 7#b7 ,phase-out of credit ,the credit allowed under subsection 7a7 7determined after application of paragraph 7#a77 shall be reduced 7but not below zero7 by the sum of-- 7,a7 #ai percent of so much of the taxpayer's adjusted gross income 7reduced by the amount of any excess described in subparagraph 7,b77 as exceeds #bj1jjj 7#bg1jjj in the case of a joint return71 plus 7,b7 so much of the taxpayer's investment income for the taxable year as exceeds #c1cjj4 7c7 ,definitions ,for purposes of this section-- 7#a7 ,eligible individual 7,a7 ,in general ,the term eligible individual means any individual who has a qualifying child for the taxable year4 7,b7 ,qualifying child ineligible ,if an individual is the qualifying child of a taxpayer for any taxable year of such taxpayer beginning in a calendar year1 such individual shall not be treated as an eligible individual for any taxable year of such individual beginning in such calendar year4 7,c7 ,exception for individual claiming benefits under section #iaa ,the term eligible individual does not include any individual who claims the benefits of section #iaa 7relating to citizens or residents living abroad7 for the taxable year4 7,d7 ,limitation on eligibility of nonresident aliens ,the term eligible individual shall not include any individual who is a nonresident alien individual for any portion of the taxable year unless such individual is treated for such taxable year as a resident of the ,united ,states for purposes of this chapter by reason of an election under subsection 7g7 or 7h7 of section #fjac4 7#b7 ,employment-related taxes ,the term employment-related taxes means1 with respect to any taxpayer for any taxable year1 the sum of-- 7,a7 any tax imposed under sections #caja or #caaa on the wages 7as defined in section #caba7;a77 received by the taxpayer during the calendar year in which the taxable year begins1 7,b7 any tax imposed under sections #cbja7;a71 #cbaa7;a71 or #cbba7;a7 on the compensation 7as defined in section #cbca7;e77 received by the taxpayer during the calendar year in which the taxable year begins1 and 7,c7 any tax imposed under section #adja on the self-employment income of the taxpayer for the taxable year4 7#c7 ,qualifying child 7,a7 ,in general ,the term qualifying child means a qualifying child of the taxpayer 7within the meaning of section #ggje1 determined without regard to subsections 7c77#a77;,d7 and 7e7 thereof74 7,b7 ,place of abode ,for purposes of subparagraph 7,a71 the requirements of section #ggje7;c77#a77;,b7 shall be met only if the principal place of abode is in the ,united ,states4 7,c7 ,treatment of military personnel stationed outside the ,united ,states ,for purposes of subparagraph 7,b71 the principal place of abode of a member of the ,armed ,forces of the ,united ,states shall be treated as in the ,united ,states during any period during which such member is stationed outside the ,united ,states while serving on extended active duty with the ,armed ,forces of the ,united ,states4 ,for purposes of the preceding sentence1 the term extended active duty means any period of active duty pursuant to a call or order to such duty for a period in excess of #ij days or for an indefinite period4 7#d7 ,investment income ,for purposes of paragraph 7#a71 the term investment income means-- 7,a7 interest or dividends to the extent includible in gross income for the taxable year1 7,b7 interest received or accrued during the taxable year which is exempt from tax imposed by this chapter1 7,c7 the excess 7if any7 of-- 7i7 gross income from rents or royalties not derived in the ordinary course of a trade or business1 over 7ii7 the sum of-- 7,i7 the deductions 7other than interest7 which are clearly and directly allocable to such gross income1 plus 7,,ii7 interest deductions properly allocable to such gross income1 7,d7 the capital gain net income 7as defined in section #abbb7 of the taxpayer for such taxable year1 and 7,e7 the excess 7if any7 of-- 7i7 the aggregate income from all passive activities for the taxable year 7determined without regard to any amount with respect to which a tax described in subsection 7c77#b7 is imposed or an amount described in a preceding subparagraph71 over 7ii7 the aggregate losses from all passive activities for the taxable year 7as so determined74 ,for purposes of subparagraph 7,e71 the term passive activity has the meaning given such term by section #dfi4 7d7 ,identification requirements 7#a7 ,in general ,no credit shall be allowed under this section unless the taxpayer includes on the return of tax for the taxable year-- 7,a7 the taxpayer's ,social ,security number1 and 7,b7 the name1 age1 and ,social ,security number of each qualifying child taken into account under subsection 7b77#a74 7#b7 ,joint returns ,in the case of a joint return1 the requirement of paragraph 7#a77;,a7 shall be treated as met if the ,social ,security number of either spouse is included on such return4 7#c7 ,other methods of providing children's information ,the ,secretary may prescribe other methods for providing the information described in paragraph 7#a77;,b74 7e7 ,restrictions on taxpayers who improperly claimed credit in prior year 7#a7 ,taxpayers making prior fraudulent or reckless claims 7,a7 ,in general ,no credit shall be allowed under this section for any taxable year in the disallowance period4 7,b7 ,disallowance period ,for purposes of paragraph 7#a71 the disallowance period is-- 7i7 the period of #aj 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 fraud1 and 7ii7 the period of #b 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 reckless or intentional disregard of rules and regulations 7but not due to fraud74 7#b7 ,taxpayers making improper prior claims ,in the case of a taxpayer who is denied credit under this section for any taxable year as a result of the deficiency procedures under subchapter ,b of chapter #fc1 no credit shall be allowed under this section for any subsequent taxable year unless the taxpayer provides such information as the ,secretary may require to demonstrate eligibility for such credit4 7f7 ,other special rules ,for purposes of this section-- 7#a7 ,married individuals ,in the case of an individual who is married 7within the meaning of section #ggjc71 this section shall apply only if a joint return is filed for the taxable year under section #fjac4 7#b7 ,taxable year must be full taxable year ,except in the case of a taxable year closed by reason of the death of the taxpayer1 no credit shall be allowable under this section in the case of a taxable year covering a period of less than #ab months4 7#c7 ,coordination with certain means-tested programs ,for purposes of-- 7,a7 the ,united ,states ,housing ,act of #aicg1 7,b7 title ,v of the ,housing ,act of #aidi1 7,c7 section #aja of the ,housing and ,urban ,development ,act of #aife1 7,d7 sections #bba7;d77#c71 #bce1 and #bcf of the ,national ,housing ,act1 and 7,e7 the ,food and ,nutrition ,act of #bjjh1 any refund made to an individual 7or the spouse of an individual7 by reason of this section1 and any payment made to such individual 7or such spouse7 by an employer under section #cejg1 shall not be treated as income 7and shall not be taken into account in determining resources for the month of its receipt and the following month74 7#d7 ,coordination with payroll tax credits ,the credit allowed under subsection 7a7 with respect to any taxpayer for any taxable year shall be reduced by the sum of the credits allowed under sections #cajc and #cbjc with respect to such taxpayer for such taxable year4 7g7 ,application to certain individuals without qualifying children ,for purposes of this section and sections #cajc and #cbjc-- 7#a7 ,in general ,in the case of an individual described in paragraph 7#b7-- 7,a7 such individual shall be treated as an eligible individual1 7,b7 notwithstanding subsection 7i71 the dollar limitation applicable to such individual under subsection 7b77#a7 shall be #ajj 7twice such amount in the case of a joint return71 7,c7 subsection 7b77#b77;,a7 shall be applied by substituting #h1jjj 7#ac1jjj for #bj1jjj 7#bg1jjj1 and 7,d7 subsection 7i77#a7 shall not apply and the employment-related taxes with respect to such individual for any taxable year shall not exceed the sum of-- 7i7 any tax imposed under section #caja on the wages 7as defined in section #caba7;a77 received by the taxpayer during the calendar year in which the taxable year begins1 7ii7 any tax imposed under sections #cbja7;a7 7and so much of the tax imposed by section #cbaa7;a7 as is attributable to the rates of tax under subsections 7a7 and 7b7 of section #caja7 on the compensation 7as defined in section #cbca7;e77 received by the taxpayer during the calendar year in which the taxable year begins1 and 7iii7 #ej percent of any tax imposed under section #adja on the self-employment income of the taxpayer for the taxable year4 7#b7 ,individual to whom subsection applies ,an individual is described in this paragraph for any taxable year if-- 7,a7 such individual does not have a qualifying child for the taxable year1 7,b7 such individual's principal place of abode is in the ,united ,states for more than one-half of such taxable year1 7,c7 such individual 7or1 if the individual is married 7within the meaning of section #ggjc71 either the individual or the individual's spouse7 has attained age #be but not attained age #fe before the close of the taxable year1 and 7,d7 such individual is not a dependent of another taxpayer for any taxable year beginning in the same calendar year as such taxable year4 7h7 ,inflation adjustment ,in the case of any taxable year beginning after #bjad1 both dollar amounts in subsection 7b77#a77;,a71 the dollar amount in subsection 7b77#a77;,b71 both dollar amounts in subsection 7b77#b77;,a71 the dollar amount in subsection 7b77#b77;,b71 the #ajj amount in subsection 7g77#a77;,b71 the #h1jjj and #ac1jjj amounts in subsection 7g77#a77;,c71 the #d1jjj amount in subsection 7i77#b71 and the #c1jjj amount in subsection 7i77#c71 shall each be increased by an amount equal to-- 7#a7 such dollar amount1 multiplied by 7#b7 the cost-of-living adjustment determined under section #a7;c77#b77;,a7 for the calendar year in which the taxable year begins4 ,if any increase determined under the preceding sentence is not a multiple of #ajj 7#aj in the case of the #ajj amount in subsection 7g77#a77;,b771 such increase shall be rounded to the next lowest multiple of #ajj 7#aj in the case of the #ajj amount in subsection 7g77#a77;,b774 7i7 ,special rules for taxable years beginning before #bjah ,in the case of any taxable year beginning before ,january #a1 #bjah-- 7#a7 subsection 7a7 shall be applied by substituting #bjj percent of the taxpayer's employment-related taxes for the taxpayer's employment-related taxes1 7#b7 subsection 7b77#a77;,a7 shall be applied by substituting #d1jjj for #c1jjj 7#d1jjj in the case of a joint return71 and 7#c7 subsection 7b77#a77;,b7 shall be applied by substituting #c1jjj for #b1djj4 4 7b7 ,credit allowed against payroll taxes 7#a7 ,,fica tax ,subchapter ,a of chapter #ba is amended by adding at the end the following new section3 #cajc4 ,credit against tax 7a7 ,in general ,in the case of an individual who is allowed a credit under section #cb 7determined without regard to subsection 7f77#d7 thereof7 for a taxable year1 there shall be allowed as a credit against the tax imposed by section #caja with respect to wages received by such individual during the calendar year ending with or within such taxable year the lesser of-- 7#a7 the amount of tax so imposed1 or 7#b7 the amount of the credit allowed under section #cb 7as so determined7 for such taxable year4 7b7 ,application of credit ,the credit determined under subsection 7a7 shall be taken into account under this title in the same manner as a credit or refund to which the taxpayer is entitled under section #fdac7;c77#a74 ,such credit shall not be taken into account for purposes of determining any amount deducted and withheld under section #cajb4 4 7#b7 ,railroad retirement tax ,subchapter ,a of chapter #bb is amended by adding at the end the following new section3 #cbjc4 ,credit against tax 7a7 ,in general ,in the case of an individual who is allowed a credit under section #cb 7determined without regard to subsection 7f77#d7 thereof7 for a taxable year1 there shall be allowed as a credit against the tax imposed by section #cbja7;a7 7and so much of the tax imposed by section #cbaa7;a7 as is attributable to the rates of tax under subsections 7a7 and 7b7 of section #caja7 with respect to compensation received by such individual during the calendar year ending with or within such taxable year the lesser of-- 7#a7 the amount of tax so imposed1 or 7#b7 the excess of-- 7,a7 the amount of the credit allowed under section #cb 7as so determined7 for such taxable year1 over 7,b7 the amount of the credit allowed under section #cajc4 7b7 ,application of credit ,the credit determined under subsection 7a7 shall be taken into account under this title in the same manner as a credit or refund to which the taxpayer is entitled under section #fdac7;c77#a74 ,such credit shall not be taken into account for purposes of determining any amount deducted and withheld under section #cbjb4 4 7c7 ,conforming amendments 7#a7 ,section #hf7;f77#b7 is amended by striking section #cb7;c77#b7 and inserting section #bd7;d77#b74 7#b7 ,section #abi7;e77#b7 is amended by striking section #cb7;c77#b7 and inserting section #bd7;d77#b7 7#c7 ,section #fjea7;a77#aj7 is amended by striking for purposes of section #cb 7relating to earned income credit7 and inserting under section #bd7;d77#b74 7#d7 ,section #fbaa7;b77#d77;,a7 is amended by inserting 7determined without regard to subsection 7f77#d7 thereof7 after #cb4 7#e7 ,section #fbac7;g77#b77;,f7 is amended by striking taxpayer identification number and inserting ,social ,security number4 7#f7 ,section #fbac7;g77#b77;,g7 is amended by striking with respect to and all that follows and inserting with respect to the tax imposed under section #adja 7relating to self-employment tax7 to the extent such tax has not been paid14 7#g7 ,section #fbac7;g77#b77,k7 is amended by striking section #cb7k77#b7 and inserting section #cb7;e77#b74 7#h7 ,section #ggje7;f77#f77;,b71 as redesignated by this ,act1 is amended by striking clause 7iv71 by striking 1 and at the end of clause 7iii7 and inserting a period1 and by inserting and at the end of clause 7ii74 7#i7 ,the table of sections for subchapter ,a of chapter #ba is amended by adding at the end the following new item3 ,sec4 #cajc4 ,credit against tax4 4 7#aj7 ,the table of sections for subchapter ,a of chapter #bb is amended by adding at the end the following new item3 ,sec4 #cbjc4 ,credit against tax4 4 7d7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 7e7 ,treatment of taxpayers who improperly claimed credit in prior years ,a claim of credit under section #cb of the ,internal ,revenue ,code of #aihf 7as in effect before the amendments made by this section7 shall not fail to be taken into account under subsection 7e7 of such section 7as amended by this section7 merely because such claim is for a taxable year beginning before ,january #a1 #bjae4 7f7 ,treasury report on making credit advanceable ,not later than the date which is #ahj days after the date of the enactment of this ,act1 the ,secretary of the ,treasury 7or the ,secretary's designee7 shall submit a report to ,congress making recommendations regarding the best method for providing for advance payment of the credits established by the amendments made by this section4 ,the recommendations in such report shall seek to-- 7#a7 provide for the payment of such credits to taxpayers as promptly as is feasible1 including on a weekly1 biweekly1 or monthly basis1 and 7#b7 minimize any administrative burdens on employers and the ,internal ,revenue ,service4 #aajd4 ,repeal of deduction for personal exemptions 7a7 ,in general ,part ,v of subchapter ,b of chapter #a is hereby repealed4 7b7 ,definition of dependent retained 7#a7 ,in general ,section #aeb1 prior to repeal by subsection 7a71 is hereby redesignated as section #ggje and moved to the end of chapter #gi4 7#b7 ,modification of age requirements ,section #ggje7;c77#c77;,a71 as redesignated by paragraph 7#a71 is amended by striking as a qualifying child and-- and all that follows and inserting is a qualifying child and has not attained the age of #ah as of the close of the calendar year in which the taxable year of the taxpayer begins44 7c7 ,application to estates and trusts ,subsection 7b7 of section #fdb is amended-- 7#a7 by striking paragraph 7#b77;,c71 7#b7 by striking paragraph 7#c71 and 7#c7 by striking ,deduction for personal exemption in the heading thereof and inserting ,basic deduction4 7d7 ,application to nonresident aliens ,section #hgc7;b7 is amended by striking paragraph 7#c74 7e7 ,modification of wage withholding rules 7#a7 ,in general ,section #cdjb7;a77#b7 is amended by striking the amount of one personal exemption provided in section #aea7;b7 and inserting #c1ijj4 7#b7 ,inflation adjustment ,section #cdjb7;a7 is amended by adding at the end the following new paragraph3 7#c7 ,inflation adjustment ,in the case of any calendar year beginning after #bjad1 the #c1ijj amount in paragraph 7#b7 shall be increased by an amount equal to-- 7,a7 such dollar amount1 multiplied by 7,b7 the cost-of-living adjustment determined under section #a7;c77#b77;,a7 for such calendar year4 ,if any increase determined under the preceding sentence is not a multiple of #ajj1 such increase shall be rounded to the next lowest multiple of #ajj4 4 7#c7 ,number of exemptions ,section #cdjb7;f77#a7 is amended-- 7,a7 in subparagraph 7,a71 by striking an individual described in section #aea7;d77#b7 and inserting a dependent of any other taxpayer1 and 7,b7 in subparagraph 7,c71 by striking with respect to whom1 on the basis of facts existing at the beginning of such day1 there may reasonably be expected to be allowable an exemption under section #aea7;c7 and inserting who1 on the basis of facts existing at the beginning of such day1 is reasonably expected to be a dependent of the employee4 7f7 ,modification of return requirement 7#a7 ,in general ,paragraph 7#a7 of section #fjab7;a7 is amended to read as follows3 7#a7 ,every individual who has gross income for the taxable year1 except that a return shall not be required of-- 7,a7 an individual who is not married 7determined by applying section #ggjc7 and who has gross income for the taxable year which does not exceed the standard deduction applicable to such individual for such taxable year under section #fc1 or 7,b7 an individual entitled to make a joint return if-- 7i7 the gross income of such individual1 when combined with the gross income of such individual's spouse1 for the taxable year does not exceed the standard deduction which would be applicable to the taxpayer for such taxable year under section #fc if such individual and such individual's spouse made a joint return1 7ii7 such individual and such individual's spouse have the same household as their home at the close of the taxable year1 7iii7 such individual's spouse does not make a separate return1 and 7iv7 neither such individual nor such individual's spouse is an individual described in section #fc7;c77#d7 who has income 7other than earned income7 in excess of the amount in effect under section #fc7;c77#d77;,a74 4 7#b7 ,bankruptcy estates ,paragraph 7#h7 of section #fjab7;a7 is amended by striking the sum of the exemption amount plus the basic standard deduction under section #fc7;c77#b77;,d7 and inserting the standard deduction in effect under section #fc7;c77#a77;,b74 7g7 ,conforming amendments 7#a7 ,section #b7;a77#a77;,b7 is amended by striking a dependent and all that follows through section #aea and inserting a dependent who 7within the meaning of section #ggje1 determined without regard to subsections 7b77#a71 7b77#b7 and 7d77#a77;,b7 thereof7 is a son1 stepson1 daughter1 or stepdaughter of the taxpayer4 7#b7 ,section #cf;,b7b77#b77;,a7 is amended by striking section #aeb and inserting section #ggje4 7#c7 ,section #cf;,b7b77#c77;,b7 is amended by striking unless a deduction is allowed under section #aea for the taxable year with respect to a dependent in the flush matter at the end and inserting unless the taxpayer has a dependent for the taxable year4 7#d7 ,section #cf;,b7c77#a77;,d7 is amended by striking with respect to whom a deduction under section #aea is allowable to another taxpayer and inserting who is a dependent of another taxpayer4 7#e7 ,section #cf;,b7d77#a7 is amended by striking equal to the number of individuals for whom the taxpayer is allowed a deduction under section #aea 7relating to allowance of deduction for personal exemptions7 for the taxable year and inserting the sum of #a 7#b in the case of a joint return7 plus the number of the taxpayer's dependents for the taxable year4 7#f7 ,section #cf;,b7e77#a7 is amended by striking #a or more individuals for whom a taxpayer is allowed a deduction under section #aea 7relating to allowance of deduction for personal exemptions7 for the taxable year 7including the taxpayer or his spouse7 and inserting #a or more of the taxpayer1 the taxpayer's spouse1 or any dependent of the taxpayer4 7#g7 ,section #db7;i77#c77;,d77ii77,i7 is amended-- 7,a7 by striking section #aeb and inserting section #ggje1 and 7,b7 by striking the period at the end and inserting a comma4 7#h7 ,section #fc7;b7 is amended by striking minus-- and all that follows and inserting minus the standard deduction44 7#i7 ,section #fc7;d7 is amended by striking other than-- and all that follows and inserting other than the deductions allowable in arriving at adjusted gross income44 7#aj7 ,section #gb7t77#b77;,d77i77,,iii7 is amended by striking section #aeb and inserting section #ggje4 7#aa7 ,section #gb7t77#g77;,a77iii7 is amended by striking section #aeb7;f77#a7 and inserting section #ggje7;f77#a74 7#ab7 ,section #aje7;b7 is amended-- 7,a7 by striking as defined in section #aeb and inserting as defined in section #ggje1 7,b7 by striking section #aeb7;f77#a7 and inserting section #ggje7;f77#a7 and 7,c7 by striking section #aeb7;e7 and inserting section #ggje7;e74 7#ac7 ,section #aje7;c77#a7 is amended by striking section #aeb and inserting section #ggje4 7#ad7 ,section #abe7;e77#a77;,d7 is amended by striking section #aeb and inserting section #ggje4 7#ae7 ,section #abi7;c7 is amended-- 7,a7 by striking with respect to whom1 for such taxable year1 a deduction is allowable under section #aea7;c7 7relating to personal exemptions for dependents7 to in paragraph 7#a7 and inserting who is a dependent of1 and 7,b7 by striking section #aeb7;f77#a7 in paragraph 7#b7 and inserting section #ggje7;f77#a74 7#af7 ,section #acb7;h77#b77;,b7 is amended-- 7,a7 by striking section #aeb7;f77#a7 and inserting section #ggje7;f77#a71 and 7,b7 by striking section #aeb7;e7 and inserting section #ggje7;e74 7#ag7 ,section #aci;,d7c77#e7 is amended by striking section #aeb and inserting section #ggje4 7#ah7 ,section #afb7l77#a77;,d7 is amended by striking section #aeb7;f77#a7 and inserting section #ggje7;f77#a74 7#ai7 ,section #agj7;g77#a7 is amended by striking section #aeb and inserting section #ggje4 7#bj7 ,section #agj7;g77#c7 is amended by striking section #aeb7;d77#b7 and inserting section #ggje7;d77#b74 7#ba7 ,section #agb7;d7 is amended by striking paragraph 7#c74 7#bb7 ,section #bbj7;b77#f7 is amended by striking with respect to whom a deduction under section #aea is allowable to and inserting who is a dependent of4 7#bc7 ,section #bbj7;d77#b77;,a7 is amended by striking section #aeb and inserting section #ggje4 7#bd7 ,section #bbc7;b77#f7 is amended by striking with respect to whom a deduction under section #aea is allowable to and inserting who is a dependent of4 7#be7 ,section #bbc7;d77#b77;,a7 is amended by striking section #aeb and inserting section #ggje4 7#bf7 ,section #dja7;h7 is amended by striking section #aeb7;f77#a7 in the last sentence and inserting section #ggje7;f77#a74 7#bg7 ,section #djb7l77#d77;,d7 is amended by striking section #aeb and inserting section #ggje4 7#bh7 ,section #dji;,a7a77#b77;,b77ii77,i7 is amended by striking section #aeb7;a7 and inserting section #ggje7;a74 7#bi7 ,section #eja7;c77#i7 is amended by striking section #aeb7;f77#a7 and inserting section #ggje7;f77#a74 7#cj7 ,section #ebi7;e77#b77;,b7 is amended by striking section #aeb7;d77#b7 and inserting section #ggje7;d77#b74 7#ca7 ,section #gjc7;a77#b7 is amended by striking subparagraph 7,a7 and by redesignating subparagraphs 7,b7 through 7,f7 as subparagraphs 7,a7 through 7,e71 respectively4 7#cb7 ,section #hgd is amended by striking subsection 7b7 and by redesignating subsection 7c7 as subsection 7b74 7#cc7 ,section #hia is amended by striking under section #aea and4 7#cd7 ,section #ijd7;b7 is amended by striking paragraph 7#a74 7#ce7 ,section #ica7;b77#a7 is amended by striking 7other than the deduction under section #aea1 relating to personal exemptions74 7#cf7 ,section #icc is amended-- 7,a7 by striking 7other than the deduction under section #aea1 relating to personal exemptions7 in paragraph 7#a71 and 7,b7 by striking 7other than the deduction for personal exemptions under section #aea7 in paragraph 7#b74 7#cg7 ,section #abab7;b77#b77;,b77ii7 is amended to read as follows3 7ii7 in the case of an estate or trust1 the deduction allowed for such year under section #fdb7;b74 4 7#ch7 ,section #acfa7;c77#a77;,c7 is amended by striking section #aeb7;f77#a77;,c7 and inserting section #ggje7;f77#a77;,c74 7#ci7 ,section #adjb7;a7 is amended by striking paragraph 7#g74 7#dj7 ,section #bjcb;,a7c77#g77;,d7 is amended by striking section #aeb7;f77#b7 and inserting section #ggje7;f77#b74 7#da7 ,section #cdjb7m77#a7 is amended by striking other than the deductions referred to in section #aea and4 7#db7 ,section #cdjb7r77#b7 is amended by striking the sum of-- and all that follows and inserting the standard deduction in effect under section #fc7;c77#a77;,b744 7#dc7 ,section #ejjj;,a7b77#c77;,a7 is amended by striking section #aeb and inserting section #ggje4 7#dd7 ,section #ejjj;,a7c77#d77;,a7 is amended by striking the number of individuals for whom the taxpayer is allowed a deduction under section #aea 7relating to allowance of deduction for personal exemptions7 for the taxable year and inserting the sum of #a 7#b in the case of a joint return7 plus the number of the taxpayer's dependents for the taxable year4 7#de7 ,section #fjac7;b77#c77;,a7 is amended-- 7,a7 by striking had less than the exemption amount of gross income in clause 7ii7 and inserting had no gross income1 7,b7 by striking had gross income of the exemption amount or more in clause 7iii7 and inserting had any gross income1 and 7,c7 by striking the flush language following clause 7iii74 7#df7 ,section #fajc7l77#ba77;,a77iii7 is amended to read as follows3 7iii7 the number of the taxpayer's dependents1 4 7#dg7 ,section #fbac7;g77#b7 is amended by striking subparagraph 7,h74 7#dh7 ,section #fccd7;d77#b7 is amended to read as follows3 7#b7 ,exempt amount 7,a7 ,in general ,for purposes of paragraph 7#a71 the term exempt amount means an amount equal to-- 7i7 the sum of the standard deduction and the personal exemption amount1 divided by 7ii7 #eb4 7,b7 ,personal exemption amount ,for purposes of subparagraph 7,a71 the personal exemption amount is #c1ijj multiplied by the number of the taxpayer's dependents for the taxable year in which the levy occurs4 7,c7 ,inflation adjustment ,in the case of any taxable year beginning after #bjad1 the #c1ijj amount in subparagraph 7,b7 shall be increased by an amount equal to-- 7i7 such dollar amount1 multiplied by 7ii7 the cost-of-living adjustment determined under section #a7;c77#b77;,a7 for the calendar year in which the taxable year begins4 ,if any increase determined under the preceding sentence is not a multiple of #ajj1 such increase shall be rounded to the next lowest multiple of #ajj4 7,d7 ,verified statement ,unless the taxpayer submits to the ,secretary a written and properly verified statement specifying the facts necessary to determine the proper amount under subparagraph 7,a71 subparagraph 7,a7 shall be applied as if the taxpayer were a married individual filing a separate return with no dependents4 4 7#di7 ,section #ggjb;,b7f77#b77;,c77iii7 is amended by striking section #aeb7;d77#b7 and inserting section #ggje7;d77#b74 7#ej7 ,section #ggjc7;a7 is amended by striking part ,v of subchapter ,b of chapter #a and4 7#ea7 ,section #ggjc7;b77#a7 is amended by striking section #aeb7;f77#a7 and all that follows and inserting section #ggje7;f77#a714 7#eb7 ,section #ggje7;a71 as redesignated by this section1 is amended by striking this subtitle and inserting subtitle ,a4 7#ec7 7,a7 ,section #ggje7;d77#a77;,b71 as redesignated by this section1 is amended by striking the exemption amount 7as defined in section #aea7;d77 and inserting #c1ijj4 7,b7 ,section #ggje7;d71 as redesignated by this section1 is amended by adding at the end the following new paragraph3 7#f7 ,inflation adjustment ,in the case of any calendar year beginning after #bjad1 the #c1ijj amount in paragraph 7#a77;,b7 shall be increased by an amount equal to-- 7,a7 such dollar amount1 multiplied by 7,b7 the cost-of-living adjustment determined under section #a7;c77#b77;,a7 for such calendar year4 ,if any increase determined under the preceding sentence is not a multiple of #ajj1 such increase shall be rounded to the next lowest multiple of #ajj4 4 7#ed7 ,the table of sections for chapter #gi is amended by adding at the end the following new item3 ,sec4 #ggje4 ,dependent defined4 4 7h7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 ,c ,simplification of education incentives #abja4 ,american opportunity tax credit 7a7 ,in general ,section #be;,a is amended to read as follows3 #be;,a4 ,american opportunity tax credit 7a7 ,in general ,in the case of an individual1 there shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to the sum of-- 7#a7 #ajj percent of so much of the qualified tuition and related expenses paid by the taxpayer during the taxable year 7for education furnished to any eligible student for whom an election is in effect under this section for such taxable year during any academic period beginning in such taxable year7 as does not exceed #b1jjj1 plus 7#b7 #be percent of so much of such expenses so paid as exceeds the dollar amount in effect under paragraph 7#a7 but does not exceed twice such dollar amount4 7b7 ,portion of credit refundable ,so much of the credit allowable under subsection 7a7 7determined without regard to this subsection and section #bf7;a7 and after application of all other provisions of this section7 as does not exceed #a1ejj shall be treated as a credit allowable under subpart ,c 7and not under this part74 ,the preceding sentence shall not apply to any taxpayer for any taxable year if such taxpayer is a child to whom section #a7;d7 applies for such taxable year4 7c7 ,limitation based on modified adjusted gross income 7#a7 ,in general ,the amount allowable as a credit under subsection 7a7 for any taxable year shall be reduced 7but not below zero7 by an amount which bears the same ratio to the amount so allowable 7determined without regard to this subsection and subsection 7b7 but after application of all other provisions of this section7 as-- 7,a7 the excess of-- 7i7 the taxpayer's modified adjusted gross income for such taxable year1 over 7ii7 #dc1jjj 7twice such amount in the case of a joint return71 bears to 7,b7 #bj1jjj 7twice such amount in the case of a joint return74 7#b7 ,modified adjusted gross income ,for purposes of this subsection1 the term modified adjusted gross income means the adjusted gross income of the taxpayer for the taxable year increased by any amount excluded from gross income under section #iaa1 #ica1 or #icc4 7d7 ,other limitations 7#a7 ,credit allowed only for #d taxable years ,an election to have this section apply may not be made for any taxable year if such an election 7by the taxpayer or any other individual7 is in effect with respect to such student for any #d prior taxable years4 7#b7 ,credit allowed only for first #d years of postsecondary education ,no credit shall be allowed under subsection 7a7 for a taxable year with respect to the qualified tuition and related expenses of an eligible student if the student has completed 7before the beginning of such taxable year7 the first #d years of postsecondary education at an eligible educational institution4 7e7 ,definitions ,for purposes of this section-- 7#a7 ,eligible student ,the term eligible student means1 with respect to any academic period1 a student who-- 7,a7 meets the requirements of section #dhd7;a77#a7 of the ,higher ,education ,act of #aife 7#bj ,u4,s4,c4 #ajia7;a77#a771 as in effect on ,august #e1 #aiig1 and 7,b7 is carrying at least #a_/b the normal full-time work load for the course of study the student is pursuing4 7#b7 ,qualified tuition and related expenses 7,a7 ,in general ,the term qualified tuition and related expenses means tuition1 fees1 and course materials1 required for enrollment or attendance of-- 7i7 the taxpayer1 7ii7 the taxpayer's spouse1 or 7iii7 any dependent of the taxpayer1 at an eligible educational institution for courses of instruction of such individual at such institution4 7,b7 ,exception for education involving sports1 etc ,such term does not include expenses with respect to any course or other education involving sports1 games1 or hobbies1 unless such course or other education is part of the individual's degree program4 7,c7 ,exception for nonacademic fees ,such term does not include student activity fees1 athletic fees1 insurance expenses1 or other expenses unrelated to an individual's academic course of instruction4 7#c7 ,eligible educational institution ,the term eligible educational institution means an institution-- 7,a7 which is described in section #dha of the ,higher ,education ,act of #aife 7#bj ,u4,s4,c4 #ajhh71 as in effect on ,august #e1 #aiig1 and 7,b7 which is eligible to participate in a program under title ,,iv of such ,act4 7f7 ,special rules 7#a7 ,identification requirement ,no credit shall be allowed under subsection 7a7 to a taxpayer with respect to the qualified tuition and related expenses of an individual unless the taxpayer includes the name and taxpayer identification number of such individual1 and the employer identification number of any institution to which such expenses were paid1 on the return of tax for the taxable year4 7#b7 ,adjustment for certain scholarships1 etc 7,a7 ,in general ,the amount of qualified tuition and related expenses otherwise taken into account under subsection 7a7 with respect to an individual for an academic period shall be reduced 7before the application of subsection 7c77 by the sum of any amounts paid for the benefit of such individual which are allocable to such period as-- 7i7 a qualified scholarship which is excludable from gross income under section #aag1 7ii7 an educational assistance allowance under chapter #cj1 #ca1 #cb1 #cd1 or #ce of title #ch1 ,united ,states ,code1 or under chapter #afjf of title #aj1 ,united ,states ,code1 and 7iii7 a payment 7other than a gift1 bequest1 devise1 or inheritance within the meaning of section #ajb7;a77 for such individual's educational expenses1 or attributable to such individual's enrollment at an eligible educational institution1 which is excludable from gross income under any law of the ,united ,states4 7,b7 ,coordination with ,pell ,grants not used for qualified tuition and related expenses ,for purposes of subparagraph 7,a71 the amount of any ,federal ,pell ,grant under section #dja of the ,higher ,education ,act of #aife 7#bj ,u4,s4,c4 #ajgj;a7 shall be reduced 7but not below zero7 by the amount of expenses 7other than qualified tuition and related expenses7 which are taken into account in determining the cost of attendance 7as defined in section #dgb of the ,higher ,education ,act of #aife1 as in effect on the date of the enactment of this paragraph7 of such individual at an eligible educational institution for the academic period for which the credit under this section is being determined4 7#c7 ,treatment of expenses paid by dependent ,if an individual is a dependent of another taxpayer for a taxable year beginning in the calendar year in which such individuals taxable year begins-- 7,a7 no credit shall be allowed under subsection 7a7 to such individual for such individual's taxable year1 and 7,b7 qualified tuition and related expenses paid by such individual during such individual's taxable year shall be treated for purposes of this section as paid by such other taxpayer4 7#d7 ,treatment of certain prepayments ,if qualified tuition and related expenses are paid by the taxpayer during a taxable year for an academic period which begins during the first #c months following such taxable year1 such academic period shall be treated for purposes of this section as beginning during such taxable year4 7#e7 ,denial of double benefit ,no credit shall be allowed under this section for any amount for which a deduction is allowed under any other provision of this chapter4 7#f7 ,no credit for married individuals filing separate returns ,if the taxpayer is a married individual 7within the meaning of section #ggjc71 this section shall apply only if the taxpayer and the taxpayer's spouse file a joint return for the taxable year4 7#g7 ,nonresident aliens ,if the taxpayer is a nonresident alien individual for any portion of the taxable year1 this section shall apply only if such individual is treated as a resident alien of the ,united ,states for purposes of this chapter by reason of an election under subsection 7g7 or 7h7 of section #fjac4 7g7 ,inflation adjustment 7#a7 ,in general ,in the case of a taxable year beginning after #bjah1 the #b1jjj amount in subsection 7a77#a71 the #a1ejj amount in subsection 7b71 and the #dc1jjj amount in subsection 7c77#a77;,a77ii7 shall each be increased by an amount equal to-- 7,a7 such dollar amount1 multiplied by 7,b7 the cost-of-living adjustment determined under section #a7;c77#b77;,a7 for the calendar year in which the taxable year begins1 determined by substituting calendar year #bjag for calendar year #bjab in clause 7ii7 thereof4 7#b7 ,rounding ,if any amount as adjusted under paragraph 7#a7 is not a multiple of #ajj 7#a1jjj in the case of the amount in subsection 7c77#a77;,a77ii771 such amount shall be rounded to the next lowest multiple of #ajj 7#a1jjj in the case of the amount in subsection 7c77#a77;,a77ii774 7h7 ,regulations ,the ,secretary may prescribe such regulations or other guidance as may be necessary or appropriate to carry out this section1 including regulations providing for a recapture of the credit allowed under this section in cases where there is a refund in a subsequent taxable year of any amount which was taken into account in determining the amount of such credit4 4 7b7 ,requirement ,to report tuition paid rather than tuition billed ,section #fjej,s7b77#b77;,b77i7 is amended by striking or the aggregate amount billed4 7c7 ,conforming amendments 7#a7 ,section #gb7t77#g77;,b7 of such ,code is amended by striking section #be;,a7g77#b7 and inserting section #be;,a7f77#b74 7#b7 ,section #ebi7;c77#c77;,b77v77,i7 of such ,code is amended by striking section #be;,a7g77#b7 and inserting section #be;,a7f77#b74 7#c7 ,section #ebi7;e77#c77;,b77i7 of such ,code is amended by striking section #be;,a7b77#c7 and inserting section #be;,a7d74 7#d7 ,section #ecj7;d77#b77;,c7 of such ,code is amended-- 7,a7 by striking section #be;,a7g77#b7 in clause 7i77,i7 and inserting section #be;,a7f77#b71 and 7,b7 by striking ,hope and ,lifetime ,learning credits in the heading and inserting ,american opportunity tax credit4 7#e7 ,section #ecj7;d77#d77;,b77iii7 of such ,code is amended by striking section #be;,a7g77#b7 and inserting section #be;,a7d77#d77;,b74 7#f7 ,section #fjej,s7e7 of such ,code is amended by striking subsection 7g77#b7 and inserting subsection 7f77#b74 7#g7 ,section #fbaa7;b77#d77;,a7 of such ,code is amended by striking subsection 7i77#f7 and inserting subsection 7b74 7#h7 ,section #fbac7;g77#b77;,j7 of such ,code is amended by striking ,,tin required under section #be;,a7g77#a7 and inserting ,,tin1 and employer identification number1 required under section #be;,a7f77#a74 7#i7 ,section #ajjd7;c7 of division ,b of the ,american ,recovery and ,reinvestment ,tax ,act of #bjji is amended-- 7,a7 in paragraph 7#a7-- 7i7 by striking section #be;,a7i77#f7 each place it appears and inserting section #be;,a7b71 and 7ii7 by striking with respect to taxable years beginning after #bjjh and before #bjah each place it appears and inserting with respect to each taxable year1 7,b7 in paragraph 7#b71 by striking ,section #be;,a7i77#f7 and inserting ,section #be;,a7b71 and 7,c7 in paragraph 7#c77;,c71 by striking subsection 7i77#f7 and inserting subsection 7b74 7#aj7 ,the table of sections for subpart ,a of part ,,iv of subchapter ,a of chapter #a of the ,internal ,revenue ,code of #aihf is amended by striking the item relating to section #be;,a and inserting the following new item3 ,sec4 #be;,a4 ,american opportunity tax credit4 4 7d7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 #abjb4 ,expansion of ,pell ,grant exclusion from gross income 7a7 ,in general ,paragraph 7#a7 of section #aag7;b7 of the ,internal ,revenue ,code of #aihf is amended-- 7#a7 by striking the period at the end and inserting 1 or1 7#b7 by striking received by an individual as a scholarship and inserting the following3 received by an individual-- 7,a7 as a scholarship 1 and 7#c7 by adding at the end the following new subparagraph3 7,b7 as a ,federal ,pell ,grant under section #dja of the ,higher ,education ,act of #aife 7#bj ,u4,s4,c4 #ajgj;a74 4 7b7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 #abjc4 ,repeal of exclusion of income from ,united ,states savings bonds used to pay higher education tuition and fees 7a7 ,in general ,part ,,iii of subchapter ,b of chapter #a is amended by striking section #ace 7and by striking the item relating to such section in the table of sections for such part74 7b7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 #abjd4 ,repeal of deduction for interest on education loans 7a7 ,in general ,part ,,vii of subchapter ,b of chapter #a is amended by striking section #bba 7and by striking the item relating to such section in the table of sections for such part74 7b7 ,conforming amendment ,section #fb7;a7 is amended by striking paragraph 7#ag74 7c7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 #abje4 ,repeal of deduction for qualified tuition and related expenses 7a7 ,in general ,part ,,vii of subchapter ,b of chapter #a is amended by striking section #bbb 7and by striking the item relating to such section in the table of sections for such part74 7b7 ,conforming amendment ,section #fb7;a7 is amended by striking paragraph 7#ah74 7c7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjac4 #abjf4 ,no new contributions to ,coverdell education savings accounts 7a7 ,in general ,section #ecj7;b77#a77;,a7 is amended to read as follows3 7,a7 ,except in the case of rollover contributions1 no contribution will be accepted after ,december #ca1 #bjad4 4 7b7 ,rollovers to qualified tuition programs permitted ,section #ecj7;d77#e7 is amended by inserting 1 or into 7by purchase or contribution7 a qualified tuition program 7as defined in section #ebi71 after into another ,coverdell education savings account4 7c7 ,effective dates 7#a7 ,in general ,except as otherwise provided in this subsection1 the amendments made by this section shall apply to contributions made after ,december #ca1 #bjad4 7#b7 ,rollovers to qualified tuition programs ,the amendments made by subsection 7b7 shall apply to distributions after ,december #ca1 #bjad4 #abjg4 ,repeal of exclusion for discharge of student loan indebtedness 7a7 ,in general ,section #ajh is amended by striking subsection 7f74 7b7 ,conforming amendments 7#a7 ,section #caba7;a77#bj7 is amended by striking #ajh7;f77#d714 7#b7 ,section #bji7;a77#ag7 of the ,social ,security ,act is amended by striking #ajh7;f77#d714 7#c7 ,section #cbca7;e77#e7 is amended by striking #ajh7;f77#d714 7#d7 ,section #ccjf7;b77#af7 is amended by striking #ajh7;f77#d714 7#e7 ,section #cdja7;a77#ai7 is amended by striking #ajh7;f77#d714 7c7 ,effective date ,the amendments made by this section shall apply to amounts discharged after ,december #ca1 #bjad4 #abjh4 ,repeal of exclusion for qualified tuition reductions 7a7 ,in general ,section #aag is amended by striking subsection 7d74 7b7 ,conforming amendments 7#a7 ,section #aag7;c77#a7 is amended-- 7,a7 by striking subsections 7a7 and 7d7 and inserting subsection 7a71 and 7,b7 by striking or qualified tuition reduction4 7#b7 ,section #dad7n77#c77;,c7 is amended by striking #aag7;d714 7#c7 ,section #dad7t77#b7 is amended by striking #aag7;d714 7c7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 #abji4 ,repeal of exclusion for education assistance programs 7a7 ,in general ,part ,,iii of subchapter ,b of chapter #a is amended by striking section #abg 7and by striking the item relating to such section in the table of sections for such part74 7b7 ,conforming amendments 7#a7 ,section #abe7;f77#a7 is amended by striking #abg14 7#b7 ,section #acb7;j77#h7 is amended by striking which are not excludable from gross income under section #abg4 7#c7 ,section #acg7;c7 is amended to read as follows3 7c7 ,adoption assistance program 7#a7 ,in general ,for purposes of this section1 an adoption assistance program is a separate written plan of an employer for the exclusive benefit of such employer's employees under which the employer provides such employees with adoption assistance4 ,except as provided in paragraph 7#f71 such program must meet the requirements of paragraphs 7#b71 7#c71 and 7#d74 7#b7 ,eligibility ,the program shall benefit employees who qualify under a classification set up by the employer and found by the ,secretary not to be discriminatory in favor of employees who are highly compensated employees 7within the meaning of section #dad7q77 or their dependents4 ,for purposes of this paragraph1 there shall be excluded from consideration employees not included in the program who are included in a unit of employees covered by an agreement which the ,secretary of ,labor finds to be a collective bargaining agreement between employee representatives and one or more employers1 if there is evidence that adoption assistance benefits were the subject of good faith bargaining between such employee representatives and such employer or employers4 7#c7 ,principal shareholders or owners ,not more than #e percent of the amounts paid or incurred by the employer for adoption assistance during the year may be provided for the class of individuals who are shareholders or owners 7or their spouses or dependents71 each of whom 7on any day of the year7 owns more than #e percent of the stock or of the capital or profits interest in the employer4 7#d7 ,notification of employees ,reasonable notification of the availability and terms of the program must be provided to eligible employees4 7#e7 ,no funding required ,a program referred to in paragraph 7#a7 is not required to be funded4 7#f7 ,certain ,federal programs ,an adoption reimbursement program operated under section #ajeb of title #aj1 ,united ,states ,code 7relating to armed forces7 or section #ead of title #ad1 ,united ,states ,code 7relating to members of the ,coast ,guard7 shall be treated as an adoption assistance program for purposes of this section4 4 7#d7 ,section #dad7n77#c77;,c7 is amended by striking #abg14 7#e7 ,section #dad7t77#b7 is amended by striking #abg14 7#f7 ,section #caba7;a77#ah7 is amended by striking #abg14 7#g7 ,section #bji7;a77#ae7 of the ,social ,security ,act is amended by striking #abg or4 7#h7 ,section #cbca7;e7 is amended by striking paragraph 7#f74 7#i7 ,section #ccjf7;b77#ac7 is amended by striking #abg14 7#aj7 ,section #cdja7;a77#ah7 is amended by striking #abg14 7#aa7 ,section #fjci;,d7d77#a7 is amended by striking #abg14 7c7 ,effective date ,the amendments made by this section shall apply to amounts paid or incurred after ,december #ca1 #bjad4 #abaj4 ,repeal of exception to #aj-percent penalty for higher education expenses 7a7 ,in general ,section #gb7t77#b7 is amended by striking subparagraph 7,e74 7b7 ,conforming amendment ,section #gb7t7 is amended by striking paragraph 7#g74 7c7 ,effective date ,the amendments made by this section shall apply to distributions after ,december #ca1 #bjad4 ,d ,repeal of certain credits for individuals #acja4 ,repeal of dependent care credit 7a7 ,in general ,subpart ,a of part ,,iv of subchapter ,a of chapter #a is amended by striking section #ba 7and by striking the item relating to such section in the table of sections for such subpart74 7b7 ,conforming amendments 7#a7 7,a7 ,section #abi7;a77#b7 is amended by striking subparagraph 7,c74 7,b7 ,section #abi7;e7 is amended by adding at the end the following new paragraph3 7#aj7 ,marital status ,rules similar to the rules of subsections 7a7 and 7b7 of section #ggjc shall apply for purposes of this section4 4 7#b7 ,section #abi7;e77#a7 is amended to read as follows3 7#a7 ,dependent care assistance 7,a7 ,in general ,the term dependent care assistance means employment-related expenses and the provision of services which constitute employment-related expenses4 7,b7 ,employment-related expenses ,the term employment-related expenses means amounts paid for the following expenses1 but only if such expenses are incurred to enable the employee to be gainfully employed for any period for which there are #a or more qualifying individuals with respect to the employee3 7i7 expenses for household services1 and 7ii7 expenses for the care of a qualifying individual4 ,such term shall not include any amount paid for services outside the employee's household at a camp where the qualifying individual stays overnight4 7,c7 ,exception ,employment-related expenses described in subparagraph 7,a7 which are incurred for services outside the employee's household shall be taken into account only if incurred for the care of-- 7i7 a qualifying individual described in subparagraph 7,d77i71 or 7ii7 a qualifying individual 7not described in subparagraph 7,d77i77 who regularly spends at least #h hours each day in the employee's household4 7,d7 ,qualifying individual ,the term qualifying individual means-- 7i7 a dependent of the taxpayer 7as defined in section #ggje7;a77#a77 who has not attained age #ac1 7ii7 a dependent of the taxpayer 7as defined in section #ggje1 determined without regard to subsections 7b77#a71 7b77#b71 and 7d77#a77;,b77 who is physically or mentally incapable of caring for himself or herself and who has the same principal place of abode as the taxpayer for more than one-half of such taxable year1 or 7iii7 the spouse of the taxpayer1 if the spouse is physically or mentally incapable of caring for himself or herself and who has the same principal place of abode as the taxpayer for more than one-half of such taxable year4 7,e7 ,dependent care centers ,employment-related expenses described in subparagraph 7,a7 which are incurred for services provided outside the employee's household by a dependent care center shall be taken into account only if-- 7i7 such center complies with all applicable laws and regulations of a ,state or unit of local government1 and 7ii7 the requirements of subparagraph 7,b7 are met4 7,f7 ,dependent care center defined ,for purposes of this paragraph1 the term dependent care center means any facility which-- 7i7 provides care for more than six individuals 7other than individuals who reside at the facility71 and 7ii7 receives a fee1 payment1 or grant for providing services for any of the individuals 7regardless of whether such facility is operated for profit74 7,g7 ,place of abode ,for purposes of this paragraph1 an individual shall not be treated as having the same principal place of abode as the taxpayer if at any time during the taxable year of the taxpayer the relationship between the individual and the taxpayer is in violation of local law4 7,h7 ,special dependency test in case of divorced parents1 etc4 ,if-- 7i7 section #ggje7;e7 applies to any child with respect to any calendar year1 and 7ii7 such child is under the age of #ac or is physically or mentally incapable of caring for himself1 in the case of any taxable year beginning in such calendar year1 such child shall be treated as a qualifying individual described in clause 7i7 or 7ii7 of subparagraph 7,d7 7whichever is appropriate7 with respect to the custodial parent 7as defined in section #ggje7;e77#d77;,a771 and shall not be treated as a qualifying individual with respect to the noncustodial parent4 4 7#c7 ,section #fbac7;g77#b77,l7 is amended by striking #ba14 7c7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 #acjb4 ,repeal of credit for adoption expenses 7a7 ,in general ,subpart ,a of part ,,iv of subchapter ,a of chapter #a is amended by striking section #bc 7and by striking the item relating to such section in the table of sections for such subpart74 7b7 ,conforming amendments 7#a7 ,section #acg is amended by striking subsections 7d7 and 7e74 7#b7 ,subsections 7d7 and 7e7 of section #bc 7prior to being stricken by subsection 7a77 are each moved to section #acg 7after amendment by paragraph 7#a77 and inserted after subsection 7c7 as new subsections 7d7 and 7e71 respectively4 7#c7 ,section #acg7;d77#a77;,d71 as amended by paragraphs 7#a7 and 7#b71 is amended by inserting 7determined without regard to reimbursements under this section7 before the period at the end4 7#d7 ,section #acg7;e71 as amended by paragraphs 7#a7 and 7#b71 is amended by striking 7as defined in section #bag7;h77#c77 and inserting 7or any possession of the ,united ,states74 7#e7 ,section #acg is amended by redesignating subsection 7f7 as subsection 7h71 and by inserting before subsection 7h7 7as so redesignated7 the following new subsections3 7f7 ,filing requirements 7#a7 ,married couples must file joint return 7,a7 ,in general ,if the taxpayer is married at the close of the taxable year1 subsection 7a7 shall apply to the taxpayer only if the taxpayer and the taxpayer's spouse file a joint return for the taxable year4 7,b7 ,marital status ,rules similar to the rules of subsections 7a7 and 7b7 of section #ggjc shall apply for purposes of this section4 7#b7 ,taxpayer must include ,,tin 7,a7 ,in general ,subsection 7a7 shall apply with respect to any child only if the taxpayer includes 7if known7 the name1 age1 and ,,tin of such child on the return of tax for the taxable year4 7,b7 ,other methods ,the ,secretary may1 in lieu of the information referred to in subparagraph 7,a71 require other information meeting the purposes of subparagraph 7,a71 including identification of an agent assisting with the adoption4 7g7 ,basis adjustments ,for purposes of this subtitle1 if the amount of any expenditure with respect to any property is excluded from gross income under this section1 the increase in the basis of such property which would 7but for this subsection7 result from such expenditure shall be reduced by the amount of such expenditure which is so excluded4 4 7#f7 ,section #ajaf7;a77#bf7 is amended by striking sections #bc7;g7 and #acg7;e7 and inserting section #acg7;g74 7c7 ,effective date 7#a7 ,in general ,the amendments made by this section shall apply to amounts paid or incurred after ,december #ca1 #bjad4 7#b7 ,special needs adoptions ,for purposes of paragraph 7#a71 any amount treated as paid by the taxpayer under section #bc7;a77#c7 of the ,internal ,revenue ,code of #aihf 7as in effect before its repeal by subsection 7a77 shall be treated as paid on the date that the adoption referred to in such section becomes final4 #acjc4 ,repeal of credit for nonbusiness energy property 7a7 ,in general ,subpart ,a of part ,,iv of subchapter ,a of chapter #a is amended by striking section #be;,c 7and by striking the item relating to such section in the table of sections of such subpart74 7b7 ,conforming amendment ,section #ajaf7;a7 is amended by striking paragraph 7#cc74 7c7 ,effective date ,the amendments made by this section shall apply to property placed in service after ,december #ca1 #bjac4 #acjd4 ,repeal of credit for residential energy efficient property 7a7 ,in general ,subpart ,a of part ,,iv of subchapter ,a of chapter #a is amended by striking section #be;,d 7and by striking the item relating to such section in the table of sections for such subpart74 7b7 ,conforming amendment ,section #ajaf7;a7 is amended by striking paragraph 7#cd74 7c7 ,effective date ,the amendment made by this section shall apply to property placed in service after ,december #ca1 #bjad4 #acje4 ,repeal of credit for qualified electric vehicles 7a7 ,in general ,subpart ,b of part ,,iv of subchapter ,a of chapter #a is amended by striking section #cj 7and by striking the item relating to such section in the table of sections of such subpart74 7b7 ,conforming amendments 7#a7 ,section #ajaf7;a7 is amended by striking paragraph 7#be74 7#b7 ,section #feja7m7 is amended by striking section #cj7;e77#f714 7c7 ,effective date ,the amendments made by this section shall apply to vehicles acquired after ,december #ca1 #bjaa4 #acjf4 ,repeal of alternative motor vehicle credit 7a7 ,in general ,subpart ,b of part ,,iv of subchapter ,a of chapter #a is amended by striking section #cj;,b 7and by striking the item relating to such section in the table of sections for such subpart74 7b7 ,conforming amendments 7#a7 ,section #ch7;b7 is amended by striking paragraph 7#be74 7#b7 ,section #ajaf7;a7 is amended by striking paragraph 7#ce74 7#c7 ,section #feja7m7 is amended by striking #cj;,b7h77#i714 7c7 ,effective date ,the amendment made by this section shall apply to property purchased after ,december #ca1 #bjad4 #acjg4 ,repeal of alternative fuel vehicle refueling property credit 7a7 ,in general ,subpart ,b of part ,,iv of subchapter ,a of chapter #a is amended by striking section #cj;,c 7and by striking the item relating to such section in the table of sections for such subpart74 7b7 ,conforming amendments 7#a7 ,section #ch7;b7 is amended by striking paragraph 7#bf74 7#b7 ,section #ajaf7;a7 is amended by striking paragraph 7#cf74 7#c7 ,section #feja7m7 is amended by striking #cj;,c7e77#e714 7c7 ,effective date ,the amendment made by this section shall apply to property placed in service after ,december #ca1 #bjad4 #acjh4 ,repeal of credit for new qualified plug-in electric drive motor vehicles 7a7 ,in general ,subpart ,b of part ,,iv of subchapter ,a of chapter #a is amended by striking section #cj;,d 7and by striking the item relating to such section in the table of sections for such subpart74 7b7 ,conforming amendments 7#a7 ,section #ch7;b7 is amended by striking paragraph 7#ce74 7#b7 ,section #ajaf7;a7 is amended by striking paragraph 7#cg74 7#c7 ,section #feja7m7 is amended by striking #cj;,d7e77#d714 7c7 ,effective date ,the amendments made by this section shall apply to vehicles acquired after ,december #ca1 #bjad4 #acji4 ,repeal of credit for health insurance costs of eligible individuals 7a7 ,in general ,subpart ,c of part ,,iv of subchapter ,a of chapter #a is amended by striking section #ce 7and by striking the item relating to such section in the table of sections of such subpart74 7b7 ,conforming amendments 7#a7 ,chapter #gg is amended by striking section #gebg 7and by striking the item relating to such section in the table of sections of such chapter74 7#b7 ,section #dihj;,b7f77#e77;,c77iv77,,ii7 is amended by inserting as in effect before its repeal after section #ce7;c74 7#c7 ,section #fbaa7;b77#d77;,a7 is amended by striking #ce14 7c7 ,effective date ,the amendments made by this section shall apply to months beginning after ,december #ca1 #bjac4 #acaj4 ,repeal of first-time homebuyer credit 7a7 ,in general ,subpart ,c of part ,,iv of subchapter ,a of chapter #a is amended by striking section #cf 7and by striking the item relating to such section in the table of sections of such subpart74 7b7 ,conforming amendments 7#a7 ,section #bf7;b77#b7 is amended by striking subparagraph 7,w74 7#b7 ,section #adjj;,c7e7 is amended by striking paragraph 7#d74 7#c7 ,section #fbaa7;b77#d77;,a7 is amended by striking #cf14 7#d7 ,section #fbac7;g77#b7 is amended by striking subparagraphs 7,o7 and 7,p74 7c7 ,effective date ,the amendments made by this section shall apply to residences purchased after ,june #cj1 #bjaa4 ,e ,deductions1 exclusions1 and certain other provisions #adja4 ,exclusion of gain from sale of a principal residence 7a7 ,requirement that residence be principal residence for #e years during #h-,year period ,subsection 7a7 of section #aba is amended-- 7#a7 by striking #e-year period and inserting #h-year period1 and 7#b7 by striking #b years and inserting #e years4 7b7 ,application to only #a sale or exchange every #e years ,paragraph 7#c7 of section #aba7;b7 is amended to read as follows3 7#c7 ,application to only #a sale or exchange every #e years ,subsection 7a7 shall not apply to any sale or exchange by the taxpayer if1 during the #e-year period ending on the date of such sale or exchange1 there was any other sale or exchange by the taxpayer to which subsection 7a7 applied4 4 7c7 ,phaseout based on modified adjusted gross income ,section #aba is amended by adding at the end the following new subsection3 7h7 ,phaseout based on modified adjusted gross income 7#a7 ,in general ,if the modified adjusted gross income of the taxpayer for the taxable year exceeds #bej1jjj 7twice such amount in the case of a joint return71 the amount which would 7but for this subsection7 be excluded from gross income under subsection 7a7 for such taxable year shall be reduced 7but not below zero7 by the amount of such excess4 7#b7 ,modified adjusted gross income ,for purposes of this subsection1 the term modified adjusted gross income has the meaning given such term by section #b determined after the application of this section but without regard to this subsection4 4 7d7 ,conforming amendments 7#a7 ,the last paragraph of section #aba7;b7 7relating to exclusion of gain allocated to nonqualified use7 is redesignated as paragraph 7#e74 7#b7 ,the following provisions of section #aba are each amended by striking #e-year period each place it appears therein and inserting #h-year period3 7,a7 ,subsection 7b77#e77;,c77ii77,i7 7as redesignated by paragraph 7#a774 7,b7 ,subsection 7c77#a77;,b77i77,i74 7,c7 ,subsection 7d77#g77;,b74 7,d7 ,subparagraphs 7,a7 and 7,b7 of subsection 7d77#i74 7,e7 ,subsection 7d77#aj7 7,f7 ,subsection 7d77#ab77;,a74 7#c7 ,section #aba7;c77#a77;,b77ii7 is amended by striking #b years and inserting #e years3 7e7 ,effective date ,the amendments made by this section shall apply to sales and exchanges after ,december #ca1 #bjad4 #adjb4 ,mortgage interest 7a7 ,modification of limitations 7#a7 ,in general ,paragraph 7#c7 of section #afc7;h7 is amended to read as follows3 7#c7 ,qualified residence interest ,for purposes of this subsection-- 7,a7 ,in general ,the term qualified residence interest means any interest which is paid or accrued during the taxable year on indebtedness which-- 7i7 is incurred in acquiring1 constructing1 or substantially improving any qualified residence 7determined as of the time the interest is accrued7 of the taxpayer1 and 7ii7 is secured by such residence4 ,such term also includes interest on any indebtedness secured by such residence resulting from the refinancing of indebtedness meeting the requirements of the preceding sentence 7or this sentence72 but only to the extent the amount of the indebtedness resulting from such refinancing does not exceed the amount of the refinanced indebtedness4 7,b7 ,limitation 7i7 ,in general ,the aggregate amount of indebtedness taken into account under subparagraph 7,a7 for any period shall not exceed #ejj1jjj 7half of such amount in the case of a married individual filing a separate return74 7ii7 ,phase-in of decreased limitation ,for purposes of applying clause 7i7 with respect to any indebtedness incurred during a calendar year after #bjad and before #bjah1 the #ejj1jjj amount in clause 7i7 shall be increased by the phase-in amount determined in accordance with the following table3 ,in the case of indebtedness incurred during3,the phase-in amount is3 #bjaecge1jjj #bjafbej1jjj #bjagabe1jjj 7iii7 ,treatment of refinancings of indebtedness incurred during phase-in period ,in the case of any indebtedness which is incurred to refinance indebtedness to which clause 7ii7 applies 7or to which this clause applies71 such refinanced indebtedness shall be treated for purposes of clause 7ii7 as incurred on the date that the original indebtedness was incurred to the extent the amount of the indebtedness resulting from such refinancing does not exceed the amount of the refinanced indebtedness4 7,c7 ,treatment of indebtedness incurred before ,january #a1 #bjae 7i7 ,in general ,in the case of any pre-,january #a1 #bjae1 indebtedness1 this paragraph shall apply as in effect immediately before the enactment of the ,tax ,reform ,act of #bjad4 7ii7 ,reduction in dollar limitation ,the limitation of subparagraph 7,b7 7after application of clause 7ii7 thereof7 shall be reduced 7but not below zero7 by the aggregate amount of outstanding pre-,january #a1 #bjae1 indebtedness of the taxpayer with respect to which interest is allowable as a deduction by reason of this subparagraph4 7iii7 ,pre-,january #a1 #bjae1 indebtedness ,for purposes of this subparagraph1 the term pre-,january #a1 #bjae1 indebtedness means-- 7,i7 any indebtedness incurred before ,january #a1 #bjae1 and 7,,ii7 any indebtedness incurred on or after such date to refinance indebtedness described in subclause 7,i7 7or refinanced indebtedness meeting the requirements of this subclause7 to the extent the amount of the indebtedness resulting from such refinancing does not exceed the amount of the refinanced indebtedness4 7,d7 ,limitation on period of refinancing ,subparagraphs 7,b77iii7 and 7,c77iii77,,ii7 shall not apply to any indebtedness after-- 7i7 the expiration of the term of the original indebtedness1 or 7ii7 if the principal of such original indebtedness is not amortized over its term1 the expiration of the term of the #ast refinancing of such indebtedness 7or if earlier1 the date which is #cj years after the date of such #ast refinancing74 7,e7 ,coordination with certain exclusions ,the amount otherwise treated as qualified residence interest 7determined without regard to this subparagraph7 with respect to any residence of the taxpayer for any taxable year shall be reduced by the sum of the amounts excludable from the gross income of such taxpayer under sections #ajg and #aai with respect to such residence4 4 7#b7 ,conforming amendments 7,a7 ,section #ajh7;h77#b7 is amended to read as follows3 7#b7 ,qualified principal residence indebtedness ,for purposes of this section1 the term qualified principal residence indebtedness means indebtedness described in section #afc7;h77#c7 applied without regard to clauses 7ii7 and 7iii7 of subparagraph 7,b7 thereof and by substituting #b1jjj1jjj for #ejj1jjj in subparagraph 7,b77i7 thereof4 4 7,b7 ,section #afc7;h7 is amended-- 7i7 by striking subparagraph 7,e7 in paragraph 7#c71 7ii7 by striking subparagraphs 7,e7 and 7,f7 in paragraph 7#d71 and 7iii7 by striking paragraph 7#e74 7,c7 ,section #bfe7;a77#f7 is amended-- 7i7 by striking an amount as-- and all that follows and inserting an amount as a military housing allowance41 and 7ii7 by striking parsonage and in the heading thereof4 7b7 ,modification of reporting requirements 7#a7 ,information return requirements ,paragraph 7#b7 of section #fjej;,h7b7 is amended by striking and at the end of subparagraph 7,c71 by redesignating subparagraph 7,d7 as subparagraph 7,f7 and by inserting after subparagraph 7,c7 the following new subparagraphs3 7,d7 the amount of outstanding principal on the mortgage as of the beginning of such calendar year1 7,e7 the date of the origination of the mortgage1 and 4 7#b7 ,statements to individuals ,paragraph 7#b7 of section #fjej;,h7d7 is amended by striking subsection 7b77#b77;,c7 and inserting subparagraphs 7,c71 7,d71 and 7,e7 of subsection 7b77#b74 7c7 ,effective dates 7#a7 ,modification of limitations 7,a7 ,in general ,the amendments made by subsection 7a7 shall apply to interest paid or accrued in taxable years beginning after ,december #ca1 #bjad1 with respect to indebtedness incurred before1 on1 or after such date4 7,b7 ,treatment of grandfathered indebtedness ,for application of the amendments made by subsection 7a7 to grandfathered indebtedness1 see section #afc7;h77#c77;,c7 of the ,internal ,revenue ,code of #aihf as amended by this section4 7#b7 ,modification of reporting requirements ,the amendments made by subsection 7b7 shall apply to returns and statements for calendar years after ,december #ca1 #bjad4 #adjc4 ,charitable contributions 7a7 #b percent floor on charitable deduction for individuals ,paragraph 7#c7 of section #agj7;b7 is amended to read as follows3 7#c7 #b percent floor on charitable deduction for individuals ,the amount of charitable contributions taken into account under this section as made by any individual during a taxable year 7determined without regard to subsection 7d77 shall be reduced by #b percent of the taxpayer's contribution base for such taxable year4 ,such reduction shall apply-- 7,a7 first1 to charitable contributions to which paragraph 7#a77;,b7 applies to the extent thereof1 7,b7 second1 to charitable contributions to which paragraph 7#a77;,c7 applies to the extent thereof1 and 7,c7 third1 to charitable contributions to which paragraph 7#a77;,a7 applies to the extent thereof4 4 7b7 ,extension of time for making charitable contributions ,subsection 7a7 of section #agj is amended by redesignating paragraphs 7#b7 and 7#c7 as paragraphs 7#c7 and 7#d71 respectively1 and by inserting after paragraph 7#a7 the following new paragraph3 7#b7 ,treatment of charitable contributions made by individuals before due date of return ,if any charitable contribution is made by an individual after the close of a taxable year but not later than the due date 7determined without regard to extensions7 for the return of tax for such taxable year1 then the taxpayer may elect to treat such charitable contribution as made in such taxable year4 ,such election may be made only at the time of the filing of such return of tax and shall be signified in such manner as the ,secretary may provide4 4 7c7 ,deduction for contributions of property generally limited to adjusted basis 7#a7 ,in general ,subsection 7e7 of section #agj is amended-- 7,a7 by striking paragraphs 7#a7 and 7#f71 7,b7 by redesignating paragraphs 7#b71 7#c71 7#d71 and 7#e7 as paragraphs 7#c71 7#d71 7#e71 and 7#f71 respectively1 and 7,c7 by inserting before paragraph 7#c7 7as so redesignated7 the following new paragraphs3 7#a7 ,in general ,except in the case of property to which paragraph 7#b7 applies1 the amount of any charitable contribution of property otherwise taken into account under this section shall be reduced by the amount of gain which would have been realized if the property contributed had been sold by the taxpayer for its fair market value 7determined at the time of such contribution74 7#b7 ,special rule for certain property 7,a7 ,in general ,in the case of property to which this paragraph applies1 the amount of any charitable contribution of property otherwise taken into account under this section shall be reduced by the amount of gain which would not have been long-term capital gain if the property contributed had been sold by the taxpayer at its fair market value 7determined at the time of such contribution74 7,b7 ,property to which this paragraph applies ,this paragraph shall apply to-- 7i7 any contribution of tangible personal property if the use of such property by the donee is related to the purpose or function constituting the basis for its exemption under section #eja 7or1 in the case of a governmental unit1 to any purpose or function described in subsection 7c771 7ii7 any qualified conservation contribution 7as defined in subsection 7h77#a771 7iii7 any qualified contribution 7as defined in paragraph 7#d77;,a771 7iv7 any qualified research contribution 7as defined in paragraph 7#e77;,b771 and 7v7 any qualified appreciated stock 7as defined in subsection 7e77#f774 7,c7 ,special rules for determining long-term capital gain 7i7 ,in general ,for purposes of applying this paragraph 7other than in the case of gain to which section #abde7;a71 #abej7;a71 #abeb7;a71 or #abed7;a7 applies71 property which is property used in the trade or business 7as defined in section #abca7;b77 shall be treated as a capital asset4 7ii7 ,contributions of stock in ,s corporations ,for purposes of applying this paragraph in the case of a charitable contribution of stock in an ,s corporation1 rules similar to the rules of section #gea shall apply in determining whether gain on such stock would have been long-term capital gain if such stock were sold by the taxpayer4 4 7#b7 ,repeal of special rules for food and book inventory ,paragraph 7#d7 of section #agj7;e71 as redesignated by paragraph 7#a71 is amended by striking subparagraphs 7,c7 and 7,d7 and by redesignating subparagraph 7,e7 as subparagraph 7,c74 7#c7 ,conforming amendments 7,a7 ,section #agj7;e77#c71 as redesignated by paragraph 7#a71 is amended by striking paragraph 7#a7 and inserting paragraphs 7#a7 and 7#b74 7,b7 ,paragraphs 7#d7 and 7#e7 of section #agj7;e71 as redesignated by paragraph 7#a71 are each amended by striking paragraph 7#a77;,a7 each place it appears and inserting paragraph 7#b77;,a74 7,c7 ,section #agj7;e77#f71 as redesignated by paragraph 7#a71 is amended-- 7i7 by striking all that precedes for purposes of this paragraph in subparagraph 7,b7 and inserting the following3 7#f7 ,qualified appreciated stock 7,a7 ,in general ,except as provided in subparagraph 7,b71 1 7ii7 by redesignating subparagraph 7,c7 as subparagraph 7,b71 and 7iii7 by striking in a contribution to which paragraph 7#a77;,b77ii7 applies 7determined without regard to this paragraph7 in subparagraph 7,b7 as so redesignated4 7d7 ,modification of income based contribution limitations 7#a7 ,in general ,section #agj7;b77#a7 is amended-- 7,a7 by striking #cj percent in subparagraph 7,b77i7 and inserting #be percent1 and 7,b7 by striking #ej percent and inserting #dj percent in-- 7i7 the flush matter at the end of subparagraph 7,a71 7ii7 subparagraph 7,b77ii71 and 7iii7 clauses 7i71 7iv77,i71 and 7v7 of subparagraph 7,c7 7as redesignated by paragraph 7#b774 7#b7 ,repeal of special limitations for certain capital gain property 7,a7 ,in general ,paragraph 7#a7 of section #agj7;b7 is amended by striking subparagraphs 7,c7 and 7,d7 and by redesignating subparagraphs 7,e71 7,f71 and 7,g7 as subparagraphs 7,c71 7,d71 and 7,e71 respectively4 7,b7 ,conforming amendments 7i7 ,section #agj7;b77#a77;,a77vii7 is amended by striking subparagraph 7,f7 and inserting subparagraph 7,d7 7ii7 ,section #agj7;b77#a77;,b77ii7 is amended by striking 7determined without regard to subparagraph 7,c774 7iii7 ,section #agj7;b77#a77;,c77iii71 as redesignated by paragraph 7#a71 is amended by striking subparagraph 7,a71 7,b71 7,c7 or 7,d7 and inserting subparagraph 7,a7 or 7,b74 7iv7 ,section #agj7;b77#b77;,b77i77,i7 is amended by striking paragraph 7#a77;,e77v7 and inserting paragraph 7#a77;,c77v74 7v7 ,section #ede7;b77#b7 is amended by striking 7,d71 and 7,e7 and inserting and 7,c74 7e7 ,qualified conservation contributions 7#a7 ,rules made permanent 7,a7 ,in general ,subparagraph 7,c7 of section #agj7;b77#a71 as redesignated by subsection 7d71 is amended by striking clause 7vi74 7,b7 ,corporate farmers and ranchers ,subparagraph 7,b7 of section #agj7;b77#b7 is amended by striking clause 7iii74 7#b7 ,treatment of golf course easements ,subsection 7h7 of section #agj is amended by adding at the end the following new paragraph3 7#g7 ,special rule with respect to golf courses ,an interest in real property shall not be treated as a qualified real property interest for purposes of this subsection if 7at the time of the contribution of such interest7 such property is1 or is reasonably expected to be1 used as a golf course4 4 7#c7 ,conforming amendments 7,a7 ,section #agj7;b77#a77;,c77iv77,,ii71 as redesignated by subsection 7d71 is amended by striking made after the date of the enactment of this subparagraph4 7,b7 ,section #agj7;b77#b77;,b77i77,,ii7 is amended by striking 1 in the case of contributions made after the date of the enactment of this subparagraph14 7f7 ,repeal of special rule for college athletic event seating rights ,section #agj is amended by striking subsection 7l74 7g7 ,repeal of special rule treating donee income from intellectual property as an additional charitable contribution 7#a7 ,in general ,section #agj is amended by striking subsection 7m74 7#b7 ,conforming amendments ,section #fjej,l is amended-- 7,a7 by striking subsection 7b7 and redesignating subsection 7c7 as subsection 7b71 and 7,b7 by striking or 7b7 in subsection 7b7 7as redesignated by subparagraph 7,a774 7h7 ,effective date 7#a7 ,in general ,except as otherwise provided in this subsection1 the amendments made by this section shall apply to contributions made in taxable years beginning after ,december #ca1 #bjad4 7#b7 ,qualified conservation contributions ,the amendments made by subsection 7e7 shall apply to contributions made in taxable years beginning after ,december #ca1 #bjac4 #adjd4 ,denial of deduction for expenses attributable to the trade or business of being an employee 7a7 ,in general ,part ,,ix of subchapter ,b of chapter #a is amended by inserting after the item relating to section #bfb the following new item3 #bfb;,a4 ,expenses attributable to being an employee 7a7 ,in general ,except as otherwise provided in this section1 no deduction shall be allowed with respect to any trade or business of the taxpayer which consists of the performance of services by the taxpayer as an employee4 7b7 ,exception for above-the-,line deductions ,subsection 7a7 shall not apply to any deduction allowable 7determined without regard to subsection 7a77 in determining adjusted gross income4 4 7b7 ,repeal of certain above-the-,line trade and business deductions of employees 7#a7 ,in general ,paragraph 7#b7 of section #fb7;a7 is amended-- 7,a7 by striking subparagraphs 7,b71 7,c71 and 7,d71 and 7,b7 by redesignating subparagraph 7,e7 as subparagraph 7,b74 7#b7 ,conforming amendments 7,a7 ,section #fb is amended by striking subsections 7b7 and 7d7 and by redesignating subsections 7c7 and 7e7 as subsections 7b7 and 7c71 respectively4 7,b7 ,section #fb7;a77#bj7 is amended by striking subsection 7e7 and inserting subsection 7c74 7c7 ,continued exclusion of working condition fringe benefits ,section #acb7;d7 is amended by inserting 7determined without regard to section #bfb;,a7 after section #afb4 7d7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 #adje4 ,repeal of deduction for taxes not paid or accrued in a trade or business 7a7 ,in general ,subsection 7b7 of section #afd is amended by striking paragraphs 7#e7 and 7#f7 and inserting the following new paragraph3 7#e7 ,limitation in case of individuals ,in the case of a taxpayer other than a corporation-- 7,a7 paragraphs 7#a7 and 7#b7 of subsection 7a7 shall only apply to taxes which are paid or accrued in carrying on a trade or business or an activity described in section #bab1 and 7,b7 paragraph 7#c7 of subsection 7a7 shall not apply to ,state and local taxes4 4 7b7 ,conforming amendments 7#a7 ,section #afd7;a7 is amended by striking paragraph 7#f74 7#b7 7,a7 ,section #baf7;a7 is amended by striking proportionate share of-- and all that follows and inserting proportionate share of the interest allowable as a deduction to the corporation under section #afc which is paid or incurred by the corporation on its indebtedness contracted-- 7#a7 in the acquisition1 construction1 alteration1 rehabilitation1 or maintenance of the houses or apartment building1 or 7#b7 in the acquisition of the land on which the houses 7or apartment building7 are situated4 4 7,b7 ,section #baf7;b77#c77;,b77i7 is amended-- 7i7 by striking a share of such corporation's real estate taxes described in subsection 7a77#a7 or in subclause 7,i71 and 7ii7 by striking of such taxes1 or of such interest1 in subclause 7,,ii7 and inserting of such interest4 7,c7 ,section #baf7;d7 is amended by striking subsections 7a77#a7 and 7a77#b7 and inserting subsection 7a74 7#c7 ,section #bgd7;f7 is amended by striking taxes1 in the heading thereof4 7#d7 ,section #bhj;,a7b7 is amended by striking taxes1 in the heading thereof4 7#e7 ,section #iaa7;c77#c77;,a77ii7 is amended-- 7,a7 by striking and taxes1 and 7,b7 by striking or #afd4 7c7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 #adjf4 ,repeal of deduction for personal casualty losses 7a7 ,in general ,subsection 7c7 of section #afe is amended by inserting and at the end of paragraph 7#a71 by striking 2 and at the end of paragraph 7#b7 and inserting a period1 and by striking paragraph 7#c74 7b7 ,conforming amendments 7#a7 ,section #afe is amended by striking subsections 7h7 and 7k74 7#b7 ,subsection 7i7 of section #afe is amended-- 7,a7 in paragraph 7#a7-- 7i7 by striking 7as defined by clause 7ii7 of subsection 7h77#c77;,c771 and 7ii7 by striking 7as defined by clause 7i7 of such subsection71 7,b7 by striking 7as defined by subsection 7h77#c77;,c77i7 in paragraph 7#d71 and 7,c7 by adding at the end the following new paragraph3 7#e7 ,federally declared disaster ,for purposes of this subsection-- 7,a7 ,federally declared disaster ,the term federally declared disaster means any disaster subsequently determined by the ,president of the ,united ,states to warrant assistance by the ,federal ,government under the ,robert ,t4 ,stafford ,disaster ,relief and ,emergency ,assistance ,act4 7,b7 ,disaster area ,the term disaster area means the area so determined to warrant such assistance4 4 7#c7 7,a7 ,section #afe7l77#a7 is amended by striking a loss described in subsection 7c77#c7 and inserting an ordinary loss described in subsection 7c77#b74 7,b7 ,section #afe7l7 is amended-- 7i7 by striking paragraph 7#e71 7ii7 by redesignating paragraphs 7#b71 7#c71 and 7#d7 as paragraphs 7#c71 7#d71 and 7#e71 respectively1 and 7iii7 by inserting after paragraph 7#a7 the following new paragraph3 7#b7 ,limitations 7,a7 ,deposit may not be federally insured ,no election may be made under paragraph 7#a7 with respect to any loss on a deposit in a qualified financial institution if part or all of such deposit is insured under ,federal law4 7,b7 ,dollar limitation ,with respect to each financial institution1 the aggregate amount of losses attributable to deposits in such financial institution to which an election under paragraph 7#a7 may be made by the taxpayer for any taxable year shall not exceed #bj1jjj 7#aj1jjj in the case of a separate return by a married individual74 ,the limitation of the preceding sentence shall be reduced by the amount of any insurance proceeds under any ,state law which can reasonably be expected to be received with respect to losses on deposits in such institution4 4 7#d7 ,section #agb7;b77#a77;,f77ii71 prior to redesignation under title ,,iii1 is amended-- 7,a7 by striking subclause 7,i7 and by redesignating subclauses 7,,ii7 and 7,,iii7 as subclauses 7,i7 and 7,,ii71 respectively1 and 7,b7 by striking subsection 7h77#c77;,c77i7 and inserting section #afe7;i77#e74 7#e7 ,section #agb7;d77#d77;,c7 is amended by striking paragraph 7#b7 or 7#c7 of section #afe7;c7 and inserting section #afe7;c77#b74 7#f7 ,section #bgd7;f7 is amended by striking casualty losses1 in the heading thereof4 7#g7 ,section #bhj;,a7b7 is amended by striking casualty losses1 in the heading thereof4 7#h7 ,section #hgc7;b71 as amended by the preceding provisions of this ,act1 is amended by striking paragraph 7#a7 and by redesignating paragraphs 7#b7 and 7#c7 as paragraphs 7#a7 and 7#b71 respectively4 7c7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 #adjg4 ,limitation on wagering losses 7a7 ,in general ,section #afe7;d7 is amended by adding at the end the following3 ,for purposes of the preceding sentence1 the term losses from wagering transactions includes any deduction otherwise allowable under this chapter incurred in carrying on any wagering transaction44 7b7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 #adjh4 ,repeal of deduction for tax preparation expenses 7a7 ,in general ,section #bab is amended by adding or at the end of paragraph 7#a71 by striking 2 or at the end of paragraph 7#b7 and inserting a period1 and by striking paragraph 7#c74 7b7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 #adji4 ,repeal of deduction for medical expenses 7a7 ,in general ,part ,,vii of subchapter ,b of chapter #a is amended by striking section #bac 7and by striking the item relating to such section in the table of sections for such part74 7b7 ,conforming amendments 7#a7 7,a7 ,section #bbc is amended by redesignating subsections 7e71 7f71 7g71 and 7h7 as subsections 7f71 7g71 7h71 and 7i71 respectively1 and by inserting after subsection 7d7 the following new subsection3 7e7 ,medical care ,for purposes of this section-- 7#a7 ,in general ,the term medical care means amounts paid-- 7,a7 for the diagnosis1 cure1 mitigation1 treatment1 or prevention of disease1 or for the purpose of affecting any structure or function of the body1 7,b7 for transportation primarily for and essential to medical care referred to in subparagraph 7,a71 7,c7 for qualified long-term care services 7as defined in section #ggjb;,b7c771 or 7,d7 for insurance 7including amounts paid as premiums under part ,b of title ,,xviii of the ,social ,security ,act1 relating to supplementary medical insurance for the aged7 covering medical care referred to in subparagraphs 7,a7 and 7,b7 or for any qualified long-term care insurance contract 7as defined in section #ggjb;,b7b774 ,in the case of a qualified long-term care insurance contract 7as defined in section #ggjb;,b7b771 only eligible long-term care premiums 7as defined in paragraph 7#g77 shall be taken into account under subparagraph 7,d74 7#b7 ,amounts paid for certain lodging away from home treated as paid for medical care ,amounts paid for lodging 7not lavish or extravagant under the circumstances7 while away from home primarily for and essential to medical care referred to in paragraph 7#a77;,a7 shall be treated as amounts paid for medical care if-- 7,a7 the medical care referred to in paragraph 7#a77;,a7 is provided by a physician in a licensed hospital 7or in a medical care facility which is related to1 or the equivalent of1 a licensed hospital71 and 7,b7 there is no significant element of personal pleasure1 recreation1 or vacation in the travel away from home4 ,the amount taken into account under the preceding sentence shall not exceed #ej for each night for each individual4 7#c7 ,physician ,the term physician has the meaning given to such term by section #ahfa7r7 of the ,social ,security ,act 7#db ,u4,s4,c4 #aciex7r774 7#d7 ,contracts covering other than medical care ,in the case of an insurance contract under which amounts are payable for other than medical care referred to in subparagraphs 7,a71 7,b7 and 7,c7 of paragraph 7#a7-- 7,a7 no amount shall be treated as paid for insurance to which paragraph 7#a77;,d7 applies unless the charge for such insurance is either separately stated in the contract1 or furnished to the policyholder by the insurance company in a separate statement1 7,b7 the amount taken into account as the amount paid for such insurance shall not exceed such charge1 and 7,c7 no amount shall be treated as paid for such insurance if the amount specified in the contract 7or furnished to the policyholder by the insurance company in a separate statement7 as the charge for such insurance is unreasonably large in relation to the total charges under the contract4 7#e7 ,certain pre-paid contracts ,subject to the limitations of paragraph 7#d71 premiums paid during the taxable year by a taxpayer before he attains the age of #fe for insurance covering medical care 7within the meaning of subparagraphs 7,a71 7,b71 and 7,c7 of paragraph 7#a77 for the taxpayer1 his spouse1 or a dependent after the taxpayer attains the age of #fe shall be treated as expenses paid during the taxable year for insurance which constitutes medical care if premiums for such insurance are payable 7on a level payment basis7 under the contract for a period of #aj years or more or until the year in which the taxpayer attains the age of #fe 7but in no case for a period of less than #e years74 7#f7 ,cosmetic surgery 7,a7 ,in general ,the term medical care does not include cosmetic surgery or other similar procedures1 unless the surgery or procedure is necessary to ameliorate a deformity arising from1 or directly related to1 a congenital abnormality1 a personal injury resulting from an accident or trauma1 or disfiguring disease4 7,b7 ,cosmetic surgery defined ,for purposes of this paragraph1 the term cosmetic surgery means any procedure which is directed at improving the patient's appearance and does not meaningfully promote the proper function of the body or prevent or treat illness or disease4 7#g7 ,eligible long-term care premiums 7,a7 ,in general ,for purposes of this section1 the term eligible long-term care premiums means the amount paid during a taxable year for any qualified long-term care insurance contract 7as defined in section #ggjb;,b7b77 covering an individual1 to the extent such amount does not exceed the limitation determined under the following table3 ,in the case of an individual with an attained age before the close of the taxable year of3,the limitation is3 #dj or less#bjj ,more than #dj but not more than #ejcge ,more than #ej but not more than #fjgej ,more than #fj but not more than #gjb1jjj ,more than #gjb1ejj 7,b7 ,indexing 7i7 ,in general ,in the case of any taxable year beginning after #aiig1 each dollar amount in subparagraph 7,a7 shall be increased by the medical care cost adjustment of such amount for such calendar year4 ,any increase determined under the preceding sentence shall be rounded to the nearest multiple of #aj4 7ii7 ,medical care cost adjustment ,for purposes of clause 7i71 the medical care cost adjustment for any calendar year is the adjustment prescribed by the ,secretary1 in consultation with the ,secretary of ,health and ,human ,services1 for purposes of such clause4 ,to the extent that ,,cpi 7as defined section #a7;c771 or any component thereof1 is taken into account in determining such adjustment1 such adjustment shall be determined by taking into account ,c-,,cpi-,u 7as so defined71 or the corresponding component thereof1 in lieu of such ,,cpi 7or component thereof71 but only with respect to the portion of such adjustment which relates to periods after ,december #ca1 #bjad4 7#h7 ,certain payments to relatives treated as not paid for medical care ,an amount paid for a qualified long-term care service 7as defined in section #ggjb;,b7c77 provided to an individual shall be treated as not paid for medical care if such service is provided-- 7,a7 by the spouse of the individual or by a relative 7directly or through a partnership1 corporation1 or other entity7 unless the service is provided by a licensed professional with respect to such service1 or 7,b7 by a corporation or partnership which is related 7within the meaning of section #bfg7;b7 or #gjg7;b77 to the individual4 ,for purposes of this paragraph1 the term relative means an individual bearing a relationship to the individual which is described in any of subparagraphs 7,a7 through 7,g7 of section #ggje7;d77#b74 ,this paragraph shall not apply for purposes of section #aje7;b7 with respect to reimbursements through insurance4 4 7,b7 ,section #gb7t77#b77;,d77i77,,iii7 is amended by striking section #bac7;d77#a77;,d7 and inserting section #bbc7;e77#a77;,d74 7,c7 ,section #ajd7;a7 is amended by striking section #bac7;d77#a7 in the last sentence and inserting section #bbc7;e77#a74 7,d7 ,section #aje7;b7 is amended by striking section #bac7;d7 and inserting section #bbc7;e74 7,e7 ,section #aci;,d is amended by striking section #bac and inserting section #bbc4 7,f7 ,section #afb7l77#b7 is amended by striking section #bac7;d77#aj7 and inserting section #bbc7;e77#g74 7,g7 ,section #bbj7;d77#b77;,a7 is amended by striking section #bac7;d7 and inserting section #bbc7;e74 7,h7 ,section #bbc7;d77#b77;,a7 is amended by striking section #bac7;d7 and inserting subsection 7e774 7,i7 ,section #dai;,a7f77#b7 is amended by striking section #bac7;d7 and inserting section #bbc7;e74 7,j7 ,section #eja7;c77#bf77;,a7 is amended by striking section #bac7;d7 and inserting section #bbc7;e74 7,k7 ,section #bejc7;e7 is amended by striking section #bac7;d7 and inserting section #bbc7;e74 7,l7 ,section #dihj;,b7c77#d77;,b77i77,i7 is amended by striking section #bac7;d7 and inserting section #bbc7;e74 7,m7 ,section #fjda7;f7 is amended by striking section #bac7;d7 and inserting section #bbc7;e74 7,n7 ,section #ggjb;,b7a77#b7 is amended by striking section #bac7;d7 and inserting section #bbc7;e74 7,o7 ,section #ggjb;,b7a77#d7 is amended by striking section #bac7;d77#a77;,d7 and inserting section #bbc7;e77#a77;,d74 7,p7 ,section #ggjb;,b7d77#e7 is amended by striking section #bac7;d77#aj7 and inserting section #bbc7;e77#g74 7,q7 ,section #ihcb7;d77#c7 is amended by striking section #bac7;d7 and inserting section #bbc7;e74 7#b7 ,section #gb7t77#b77;,b7 is amended to read as follows3 7,b7 ,medical expenses ,distributions made to an individual 7other than distributions described in subparagraph 7,a71 7,c71 or 7,d7 to the extent such distributions do not exceed the excess of-- 7i7 the expenses paid by the taxpayer during the taxable year1 not compensated for by insurance or otherwise1 for medical care 7as defined in #bbc7;e77 of the taxpayer1 his spouse1 or a dependent 7as defined in section #ggje1 determined without regard to subsections 7b77#a71 7b77#b71 and 7d77#a77;,b7 thereof71 over 7ii7 #aj percent of the taxpayer's adjusted gross income4 4 7#c7 ,section #aje is amended by striking subsection 7f74 7#d7 ,section #afb7l7 is amended by striking paragraph 7#c74 7#e7 ,section #djb7l7 is amended by striking paragraph 7#g7 and redesignating paragraph 7#h7 as paragraph 7#g74 7#f7 ,section #bbj7;f7 is amended by striking paragraph 7#f74 7#g7 ,section #bbc7;f7 is amended by striking paragraph 7#f74 7#h7 ,section #ggjb;,b7e7 is amended by striking paragraph 7#b74 7#i7 ,section #ggje7;f77#g71 as redesignated by this ,act1 is amended by striking sections #aje7;b71 #acb7;h77#b77;,b71 and #bac7;d77#e7 and inserting sections #aje7;b7 and #acb7;h77#b77;,b74 7c7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 #adaj4 ,repeal of disqualification of expenses for over-the-counter drugs under certain accounts and arrangements 7a7 ,h,s,as ,subparagraph 7,a7 of section #bbc7;d77#b7 is amended by striking the last sentence4 7b7 ,archer ,m,s,as ,subparagraph 7,a7 of section #bbj7;d77#b7 is amended by striking the last sentence4 7c7 ,health flexible spending arrangements and health reimbursement arrangements ,section #ajf is amended by striking subsection 7f74 7d7 ,effective date ,the amendments made by this section shall apply to expenses incurred after ,december #ca1 #bjad4 #adaa4 ,repeal of deduction for alimony payments and corresponding inclusion in gross income 7a7 ,in general ,part ,,vii of subchapter ,b of chapter #a is amended by striking section #bae 7and by striking the item relating to such section in the table of sections for such part74 7b7 ,corresponding repeal of provisions providing for inclusion of alimony in gross income 7#a7 ,subsection 7a7 of section #fa is amended by striking paragraph 7#h7 and by redesignating paragraphs 7#i7 through 7#ae7 as paragraphs 7#h7 through 7#ad71 respectively4 7#b7 ,part ,,ii of subchapter ,b of chapter #a is amended by striking section #ga 7and by striking the item relating to such section in the table of sections for such part74 7#c7 ,subpart ,f of part ,i of subchapter ,j of chapter #a is amended by striking section #fhb 7and by striking the item relating to such section in the table of sections for such subpart74 7c7 ,conforming amendments 7#a7 ,related to repeal of section #bae 7,a7 ,section #fb7;a7 is amended by striking paragraph 7#aj74 7,b7 ,section #cdjb7m77#a7 is amended by striking 7other than paragraph 7#aj7 thereof74 7#b7 ,related to repeal of section #ga 7,a7 ,section #aba7;d77#c7 is amended-- 7i7 by striking 7as defined in section #ga7;b77#b77 in subparagraph 7,b71 and 7ii7 by adding at the end the following new subparagraph3 7,c7 ,divorce or separation instrument ,for purposes of this paragraph1 the term divorce or separation instrument means-- 7i7 a decree of divorce or separate maintenance or a written instrument incident to such a decree1 7ii7 a written separation agreement1 or 7iii7 a decree 7not described in clause 7i77 requiring a spouse to make payments for the support or maintenance of the other spouse4 4 7,b7 ,section #bbj7;f77#g7 is amended by striking subparagraph 7,a7 of section #ga7;b77#b7 and inserting clause 7i7 of section #aba7;d77#c77;,c74 7,c7 ,section #bbc7;f77#g7 is amended by striking subparagraph 7,a7 of section #ga7;b77#b7 and inserting clause 7i7 of section #aba7;d77#c77;,c74 7,d7 ,section #chb7l77#c77;,b77iii7 is amended by striking section #ga7;b77#b7 and inserting section #aba7;d77#c77;,c74 7,e7 ,section #djh7;d77#f7 is amended by striking subparagraph 7,a7 of section #ga7;b77#b7 and inserting clause 7i7 of section #aba7;d77#c77;,c74 7d7 ,effective date ,the amendments made by this section shall apply to-- 7#a7 any divorce or separation instrument 7as defined in section #ga7;b77#b7 of the ,internal ,revenue ,code of #aihf as in effect before the date of the enactment of this ,act7 executed after ,december #ca1 #bjad1 and 7#b7 any divorce or separation instrument 7as so defined7 executed on or before such date and modified after such date if the modification expressly provides that the amendments made by this section apply to such modification4 #adab4 ,repeal of deduction for moving expenses 7a7 ,in general ,part ,,vii of subchapter ,b of chapter #a is amended by striking section #bag 7and by striking the item relating to such section in the table of sections for such part74 7b7 ,conforming amendments 7#a7 ,section #fb7;a7 is amended by striking paragraph 7#ae74 7#b7 7,a7 ,section #acb7;a7 is amended by striking paragraph 7#f74 7,b7 ,section #hb is amended by striking ,except as provided in section #acb7;a77#f71 there and inserting ,there4 7#c7 7,a7 ,section #acb is amended by striking subsection 7g74 7,b7 ,section #acb7l7 is amended by striking by striking subsections 7e7 and 7g7 and inserting subsection 7e74 7#d7 ,section #bgd7m77#c7 is amended by striking 7other than section #bag74 7#e7 ,section #caba7;a7 is amended by striking paragraph 7#aa74 7#f7 ,section #bji7;a7 of the ,social ,security ,act is amended by striking paragraph 7#i74 7#g7 ,section #ccjf7;b7 is amended by striking paragraph 7#i74 7#h7 ,section #cdja7;a7 is amended by striking paragraph 7#ae74 7#i7 ,section #ghgb7;f7 is amended by striking paragraph 7#aa74 7c7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 #adac4 ,termination of deduction and exclusions for contributions to medical savings accounts 7a7 ,termination of income tax deduction ,section #bbj is amended by adding at the end the following new subsection3 7k7 ,termination ,no deduction shall be allowed under subsection 7a7 with respect to any taxable year beginning after ,december #ca1 #bjad4 4 7b7 ,termination of exclusion for employer-,provided contributions ,section #ajf is amended by striking subsection 7b74 7c7 ,conforming amendments 7#a7 ,section #fb7;a7 is amended by striking paragraph 7#af74 7#b7 ,section #ajf7;d7 is amended by striking paragraph 7#b71 by redesignating paragraph 7#c7 as paragraph 7#f71 and by inserting after paragraph 7#a7 the following new paragraphs3 7#b7 ,no constructive receipt ,no amount shall be included in the gross income of any employee solely because the employee may choose between the contributions referred to in paragraph 7#a7 and employer contributions to another health plan of the employer4 7#c7 ,special rule for deduction of employer contributions ,any employer contribution to a health savings account 7as so defined71 if otherwise allowable as a deduction under this chapter1 shall be allowed only for the taxable year in which paid4 7#d7 ,employer health savings account contribution required to be shown on return ,every individual required to file a return under section #fjab for the taxable year shall include on such return the aggregate amount contributed by employers to the health savings accounts 7as so defined7 of such individual or such individual's spouse for such taxable year4 7#e7 ,health savings account contributions not part of ,,cobra coverage ,paragraph 7#a7 shall not apply for purposes of section #dihj;,b4 4 7#c7 ,section #bbc7;b77#d7 is amended by striking subparagraph 7,a7 and by redesignating subparagraphs 7,b7 and 7,c7 as subparagraphs 7,a7 and 7,b71 respectively4 7#d7 ,section #cbca7;e7 is amended by striking paragraph 7#aj7 and by redesignating paragraphs 7#aa7 and 7#ab7 as paragraphs 7#aj7 and 7#aa71 respectively4 7#e7 ,section #ccjf7;b7 is amended by striking paragraph 7#ag74 7#f7 ,section #cdja7;a7 is amended by striking paragraph 7#ba74 7#g7 ,chapter #dc is amended by striking section #dihj;,e 7and by striking the item relating to such section in the table of sections for such chapter74 7#h7 ,section #dihj;,g is amended to read as follows3 #dihj;,g4 ,failure of employer to make comparable health savings account contributions 7a7 ,in general ,in the case of an employer who makes a contribution to the health savings account of any employee during a calendar year1 there is hereby imposed a tax on the failure of such employer to meet the requirements of subsection 7d7 for such calendar year4 7b7 ,amount of tax ,the amount of the tax imposed by subsection 7a7 on any failure for any calendar year is the amount equal to #ce percent of the aggregate amount contributed by the employer to health savings accounts of employees for taxable years of such employees ending with or within such calendar year4 7c7 ,waiver by ,secretary ,in the case of a failure which is due to reasonable cause and not to willful neglect1 the ,secretary may waive part or all of the tax imposed by subsection 7a7 to the extent that the payment of such tax would be excessive relative to the failure involved4 7d7 ,employer required ,to make comparable health savings account contributions for all participating employees 7#a7 ,in general ,an employer meets the requirements of this subsection for any calendar year if the employer makes available comparable contributions to the health savings accounts of all comparable participating employees for each coverage period during such calendar year4 7#b7 ,comparable contributions 7,a7 ,in general ,for purposes of paragraph 7#a71 the term comparable contributions means contributions-- 7i7 which are the same amount1 or 7ii7 which are the same percentage of the annual deductible limit under the high deductible health plan covering the employees4 7,b7 ,part-year employees ,in the case of an employee who is employed by the employer for only a portion of the calendar year1 a contribution to the health savings account of such employee shall be treated as comparable if it is an amount which bears the same ratio to the comparable amount 7determined without regard to this subparagraph7 as such portion bears to the entire calendar year4 7#c7 ,comparable participating employees 7,a7 ,in general ,for purposes of paragraph 7#a71 the term comparable participating employees means all employees-- 7i7 who are eligible individuals covered under any high deductible health plan of the employer1 and 7ii7 who have the same category of coverage4 7,b7 ,categories of coverage ,for purposes of subparagraph 7,b71 the categories of coverage are self-only and family coverage4 7#d7 ,part-time employees 7,a7 ,in general ,paragraph 7#c7 shall be applied separately with respect to part-time employees and other employees4 7,b7 ,part-time employee ,for purposes of subparagraph 7,a71 the term part-time employee means any employee who is customarily employed for fewer than #cj hours per week4 7#e7 ,special rule for non-highly compensated employees ,for purposes of applying this section to a contribution to a health savings account of an employee who is not a highly compensated employee 7as defined in section #dad7q771 highly compensated employees shall not be treated as comparable participating employees4 7e7 ,controlled groups ,for purposes of this section1 all persons treated as a single employer under subsection 7b71 7c71 7m71 or 7o7 of section #dad shall be treated as #a employer4 7f7 ,definitions ,terms used in this section which are also used in section #bbc have the respective meanings given such terms in section #bbc4 7g7 ,regulations ,the ,secretary shall issue regulations to carry out the purposes of this section4 4 7#i7 ,section #fjea7;a7 is amended by striking paragraph 7#aa74 7#aj7 ,section #fjea7;a77#ad77;,a7 is amended by striking paragraphs 7#aa7 and 7#ab7 and inserting paragraph 7#ab74 7d7 ,effective date ,the amendment made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 #adad4 ,repeal of #b-percent floor on miscellaneous itemized deductions 7a7 ,in general ,part #a of subchapter ,b of chapter #a is amended by striking section #fg 7and the item relating to such section in the table of sections for such part74 7b7 ,conforming amendments 7#a7 ,section #fdb7;b77#b77;,c77i77,,ii7 is amended to read as follows3 7,,ii7 by determining the adjusted gross income of the trust under the rules of section #b7;b77#b7 7without the reference to section #fdb7;b774 4 7#b7 ,section #afb7o7 is amended by striking paragraph 7#b74 7#c7 ,section #cjb7;b77#e7 is amended by striking section #fg7;c77#b77;,b7 and inserting section #efb7;c77#b74 7#d7 ,section #efb7;c7 is amended-- 7,a7 by striking 7as defined in section #fg7;c77#b77;,b771 7,b7 by striking 7as so defined71 7,c7 by striking ,except in the case of and inserting the following3 7#a7 ,in general ,except in the case of 1 and 7,d7 by adding at the end the following new paragraph3 7#b7 ,publicly offered regulated investment company ,for purposes of this subsection-- 7,a7 ,in general ,the term publicly offered regulated investment company means a regulated investment company the shares of which are-- 7i7 continuously offered pursuant to a public offering 7within the meaning of section #d of the ,securities ,act of #aicc1 as amended 7#ae ,u4,s4,c4 #gg;a to #gg;aa771 7ii7 regularly traded on an established securities market1 or 7iii7 held by or for no fewer than #ejj persons at all times during the taxable year4 7,b7 ,secretary may reduce #ejj person requirement ,the ,secretary may by regulation decrease the minimum shareholder requirement of clause 7i77,,iii7 in the case of regulated investment companies which experience a loss of shareholders through net redemptions of their shares4 4 7c7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 #adae4 ,repeal of overall limitation on itemized deductions 7a7 ,in general ,part #a of subchapter ,b of chapter #a is amended by striking section #fh 7and the item relating to such section in the table of sections for such part74 7b7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 #adaf4 ,deduction for amortizable bond premium allowed in determining adjusted gross income 7a7 ,in general ,subsection 7a7 of section #fb1 as amended by section #adaa1 is amended by inserting after paragraph 7#i7 the following new paragraph3 7#aj7 ,amortizable bond premium ,the deduction allowed under section #aga7;a77#a74 4 7b7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 #adag4 ,repeal of exclusion1 etc41 for employee achievement awards 7a7 ,in general ,section #gd is amended by striking subsection 7c74 7b7 ,repeal of limitation on deduction ,section #bgd is amended by striking subsection 7j74 7c7 ,conforming amendments 7#a7 ,section #ajb7;c77#b7 is amended by striking the first sentence4 7#b7 ,section #dad7n77#c77;,c7 is amended by striking #bgd7;j714 7#c7 ,section #dad7t77#b7 is amended by striking #bgd7;j714 7#d7 ,section #caba7;a77#bj7 is amended by striking #gd7;c714 7#e7 ,section #bji7;a77#ag7 of the ,social ,security ,act is amended by striking #gd7;c714 7#f7 ,section #cbca7;e77#e7 is amended by striking #gd7;c714 7#g7 ,section #ccjf7;b77#af7 is amended by striking #gd7;c714 7#h7 ,section #cdja7;a77#ai7 is amended by striking #gd7;c714 7d7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 #adah4 ,clarification of special rule for certain governmental plans 7a7 ,treatment of beneficiaries ,section #aje7;j77#a7 is amended-- 7#a7 by striking the taxpayer and inserting an employee1 spouse1 dependent 7as defined for purposes of subsection 7b771 or child 7as so defined71 and 7#b7 by striking deceased plan participant's beneficiary and inserting deceased employee's beneficiary who is not a surviving spouse1 dependent 7as so defined71 or child 7as so defined74 7b7 ,application to political subdivisions of ,states ,section #aje7;j77#b7 is amended-- 7#a7 by inserting or established by or on behalf of a ,state or political subdivision thereof after public retirement system1 and 7#b7 by inserting or #eja7;c77#i7 after section #aae in subparagraph 7,b7 thereof4 7c7 ,effective date ,the amendments made by this section shall apply to payments after the date of the enactment of this ,act4 #adai4 ,limitation on exclusion for employer-provided housing 7a7 ,in general ,section #aai is amended by adding at the end the following new subsection3 7e7 ,limitation on exclusion of lodging 7#a7 ,in general ,the aggregate amount excluded from gross income of the taxpayer under subsections 7a7 and 7d7 with respect to lodging for any taxable year shall not exceed #ej1jjj 7half such amount in the case of a married individual filing a separate return74 7#b7 ,limitation to #a home ,subsections 7a7 and 7d7 7separately and in combination7 shall not apply with respect to more than #a residence of the taxpayer at any given time4 ,in the case of a joint return1 the preceding sentence shall apply separately to each spouse for any period during which each spouse resides separate from the other spouse in a residence which is provided in connection with the employment of each spouse1 respectively4 4 7b7 ,effective date ,the amendment made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 #adbj4 ,fringe benefits 7a7 ,repeal of special rule for air transportation by parent of employee ,subsection 7h7 of section #acb is amended by striking paragraph 7#c74 7b7 ,transportation and parking 7#a7 ,freeze at current levels 7,a7 ,in general ,paragraph 7#b7 of section #acb7;f7 is amended-- 7i7 in subparagraph 7,a7 by striking #ajj and inserting #acj1 and 7ii7 in subparagraph 7,b7 by striking #age and inserting #bej4 7,b7 ,inflation adjustment ,subsection 7f7 of such section is amended by striking paragraph 7#f7 and redesignating paragraph 7#g7 as paragraph 7#f74 7#b7 ,repeal of bicycle benefit 7,a7 ,in general ,paragraph 7#a7 of section #acb7;f7 is amended by striking subparagraph 7,d74 7,b7 ,conforming amendments 7i7 ,section #acb7;f77#b7 is amended by inserting and at the end of subparagraph 7,a71 by striking and at the end of subparagraph 7,b7 and inserting a period1 and by striking subparagraph 7,c74 7ii7 ,section #acb7;f77#d7 is amended by striking 7other than a qualified bicycle commuting reimbursement74 7iii7 ,section #acb7;f77#e7 is amended by striking subparagraph 7,f74 7c7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 #adba4 ,repeal of exclusion of net unrealized appreciation in employer securities 7a7 ,in general ,section #djb7;e7 is amended by striking paragraph 7#d74 7b7 ,conforming amendments 7#a7 ,section #dja7k77#aj7 is amended by striking subparagraph 7,b7 and inserting the following new subparagraphs3 7,b7 ,distributions must be lump sum distributions ,a termination shall not be treated as described in subparagraph 7,a7 with respect to any employee unless the employee receives a lump sum distribution by reason of the termination4 7,c7 ,lump-sum distribution defined ,for purposes of this paragraph-- 7i7 ,in general ,the term lump sum distribution means the distribution or payment within one taxable year of the recipient of the balance to the credit of an employee which becomes payable to the recipient from a trust which forms a part of a plan described in section #dja7;a7 and which is exempt from tax under section #eja or from a plan described in section #djc7;a74 ,such term includes a distribution of an annuity contract from-- 7,i7 a trust which forms a part of a plan described in section #dja7;a7 and which is exempt from tax under section #eja7;a71 or 7,,ii7 an annuity plan described in section #djc7;a74 ,for purposes of this clause1 a distribution to two or more trusts shall be treated as a distribution to one recipient4 7ii7 ,aggregation of certain trusts and plans ,for purposes of determining the balance to the credit of an employee under clause 7i7-- 7,i7 all trusts which are part of a plan shall be treated as a single trust1 all pension plans maintained by the employer shall be treated as a single plan1 all profit-sharing plans maintained by the employer shall be treated as a single plan1 and all stock bonus plans maintained by the employer shall be treated as a single plan1 and 7,,ii7 trusts which are not qualified trusts under section #dja7;a7 and annuity contracts which do not satisfy the requirements of section #djd7;a77#b7 shall not be taken into account4 7iii7 ,community property laws ,the provisions of this subparagraph shall be applied without regard to community property laws4 7iv7 ,balance to credit of employee not to include amounts payable under qualified domestic relations order ,the balance to the credit of an employee shall not include any amount payable to an alternate payee under a qualified domestic relations order 7within the meaning of section #dad7p774 7v7 ,transfers to cost-of-living arrangement not treated as distribution ,the balance to the credit of an employee under a defined contribution plan shall not include any amount transferred from such defined contribution plan to a qualified cost-of-living arrangement 7within the meaning of section #dae7k77#b77 under a defined benefit plan4 7vii7 7vi7 ,lump-sum distributions of alternate payees ,if any distribution or payment of the balance to the credit of an employee would be treated as a lump-sum distribution1 then1 for purposes of this paragraph1 the payment under a qualified domestic relations order 7within the meaning of section #dad7p77 of the balance to the credit of an alternate payee who is the spouse or former spouse of the employee shall be treated as a lump-sum distribution4 ,for purposes of this clause1 the balance to the credit of the alternate payee shall not include any amount payable to the employee4 7vii7 ,exclusion of accumulate deductible employee contributions ,for purposes of this subparagraph1 the balance to the credit of the employee does not include the accumulated deductible employee contributions under the plan 7within the meaning of section #gb7o77#e774 4 7#b7 ,section #cdje7;e7 is amended by striking paragraph 7#h74 7c7 ,effective date ,the amendments made by this section shall apply to distributions after ,december #ca1 #bjad4 #adbb4 ,consistent basis reporting between estate and person acquiring property from decedent 7a7 ,property acquired from a decedent ,section #ajad is amended by adding at the end the following new subsection3 7f7 ,basis must be consistent with estate tax return ,for purposes of this section-- 7#a7 ,in general ,the basis of any property to which subsection 7a7 applies shall not exceed-- 7,a7 in the case of property the final value of which has been determined for purposes of the tax imposed by chapter #aa on the estate of such decedent1 such value1 and 7,b7 in the case of property not described in subparagraph 7,a7 and with respect to which a statement has been furnished under section #fjce7;a7 identifying the value of such property1 such value4 7#b7 ,exception ,paragraph 7#a7 shall only apply to any property whose inclusion in the decedent's estate increased the liability for the tax imposed by chapter #aa 7reduced by credits allowable against such tax7 on such estate4 7#c7 ,regulations ,the ,secretary may by regulations provide exceptions to the application of this subsection4 4 7b7 ,information reporting 7#a7 ,in general ,subpart ,a of part ,,iii of subchapter ,a of chapter #fa is amended by inserting after section #fjcd;,a the following new section3 #fjce4 ,basis information to persons acquiring property from decedent 7a7 ,information with respect to property acquired from decedents 7#a7 ,in general ,the executor of any estate required to file a return under section #fjah7;a7 shall furnish to the ,secretary and to each person acquiring any interest in property included in the decedent's gross estate for ,federal estate tax purposes a statement identifying the value of each interest in such property as reported on such return and such other information with respect to such interest as the ,secretary may prescribe4 7#b7 ,statements by beneficiaries ,each person required to file a return under section #fjah7;b7 shall furnish to the ,secretary and to each other person who holds a legal or beneficial interest in the property to which such return relates a statement identifying the information described in paragraph 7#a74 7#c7 ,time for furnishing statement 7,a7 ,in general ,each statement required to be furnished under paragraph 7#a7 or 7#b7 shall be furnished at such time as the ,secretary may prescribe1 but in no case at a time later than the earlier of-- 7i7 the date which is #cj days after the date on which the return under section #fjah was required to be filed 7including extensions1 if any71 or 7ii7 the date which is #cj days after the date such return is filed4 7,b7 ,adjustments ,in any case in which there is an adjustment to the information required to be included on a statement filed under paragraph 7#a7 or 7#b7 after such statement has been filed1 a supplemental statement under such paragraph shall be filed not later than the date which is #cj days after such adjustment is made4 7b7 ,regulations ,the ,secretary shall prescribe such regulations as necessary to carry out this section1 including regulations relating to-- 7#a7 the application of this section to property with regard to which no estate tax return is required to be filed1 and 7#b7 situations in which the surviving joint tenant or other recipient may have better information than the executor regarding the basis or fair market value of the property4 4 7#b7 ,penalty for failure to file 7,a7 ,return ,section #fgbd7;d77#a7 is amended by striking and at the end of subparagraph 7,b71 by striking the period at the end of subparagraph 7,c7 and inserting 1 and1 and by adding at the end the following new subparagraph3 7,d7 any statement required to be filed with the ,secretary under section #fjce4 4 7,b7 ,statement ,section #fgbd7;d77#b7 is amended by striking or at the end of subparagraph 7,,gg71 by striking the period at the end of subparagraph 7,,hh7 and inserting 1 or1 and by adding at the end the following new subparagraph3 7,,ii7 section #fjce 7other than a statement described in paragraph 7#a77;,d774 4 7#c7 ,clerical amendment ,the table of sections for subpart ,a of part ,,iii of subchapter ,a of chapter #fa is amended by inserting after the item relating to section #fjcd;,a the following new item3 ,sec4 #fjce4 ,basis information to persons acquiring property from decedent4 4 7c7 ,penalty for inconsistent reporting 7#a7 ,in general ,subsection 7b7 of section #fffb is amended by inserting after paragraph 7#g7 the following new paragraph3 7#h7 ,any inconsistent estate basis4 4 7#b7 ,inconsistent basis reporting ,section #fffb is amended by adding at the end the following new subsection3 7k7 ,inconsistent estate basis reporting ,for purposes of this section1 the term inconsistent estate basis means the portion of the understatement which is attributable to in the case of property acquired from a decedent1 a basis determination with respect to such property which is not consistent with the value of such property as determined under section #ajad7;f74 4 7d7 ,effective date ,the amendments made by this section shall apply to transfers for which an estate tax return is filed after the date of the enactment of this ,act4 ,f ,employment tax modifications #aeja4 ,modifications of deduction for ,social ,security taxes in computing net earnings from self-employment 7a7 ,in general ,paragraph 7#ab7 of section #adjb7;a7 is amended to read as follows3 7#ab7 in lieu of the deduction allowable under section #afd7;f7 7relating to deduction for one-half of self-employment taxes71 there shall be allowed as a deduction an amount equal to the sum of-- 7,a7 #g4ajfd percent of so much of the individual's net earnings from self-employment for the taxable year 7determined without regard to this paragraph7 as does not exceed an amount equal to the product of #a4jgfe and the excess 7if any7 of-- 7i7 the contribution and benefit base 7as determined under section #bcj of the ,social ,security ,act7 in effect for the calendar year in which the taxable year begins1 over 7ii7 the wages 7within the meaning of subsection 7b77#a77 paid to the individual during such taxable year1 plus 7,b7 #a4dbic percent of the excess 7if any7 of the individual's net earnings from self-employment for the taxable year 7determined without regard to this paragraph7 over the amount of such net earnings taken into account under subparagraph 7,a72 4 7b7 ,coordination with benefits ,paragraph 7#aa7 of section #baa7;a7 of the ,social ,security ,act is amended to read as follows3 7#aa7 in lieu of the deduction allowable under section #afd7;f7 of the ,internal ,revenue ,code of #aihf 7relating to deduction for one-half of self-employment taxes71 there shall be allowed as a deduction an amount equal to the sum of-- 7,a7 #g4ajfd percent of so much of the individual's net-earnings from self-employment for the taxable year 7determined without regard to this paragraph7 as does not exceed an amount equal to the product of #a4jgfe and the excess 7if any7 of-- 7i7 the contribution and benefit base 7as determined under section #bcj7 in effect for the calendar year in which the taxable year begins1 7ii7 the wages 7within the meaning of section #adjb7;b77#a7 of the ,internal ,revenue ,code of #aihf7 paid to the individual during such taxable year1 plus 7,b7 #a4dbic percent of the excess 7if any7 of such net earnings over the amount of such net earnings taken into account under subparagraph 7,a72 4 7c7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 #aejb4 ,determination of net earnings from self-employment 7a7 ,pro rata share of ,s corporation items included as net earnings from self-,employment 7#a7 ,in general ,section #adjb7;a7 is amended by inserting 1 plus 7notwithstanding subsection 7c77#b77 his pro rata share of nonseparately computed income or loss 7as defined in section #acff7;a77#b77 from any trade or business carried on by an ,s corporation in which he is a shareholder before 2 except that in the matter preceding paragraph 7#a74 7#b7 ,application of adjustments ,section #adjb7;a7 is amended by inserting and such pro rata share of ,s corporation nonseparately computed income or loss after such distributive share of partnership ordinary income or loss in the matter preceding paragraph 7#a74 7#c7 ,conforming amendments ,section #baa7;a7 of the ,social ,security ,act is amended in the matter preceding paragraph 7#a7-- 7,a7 by inserting 1 plus 7notwithstanding subsection 7c77#b77 his pro rata share of nonseparately computed income or loss 7as defined in section #acff7;a77#b7 of the ,internal ,revenue ,code of #aihf7;from any trade or business carried on by an ,s corporation in which he is a shareholder before 2 except that1 and 7,b7 by inserting and such pro rata share of ,s corporation nonseparately computed income or loss after such distributive share of partnership ordinary income or loss4 7b7 ,repeal of exception for limited partners 7#a7 ,in general ,section #adjb7;a7 is amended by striking paragraph 7#ac74 7#b7 ,conforming amendment ,section #baa7;a7 of the ,social ,security ,act is amended by striking paragraph 7#ab74 7c7 ,deduction for return on invested capital 7#a7 ,in general ,section #adjb is amended by adding at the end the following new subsection3 7m7 ,deduction for return on invested capital 7#a7 ,in general ,an individual's net earnings from self-employment shall be reduced 7but not below zero7 by the lesser of-- 7,a7 #cj percent of the sum of-- 7i7 such individual's pass-through net earnings from self-employment1 and 7ii7 such individual's wages 7as defined in section #caba7 paid with respect to any trade or business carried on by an ,s corporation in which he is a shareholder1 or 7,b7 such individual's pass-through net earnings from self-employment4 7#b7 ,pass-through net earnings from self-employment ,for purposes of this subsection1 the term pass-through net earnings from self-employment means net earnings from self-employment 7as computed under subsection 7a7 without regard to this subsection7 determined without regard to any trade or business carried on by the individual4 7#c7 #ajj percent deduction where no material participation 7,a7 ,in general ,if an individual does not have material participation with respect to an entity 7as determined under subparagraph 7,b771 in lieu of the reduction provided under paragraph 7#a7 such individual's net earnings from self-employment shall be reduced 7but not below zero7 by the sum of-- 7i7 the reduction determined under paragraph 7#a7 applied-- 7,i7 by substituting #ajj percent for #cj percent in subparagraph 7,a7 thereof1 and 7,,ii7 by determining pass-through net earnings from self-employment by only taking into account distributive and pro rata shares from non-participation entities1 and 7,,iii7 by only taking into account under subparagraph 7,a77ii7 thereof wages paid with respect to trades or businesses carried on by ,s corporations which are non-participation entities1 plus 7ii7 the reduction determined under paragraph 7#a7 applied-- 7,i7 by determining pass-through net earnings from self-employment by not taking into account any distributive or pro rata share from a non-participation entity1 and 7,,ii7 by not taking into account under subparagraph 7,a77ii7 thereof any wages paid with respect to trades or businesses carried on by an ,s corporation which is a non-participation entity4 7,b7 ,material participation ,for purposes of this paragraph-- 7i7 ,in general ,an individual does not have material participation with respect to an entity 7hereafter referred to as the top-tier entity7 if such individual demonstrates to the satisfaction of the ,secretary that such individual-- 7,i7 does not materially participate 7as determined under section #dfi7;h7 without regard to paragraph 7#b7 thereof7 in any activity carried on by such top-tier entity1 and 7,,ii7 does not materially participate 7as so determined7 in any activity carried on by any entity in which such top-tier entity holds 7directly or indirectly7 any interest4 7ii7 ,family attribution ,for purposes of applying clause 7i71 the participation of any individual in any activity shall also be treated as performed by such individual's spouse and the lineal descendants of such individual and such individual's spouse4 7,c7 ,non-participation entity ,for purposes of this paragraph1 the term non-participation entity means1 with respect to any individual1 any entity with respect to which such individual does not have material participation 7as determined under subparagraph 7,b774 4 7#b7 ,conforming amendment ,section #baa of the ,social ,security ,act is amended by adding at the end the following new subsection3 7l7 ,deduction for return on invested capital 7#a7 ,in general ,an individual's net earnings from self-employment shall be reduced 7but not below zero7 by the lesser of-- 7,a7 #cj percent of the sum of-- 7i7 such individual's pass-through net earnings from self-employment1 and 7ii7 such individual's wages 7as defined in section #bji7 paid with respect to any trade or business carried on by an ,s corporation in which he is a shareholder1 or 7,b7 such individual's pass-through net earnings from self-employment4 7#b7 ,pass-through net earnings from self-employment ,for purposes of this subsection1 the term pass-through net earnings from self-employment means net earnings from self-employment 7as computed under subsection 7a7 without regard to this subsection7 determined without regard to any trade or business carried on by the individual4 7#c7 #ajj percent deduction where no material participation 7,a7 ,in general ,if an individual does not have material participation with respect to an entity 7as determined under subparagraph 7,b771 in lieu of the reduction provided under paragraph 7#a7 such individual's net earnings from self-employment shall be reduced 7but not below zero7 by the sum of-- 7i7 the reduction determined under paragraph 7#a7 applied-- 7,i7 by substituting #ajj percent for #cj percent in subparagraph 7,a7 thereof1 and 7,,ii7 by determining pass-through net earnings from self-employment by only taking into account distributive and pro rata shares from non-participation entities1 and 7,,iii7 by only taking into account under subparagraph 7,a77ii7 thereof wages paid with respect to trades or businesses carried on by ,s corporations which are non-participation entities1 plus 7ii7 the reduction determined under paragraph 7#a7 applied-- 7,i7 by determining pass-through net earnings from self-employment by not taking into account any distributive or pro rata share from a nonparticipation entity1 and 7,,ii7 by not taking into account under subparagraph 7,a77ii7 thereof any wages paid with respect to trades or businesses carried on by an ,s corporation which is a nonparticipation entity4 7,b7 ,material participation ,for purposes of this paragraph-- 7i7 ,in general ,an individual does not have material participation with respect to an entity 7hereafter referred to as the top-tier entity7 if such individual demonstrates to the satisfaction of the ,secretary of the ,treasury under section #adjb7m7 of the ,internal ,revenue ,code of #aihf that such individual-- 7,i7 does not materially participate 7as determined under section #dfi7;h7 of the ,internal ,revenue ,code of #aihf without regard to paragraph 7#b7 thereof7 in any activity carried on by such top-tier entity1 and 7,,ii7 does not materially participate 7as so determined7 in any activity carried on by any entity in which such top-tier entity holds 7directly or indirectly7 any interest4 7ii7 ,family attribution ,for purposes of applying clause 7i71 the participation of any individual in any activity shall also be treated as performed by such individual's spouse and the lineal descendants of such individual and such individual's spouse4 7,c7 ,nonparticipation entity ,for purposes of this paragraph1 the term nonparticipation entity means1 with respect to any individual1 any entity with respect to which such individual does not have material participation 7as determined under subparagraph 7,b774 4 7d7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 #aejc4 ,repeal of exemption from ,,fica taxes for certain foreign workers 7a7 ,in general ,subsection 7b7 of section #caba is amended by striking paragraphs 7#a7 and 7#ai74 7b7 ,coordination with benefits ,subsection 7a7 of section #baj of the ,social ,security ,act is amended by striking paragraphs 7#a7 and 7#ai74 7c7 ,railroad retirement tax ,paragraph 7#a7 of section #cbca7;e7 is amended by striking the third sentence4 7d7 ,effective date ,the amendments made by this section shall apply to remuneration received for services performed after ,december #ca1 #bjad4 #aejd4 ,repeal of exemption from ,,fica taxes for certain students 7a7 ,in general ,paragraph 7#aj7 of section #caba7;b7 is amended-- 7#a7 by inserting during any calendar year after service performed in the matter preceding subparagraph 7,a71 and 7#b7 by inserting 1 and the remuneration paid by the employer with respect to such service during such calendar year is less than the dollar amount in effect under section #bac7;d7 of the ,social ,security ,act 7relating to amount required for a quarter of coverage7 with respect to such year before the semicolon at the end4 7b7 ,college clubs1 fraternities1 and sororities ,paragraph 7#b7 of section #caba7;b7 is amended-- 7#a7 by inserting during any calendar year after domestic service performed1 and 7#b7 by inserting 1 if the remuneration paid by the employer with respect to such service during such calendar year is less than the dollar amount in effect under section #bac7;d7 of the ,social ,security ,act 7relating to amount required for a quarter of coverage7 with respect to such year before the semicolon at the end4 7c7 ,deduction of tax from wages ,subsection 7a7 of section #cajb is amended by inserting 2 and an employer who in any calendar year pays to an employee remuneration to which paragraph 7#b7 or 7#aj7 of section #caba7;b7 is applicable may deduct an amount equivalent to such tax from any such payment of remuneration1 even though at the time of payment the total amount of such remuneration paid to the employee by the employer in the calendar year is less than the dollar amount in effect under section #bac7;d7 of the ,social ,security ,act with respect to such year before the period at the end4 7d7 ,coordination with benefits 7#a7 ,paragraph 7#aj7 of section #baj7;a7 of the ,social ,security ,act is amended-- 7,a7 by inserting during any calendar year after ,service performed in the matter preceding subparagraph 7,a71 and 7,b7 by inserting 1 and the remuneration paid by the employer with respect to such service during such calendar year is less than the dollar amount in effect under section #bac7;d7 7relating to amount required for a quarter of coverage7 with respect to such year before the semicolon at the end4 7#b7 ,paragraph 7#b7 of section #baj7;a7 of the ,social ,security ,act is amended-- 7,a7 by inserting during any calendar year after ,domestic service performed1 and 7,b7 by inserting 1 if the remuneration paid by the employer with respect to such service during such calendar year is less than the dollar amount in effect under section #bac7;d7 7relating to amount required for a quarter of coverage7 with respect to such year before the semicolon at the end4 7e7 ,effective date ,the amendments made by this section shall apply to remuneration received for services performed after ,december #ca1 #bjad4 #aeje4 ,override of ,treasury guidance providing that certain employer-provided supplemental unemployment benefits are not subject to employment taxes 7a7 ,in general ,effective with respect to amounts paid after ,december #ca1 #bjad-- 7#a7 ,revenue ,ruling #ef-bdi1 7#b7 ,revenue ,ruling #eh-abh1 7#c7 ,revenue ,ruling #fj-ccj1 7#d7 so much of the holding of ,revenue ,ruling #gg-cdg as relates to ,plan 7#a7 and ,plan 7#b71 7#e7 ,revenue ,ruling #ij-gb1 and 7#f7 any other ruling1 regulation1 or other guidance provided by the ,secretary of the ,treasury1 or his designee1 to the extent that such ruling1 regulation1 or guidance provides that any payment made by an employer by reason of involuntary termination of employment shall not be treated as wages or compensation for purposes of any provision of the ,internal ,revenue ,code of #aihf1 shall be null and void4 ,the preceding sentence shall not apply to the extent a ruling1 regulation1 or other guidance implements a statutory exception to wages or compensation4 7b7 ,repeal of withholding requirement 7#a7 ,in general ,section #cdjb7o77#a7 is amended by striking subparagraph 7,a7 and by redesignating subparagraphs 7,b7 and 7,c7 as subparagraphs 7,a7 and 7,b71 respectively4 7#b7 ,conforming amendments 7,a7 ,section #cdjb7o77#b7 is amended by striking subparagraph 7,a7 and by redesignating subparagraphs 7,b7 and 7,c7 as subparagraphs 7,a7 and 7,b71 respectively4 7,b7 ,section #cdjb7o77#e77;,a7 is amended by striking paragraph 7#a77;,c7 and inserting paragraph 7#a77;,b74 7#c7 ,effective date 7,a7 ,in general ,the amendments made by this subsection shall apply to amounts paid after ,december #ca1 #bjac4 7,b7 ,no inference ,no amendment made by this subsection shall be construed to create any inference with respect to any amounts paid before ,january #a1 #bjad4 #aejf4 ,certified professional employer organizations 7a7 ,employment taxes ,chapter #be is amended by adding at the end the following new section3 #ceaa4 ,certified professional employer organizations 7a7 ,general rules ,for purposes of the taxes and other obligations imposed by this subtitle-- 7#a7 a certified professional employer organization shall be treated as the employer 7and no other person shall be treated as the employer7 of any work site employee performing services for any customer of such organization1 but only with respect to remuneration remitted by such organization to such work site employee1 and 7#b7 the exemptions1 exclusions1 definitions1 and other rules which are based on type of employer and which would 7but for paragraph 7#a77 apply shall apply with respect to such taxes imposed on such remuneration4 7b7 ,successor employer status ,for purposes of sections #caba7;a77#a71 #cbca7;e77#b77;,c71 and #ccjf7;b77#a7-- 7#a7 a certified professional employer organization entering into a service contract with a customer with respect to a work site employee shall be treated as a successor employer and the customer shall be treated as a predecessor employer during the term of such service contract1 and 7#b7 a customer whose service contract with a certified professional employer organization is terminated with respect to a work site employee shall be treated as a successor employer and the certified professional employer organization shall be treated as a predecessor employer4 7c7 ,liability of certified professional employer organization ,solely for purposes of its liability for the taxes and other obligations imposed by this subtitle-- 7#a7 a certified professional employer organization shall be treated as the employer of any work site employee 7other than a person described in subsection 7e77 who is performing services covered by a contract meeting the requirements of section #ggjf7;e77#b71 but only with respect to remuneration remitted by such organization to such individual1 and 7#b7 exemptions1 exclusions1 definitions1 and other rules which are based on type of employer and which would 7but for paragraph 7#a77 apply shall apply with respect to such taxes imposed on such remuneration4 7d7 ,special rule for related party ,this section shall not apply in the case of a customer which bears a relationship to a certified professional employer organization described in section #bfg7;b7 or #gjg7;b74 ,for purposes of the preceding sentence1 such sections shall be applied by substituting #aj percent for #ej percent4 7e7 ,special rule for certain individuals ,for purposes of the taxes imposed under this subtitle1 an individual with net earnings from self-employment derived from the customer's trade or business 7including a partner in a partnership that is a customer71 is not a work site employee with respect to remuneration paid by a certified professional employer organization4 7f7 ,regulations ,the ,secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this section4 4 7b7 ,certified professional employer organization defined ,chapter #gi1 as amended by the preceding provisions of this ,act1 is amended by adding at the end the following new section3 #ggjf4 ,certified professional employer organizations 7a7 ,in general ,for purposes of this title1 the term certified professional employer organization means a person who applies to be treated as a certified professional employer organization for purposes of section #ceaa and who has been certified by the ,secretary as meeting the requirements of subsection 7b74 7b7 ,certification requirements ,a person meets the requirements of this subsection if such person-- 7#a7 demonstrates that such person 7and any owner1 officer1 and such other persons as may be specified in regulations7 meets such requirements as the ,secretary shall establish with respect to tax status1 background1 experience1 business location1 and annual financial audits1 7#b7 agrees that it will satisfy the bond and independent financial review requirements of subsections 7c7 on an ongoing basis1 7#c7 agrees that it will satisfy such reporting obligations as may be imposed by the ,secretary1 7#d7 computes its taxable income using an accrual method of accounting unless the ,secretary approves another method1 7#e7 agrees to verify on such periodic basis as the ,secretary may prescribe that it continues to meet the requirements of this subsection1 and 7#f7 agrees to notify the ,secretary in writing1 within such time as the of ,secretary may prescribe1 of any change that materially affects the continuing accuracy of any agreement or information which was previously made or provided4 7c7 ,bond and independent financial review 7#a7 ,in general ,an organization meets the requirements of this paragraph if such organization-- 7,a7 meets the bond requirements of paragraph 7#b71 and 7,b7 meets the independent financial review requirements of paragraph 7#c74 7#b7 ,bond 7,a7 ,in general ,a certified professional employer organization meets the requirements of this paragraph if the organization has posted a bond for the payment of taxes under subtitle ,c 7in a form acceptable to the ,secretary7 that is in an amount at least equal to the amount specified in subparagraph 7,b74 7,b7 ,amount of bond 7i7 ,in general ,for the period ,april #a of any calendar year through ,march #ca of the following calendar year1 the amount of the bond required is equal to the greater of-- 7,i7 #e percent of the organization's liability under section #ceaa for taxes imposed by subtitle ,c during the preceding calendar year 7but not to exceed #a1jjj1jjj71 or 7,,ii7 #ej1jjj4 7ii7 ,special rule for newly created professional employer organizations ,during the first three full calendar years that an organization is in existence1 subclause 7,i7 of clause 7i7 shall not apply4 ,for this purpose-- 7,i7 under rules provided by the ,secretary1 an organization is treated as in existence as of the date that such organization began providing services to any customer which were comparable to the services being provided with respect to work site employees1 regardless of whether such date occurred before or after the organization is certified under subsection 7b71 and 7,,ii7 an organization with liability under section #ceaa for taxes imposed by subtitle ,c during the preceding calendar year in excess of #e1jjj1jjj shall no longer be described in this clause 7ii7 as of ,april #a of the year following such calendar year4 7#c7 ,independent financial review requirements ,a certified professional employer organization meets the requirements of this paragraph if such organization-- 7,a7 has1 as of the most recent audit date1 caused to be prepared and provided to the ,secretary 7in such manner as the ,secretary may prescribe7 an opinion of an independent certified public accountant as to whether the certified professional employer organization's financial statements are presented fairly in accordance with generally accepted accounting principles1 and 7,b7 provides to the ,secretary an assertion regarding ,federal employment tax payments and an examination level attestation on such assertion from an independent certified public accountant not later than the last day of the second month beginning after the end of each calendar quarter4 ,such assertion shall state that the organization has withheld and made deposits of all taxes imposed by chapters #ba1 #bb1 and #bd of the ,internal ,revenue ,code in accordance with regulations imposed by the ,secretary for such calendar quarter and such examination level attestation shall state that such assertion is fairly stated1 in all material respects4 7#d7 ,controlled group rules ,for purposes of the requirements of paragraphs 7#b7 and 7#c71 all professional employer organizations that are members of a controlled group within the meaning of sections #dad7;b7 and 7c7 shall be treated as a single organization4 7#e7 ,failure to file assertion and attestation ,if the certified professional employer organization fails to file the assertion and attestation required by paragraph 7#c7 with respect to any calendar quarter1 then the requirements of paragraph 7#c7 with respect to such failure shall be treated as not satisfied for the period beginning on the due date for such attestation4 7#f7 ,audit date ,for purposes of paragraph 7#c77;,a71 the audit date shall be six months after the completion of the organization's fiscal year4 7d7 ,suspension and revocation authority ,the ,secretary may suspend or revoke a certification of any person under subsection 7b7 for purposes of section #ceaa if the ,secretary determines that such person is not satisfying the agreements or requirements of subsections 7b7 or 7c71 or fails to satisfy applicable accounting1 reporting1 payment1 or deposit requirements4 7e7 ,work site employee ,for purposes of this title-- 7#a7 ,in general ,the term work site employee means1 with respect to a certified professional employer organization1 an individual who-- 7,a7 performs services for a customer pursuant to a contract which is between such customer and the certified professional employer organization and which meets the requirements of paragraph 7#b71 and 7,b7 performs services at a work site meeting the requirements of paragraph 7#c74 7#b7 ,service contract requirements ,a contract meets the requirements of this paragraph with respect to an individual performing services for a customer if such contract is in writing and provides that the certified professional employer organization shall-- 7,a7 assume responsibility for payment of wages to the individual1 without regard to the receipt or adequacy of payment from the customer for such services1 7,b7 assume responsibility for reporting1 withholding1 and paying any applicable taxes under subtitle ,c1 with respect to the individual's wages1 without regard to the receipt or adequacy of payment from the customer for such services1 7,c7 assume responsibility for any employee benefits which the service contract may require the certified professional employer organization to provide1 without regard to the receipt or adequacy of payment from the customer for such services1 7,d7 assume responsibility for hiring1 firing and for recruiting workers in addition to the customer's responsibility for recruiting1 hiring1 and firing workers1 7,e7 maintain employee records relating to the individual1 and 7,f7 agree to be treated as a certified professional employer organization for purposes of section #ceaa with respect to such individual4 7#c7 ,work site coverage requirement ,the requirements of this paragraph are met with respect to an individual if at least #he percent of the individuals performing services for the customer at the work site where such individual performs services are subject to #a or more contracts with the certified professional employer organization which meet the requirements of paragraph 7#b7 7but not taking into account those individuals who are excluded employees within the meaning of section #dad7q77#e774 7f7 ,determination of employment status ,except to the extent necessary for purposes of section #ceaa1 nothing in this section shall be construed to affect the determination of who is an employee or employer for purposes of this title4 7g7 ,regulations ,the ,secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this section4 4 7c7 ,conforming amendments 7#a7 ,section #ccjb is amended by adding at the end the following new subsection3 7h7 ,treatment of certified professional employer organizations ,if a certified professional employer organization 7as defined in section #ggjf71 or a customer of such organization1 makes a contribution to the ,state's unemployment fund with respect to a work site employee1 such organization shall be eligible for the credits available under this section with respect to such contribution4 4 7#b7 ,section #ccjc7;a7 is amended-- 7,a7 by striking the period at the end of paragraph 7#c7 and inserting 2 and and by inserting after paragraph 7#c7 the following new paragraph3 7#d7 if the taxpayer is a certified professional employer organization 7as defined in section #ggjf7 that is treated as the employer under section #ceaa1 such certified professional employer organization is permitted to collect and remit1 in accordance with paragraphs 7#a71 7#b71 and 7#c71 contributions during the taxable year to the ,state unemployment fund with respect to a work site employee4 1 and 7,b7 in the last sentence-- 7i7 by striking paragraphs 7#a71 7#b71 and 7#c7 and inserting paragraphs 7#a71 7#b71 7#c71 and 7#d71 and 7ii7 by striking paragraph 7#a71 7#b71 or 7#c7 and inserting paragraph 7#a71 7#b71 7#c71 or 7#d74 7#c7 ,section #fjec7;c7 is amended by adding at the end the following new paragraph3 7#h7 ,certified professional employer organizations ,for purposes of any report required by this subsection1 in the case of a certified professional employer organization that is treated1 under section #ceaa1 as the employer of a work site employee1 the customer with respect to whom a work site employee performs services shall be the employer for purposes of reporting under this section and the certified professional employer organization shall furnish to the customer any information necessary to complete such reporting no later than such time as the ,secretary shall prescribe4 4 7d7 ,clerical amendments 7#a7 ,the table of sections for chapter #be is amended by adding at the end the following new item3 ,sec4 #ceaa4 ,certified professional employer organizations4 4 7#b7 ,the table of sections for chapter #gi1 as amended by the preceding provisions of this ,act1 is amended by adding at the end the following new item3 ,sec4 #ggjf4 ,certified professional employer organizations4 4 7e7 ,reporting requirements and obligations ,the ,secretary of the ,treasury shall develop such reporting and recordkeeping rules1 regulations1 and procedures as the ,secretary determines necessary or appropriate to ensure compliance with the amendments made by this section with respect to entities applying for certification as certified professional employer organizations or entities that have been so certified4 ,such rules shall be designed in a manner which streamlines1 to the extent possible1 the application of requirements of such amendments1 the exchange of information between a certified professional employer organization and its customers1 and the reporting and recordkeeping obligations of the certified professional employer organization4 7f7 ,user fees ,subsection 7b7 of section #gebh is amended by adding at the end thereof the following new paragraph3 7#d7 ,certified professional employer organizations ,the fee charged under the program in connection with the certification by the ,secretary of a professional employer organization under section #ggjf shall be an annual fee not to exceed #a1jjj per year4 4 7g7 ,effective dates 7#a7 ,in general ,the amendments made by this section shall apply with respect to wages for services performed on or after ,january #a of the first calendar year beginning more than #ab months after the date of the enactment of this ,act4 7#b7 ,certification program ,the ,secretary of the ,treasury shall establish the certification program described in section #ggjf7;b7 of the ,internal ,revenue ,code of #aihf1 as added by this section1 not later than #f months before the effective date determined under paragraph 7#a74 7h7 ,no inference ,nothing contained in this section or the amendments made by this section shall be construed to create any inference with respect to the determination of who is an employee or employer-- 7#a7 for ,federal tax purposes 7other than the purposes set forth in the amendments made by this section71 or 7#b7 for purposes of any other provision of law4 ,g ,pensions and ,retirement #a ,individual ,retirement ,plans #afja4 ,elimination of income limits on contributions to ,roth ,i,r,as 7a7 ,in general ,subsection 7c7 of section #djh;,a is amended by striking paragraph 7#c74 7b7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 #afjb4 ,no new contributions to traditional ,i,r,as 7a7 ,in general 7#a7 ,individual retirement accounts ,paragraph 7#a7 of section #djh7;a7 is amended by striking in excess of the amount and all that follows through the end and inserting the following3 unless it is a contribution under a simplified employee pension described in subsection 7k7 not in excess of the amount of the limitation in effect for such taxable year under section #dae7;c77#a77;,a71 a contribution to a simple retirement account described in subsection 7p7 not in excess of the amount described in section #djh7p77#h7 for such taxable year1 or a contribution to a ,roth ,,ira described in section #djh;,a not in excess of the amount in effect for the taxable year with respect to such individual under section #djh;,a7c77#a77;,a77i744 7#b7 ,individual retirement annuities 7,a7 ,in general ,subparagraph 7,b7 of section #djh7;b77#b7 is amended to read as follows3 7,b7 any amount paid as a premium on behalf of any individual for a taxable year would meet the requirements of subsection 7a77#a7 if it were paid as a contribution to an individual retirement account1 and 4 7,b7 ,endowment contract requirement ,the last sentence of section #djh7;b7 is amended by striking the dollar amount in effect under section #bai7;b77#a77;,a7 and inserting the amounts described in paragraph 7#b77;,b74 7b7 ,conforming amendments 7#a7 ,amendments relating to deductibility 7,a7 ,section #bai7;a7 is amended by striking equal to the qualified retirement contributions of the individual and inserting equal to the amounts contributed on behalf of the individual to a plan described in section #eja7;c77#ah74 7,b7 ,section #bai7;b7 is amended-- 7i7 by striking ,maximum amount of deduction and all that follows through ,notwithstanding paragraph 7#a71 the amount allowable as a deduction and inserting ,maximum amount of deduction4--,the amount allowable as a deduction1 and 7ii7 by striking paragraphs 7#d7 and 7#e74 7,c7 ,section #bai is amended by striking subsections 7c71 7d71 7e71 7g71 and 7h7 and by redesignating subsection 7f7 as subsection 7c74 7,d7 ,section #bai7;c71 as so redesignated1 is amended-- 7i7 by striking ,other definitions and special rules and inserting ,special rules1 7ii7 by striking paragraphs 7#a71 7#c71 7#d71 7#e71 7#f71 7#g71 and 7#h71 and 7iii7 by inserting before paragraph 7#b7 the following new paragraph3 7#a7 ,beneficiary must be under age #gja_/b ,no deduction shall be allowed under this section with respect to any amount contributed on behalf of an individual to a plan described in section #eja7;c77#ah7 if such individual has attained age #gja_/b before the close of such individual's taxable year for which the contribution was made4 4 7,e7 ,section #digc7;b77#b77;,c7 is amended by striking 7determined without regard to section #bai7;f77#f774 7#b7 ,amendments relating to ,roth ,,ira contribution limits 7,a7 ,section #djh;,a7c71 as amended by this ,act1 is amended-- 7i7 by striking paragraphs 7#a7 and 7#b7 and inserting the following new paragraphs3 7#a7 ,maximum contribution 7,a7 ,in general ,the aggregate amount of contributions for any taxable year to all ,roth ,i,r,as maintained for the benefit of an individual shall not exceed the lesser of-- 7i7 #e1ejj1 or 7ii7 an amount equal to the compensation includible in the individual's gross income for such taxable year4 7,b7 ,catch-up contributions for individuals #ej or older ,in the case of an individual who has attained the age of #ej before the close of the taxable year1 the amount in effect under subparagraph 7,a77i7 for such taxable year shall be increased by #a1jjj4 7#b7 ,special rule for certain married individuals ,in the case of an individual to whom this paragraph applies for the taxable year1 the limitation of paragraph 7#a7 shall be equal to the lesser of-- 7,a7 the dollar amount in effect under paragraph 7#a77;,a77i7 for the taxable year1 or 7,b7 the sum of-- 7i7 the compensation includible in such individual's gross income for the taxable year1 plus 7ii7 the compensation includible in the gross income of such individual's spouse for the taxable year reduced by-- 7,i7 the amount allowed as a deduction under section #bai7;a7 to such spouse for such taxable year1 7,,ii7 the amount of any contribution on behalf of such spouse to a ,roth ,,ira for such taxable year4 7#c7 ,individuals to whom paragraph 7#b7 applies ,paragraph 7#b7 shall apply to any individual if-- 7,a7 such individual files a joint return for the taxable year1 and 7,b7 the amount of compensation 7if any7 includible in such individual's gross income for the taxable year is less than the compensation includible in the gross income of such individual's spouse for the taxable year4 4 7ii7 by striking paragraph 7#b7 in paragraph 7#f7 and inserting paragraph 7#a71 7iii7 by striking the rule of section #bai7;f77#c7 shall apply in paragraph 7#g7 and inserting the following3 a taxpayer shall be deemed to have made a contribution to a ,roth ,,ira on the last day of the preceding taxable year if the contribution is made on account of such taxable year and is made not later than the time prescribed by law for filing the return for such taxable year 7not including extensions thereof71 and 7iv7 by adding at the end the following new paragraphs3 7#h7 ,compensation ,for purposes of this section1 the term compensation includes earned income 7as defined in section #dja7;c77#b774 ,the term compensation does not include any amount received as a pension or annuity and does not include any amount received as deferred compensation4 ,for purposes of this paragraph1 section #dja7;c77#b7 shall be applied as if the term trade or business for purposes of section #adjb included service described in subsection 7c77#f7 thereof4 ,the term compensation includes any differential wage payment 7as defined in section #cdja7;h77#b774 7#i7 ,married individuals ,the limitation under this subsection shall be computed separately for each individual1 and this section shall be applied without regard to any community property laws4 7#aj7 ,special rule for compensation earned by members of ,armed ,forces for services in combat zone ,for purposes of paragraphs 7#a77;,a77ii7 and 7#b71 the amount of compensation includible in an individual's gross income shall be determined without regard to section #aab4 4 7,b7 ,section #djh;,a7d77#c77;,a7 is amended-- 7i7 by inserting and at the end of clause 7i71 7ii7 by striking 1 and at the end of clause 7ii7 and inserting a period1 7iii7 by striking clause 7iii71 and 7iv7 by striking the last sentence4 7#c7 ,amendments relating to traditional ,i,r,as 7,a7 ,section #djh7;d77#d7 is amended-- 7i7 by striking subparagraph 7,b7 and inserting the following3 7,b7 in the case of simplified employee pension1 such contribution is not excluded from gross income under section #djb7;h71 4 7ii7 by adding at the end the following3 ,this paragraph shall not apply to any contribution to a simple retirement account44 7,b7 ,section #djh7;d77#e77;,a7 is amended-- 7i7 by striking in effect under section #bai7;b77#a77;,a7 and inserting in effect with respect to the taxpayer for the taxable year under section #djh;,a7c77#a77;,a77i71 7ii7 by striking the amount allowable as a deduction and all that follows through such excess contribution4 and inserting the amount that may be contributed under section #djh;,a7c77#a7 for the taxable year for which the contribution was made if such distribution is received after the date described in paragraph 7#d741 7iii7 by adding at the end of subparagraph 7,a7 the following3 ,this paragraph shall not apply to any contribution to a simple retirement account41 and 7iv7 by striking the last sentence4 7,c7 ,section #djh is amended by striking subsection 7o74 7#d7 ,amendments relating to simple retirement accounts 7,a7 ,section #djh7p77#b77;,d77ii7 is amended by striking means a plan1 contract and all that follows through the period at the end and inserting the following3 means-- 7,i7 a plan described in section #dja7;a7 which includes a trust exempt from tax under section #eja7;a71 7,,ii7 an annuity plan described in section #djc7;a71 7,,iii7 an eligible deferred compensation plan 7as defined in section #deg7;b77 of an eligible employer described in section #deg7;e77#a77;,a771 7,,iv7 an annuity contract described in section #djc7;b71 7,v7 a simplified employee pension 7within the meaning of section #djh7k771 7,,vi7 any simple retirement account 7within the meaning of section #djh7p771 or 7,,vii7 a trust described in section #eja7;c77#ah74 4 7,b7 ,section #djh7p77#h7 is amended to read as follows3 7#h7 ,coordination with maximum limitation under subsection 7a7 ,in the case of a simple retirement account1 for purposes of subsections 7a77#a7 and 7b77#b71 contributions may not exceed the sum of-- 7,a7 the dollar amount in effect under paragraph 7#b77;,a77ii71 and 7,b7 the employer contribution required under subparagraph 7,a77iii7 or 7,b77i7 of paragraph 7#b71 whichever is applicable4 4 7#e7 ,amendments relating to ,s,e,ps ,section #djh is amended by striking subsection 7j74 7#f7 ,amendments relating to excise tax on excess contributions 7,a7 ,traditional ,i,r,as ,subsection 7b7 of section #digc is amended-- 7i7 by striking paragraph 7#a7 and inserting the following3 7#a7 the amounts contributed for the taxable year to the accounts or for the annuities or bonds 7other than any contributions to a ,roth ,,ira7 which are not permitted contributions under subsection 7a77#a7 or 7b77#b7 of section #djh1 and 4 7ii7 in paragraph 7#b77;,c71 by striking the maximum amount allowable and all that follows through without regard to section #bai7;f77#f77 and inserting the permitted contributions under subsection 7a77#a7 or 7b77#b7 of section #djh for the taxable year over the amount contributed1 and 7iii7 by striking the last sentence and inserting the following3 ,paragraph 7#b7 shall be determined separately with respect to any simplified employee pension 7within the meaning of section #djh7k77 and any simple retirement account 7within the meaning of section #djh7p7744 7,b7 ,roth ,i,r,as ,section #digc7;f7 is amended by striking sections #djh;,a7c77#b7 and 7c77#c7 each place it appears and inserting section #djh;,a7c77#a74 7#g7 ,amendments relating to saver's credit ,section #be;,b7d77#a77;,a7 is amended to read as follows3 7,a7 the amounts-- 7i7 paid in cash for the taxable year by or on behalf of an individual to all ,roth ,i,r,as maintained for such individual's benefit1 and 7ii7 contributed on behalf of the individual to a plan described in section #eja7;c77#ah71 4 7#h7 ,other conforming amendments 7,a7 ,section #hf7;f77#c7 is amended by striking #bai7;f77#a7 and inserting section #djh;,a7c77#h74 7,b7 ,section #acb7m77#c7 is amended by striking section #bai7;g77#e7 and inserting section #djh7p77#b77;,d77ii74 7,c7 7i7 ,section #bbc7;d7 is amended-- 7,i7 by redesignating paragraph 7#d7 as paragraph 7#g71 7,,ii7 by inserting after paragraph 7#c7 the following new paragraphs3 7#d7 ,recontributed amounts ,no deduction shall be allowed under this section with respect to a rollover contribution described in subsection 7f77#e74 7#e7 ,time when contributions deemed made ,for purposes of this section1 a taxpayer shall be deemed to have made a contribution to a health savings account on the last day of the preceding taxable year if the contribution is made on account of such taxable year and is made not later than the time prescribed by law for filing the return for such taxable year 7not including extensions thereof74 7#f7 ,employer payments ,except as provided in section #ajf7;d71 for purposes of this title1 any amount paid by an employer to a health savings account shall be treated as payment of compensation to the employee 7other than a self-employed individual who is an employee within the meaning of section #dja7;c77#a77 includible in his gross income in the taxable year for which the amount was contributed1 whether or not a deduction for such payment is allowable under this section to the employee4 4 7ii7 ,section #bbc7;d77#g71 as so redesignated1 is amended by striking subparagraphs 7,a71 7,b71 and 7,c71 and redesignating subparagraphs 7,d7 and 7,e7 as subparagraphs 7,a7 and 7,b71 respectively4 7,d7 ,section #dji;,a7d77#b77;,a7 is amended by striking subparagraph 7,a7 or 7,b7 of section #bai7;g77#e7 7without regard to subparagraph 7,a77iii77 and inserting section #djh7p77#b77;,d77ii7 7without regard to subclause 7,,iii7 thereof74 7,e7 ,section #eja7;c77#ah77;,d77i7 is amended by striking section #bai7;b77#c7 and inserting section #bai7;a74 7,f7 ,section #hgg;,a7d77#d77;,a7 is amended by striking section #bai7;g77#e7 and inserting #djh7p77#b77;,d77ii74 7,g7 ,section #ffeb is amended by striking subsection 7g74 7c7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 #afjc4 ,inflation adjustment for ,roth ,,ira contributions 7a7 ,in general ,subsection 7c7 of section #djh;,a1 as amended by this ,act1 is amended by adding at the end the following new paragraph3 7#aa7 ,cost-of-living adjustment ,in the case of any taxable year beginning after #bjbc1 the dollar amount in paragraph 7#a77;,a77i7 shall be increased by an amount equal to-- 7,a7 such dollar amount1 multiplied by 7,b7 the cost-of-living adjustment determined under section #a7;c77#b77;,a7 for the calendar year in which the taxable year begins1 determined by substituting calendar year #bjbb for calendar year #bjab in clause 7ii7 thereof4 ,if any increase determined under the preceding sentence is not a multiple of #ejj1 such increase shall be rounded to the next lowest multiple of #ejj4 4 7b7 ,effective date ,the amendment made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 #afjd4 ,repeal of special rule permitting recharacterization of ,roth ,,ira contributions as traditional ,,ira contributions 7a7 ,in general ,section #djh;,a7d7 is amended by striking paragraph 7#f7 and by redesignating paragraph 7#g7 as paragraph 7#f74 7b7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 #afje4 ,repeal of exception to #aj-percent penalty for first home purchases 7a7 ,in general ,section #gb7t77#b7 is amended by striking subparagraph 7,f74 7b7 ,roth ,i,r,as ,subparagraph 7,a7 of section #djh;,a7d77#b7 is amended by inserting or at the end of clause 7ii71 and by striking 1 or at the end of clause 7iii7 and inserting a period1 and by striking clause 7iv74 7c7 ,conforming amendment 7#a7 ,section #gb7t7 is amended by striking paragraph 7#h74 7#b7 ,section #djh;,a7d71 as amended by this ,act1 is amended by striking paragraph 7#e7 and by redesignating paragraph 7#f7 as paragraph 7#e74 7d7 ,effective date ,the amendments made by this section shall apply to distributions after ,december #ca1 #bjad4 #b ,employer-,provided ,plans #afaa4 ,termination for new ,s,e,ps 7a7 ,in general 7#a7 ,section #djh7k7 is amended by redesignating paragraph 7#i7 as paragraph 7#aj7 and by inserting after paragraph 7#h7 the following new paragraph3 7#i7 ,termination ,this subsection shall not apply to years beginning after ,december #ca1 #bjad4 ,the preceding sentence shall not apply to any simplified employee pension of an employer if such simplified employee pension1 and the terms thereof1 meet the requirements of this subsection on and after such date4 4 7#b7 ,section #djb7;h7 is amended by adding at the end the following new paragraph3 7#d7 ,termination ,this subsection shall not apply to any simplified employee pension the arrangement for which is established after ,december #ca1 #bjad4 4 7b7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 #afab4 ,termination for new ,,simple #dja7k7s 7a7 ,amendments relating to ,,simple #dja7k7s ,section #dja7k77#aa7 is amended by adding at the end the following new subparagraph3 7,e7 ,termination ,this paragraph shall apply to a cash or deferred arrangement for any plan year beginning after ,december #ca1 #bjad1 only if such arrangement meets the requirements of this paragraph for the last plan year beginning before ,january #a1 #bjae1 and for each plan year thereafter4 4 7b7 ,effective date ,the amendment made by this section shall apply to plan years beginning after ,december #ca1 #bjad4 #afac4 ,rules related to designated ,roth contributions 7a7 ,applicable retirement plans which permit elective deferrals required ,to accept designated ,roth contributions 7#a7 ,in general ,paragraph 7#cj7 of section #dja7;a7 is amended-- 7,a7 by striking deferrals4-- and all that follows through ,in the case of a trust and inserting the following3 deferrals4-- 7,a7 ,in general ,in the case of a trust 1 7,b7 by striking unless the plan provides that and inserting the following3 unless the plan-- 7i7 provides that 1 7,c7 by striking the period at the end and inserting 1 and1 and 7,d7 by adding at the end the following3 7ii7 except as provided in subparagraph 7,b71 includes a qualified ,roth contribution program 7as defined in section #djb;,a7b774 7,b7 ,exception for certain small plans ,subparagraph 7,a77ii7 shall not apply to any plan of an eligible employer 7as defined in section #djh7p77#b77;,c774 4 7#b7 ,conforming amendments 7,a7 ,section #djb;,a7b77#a7 is amended by striking all that follows designated ,roth contributions and inserting a period4 7,b7 ,the heading of section #djb;,a 7and the item relating to such section in the table of sections for part ,i of subchapter ,d of chapter #a7 is amended by striking ,optional treatment of elective deferrals as ,roth contributions and inserting ,designated ,roth contributions4 7b7 ,restriction on portion of elective deferral limitation which may apply to traditional elective deferrals 7#a7 ,in general ,subparagraph 7,a7 of section #djb7;g77#a7 is amended by striking the applicable dollar amount and inserting #ej percent 7#ajj percent in the case of elective deferrals with respect to any plan of an eligible employer 7as defined in section #djh7p77#b77;,c77 of the applicable dollar amount4 7#b7 ,government #deg7;b7 plans 7,a7 ,in general ,subsection 7b7 of section #deg is amended by striking and at the end of paragraph 7#e71 by redesignating paragraph 7#f7 as paragraph 7#g71 and by inserting after paragraph 7#e7 the following new paragraph3 7#f7 which1 in the case of a plan maintained by an employer described in subsection 7e77#a77;,a71 meets requirements similar to the requirements of section #dja7;a77#cj71 and 4 7,b7 ,conforming amendment ,section #djb7;g77#a77;,a7 is amended by inserting and section #deg7;a77#a7 after 7h77#a77;,b74 7,c7 ,cross-reference ,for treatment of amounts deferred under an eligible compensation plan of a governmental employer as elective deferrals1 see section #afah7;b77#a7 of this ,act4 7#c7 ,roth elective deferrals permitted to extent of full limitation amount 7,a7 ,in general ,section #djb;,a7c77#b77;,a7 is amended to read as follows3 7,a7 the applicable dollar amount in effect under section #djb7;g77#a77;,b7 with respect to the employee for the taxable year1 over 4 7,b7 ,conforming amendments 7i7 ,section #dja7;a77#cj7 is amended-- 7,i7 by inserting 7including contributions treated as elective deferrals under section #djb;,a7a77#a77 after section #djb7;g77#c71 and 7,,ii7 by striking section #djb7;g77#a77;,a7 and inserting section #djb7;g77#a77;,b71 and that the amount of elective deferrals not included in gross income may not exceed the amount of the limitation in effect under section #djb7;g77#a77;,a714 7ii7 ,section #djb7;g77#a77;,c7 is amended-- 7,i7 by striking ,in addition to subparagraph 7,a7 and inserting ,for purposes of subparagraph 7,a74 7,,ii7 by striking gross income shall not include and all that follows through does not exceed and inserting the applicable dollar amount in effect for the taxable year under subparagraph 7,b7 shall be increased by4 7iii7 7,i7 ,so much of section #djb7;g77#b77;,a7 as precedes clause 7i7 is amended to read as follows3 7,a7 ,in general ,if an individual's aggregate elective deferrals for a taxable year exceed the applicable dollar amount under paragraph 7#a7 7hereinafter in this paragraph referred to as excess total deferrals7 or if an individual's aggregate elective deferrals 7disregarding designated ,roth contributions and simple ,roth contributions7 exceed the amount excludable under paragraph 7#a77;,a7 7hereinafter in this paragraph referred to as excess non-,roth deferrals7-- 4 7,,ii7 ,section #djb7;g77#b77;,a77i7 is amended by striking such excess deferrals and inserting such excess total deferrals or excess non-,roth deferrals4 7,,iii7 ,section #djb7;g77#b77;,c77ii7 is amended by striking the excess deferral and inserting the excess total deferral or excess non-,roth deferral4 7,,iv7 ,section #djb;,a7d77#b77;,c7 is amended by striking excess deferral and inserting excess total deferral4 7,v7 ,section #djb;,a7d77#c7 is amended by striking excess deferral each place it appears and inserting excess total deferral4 7,,vi7 ,section #djb7;g77#a77;,a7 is amended by striking the second sentence4 7iv7 ,section #djb;,a7c77#a77;,a7 is amended by striking without regard to this section and inserting 7determined without regard to this section and section #djb7;g774 7#d7 ,reporting by employers ,section #fjea7;a77#h7 is amended by inserting after 7as defined in section #djb;,a7 the following3 1 and the type of plan under which amounts are deferred or contributed4 7c7 ,,simple ,roth retirement accounts permitted 7#a7 ,in general ,subsection 7p7 of section #djh is amended by adding at the end the following new paragraph3 7#aa7 ,roth contributions ,for purposes of this section-- 7,a7 ,in general ,if a qualified salary reduction arrangement with respect to a simple retirement account includes a simple ,roth contribution program1 any simple ,roth contribution made by an employer pursuant to such program shall be treated as an elective employer contribution1 except that such contribution shall be paid to a ,roth ,,ira and shall not be excludable from gross income4 7,b7 ,simple ,roth contribution program ,the term simple ,roth contribution program means a program under which an employee may elect to make simple ,roth contributions4 7,c7 ,simple ,roth contribution ,the term simple ,roth contribution means any elective employer contribution which-- 7i7 is excludable from gross income of an employee without regard to this paragraph1 and 7ii7 the employee designates 7at such time and in such manner as the ,secretary may prescribe7 as not being so excludable4 7,d7 ,limitation ,in the case of an eligible employer which elects the application of this subparagraph with respect to the simple retirement accounts established pursuant to a qualified salary reduction arrangement of such employer1 notwithstanding paragraph 7#b77;,e71 the applicable dollar amount for purposes of paragraph 7#b77;,a77ii71 shall be equal to-- 7i7 in the case of any such account which is not designated as a ,roth ,,ira1 #ej percent of the applicable dollar amount in effect under section #djb7;g77#a77;,b7 for the taxable year1 and 7ii7 in the case of any such account which is designated as a ,roth ,,ira1 the excess 7if any7 of-- 7,i7 the applicable dollar amount in effect under section #djb7;g77#a77;,b7 for the taxable year1 over 7,,ii7 the aggregate amount of elective employer contributions to any account described in clause 7i74 ,in the case of a simple retirement account with respect to which the application of this subparagraph is elected1 the employer shall not be treated as an eligible employer for purposes of section #djb7;g77#a77;,a71 and the applicable dollar amount with respect to any eligible participant 7as defined in section #dad7v77 shall1 notwithstanding section #dad7v77#b77;,b77ii71 be determined by reference to section #djb7;g77#a77;,c74 4 7#b7 ,coordination with maximum ,roth limitation ,subsection 7c7 of section #djh;,a1 as amended by this ,act1 is amended by adding at the end the following new paragraph3 7#ab7 ,increase in maximum limitation for ,,simple ,roth ,in the case of any simple retirement account1 subparagraphs 7,a77i7 and 7,b7 of paragraph 7#a7 shall be applied by disregarding any contributions made to a simple retirement account and any qualified rollover contributions4 4 7#c7 ,conforming amendments 7,a7 ,section #djh;,a7f77#a7 is amended by striking or a simple retirement account4 7,b7 ,section #fjea7;a77#h71 as amended by this ,act1 is amended by inserting after 7as defined in section #djb;,a7 the following3 and simple ,roth contributions 7as defined in section #djh7p77#aa77;,c774 7d7 ,effective date 7#a7 ,in general ,except as provided in paragraph 7#b71 the amendments made by this section shall apply to plan years and taxable years beginning after ,december #ca1 #bjad4 7#b7 ,subsection 7c7 ,the amendments made by subsection 7c7 shall apply to calendar years beginning after ,december #ca1 #bjad4 #afad4 ,modifications of required distribution rules for pension plans 7a7 ,in general ,section #dja7;a77#i77;,b7 of the ,internal ,revenue ,code of #aihf is amended to read as follows3 7,b7 ,required distributions where employee dies before entire interest is distributed 7i7 #e-year general rule ,a trust shall not constitute a qualified trust under this section unless the plan provides that1 if an employee dies before the distribution of the employee's interest 7whether or not such distribution has begun in accordance with subparagraph 7,a771 the entire interest of the employee will be distributed within #e years after the death of such employee4 7ii7 ,exception for eligible designated beneficiaries ,if-- 7,i7 any portion of the employee's interest is payable to 7or for the benefit of7 an eligible designated beneficiary1 7,,ii7 such portion will be distributed 7in accordance with regulations7 over the life of such eligible designated beneficiary 7or over a period not extending beyond the life expectancy of such beneficiary71 and 7,,iii7 such distributions begin not later than #a year after the date of the employee's death or such later date as the ,secretary may by regulations prescribe1 then1 for purposes of clause 7i7 and except as provided in clause 7iv7 or subparagraph 7,e77iii71 the portion referred to in subclause 7,i7 shall be treated as distributed on the date on which such distributions begin4 7iii7 ,special rule for surviving spouse of employee ,if the eligible designated beneficiary referred to in clause 7ii77,i7 is the surviving spouse of the employee-- 7,i7 the date on which the distributions are required to begin under clause 7ii77,,iii7 shall not be earlier than the date on which the employee would have attained age #gja_/b1 and 7,,ii7 if the surviving spouse dies before the distributions to such spouse begin1 this subparagraph shall be applied as if the surviving spouse were the employee4 7iv7 ,rules upon death of eligible designated beneficiary ,if an eligible designated beneficiary dies before the portion of an employee's interest described in clause 7ii7 is entirely distributed1 clause 7ii7 shall not apply to any beneficiary of such eligible designated beneficiary and the remainder of such portion shall be distributed within #e years after the death of such beneficiary4 4 7b7 ,definition of eligible designated beneficiary ,section #dja7;a77#i77;,e7 of such ,code is amended to read as follows3 7,e7 ,definitions and rules relating to designated beneficiary ,for purposes of this paragraph-- 7i7 ,designated beneficiary ,the term designated beneficiary means any individual designated as a beneficiary by the employee4 7ii7 ,eligible designated beneficiary ,the term eligible designated beneficiary means1 with respect to any employee1 any designated beneficiary who1 as of the date of death of the employee1 is-- 7,i7 the surviving spouse of the employee1 7,,ii7 subject to clause 7iii71 a child of the employee who has not attained age #bb1 7,,iii7 disabled 7within the meaning of section #gb7m77#g771 7,,iv7 a chronically ill individual 7within the meaning of section #ggjb;,b7c77#b71 except that the requirements of subparagraph 7,a77i7 thereof shall only be treated as met if there is a certification that1 as of such date1 the period of inability described in such subparagraph with respect to the individual is an indefinite one that is reasonably expected to be lengthy in nature71 or 7,v7 an individual not described in any of the preceding subparagraphs who is not more than #aj years younger than the employee4 7iii7 ,special rule for children ,subject to subparagraph 7,f71 an individual described in clause 7ii77,,ii7 shall cease to be an eligible designated beneficiary as of the date the individual attains age #bb and the requirement of subparagraph 7,b77i7 shall not be treated as met with respect to any remaining portion of an employee's interest payable to the individual unless such portion is distributed within #e years after such date4 4 7c7 ,required beginning date ,section #dja7;a77#i77;,c7 of such ,code is amended by adding at the end the following new clause3 7v7 ,employees becoming #e-percent owners after age #gja_/b ,if an employee becomes a #e-percent owner 7as defined in section #daf7 with respect to a plan year ending in a calendar year after the calendar year in which the employee attains age #gja_/b1 then clause 7i77,,ii7 shall be applied by substituting the calendar year in which the employee became such an owner for the calendar year in which the employee retires4 4 7d7 ,effective dates 7#a7 ,in general ,except as provided in this subsection1 the amendments made by this section shall apply to distributions with respect to employees who die after ,december #ca1 #bjad4 7#b7 ,required beginning date ,the amendment made by subsection 7c7 shall apply to employees becoming a #e-percent owner with respect to plan years ending in calendar years beginning before1 on1 or after the date of the enactment of this ,act1 except that-- 7,a7 if1 without regard to such amendment1 an employee's required beginning date occurs before ,april #a1 #bjae1 such amendment shall not result in an earlier required beginning date for such employee1 and 7,b7 if1 solely by reason of such amendment1 an employee's required beginning date would occur before ,april #a1 #bjae1 such employee's required beginning date shall occur on ,april #a1 #bjae4 7#c7 ,exception for certain beneficiaries ,if a designated beneficiary of an employee who dies before ,january #a1 #bjae1 dies after ,december #ca1 #bjad-- 7,a7 the amendments made by this section shall apply to any beneficiary of such designated beneficiary1 and 7,b7 the designated beneficiary shall be treated as an eligible designated beneficiary for purposes of applying section #dja7;a77#i77;,b77iv7 of such ,code 7as in effect after the amendments made by this section74 7#d7 ,exception for certain existing annuity contracts 7,a7 ,in general ,the amendments made by this section shall not apply to a qualified annuity which is a binding annuity contract in effect on the date of the enactment of this ,act and at all times thereafter4 7,b7 ,qualified annuity contract ,for purposes of this paragraph1 the term qualified annuity means1 with respect to an employee1 an annuity-- 7i7 which is a commercial annuity 7as defined in section #cdje7;e77#f7 of such ,code7 or payable by a defined benefit plan1 7ii7 under which the annuity payments are substantially equal periodic payments 7not less frequently than annually7 over the lives of such employee and a designated beneficiary 7or over a period not extending beyond the life expectancy of such employee or the life expectancy of such employee and a designated beneficiary7 in accordance with the regulations described in section #dja7;a77#i77;,a77ii7 of such ,code 7as in effect before such amendments7 and which meets the other requirements of this section #dja7;a77#i7 of such ,code 7as so in effect7 with respect to such payments1 and 7iii7 with respect to which-- 7,i7 annuity payments to the employee have begun before ,january #a1 #bjae1 and the employee has made an irrevocable election before such date as to the method and amount of the annuity payments to the employee or any designated beneficiaries1 or 7,,ii7 if subclause 7,i7 does not apply1 the employee has made an irrevocable election before the date of the enactment of this ,act as to the method and amount of the annuity payments to the employee or any designated beneficiaries4 #afae4 ,reduction in minimum age for allowable in-service distributions 7a7 ,in general ,section #dja7;a77#cf7 is amended by striking age #fb and inserting age #eia_/b4 7b7 ,application to governmental section #deg7;b7 plans ,clause 7i7 of section #deg7;d77#a77;,a7 is amended by inserting 7in the case of a plan maintained by an employer described in subsection 7e77#a77;,a71 age #eia_/b7 before the comma at the end4 7c7 ,effective date ,the amendments made by this section shall apply to distributions made after ,december #ca1 #bjad4 #afaf4 ,modification of rules governing hardship distributions 7a7 ,in general ,not later than #a year after the date of the enactment of this ,act1 the ,secretary of the ,treasury shall modify ,treasury ,regulation section #a4dja7k7-#a7;d77#c77;iv77,e7 to-- 7#a7 delete the #f-month prohibition on contributions imposed by paragraph 7#b7 thereof1 and 7#b7 to make any other modifications necessary to carry out the purposes of section #dja7k77#b77;,b77i77,,iv7 of the ,internal ,revenue ,code of #aihf4 7b7 ,effective date ,the revised regulations under this section shall apply to plan years beginning after ,december #ca1 #bjad4 #afag4 ,extended rollover period for the rollover of plan loan offset amounts in certain cases 7a7 ,in general ,paragraph 7#c7 of section #djb7;c7 is amended by adding at the end the following new subparagraph3 7,c7 ,rollover of certain plan loan offset amounts 7i7 ,in general ,in the case of a qualified plan loan offset amount1 paragraph 7#a7 shall not apply to any transfer of such amount made after the due date 7including extensions7 for filing the return of tax for the taxable year in which such amount is treated as distributed from a qualified employer plan4 7ii7 ,qualified plan loan offset amount ,for purposes of this subparagraph1 the term qualified plan loan offset amount means a plan loan offset amount which is treated as distributed from a qualified employer plan to a participant or beneficiary solely by reason of-- 7,i7 the termination of the qualified employer plan1 or 7,,ii7 the failure to meet the repayment terms of the loan from such plan because of the separation from service of the participant 7whether due to layoff1 cessation of business1 termination of employment1 or otherwise74 7iii7 ,plan loan offset amount ,for purposes of clause 7ii71 the term plan loan offset amount means the amount by which the participant's accrued benefit under the plan is reduced in order to repay a loan from the plan4 7iv7 ,limitation ,this subparagraph shall not apply to any plan loan offset amount unless such plan loan offset amount relates to a loan to which section #gb7p77#a7 does not apply by reason of section #gb7p77#b74 7v7 ,qualified employer plan ,for purposes of this subsection1 the term qualified employer plan has the meaning given such term by section #gb7p77#d74 4 7b7 ,conforming amendment ,subparagraph 7,a7 of section #djb7;c77#c7 is amended by striking subparagraph 7,b7 and inserting subparagraphs 7,b7 and 7,c74 7c7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 #afah4 ,coordination of contribution limitations for #djc7;b7 plans and governmental #deg7;b7 plans 7a7 #djc7;b7 plans 7#a7 ,elimination of special catch-up rule ,subsection 7g7 of section #djb is amended by striking paragraph 7#g7 and by redesignating paragraph 7#h7 as paragraph 7#g74 7#b7 ,elimination of post termination non-elective contributions ,subsection 7b7 of section #djc is amended-- 7,a7 in paragraph 7#c71 by striking for the most recent period and all that follows through more than five years1 and 7,b7 by striking paragraph 7#d74 7#c7 ,elimination of increased contribution limit for church plans ,subsection 7c7 of section #dae is amended by striking paragraph 7#g74 7#d7 ,elimination of separate #dae7;c7 limits ,paragraph 7#d7 of section #dae7k7 is amended by striking each employer with respect to which the participant has the control required and inserting the employer and each employer which is part of a controlled group or under common control4 7b7 #deg7;b7 plans 7#a7 ,elimination of separate deferral limit ,paragraph 7#c7 of section #djb7;g7 is amended by striking and at the end of subparagraph 7,c71 by striking the period at the end of subparagraph 7,d7 and inserting 1 and1 and by inserting after subparagraph 7,d7 the following new subparagraph3 7,e7 any amount deferred under an eligible deferred compensation plan 7as defined in section #deg7;b77 of an eligible employer described in section #deg7;e77#a77;,a74 4 7#b7 ,taken into account under limitation for defined contribution plans 7,a7 ,in general ,paragraph 7#b7 of section #dae7;a7 is amended by striking or at the end of subparagraph 7,b71 by inserting or at the end of subparagraph 7,c71 and by inserting after subparagraph 7,c7 the following new subparagraph3 7,d7 an eligible deferred compensation plan 7as defined in section #deg7;b77 of an eligible employer described in section #deg7;e77#a77;,a71 4 7,b7 ,definition ,paragraph 7#a7 of section #dae7k7 is amended by striking or at the end of subparagraph 7,c71 by striking the period at the end of subparagraph 7,d7 and inserting 1 or1 and by adding at the end the following new subparagraph3 7,e7 an eligible deferred compensation plan 7as defined in section #deg7;b77 of an eligible employer described in section #deg7;e77#a77;,a74 4 7#c7 ,elimination of special catch-up rule ,paragraph 7#c7 of section #deg7;b7 is amended by inserting 1 in the case of an eligible employer described in subsection 7e77#a77;,b71 after which4 7c7 ,conforming amendments 7#a7 ,section #be;,b7d77#a77;,b7 is amended-- 7,a7 by striking clause 7ii71 and 7,b7 by striking the amount of-- and all that follows through any elective deferrals and inserting the following3 the amount of any elective deferrals4 7#b7 ,section #djb;,a7e77#b7 is amended-- 7,a7 by striking 1 and and all that follows and inserting a period1 and 7,b7 by striking means-- and all that follows through any elective deferral described in subparagraph 7,a7 or 7,c7 and inserting the following3 means any elective deferral described in 7,a71 7,c71 or 7,e74 7#c7 ,section #deg7;e7 is amended by striking paragraph 7#ah74 7#d7 ,section #dad7u77#b77;,c7 is amended by inserting by an eligible employer described in section #deg7;e77#a77;,b7 after 7as defined in section #deg7;b774 7#e7 ,section #dad7v77#b77;,d7 is amended-- 7,a7 by striking clauses 7i71 7ii71 and 7iv7 of1 and 7,b7 by striking 1 and plans described in clause 7iii7 and all that follows through the end and inserting a period4 7#f7 ,section #dad7v77#c77;,a77i7 is amended by striking 7determined without regard to section #deg7;b77#c774 7#g7 ,section #dad7v77#f77;,b7 is amended by striking subsection 7u77#b77;,c7 and inserting section #djb7;g77#c74 7#h7 ,section #dad7v77#f7 is amended by striking subparagraph 7,c74 7d7 ,effective date ,the amendments made by this section shall apply to plan years and taxable years beginning after ,december #ca1 #bjad4 #afai4 ,application of #aj-percent early distribution tax to governmental #deg plans 7a7 ,in general ,paragraph 7#a7 of section #gb7t7 is amended by inserting or an eligible deferred compensation plan 7as defined in section #deg7;b77 of an eligible employer described in section #deg7;e77#a77;,a71 after section #digd7;c7714 7b7 ,effective date ,the amendment made by this section shall apply to withdrawals on or after ,february #bf1 #bjad4 #afbj4 ,inflation adjustments for qualified plan benefit and contribution limitations 7a7 ,defined benefit plans 7#a7 ,current limit ,subparagraph 7,a7 of section #dae7;b77#a7 is amended by striking #afj1jjj and inserting #baj1jjj4 7#b7 ,inflation adjustment ,section #dae7;d7 is amended-- 7,a7 in paragraph 7#a77;,a7-- 7i7 by striking #afj1jjj and inserting #baj1jjj1 and 7ii7 by inserting for calendar years beginning after #bjbc after subsection 7b77#a77;,a71 7,b7 paragraph 7#c77;,a71 by striking ,july #a1 #bjja and inserting ,july #a1 #bjbb4 7b7 ,defined contribution plans 7#a7 ,current limit ,subparagraph 7,a7 of section #dae7;c77#a7 is amended by striking #dj1jjj and inserting #eb1jjj4 7#b7 ,inflation adjustment ,subsection 7d7 of section #dae is amended-- 7,a7 in paragraph 7#a77;,c7-- 7i7 by striking #dj1jjj and inserting #eb1jjj1 7ii7 by inserting for calendar years beginning after #bjbc after subsection 7c77#a77;,a71 7,b7 in paragraph 7#c77;,d71 by striking ,july #a1 #bjja and inserting ,july #a1 #bjbb4 7c7 ,conforming amendments 7#a7 ,section #dae7;b77#b7 is amended by striking #afj1jjj each place it appears in subparagraphs 7,c7 and 7,d7 and inserting #baj1jjj4 7#b7 ,section #dae7;b7 is amended by striking #afj1jjj in the fourth sentence of paragraph 7#g7 and inserting #baj1jjj4 7#c7 ,the headings for subparagraphs 7,c7 and 7,d7 of section #dae7;b77#b7 are each amended by striking #afj1jjj and inserting #baj1jjj4 7#d7 ,the heading for subparagraph 7,a7 of section #dae7;d77#c7 is amended by striking #afj1jjj and inserting #baj1jjj4 7#e7 ,the heading for subparagraph 7,d7 of section #dae7;d77#c7 is amended by striking #dj1jjj and inserting #eb1jjj4 7#f7 ,the heading for subparagraph 7,a7 of section #dae7;d77#d7 is amended by striking #afj1jjj and inserting #baj1jjj4 7#g7 ,the heading for subparagraph 7,b7 of section #dae7;d77#d7 is amended by striking #dj1jjj and inserting #eb1jjj4 7d7 ,effective date ,the amendments made by this section shall apply to years ending with or within a calendar year beginning after #bjad4 #afba4 ,inflation adjustments for qualified plan elective deferral limitations 7a7 ,current limit ,subparagraph 7,b7 of section #djb7;g77#a7 is amended by striking shall be and all that follows and inserting is #ag1ejj4 7b7 ,inflation adjustment ,paragraph 7#d7 of section #djb7;g7 is amended-- 7#a7 by striking ,december #ca1 #bjjf and inserting ,december #ca1 #bjbc1 7#b7 by striking #ae1jjj and inserting #ag1ejj1 and 7#c7 by striking #bjje and inserting #bjbb4 7c7 ,effective date ,the amendments made by this section shall apply to plan years and taxable years beginning after ,december #ca1 #bjad4 #afbb4 ,inflation adjustments for ,,simple retirement accounts 7a7 ,current limit ,clause 7i7 of section #djh7p77#b77;,e7 is amended by striking shall be and all that follows and inserting shall be #ab1jjj4 7b7 ,inflation adjustment ,clause 7ii7 of section #djh7p77#b77;,e7 is amended-- 7#a7 by striking ,december #ca1 #bjje and inserting ,december #ca1 #bjbc1 7#b7 by striking #aj1jjj and inserting #ab1jjj1 7#c7 by striking #bjjd and inserting #bjbb4 7c7 ,effective date ,the amendments made by this section shall apply to calendar years beginning after #bjad4 #afbc4 ,inflation adjustments for catch-up contributions for certain employer plans 7a7 ,current limit 7#a7 ,plans other than simple #dja7k7 and simple retirement accounts ,clause 7i7 of section #dad7v77#b77;,b7 is amended by striking determined in accordance with the following table and all that follows through the period at the end and inserting #e1ejj44 7#b7 ,simple #dja7k7 and simple retirement accounts ,clause 7ii7 of section #dad7v77#b77;,b7 is amended by striking determined in accordance with the following table and all that follows through the period at the end and inserting #b1ejj44 7b7 ,inflation adjustment ,subparagraph 7,c7 of section #dad7v77#b7 is amended-- 7#a7 by striking ,december #ca1 #bjjf and inserting ,december #ca1 #bjbc1 7#b7 by striking #e1jjj and inserting #e1ejj1 and 7#c7 by striking #bjje and inserting #bjbb4 7c7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 #afbd4 ,inflation adjustments for governmental and tax-exempt organization plans 7a7 ,current limit ,subparagraph 7,a7 of section #deg7;b77#b7 is amended by striking the applicable dollar amount and inserting #ag1ejj4 7b7 ,inflation adjustment ,paragraph 7#ae7 of section #deg7;e7 is amended-- 7#a7 by striking ,applicable dollar amount4-- and all that follows through ,cost-of-living adjustments4--,in the case of taxable years beginning after ,december #ca1 #bjjf and inserting the following3 ,cost-of-living adjustments4--,in the case of taxable years beginning after ,december #ca1 #bjbc1 7#b7 by striking the #ae1jjj amount under subparagraph 7,a7 and inserting the #ag1ejj amount under subsection 7b77#b77;,a71 and 7#c7 by striking #bjje and inserting #bjbb4 7c7 ,conforming amendment ,section #deg7;f77#d77;,a7 is amended by striking twice the applicable dollar limit determined under subsection 7e77#ae7 and inserting twice the amount in effect under subsection 7b77#b77;,a74 7d7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 ,h ,certain provisions related to members of ,indian tribes #agja4 ,indian general welfare benefits 7a7 ,in general ,part ,,iii of subchapter ,b of chapter #a is amended by inserting before section #adj the following new section3 #aci;,e4 ,indian general welfare benefits 7a7 ,in general ,gross income does not include the value of any ,indian general welfare benefit4 7b7 ,indian general welfare benefit ,for purposes of this section1 the term ,indian general welfare benefit includes any payment made or services provided to or on behalf of a member of an ,indian tribe 7or any spouse or dependent of such a member7 pursuant to an ,indian tribal government program1 but only if-- 7#a7 the program is administered under specified written guidelines and does not discriminate in favor of members of the governing body of the tribe1 and 7#b7 the benefits provided under such program-- 7,a7 are available to any tribal member who meets such guidelines1 7,b7 are for the promotion of general welfare1 7,c7 are not lavish or extravagant1 and 7,d7 are not compensation for services4 7c7 ,definitions and special rules ,for purposes of this section-- 7#a7 ,indian tribal government ,for purposes of this section1 the term ,indian tribal government includes any agencies or instrumentalities of an ,indian tribal government and any ,alaska ,native regional or village corporation1 as defined in1 or established pursuant to1 the ,alaska ,native ,claims ,settlement ,act 7#dc ,u4,s4,c4 #afja1 et seq474 7#b7 ,dependent ,the term dependent has the meaning given such term by section #ggje1 determined without regard to subsections 7b77#a71 7b77#b71 and 7d77#a77;,b74 7#c7 ,lavish or extravagant ,the ,secretary shall1 in consultation with the ,tribal ,advisory ,committee 7as established under section #agjb of the ,tax ,reform ,act of #bjad71 establish guidelines for what constitutes lavish or extravagant benefits with respect to ,indian tribal government programs4 7#d7 ,establishment of tribal government program ,a program shall not fail to be treated as an ,indian tribal government program solely by reason of the program being established by tribal custom or government practice4 4 7b7 ,conforming amendment ,the table of sections for part ,,iii of subchapter ,b of chapter #a is amended by inserting before the item relating to section #adj the following new item3 ,sec4 #aci;,e4 ,indian general welfare benefits4 4 7c7 ,effective date 7#a7 ,in general ,the amendments made by this section shall apply to taxable years for which the period of limitation on refund or credit under section #feaa of the ,internal ,revenue ,code of #aihf has not expired4 7#b7 ,one-year waiver of statute of limitations ,if the period of limitation on a credit or refund resulting from the amendments made by subsection 7a7 expires before the end of the #a-year period beginning on the date of the enactment of this ,act1 refund or credit of such overpayment 7to the extent attributable to such amendments7 may1 nevertheless1 be made or allowed if claim therefor is filed before the close of such #a-year period4 #agjb4 ,tribal ,advisory ,committee 7a7 ,establishment ,the ,secretary of the ,treasury shall establish a ,tribal ,advisory ,committee 7hereinafter in this subsection referred to as the ,committee74 7b7 ,duties 7#a7 ,implementation ,the ,committee shall advise the ,secretary on matters relating to the taxation of ,indians4 7#b7 ,education and training ,the ,secretary shall1 in consultation with the ,committee1 establish and require-- 7,a7 training and education for internal revenue field agents who administer and enforce internal revenue laws with respect to ,indian tribes on ,federal ,indian law and the ,federal ,government's unique legal treaty and trust relationship with ,indian tribal governments1 and 7,b7 training of such internal revenue field agents1 and provision of training and technical assistance to tribal financial officers1 about implementation of this ,act and the amendments made thereby4 7c7 ,membership 7#a7 ,in general ,the ,committee shall be composed of #g members appointed as follows3 7,a7 ,three members appointed by the ,secretary of the ,treasury4 7,b7 ,one member appointed by the ,chairman1 and one member appointed by the ,ranking ,member1 of the ,committee on ,ways and ,means of the ,house of ,representatives4 7,c7 ,one member appointed by the ,chairman1 and one member appointed by the ,ranking ,member1 of the ,committee on ,finance of the ,senate4 7#b7 ,term 7,a7 ,in general ,except as provided in subparagraph 7,b71 each member's term shall be #d years4 7,b7 ,initial staggering ,the first appointments made by the ,secretary under paragraph 7#a77;,a7 shall be for a term of #b years4 #agjc4 ,other relief for ,indian tribes 7a7 ,waiver of penalties and interest ,the ,secretary of the ,treasury may waive any interest and penalties imposed under the ,internal ,revenue ,code of #aihf on any ,indian tribal government or member of an ,indian tribe 7or any spouse or dependent of such a member7 to the extent such interest and penalties relate to excluding a payment or benefit from gross income under the general welfare exclusion4 7b7 ,definitions ,for purposes of this section-- 7#a7 ,indian tribal government ,the term ,indian tribal government shall have the meaning given such term by section #aci;,e of such ,code1 as added by this ,act4 7#b7 ,indian tribe ,the term ,indian tribe shall have the meaning given such term by section #aci;,d7c77#a7 of such ,code1 as amended by this ,act4 ,,ii ,alternative ,minimum ,tax ,repeal #bjja4 ,repeal of alternative minimum tax 7a7 ,in general ,subchapter ,a of chapter #a is amended by striking part ,,vi 7and by striking the item relating to such part in the table of parts for subchapter ,a74 7b7 ,credit for prior year minimum tax liability 7#a7 ,limitation ,subsection 7c7 of section #ec is amended to read as follows3 7c7 ,limitation ,the credit allowed under subsection 7a7 shall not exceed the regular tax liability of the taxpayer reduced by the sum of the credits allowed under subparts ,a1 ,b1 and ,d4 4 7#b7 ,credits treated as refundable ,subsection 7e7 of section #ec is amended to read as follows3 7e7 ,portion of credit treated as refundable 7#a7 ,in general ,in the case of any taxable year beginning in #bjaf1 #bjag1 #bjah1 or #bjai1 the limitation under subsection 7c7 shall be increased by the ,,amt refundable credit amount for such year4 7#b7 ,,amt refundable credit amount ,for purposes of paragraph 7#a71 the ,,amt refundable credit amount is an amount equal to #ej percent 7#ajj percent in the case of a taxable year beginning in #bjai7 of the excess 7if any7 of-- 7,a7 the minimum tax credit determined under subsection 7b7 for the taxable year1 over 7,b7 the minimum tax credit allowed under subsection 7a7 for such year 7before the application of this subsection for such year74 7#c7 ,credit refundable ,for purposes of this title 7other than this section71 the credit allowed by reason of this subsection shall be treated as a credit allowed under subpart ,c 7and not this subpart74 7#d7 ,short taxable years ,in the case of any taxable year of less than #cfe days1 the ,,amt refundable credit amount determined under paragraph 7#b7 with respect to such taxable year shall be the amount which bears the same ratio to such amount determined without regard to this paragraph as the number of days in such taxable year bears to #cfe4 4 7#c7 ,treatment of references ,section #ec7;d7 is amended by adding at the end the following new paragraph3 7#c7 ,,amt term references ,any references in this subsection to section #ee1 #ef1 or #eg shall be treated as a reference to such section as in effect before its repeal by the ,tax ,reform ,act of #bjad4 4 7#d7 ,repeal of special rules with respect to treatment of incentive stock options ,section #ec is amended by striking subsection 7f74 7c7 ,conforming amendments related to ,,amt repeal 7#a7 ,section #b7;e71 as redesignated by section #ajja1 is amended by striking sections #a and #ee and inserting section #a4 7#b7 ,section #e7;a7 is amended by striking paragraph 7#d74 7#c7 ,section #aa7;d7 is amended by striking the taxes imposed by subsection 7a7 and section #ee and inserting the tax imposed by subsection 7a74 7#d7 ,section #ac1 as redesignated by title ,i1 is amended by striking paragraph 7#g74 7#e7 ,section #bf7;a7 is amended to read as follows3 7a7 ,limitation based on amount of tax ,the aggregate amount of credits allowed by this subpart for the taxable year shall not exceed the taxpayer's regular tax liability for the taxable year4 4 7#f7 ,section #bf7;b77#b7 is amended by striking subparagraph 7,a74 7#g7 ,section #bf is amended by striking subsection 7c74 7#h7 ,section #ch7;c7 is amended-- 7,a7 by striking paragraphs 7#a7 through 7#e71 7,b7 by redesignating paragraph 7#f7 as paragraph 7#b71 7,c7 by inserting before paragraph 7#b7 7as so redesignated7 the following new paragraph3 7#a7 ,in general ,the credit allowed under subsection 7a7 for any taxable year shall not exceed the excess of-- 7,a7 the sum of-- 7i7 so much of the regular tax liability as does not exceed #be1jjj1 plus 7ii7 #ge percent of so much of the regular tax liability as exceeds #be1jjj1 over 7,b7 the sum of the credits allowable under subparts ,a and ,b of this part4 1 and 7,d7 by striking subparagraph 7,b7 of paragraph 7#a7 each place it appears in paragraph 7#b7 7as so redesignated7 and inserting clauses 7i7 and 7ii7 of paragraph 7#a77;,a74 7#i7 ,section #de;,d7g77#d77;,b7 is amended by striking or for purposes of section #ee4 7#aj7 ,section #ed7;c77#a7 is amended to read as follows3 7#a7 regular tax liability 7as defined in section #bf7;b771 over 4 7#aa7 ,section #ed;,a7c77#a77;,a7 is amended to read as follows3 7,a7 regular tax liability 7as defined in section #bf7;b771 over 4 7#ab7 7,a7 ,section #ajh7;b77#b7 is amended by striking subparagraph 7,c7 and by redesignating subparagraphs 7,d7 through 7,g7 as subparagraphs 7,c7 through 7,f71 respectively4 7,b7 ,section #ajh7;b77#c77;,b7 is amended-- 7i7 by striking subparagraphs 7,b71 7,c71 and 7,g7 and inserting subparagraphs 7,b7 and 7,f7 of paragraph 7#b71 and 7ii7 by striking subparagraph 7,f7 and inserting paragraph 7#b77;,e74 7,c7 ,section #ajh7;b77#d77;,b7 is amended by striking subparagraph 7,a7 or 7,d7 in the heading and text thereof and inserting subparagraph 7,a7 or 7,c74 7,d7 ,section #ajh7;b77#d77;,c7 is amended by striking subparagraphs 7,b7 and 7,g7 in the heading and text thereof and inserting subparagraphs 7,b7 and 7,f74 7#ac7 ,section #afh7k77#b7 is amended by striking subparagraph 7,g74 7#ad7 ,section #agc is amended by striking subsection 7b74 7#ae7 ,section #agd7;f7 is amended to read as follows3 7f7 ,cross reference ,for adjustments to basis of property for amounts allowed as deductions as deferred expenses under subsection 7b71 see section #ajaf7;a77#ad74 4 7#af7 ,section #bfc;,a7c7 is amended by striking paragraph 7#f74 7#ag7 ,section #chb7l7 is amended by striking paragraph 7#g7 and by redesignating paragraph 7#h7 as paragraph 7#g74 7#ah7 ,section #ddc 7relating to returns for a period of less than #ab months7 adjustment in computing minimum tax and tax preferences7 is amended by striking subsection 7d7 and by redesignating subsection 7e7 as subsection 7d74 7#ai7 ,section #fda7;c7 is amended-- 7,a7 in paragraph 7#b7 by striking subparagraph 7,b7 and by redesignating subparagraphs 7,c7 and 7,d7 as subparagraphs 7,b7 and 7,c71 respectively1 and 7,b7 in paragraph 7#c71 by striking paragraph 7#b77;,c7 and inserting paragraph 7#b77;,b74 7#bj7 ,subsections 7b7 and 7c7 of section #fff are each amended by striking 7other than the tax imposed by section #ee74 7#ba7 ,section #hae7;c77#b7 is amended by striking the last sentence4 7#bb7 ,section #hdg is amended-- 7,a7 by striking the last sentence of paragraph 7#i71 and 7,b7 in paragraph 7#aj71 by inserting and at the end of subparagraph 7,a71 by striking subparagraph 7,b71 and by redesignating subparagraph 7,c7 as subparagraph 7,b74 7#bc7 ,section #hdh is amended by striking subsection 7i7 and by redesignating subsection 7j7 as subsection 7i74 7#bd7 ,section #hfj;,e7a7 is amended by striking paragraph 7#d74 7#be7 ,section #hga7;b77#a7 is amended by striking or #ee4 7#bf7 ,section #hhb7;a77#a7 is amended by striking #ee14 7#bg7 ,section #hig7;a7 is amended to read as follows3 7a7 ,treatment as effectively connected with united states trade or business ,for purposes of this title1 gain or loss of a nonresident alien individual or a foreign corporation from the disposition of a ,united ,states real property interest shall be taken into account-- 7#a7 in the case of a nonresident alien individual1 under section #hga7;b77#a71 or 7#b7 in the case of a foreign corporation1 under section #hhb7;a77#a71 as if the taxpayer were engaged in a trade or business within the ,united ,states during the taxable year and as if such gain or loss were effectively connected with such trade or business4 4 7#bh7 ,section #ijd7k7 is amended to read as follows3 7k7 ,cross reference ,for increase of limitation under subsection 7a7 for taxes paid with respect to amounts received which were included in the gross income of the taxpayer for a prior taxable year as a ,united ,states shareholder with respect to a controlled foreign corporation1 see section #ifj7;b74 4 7#bi7 ,section #iaa7;f7 is amended to read as follows3 7f7 ,determination of tax liability ,if1 for any taxable year1 any amount is excluded from gross income of a taxpayer under subsection 7a71 then1 notwithstanding section #a1 if such taxpayer has taxable income for such taxable year1 the tax imposed by section #a for such taxable year shall be equal to the excess 7if any7 of-- 7#a7 the tax which would be imposed by section #a for such taxable year if the taxpayer's taxable income were increased by the amount excluded under subsection 7a7 for such taxable year1 over 7#b7 the tax which would be imposed by section #a for such taxable year if the taxpayer's taxable income were equal to the amount excluded under subsection 7a7 for such taxable year4 4 7#cj7 ,section #ifb7;a77#a7 is amended-- 7,a7 by striking sections #a and #ee and inserting section #a1 and 7,b7 by striking sections #aa and #ee and inserting section #aa4 7#ca7 ,section #ajaf7;a7 is amended by striking paragraph 7#bj74 7#cb7 ,section #abjb7;a77#d7 is amended by inserting and at the end of subparagraph 7,a71 by striking 1 and and inserting a period at the end of subparagraph 7,b71 and by striking subparagraph 7,c74 7#cc7 ,section #acgd7;b77#c77;,b7 is amended by striking the last sentence thereof4 7#cd7 ,section #acig;,e7c77#a7 is amended to read as follows3 7#a7 regular tax liability 7as defined in section #bf7;b71 over 4 7#ce7 ,section #aefa7;a7 is amended-- 7,a7 by inserting and at the end of paragraph 7#a71 by striking the comma at the end of paragraph 7#b7 and inserting a period1 and by striking paragraphs 7#c7 and 7#d71 and 7,b7 by striking the last sentence4 7#cf7 ,section #fjae7;d77#b77;,b7 is amended by striking or #ee4 7#cg7 ,section #fdbe7;c77#a77;,a7 is amended-- 7,a7 by adding plus at the end of clause 7i71 and 7,b7 by striking clause 7ii7 and by redesignating clause 7iii7 as clause 7ii74 7#ch7 ,section #ffed7;d77#b7 is amended-- 7,a7 in clause 7i7 of subparagraph 7,b71 by striking 1 alternative minimum taxable income11 and 7,b7 in clause 7i7 of subparagraph 7,c71 by striking 1 alternative minimum taxable income14 7#ci7 ,section #ffee7;e77#b77;,b7 is amended-- 7,a7 by striking ,the taxable income1 alternative minimum taxable income1 and modified alternative taxable income shall and inserting ,taxable income shall1 and 7,b7 by striking clause 7iii74 7#dj7 ,section #ffee7;g77#a77;,a7 is amended-- 7,a7 by striking clause 7ii71 and 7,b7 by redesignating clauses 7iii7 and 7iv7 as clauses 7ii7 and 7iii71 respectively4 7#da7 ,section #fffb7;e77#c77;,c7 is amended by striking the regular tax 7as defined in section #ee7;c77 and inserting the regular tax liability 7as defined in section #bf7;b774 7d7 ,effective dates 7#a7 ,in general ,except as otherwise provided in this subsection1 the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 7#b7 ,prior elections with respect to certain tax preferences ,so much of the amendment made by subsection 7a7 as relates to the repeal of section #ei7;e7 of the ,internal ,revenue ,code of #aihf shall apply to amounts paid or incurred after ,december #ca1 #bjad4 7#c7 ,treatment of net operating loss carrybacks ,for purposes of section #ef7;d7 of the ,internal ,revenue ,code of #aihf 7as in effect before its repeal71 the amount of any net operating loss which may be carried back from a taxable year beginning after ,december #ca1 #bjad1 to taxable years beginning before ,january #a1 #bjae1 shall be determined without regard to any adjustments under section #ef7;d77#b77;,a7 of such ,code 7as so in effect74 ,,iii ,business ,tax ,reform ,a ,tax ,rates #cjja4 #be-percent corporate tax rate 7a7 ,in general ,subsection 7b7 of section #aa is amended to read as follows3 7b7 ,amount of tax 7#a7 ,in general ,except as provided in paragraph 7#b71 the amount of the tax imposed by subsection 7a7 shall be #be percent of taxable income4 7#b7 ,phase-in for taxable years beginning before #bjai 7,a7 ,in general ,in the case of taxable years beginning before #bjai1 the amount of tax imposed by subsection 7a7 shall be the sum of-- 7i7 #be percent of so much of the taxable income as does not exceed #ge1jjj1 and 7ii7 the applicable percentage of so much of taxable income as exceeds #ge1jjj4 7,b7 ,applicable percentage ,for purposes of this paragraph1 the applicable percentage shall be determined in accordance with the following table3 ,in the case of taxable years beginning during calendar year,the applicable percentage is3 #bjaecc #bjafca #bjagbi #bjahbg 4 7b7 ,conforming amendments 7#a7 ,paragraphs 7#b77;,b7 and 7#f77;,a77ii7 of section #hfj;,e7e7 are each amended by striking section #aa7;b77#a7 and inserting section #aa7;b74 7#b7 7,a7 ,part ,i of subchapter ,p of chapter #a is amended by striking section #abja 7and by striking the item relating to such section in the table of sections for such part74 7,b7 ,section #ac1 as amended and redesignated by the preceding provisions of this ,act1 is amended by striking paragraphs 7#d7 and 7#f71 and by redesignating paragraph 7#e7 as paragraph 7#d74 7,c7 ,section #ebg7;b7 is amended-- 7i7 by striking paragraph 7#b71 and 7ii7 by striking all that precedes is hereby imposed and inserting3 7b7 ,tax imposed ,a tax 4 7,d7 ,sections #eid7;a7 is amended by striking taxes imposed by section #aa or #abja7;a7 and inserting tax imposed by section #aa4 7,e7 ,section #fia7;c77#d7 is amended by striking #abja14 7,f7 ,section #hja7;a7 is amended-- 7i7 by striking paragraph 7#b71 and 7ii7 by striking all that precedes is hereby imposed and inserting3 7a7 ,tax imposed ,a tax 4 7,g7 ,section #hca7;d7 is amended by striking paragraph 7#a7 and by redesignating paragraphs 7#b7 and 7#c7 as paragraphs 7#a7 and 7#b71 respectively4 7,h7 ,sections #hcb7;c77#e7 and #hcd7;b77#a77;,d7 are each amended by striking sec4 #abja and following14 7,i7 ,section #heb7;b77#c77;,a7 is amended by striking section #abja7;a7 and inserting section #aa7;b74 7,j7 ,section #heg7;b77#c7 is amended-- 7i7 by striking subparagraph 7,a7 and redesignating subparagraphs 7,b7 through 7,f7 as subparagraphs 7,a7 through 7,e71 respectively1 7ii7 in subparagraph 7,c71 as so redesignated-- 7,i7 by striking subparagraph 7,a77ii7 in clause 7i7 thereof and inserting paragraph 7#a71 7,,ii7 by striking the tax imposed by subparagraph 7,a77ii7 in clauses 7ii7 and 7iv7 thereof and inserting the tax imposed by paragraph 7#a7 on undistributed capital gain1 7iii7 in subparagraph 7,e71 as so redesignated1 by striking subparagraph 7,b7 or 7,d7 and inserting subparagraph 7,a7 or 7,c71 and 7iv7 by adding at the end the following new subparagraph3 7,f7 ,undistributed capital gain ,for purposes of this paragraph1 the term undistributed capital gain means the excess of the net capital gain over the deduction for dividends paid 7as defined in section #efa7 determined with reference to capital gain dividends only4 4 7,k7 ,section #hhb7;a77#a7 is amended by striking 1 or #abja7;a74 7,l7 ,section #acgd7;b7 is amended by striking paragraph 7#d74 7,m7 ,section #acha7;b7 is amended by striking taxes imposed by section #aa or #abja and inserting tax imposed by section #aa4 7,n7 ,sections #fdbe7;c77#a77;,a77i7 and #ffee7;g77#a77;,a77i7 are each amended by striking or #abja7;a714 7#c7 7,a7 ,section #adde7;e77#a7 is amended-- 7i7 by striking #ce percent and inserting the highest rate of tax in effect for the taxable year under section #aa7;b71 and 7ii7 by striking of the gain and inserting multiplied by the gain4 7,b7 ,section #adde7;e77#b7 is amended by striking #ce percent of the amount and inserting the highest rate of tax in effect for the taxable year under section #aa7;b7 multiplied by the amount4 7,c7 ,section #adde7;e77#f7 is amended-- 7i7 by striking #ce percent and inserting the highest rate of tax in effect for the taxable year under section #aa7;b71 and 7ii7 by striking of the amount and inserting multiplied by the amount4 7,d7 ,section #addf7;b77#b77;,b7 is amended by striking section #aa7;b77#a7 and inserting section #aa7;b74 7#d7 ,section #heb7;b77#a7 is amended by striking the last sentence4 7#e7 7,a7 ,part ,i of subchapter ,b of chapter #e is amended by striking section #aeea 7and by striking the item relating to such section in the table of sections for such part74 7,b7 ,section #ece7;c77#e7 is amended to read as follows3 7#e7 ,cross reference ,for limitation on credit provided in paragraph 7#b7 or 7#c7 in the case of certain controlled corporations1 see section #aefa4 4 7#f7 7,a7 ,section #aefa1 as amended by the preceding provisions of this ,act1 is amended to read as follows3 #aefa4 ,limitation on accumulated earnings credit in the case of certain controlled corporations 7a7 ,in general ,the component members of a controlled group of corporations on a ,december #ca shall1 for their taxable years which include such ,december #ca1 be limited for purposes of this subtitle to one #bej1jjj 7#aej1jjj if any component member is a corporation described in section #ece7;c77#b77;,b77 amount for purposes of computing the accumulated earnings credit under section #ece7;c77#b7 and 7#c74 ,such amount shall be divided equally among the component members of such group on such ,december #ca unless the ,secretary prescribes regulations permitting an unequal allocation of such amount4 7b7 ,certain short taxable years ,if a corporation has a short taxable year which does not include a ,december #ca and is a component member of a controlled group of corporations with respect to such taxable year1 then for purposes of this subtitle1 the amount to be used in computing the accumulated earnings credit under section #ece7;c77#b7 and 7#c7 of such corporation for such taxable year shall be the amount specified in subsection 7a7 with respect to such group1 divided by the number of corporations which are component members of such group on the last day of such taxable year4 ,for purposes of the preceding sentence1 section #aefc7;b7 shall be applied as if such last day were substituted for ,december #ca4 4 7,b7 ,the table of sections for part ,,ii of subchapter ,b of chapter #e is amended by striking the item relating to section #aefa and inserting the following new item3 ,sec4 #aefa4 ,limitation on accumulated earnings credit in the case of certain controlled corporations4 4 7#g7 ,section #ghgd7;e77#a77;,b7 is amended by striking section #aa7;b77#a7 and inserting section #aa7;b74 7c7 ,effective date 7#a7 ,in general ,except as otherwise provided in this subsection1 the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 7#b7 ,withholding ,the amendments made by subsection 7b77#c7 shall apply to distributions made after ,december #ca1 #bjad4 7#c7 ,certain transfers ,the amendments made by subsection 7b77#e7 shall apply to transfers made after ,december #ca1 #bjah4 7#d7 ,certain other amendments related to single rate of tax ,the amendments made by paragraphs 7#d7 and 7#f7 of subsection 7b7 shall apply to taxable years beginning after ,december #ca1 #bjah4 ,b ,reform of business-,related exclusions and deductions #caja4 ,revision of treatment of contributions to capital 7a7 ,inclusion of contributions to capital ,part ,,ii of subchapter ,b of chapter #a is amended by inserting after section #ge the following new section3 #gf4 ,contributions to capital 7a7 ,in general ,gross income includes-- 7#a7 any contribution to the capital of any entity1 and 7#b7 any premium received by such entity with respect to any option on any interest in such entity4 7b7 ,treatment of contributions in exchange for stock1 etc 7#a7 ,in general ,in the case of any contribution of money or other property to a corporation in exchange for stock of such corporation-- 7,a7 such contribution shall not be treated for purposes of subsection 7a7 as a contribution to the capital of such corporation 7and shall not be includible in the gross income of such corporation71 and 7,b7 no gain or loss shall be recognized to such corporation upon the issuance of such stock4 7#b7 ,treatment limited to value of stock ,for purposes of this subsection1 a contribution of money or other property to a corporation shall be treated as being in exchange for stock of such corporation only to the extent that the fair market value of such money and other property does not exceed the fair market value of such stock4 7#c7 ,application to entities other than corporations ,in the case of any entity other than a corporation1 rules similar to the rules of paragraphs 7#a7 and 7#b7 shall apply in the case of any contribution of money or other property to such entity in exchange for any interest in such entity4 7c7 ,treasury stock treated as stock ,any reference in this section to stock shall be treated as including a reference to treasury stock4 4 7b7 ,basis of corporation in contributed property 7#a7 ,contributions to capital ,subsection 7c7 of section #cfb is amended to read as follows3 7c7 ,contributions to capital ,if property other than money is transferred to a corporation as a contribution to the capital of such corporation 7within the meaning of section #gf7 then the basis of such property shall be the greater of-- 7#a7 the basis determined in the hands of the transferor1 increased by the amount of gain recognized to the transferor on such transfer1 or 7#b7 the amount included in gross income by such corporation under section #gf with respect to such contribution4 4 7#b7 ,contributions in exchange for stock ,paragraph 7#b7 of section #cfb7;a7 is amended by striking contribution to capital and inserting contribution in exchange for stock of such corporation 7determined under rules similar to the rules of paragraphs 7#b7 and 7#c7 of section #gf7;b774 7c7 ,conforming amendments 7#a7 ,section #ajh7;e7 is amended by striking paragraph 7#f74 7#b7 ,part ,,iii of subchapter ,b of chapter #a is amended by striking section #aah 7and by striking the item relating to such section in the table of sections for such part74 7#c7 ,the table of sections for part ,,ii of subchapter ,b of chapter #a is amended by inserting after the item relating to section #ge the following new item3 ,sec4 #gf4 ,contributions to capital4 4 7d7 ,effective date ,the amendments made by this section shall apply to contributions made1 and transactions entered into1 after the date of the enactment of this ,act4 #cajb4 ,repeal of deduction for local lobbying expenses 7a7 ,in general ,section #afb7;e7 is amended by striking paragraphs 7#b7 and 7#g7 and by redesignating paragraphs 7#c71 7#d71 7#e71 7#f71 and 7#h7 as paragraphs 7#b71 7#c71 7#d71 7#e71 and 7#f71 respectively4 7b7 ,conforming amendment ,section #fjcc7;e77#a77;,b77ii7 is amended by striking section #afb7;e77#e77;,b77ii7 and inserting section #afb7;e77#d77;,b77ii74 7c7 ,effective date ,the amendments made by this section shall apply to amounts paid or incurred after ,december #ca1 #bjad4 #cajc4 ,expenditures for repairs in connection with casualty losses 7a7 ,in general ,section #afe1 as amended by the preceding provisions of this ,act1 is amended by inserting after subsection 7g7 the following new subsection3 7h7 ,special rule for casualty losses 7#a7 ,expenditures for repairs in connection with casualty losses ,if a deduction is allowable under this section for any casualty loss with respect to any property1 any expenditure made for any repair of damage to such property in connection with such casualty loss shall be treated as a permanent improvement made to increase the value of such property for purposes of section #bfc7;a77#a74 7#b7 ,election to expense repair in lieu of deducting casualty loss ,if the taxpayer elects the application of this paragraph with respect to any property with respect to which there is a casualty loss1 no deduction shall be allowable under this section for the casualty loss with respect to such property and paragraph 7#a7 shall not apply to expenditures made for repair of damage to such property in connection with such casualty loss4 ,any election under this paragraph shall be made not later than the due date for the return of tax 7including extensions7 for the taxable year in which the casualty loss occurs and1 once made1 may be revoked only with the consent of the ,secretary4 4 7b7 ,effective date ,the amendment made by this section shall apply to losses sustained after ,december #ca1 #bjad4 #cajd4 ,reform of accelerated cost recovery system 7a7 ,applicable depreciation method ,subsection 7b7 of section #afh is amended to read as follows3 7b7 ,applicable depreciation method ,for purposes of this section-- 7#a7 ,in general ,the applicable depreciation method is the straight line method4 7#b7 ,salvage value treated as zero ,salvage value shall be treated as zero4 4 7b7 ,applicable recovery period ,subsection 7c7 of section #afh is amended to read as follows3 7c7 ,applicable recovery period ,for purposes of this section-- 7#a7 ,in general ,except as provided in paragraph 7#b71 the applicable recovery period for any property is the class life of such property4 7#b7 ,special rules for determining class life of certain property 7,a7 ,property with no class life ,in the case of personal property with no class life1 the recovery period is #ab years4 7,b7 ,certain horses ,in the case of any race horse1 and any horse other than a race horse which is more than #ab years old at the time it is placed in service1 #c years4 7,c7 ,semi-,conductor manufacturing equipment ,in the case of any semi-conductor manufacturing equipment1 the recovery period is #e years4 7,d7 ,qualified technological equipment ,in the case of any qualified technological equipment1 the recovery period is #e years4 7,e7 ,automobile or light general purpose truck ,in the case of any automobile or light general purpose truck1 the recovery period is #e years4 7,f7 ,qualified rent-to-own property ,in the case of any qualified rent-to-own property1 the recovery period is #i years4 7,g7 ,certain telephone switching equipment ,in the case of any computer-based telephone central office switching equipment1 the recovery period is #i4e years4 7,h7 ,railroad track ,in the case of any railroad track1 the recovery period is #aj years4 7,i7 ,smart electric distribution property ,in the case of qualified smart electric meters and qualified smart electric grid systems1 the recovery period is #aj years4 7,j7 ,airplanes ,in the case of any fixed-wing aircraft 7including any fixed-wing airframe or engine71 the recovery period is #ab years4 7,k7 ,natural gas gathering line ,in the case of any natural gas gathering line1 the recovery period is #ad years4 7,l7 ,tree or vine bearing fruit or nuts ,in the case of any tree or vine bearing fruit or nuts1 the recovery period is #bj years4 7,m7 ,telephone distribution plant ,in the case of any telephone distribution plant and comparable equipment used for #b-way exchange of voice and data communications by cable1 the recovery period is #bd years4 7,n7 ,real property ,in the case of nonresidential real property1 residential rental property1 and any section #abde property 7as defined in section #abde7;a77#c77 which is real property with no class life1 the recovery period is #dj years4 7,o7 ,water treatment and utility property ,in the case of any municipal wastewater treatment plant or water utility property1 the recovery period is #ej years4 7,p7 ,clearing and grading improvements2 tunnel bore ,in the case of any clearing and grading land improvements or tunnel bore1 the recovery period is #ej years4 7,q7 ,tax-exempt use property subject to lease ,in the case of any tax-exempt use property subject to a lease1 the recovery period used for purposes of paragraph 7#b7 shall 7notwithstanding any other subparagraph of this paragraph7 in no event be less than #abe percent of the lease term4 4 7c7 ,neutral cost recovery system ,section #afh1 as amended by subsection 7f71 is amended by adding at the end the following new subsection3 7i7 ,neutral cost recovery system 7#a7 ,in general ,in the case of any property 7to which this section applies7 placed in service by the taxpayer in a taxable year for which such taxpayer has elected the application of this subsection1 the deduction determined under subsection 7a7 with respect to such property for any taxable year shall be increased by an amount equal to the product of-- 7,a7 the modified adjusted basis of such property determined as of the close of such taxable year 7determined without regard to this subsection but after taking all other adjustments for such taxable year into account71 multiplied by 7,b7 the inflation adjustment percentage for the calendar year in which such taxable year begins4 7#b7 ,modified adjusted basis ,for purposes of this subsection1 the term modified adjusted basis means1 with respect to any property1 the adjusted basis which would be determined with respect to such property if this subsection never applied to such property4 7#c7 ,inflation adjustment percentage ,for purposes of this subsection1 the term inflation adjustment percentage means1 with respect to any calendar year1 the cost-of-living adjustment which would be determined under section #a7;c77#b77;,a7 for such calendar year if clause 7ii7 thereof were applied by substituting the ,c-,,cpi-,u for the calendar year preceding the calendar year referred to in clause 7i7 for the normalized ,,cpi for calendar year #bjab4 7#d7 ,increase for first taxable year reduced to take into account placed in service convention ,in the case of the taxable year in which any property is placed in service1 the increase determined under paragraph 7#a7 with respect to such property shall be equal to-- 7,a7 in the case of any property to which subsection 7d77#c7 applies1 #a_/h of the amount of such increase determined without regard to this paragraph1 and 7,b7 in the case of any other property1 #a_/b of the amount of such increase determined without regard to this paragraph4 7#e7 ,overall depreciation allowance not to exceed basis ,the deduction determined under subsection 7a7 7after any increase determined under this subsection7 with respect to any property for any taxable year shall not exceed the adjusted basis of such property determined as of the beginning of such taxable year4 7#f7 ,certain property excluded ,paragraph 7#a7 shall not apply to any specified property used outside the ,united ,states or to any property described in subsection 7d77#b74 7#g7 ,election 7,a7 ,in general ,an election under paragraph 7#a7 for any taxable year shall be made not later than the due date 7including extensions7 for the return of tax for such taxable year4 ,such election1 once made1 shall be irrevocable4 ,such election shall apply with respect to all property placed in service during the taxable for which made 7and shall apply for subsequent taxable years but only with respect to such property74 7,b7 ,taxpayer engaged in more than one business ,a taxpayer engaged in more than one trade or business may make separate elections under paragraph 7#a7 with respect to each such trade or business4 4 7d7 ,application of mid-,month convention 7#a7 ,in general ,subparagraphs 7,a71 7,b7 and 7,c7 of section #afh7;d77#b7 are amended to read as follows3 7,a7 real property1 7,b7 water treatment and utility property1 and 7,c7 any clearing and grading land improvements or tunnel bore1 4 7#b7 ,conforming amendment ,clause 7i7 of section #afh7;d77#c77;,b7 is amended to read as follows3 7i7 any property described in paragraph 7#b71 4 7e7 ,definitions ,subsection 7e7 of section #afh is amended to read as follows3 7e7 ,definitions ,for purposes of this section-- 7#a7 ,class life 7,a7 ,in general ,except as provided in this section1 the term class life means the class life 7if any7 which would be applicable with respect to any property as of ,january #a1 #aihf1 under subsection 7m7 of section #afg 7determined without regard to paragraph 7#d7 and as if the taxpayer had made an election under such subsection74 ,the reference in this paragraph to subsection 7m7 of section #afg shall be treated as a reference to such subsection as in effect on the day before the date of the enactment of the ,revenue ,reconciliation ,act of #aiij4 7,b7 ,secretarial authority to modify ,rev4 ,proc4 #hg-ef 7i7 ,in general ,the ,secretary1 through the ,office of ,tax ,analysis and in consultation with the ,bureau of ,economic ,analysis of the ,department of ,commerce1 shall-- 7,i7 determine1 and develop a schedule of1 the economic depreciation of the major categories of depreciable property 7other than property with a specified class life under subsection 7c77#b77 to approximate constant straight-line depreciation1 and 7,,ii7 develop recommendations regarding the proper economic depreciation for property with a specified class life under subsection 7c77#b74 7ii7 ,report ,not later than ,december #ca1 #bjag1 the ,secretary shall submit to the ,committee on ,ways and ,means of the ,house of ,representatives and the ,committee on ,finance of the ,senate-- 7,i7 the schedule developed under clause 7i77,i71 and 7,,ii7 the recommendations developed under clause 7i77,,ii74 ,the schedule developed under clause 7i77,i7 shall take effect with respect to property placed in service after the later of ,december #ca1 #bjag1 or the end of the first calendar year ending after the calendar year during which such schedule is submitted4 7#b7 ,residential rental property 7,a7 ,in general ,the term residential rental property means any building or structure if #hj percent or more of the gross rental income from such building or structure for the taxable year is rental income from dwelling units4 7,b7 ,dwelling unit ,for purposes of subparagraph 7,a7-- 7i7 the term dwelling unit means a house or apartment used to provide living accommodations in a building or structure1 but does not include a unit in a hotel1 motel1 or other establishment more than one-half of the units in which are used on a transient basis1 and 7ii7 if any portion of the building or structure is occupied by the taxpayer1 the gross rental income from such building or structure shall include the rental value of the portion so occupied4 7#c7 ,nonresidential real property ,the term nonresidential real property means section #abej property which is not-- 7,a7 residential rental property1 or 7,b7 property with a class life of less than #bg4e years4 7#d7 ,water utility property ,the term water utility property means property-- 7,a7 which is an integral part of the gathering1 treatment1 or commercial distribution of water1 and 7,b7 any municipal sewer4 7#e7 ,qualified rent-to-own property 7,a7 ,in general ,the term qualified rent-to-own property means any property held by a rent-to-own dealer for purposes of being subject to a rent-to-own contract4 7,b7 ,rent-to-own dealer ,the term rent-to-own dealer means a person that1 in the ordinary course of business1 regularly enters into rent-to-own contracts with customers for the use of consumer property1 if a substantial portion of those contracts terminate and the property is returned to such person before the receipt of all payments required to transfer ownership of the property from such person to the customer4 7,c7 ,consumer property ,the term consumer property means tangible personal property of a type generally used within the home for personal use4 7,d7 ,rent-to-own contract ,the term rent-to-own contract means any lease for the use of consumer property between a rent-to-own dealer and a customer who is an individual which-- 7i7 is titled ,rent-to-,own ,agreement or ,lease ,agreement with ,ownership ,option1 or uses other similar language1 7ii7 provides for level 7or decreasing where no payment is less than #dj percent of the largest payment71 regular periodic payments 7for a payment period which is a week or month71 7iii7 provides that legal title to such property remains with the rent-to-own dealer until the customer makes all the payments described in clause 7ii7 or early purchase payments required under the contract to acquire legal title to the item of property1 7iv7 provides a beginning date and a maximum period of time for which the contract may be in effect that does not exceed #aef weeks or #cf months from such beginning date 7including renewals or options to extend71 7v7 provides for payments within the #aef-week or #cf-month period that1 in the aggregate1 generally exceed the normal retail price of the consumer property plus interest1 7vi7 provides for payments under the contract that1 in the aggregate1 do not exceed #aj1jjj per item of consumer property1 7vii7 provides that the customer does not have any legal obligation to make all the payments referred to in clause 7ii7 set forth under the contract1 and that at the end of each payment period the customer may either continue to use the consumer property by making the payment for the next payment period or return such property to the rent-to-own dealer in good working order1 in which case the customer does not incur any further obligations under the contract and is not entitled to a return of any payments previously made under the contract1 and 7viii7 provides that the customer has no right to sell1 sublease1 mortgage1 pawn1 pledge1 encumber1 or otherwise dispose of the consumer property until all the payments stated in the contract have been made4 7#f7 ,qualified technological equipment 7,a7 ,in general ,the term qualified technological equipment means-- 7i7 any computer or peripheral equipment1 7ii7 any high technology telephone station equipment installed on the customer's premises1 and 7iii7 any high technology medical equipment4 7,b7 ,computer or peripheral equipment defined ,for purposes of this paragraph-- 7i7 ,in general ,the term computer or peripheral equipment means-- 7,i7 any computer1 and 7,,ii7 any related peripheral equipment4 7ii7 ,computer ,the term computer means a programmable electronically activated device which-- 7,i7 is capable of accepting information1 applying prescribed processes to the information1 and supplying the results of these processes with or without human intervention1 and 7,,ii7 consists of a central processing unit containing extensive storage1 logic1 arithmetic1 and control capabilities4 7,c7 ,high technology medical equipment ,for purposes of this paragraph1 the term high technology medical equipment means any electronic1 electromechanical1 or computer-based high technology equipment used in the screening1 monitoring1 observation1 diagnosis1 or treatment of patients in a laboratory1 medical1 or hospital environment4 7#g7 ,natural gas gathering line ,the term natural gas gathering line means-- 7,a7 the pipe1 equipment1 and appurtenances determined to be a gathering line by the ,federal ,energy ,regulatory ,commission1 and 7,b7 the pipe1 equipment1 and appurtenances used to deliver natural gas from the wellhead or a commonpoint to the point at which such gas first reaches-- 7i7 a gas processing plant1 7ii7 an interconnection with a transmission pipeline for which a certificate as an interstate transmission pipeline has been issued by the ,federal ,energy ,regulatory ,commission1 7iii7 an interconnection with an intrastate transmission pipeline1 or 7iv7 a direct interconnection with a local distribution company1 a gas storage facility1 or an industrial consumer4 7#h7 ,qualified smart electric meters 7,a7 ,in general ,the term qualified smart electric meter means any smart electric meter which-- 7i7 is placed in service by a taxpayer that is a supplier of electric energy or a provider of electric energy services1 and 7ii7 does not have a class life 7determined without regard to subsection 7c77 of less than #aj years4 7,b7 ,smart electric meter ,for purposes of subparagraph 7,a71 the term smart electric meter means any time-based meter and related communication equipment which is capable of being used by the taxpayer as part of a system that-- 7i7 measures and records electricity usage data on a time-differentiated basis in at least #bd separate time segments per day1 7ii7 provides for the exchange of information between supplier or provider and the customer's electric meter in support of time-based rates or other forms of demand response1 7iii7 provides data to such supplier or provider so that the supplier or provider can provide energy usage information to customers electronically1 and 7iv7 provides net metering4 7#i7 ,qualified smart electric grid systems 7,a7 ,in general ,the term qualified smart electric grid system means any smart grid property which-- 7i7 is used as part of a system for electric distribution grid communications1 monitoring1 and management placed in service by a taxpayer who is a supplier of electric energy or a provider of electric energy services1 and 7ii7 does not have a class life 7determined without regard to subsection 7c77 of less than #aj years4 7,b7 ,smart grid property ,for the purposes of subparagraph 7,a71 the term smart grid property means electronics and related equipment that is capable of-- 7i7 sensing1 collecting1 and monitoring data of or from all portions of a utility's electric distribution grid1 7ii7 providing real-time1 two-way communications to monitor or manage such grid1 and 7iii7 providing real time analysis of and event prediction based upon collected data that can be used to improve electric distribution system reliability1 quality1 and performance4 7#aj7 ,specified property used outside the ,united ,states 7,a7 ,in general ,the term specified property used outside the ,united ,states means-- 7i7 any aircraft which is registered by the ,administrator of the ,federal ,aviation ,agency and which is operated to and from the ,united ,states or is operated under contract with the ,united ,states1 7ii7 rolling stock which is used within and without the ,united ,states and which is-- 7,i7 of a rail carrier subject to part ,a of subtitle ,,iv of title #di1 or 7,,ii7 of a ,united ,states person 7other than a corporation described in subclause 7,i77 but only if the rolling stock is not leased to one or more foreign persons for periods aggregating more than #ab months in any #bd-month period1 7iii7 any vessel documented under the laws of the ,united ,states which is operated in the foreign or domestic commerce of the ,united ,states1 7iv7 any motor vehicle of a ,united ,states person 7as defined in section #ggja7;a77#cj77 which is operated to and from the ,united ,states1 7v7 any container of a ,united ,states person which is used in the transportation of property to and from the ,united ,states1 7vi7 any property 7other than a vessel or an aircraft7 of a ,united ,states person which is used for the purpose of exploring for1 developing1 removing1 or transporting resources from the outer ,continental ,shelf 7within the meaning of section #b of the ,outer ,continental ,shelf ,lands ,act1 as amended and supplemented 7#dc ,u4,s4,c4 #acca771 7vii7 any property which is owned by a domestic corporation or by a ,united ,states citizen 7other than a citizen entitled to the benefits of section #ica or #icc7 and which is used predominantly in a possession of the ,united ,states by such a corporation1 or such a citizen1 or by a corporation created or organized in1 or under the law of1 a possession of the ,united ,states1 7viii7 any communications satellite 7as defined in section #ajc7c7 of the ,communications ,satellite ,act of #aifb1 #dg ,u4,s4,c4 #gjb7c771 or any interest therein1 of a ,united ,states person1 7ix7 any cable1 or any interest therein1 of a domestic corporation engaged in furnishing telephone service to which section #afh7;e77#aj77;,c7 applies 7or of a wholly owned domestic subsidiary of such a corporation71 if such cable is part of a submarine cable system which constitutes part of a communication link exclusively between the ,united ,states and one or more foreign countries1 7x7 any property 7other than a vessel or an aircraft7 of a ,united ,states person which is used in international or territorial waters within the northern portion of the ,western ,hemisphere for the purpose of exploring for1 developing1 removing1 or transporting resources from ocean waters or deposits under such waters1 7xi7 any property described in section #dh7l77#c77;,a77ix7 7as in effect on the day before the date of the enactment of the ,revenue ,reconciliation ,act of #aiij7 which is owned by a ,united ,states person and which is used in international or territorial waters to generate energy for use in the ,united ,states1 and 7xii7 any satellite 7not described in clause 7viii77 or other spacecraft 7or any interest therein7 held by a ,united ,states person if such satellite or other spacecraft was launched from within the ,united ,states4 7,b7 ,northern portion of the ,western ,hemisphere ,for purposes of subparagraph 7,a77x71 the term northern portion of the ,western ,hemisphere means the area lying west of the #cjth meridian west of ,greenwich1 east of the international dateline1 and north of the ,equator1 but not including any foreign country which is a country of ,south ,america4 4 7f7 ,conforming amendments 7#a7 ,amendments to section #afh 7,a7 ,section #afh is amended by striking subsections 7g71 7j71 7k71 7l71 7m71 and 7n71 and by redesignating subsections 7h7 and 7i7 as subsections 7g7 and 7h71 respectively4 7,b7 ,section #afh7;h71 as redesignated by subparagraph 7,a71 is amended-- 7i7 by striking paragraphs 7#a71 7#b71 7#aa71 7#ab71 7#ac71 7#ad71 7#ae71 7#af71 7#ag71 7#ah71 and 7#ai7 and by redesignating paragraphs 7#c7 through 7#aj7 as paragraphs 7#a7 through 7#h71 respectively1 and 7ii7 by striking ,definitions and in the heading thereof4 7,c7 ,section #afh7;h77#h71 as redesignated by subparagraphs 7,a7 and 7,b71 is moved to the end of section #afh7;e7 7as amended by subsection 7e77 and redesignated as paragraph 7#aa74 7#b7 ,other conforming amendments 7,a7 ,section #ej7;b77#d7 is amended-- 7i7 in subparagraph 7,a77ii7-- 7,i7 by striking section #afh7;h77#b77;,c7 and inserting section #afh7;g77#b77;,c71 7,,ii7 by striking section #afh7;h77#b77;,a77iii7 and inserting section #afh7;g77#b77;,a77iii71 and 7,,iii7 by striking section #afh7;h77#b77;,b7 and inserting section #afh7;g77#b77;,b71 7ii7 in subparagraph 7,b71 by striking section #afh7;i77#c7 and inserting section #afh7;h77#a71 and 7iii7 in subparagraphs 7,d7 and 7,e71 by striking section #afh7;h7 each place it appears and inserting section #afh7;g74 7,b7 7i7 ,section #ej7;b77#a77;,b7 is amended by striking any property described in section #afh7;g77#d7 and inserting any specified property used outside the ,united ,states 7as defined in section #afh7;e77#aj74 7ii7 ,section #hfe7;c77#c77;,b7 is amended by striking property of a kind described in section #afh7;g77#d7 and inserting specified property used outside the ,united ,states 7as defined in section #afh7;e77#aj74 7,c7 ,section #agi7;e77#b7 is amended by inserting as in effect before its repeal by the ,tax ,reform ,act of #bjad after section #afh7n77#b74 7,d7 ,section #agi7;f71 as amended by section #caaa1 is amended-- 7i7 by striking paragraph 7#b71 and 7ii7 by inserting after paragraph 7#a7 the following new paragraphs3 7#b7 ,qualified real property ,for purposes of this subsection1 the term qualified real property means qualified leasehold improvement property1 qualified restaurant property1 and qualified retail improvement property4 7#c7 ,qualified leasehold improvement property ,for purposes of this subsection-- 7,a7 ,in general ,the term qualified leasehold improvement property means any improvement to an interior portion of a building which is nonresidential real property if-- 7i7 such improvement is made under or pursuant to a lease 7as defined in section #afh7;g77#g77-- 7,i7 by the lessee 7or any sublessee7 of such portion1 or 7,,ii7 by the lessor of such portion1 7ii7 such portion is to be occupied exclusively by the lessee 7or any sublessee7 of such portion1 and 7iii7 such improvement is placed in service more than #c years after the date the building was first placed in service4 7,b7 ,certain improvements not included ,such term shall not include any improvement for which the expenditure is attributable to-- 7i7 the enlargement of the building1 7ii7 any elevator or escalator1 7iii7 any structural component benefitting a common area1 and 7iv7 the internal structural framework of the building4 7,c7 ,definitions and special rules ,for purposes of this paragraph-- 7i7 ,commitment to lease treated as lease ,a commitment to enter into a lease shall be treated as a lease1 and the parties to such commitment shall be treated as lessor and lessee1 respectively4 7ii7 ,related persons ,a lease between related persons shall not be considered a lease4 ,for purposes of the preceding sentence1 the term related persons means-- 7,i7 members of an affiliated group 7as defined in section #aejd71 and 7,,ii7 persons having a relationship described in subsection 7b7 of section #bfg2 except that1 for purposes of this subclause1 the phrase #hj percent or more shall be substituted for the phrase more than #ej percent each place it appears in such subsection4 7,d7 ,improvements made by lessor ,in the case of an improvement made by the person who was the lessor of such improvement when such improvement was placed in service1 such improvement shall be qualified leasehold improvement property 7if at all7 only so long as such improvement is held by such person4 7,e7 ,exception for changes in form of business ,property shall not cease to be qualified leasehold improvement property by reason of-- 7i7 death1 7ii7 a transaction to which section #cha7;a7 applies1 7iii7 a mere change in the form of conducting the trade or business so long as the property is retained in such trade or business as qualified leasehold improvement property and the taxpayer retains a substantial interest in such trade or business1 7iv7 the acquisition of such property in an exchange described in section #ajca 7as in effect before its repeal by the ,tax ,reform ,act of #bjad71 #ajcc1 or #ajch to the extent that the basis of such property includes an amount representing the adjusted basis of other property owned by the taxpayer or a related person1 or 7v7 the acquisition of such property by the taxpayer in a transaction described in section #ccb1 #cea1 #cfa1 #gba1 or #gca 7or the acquisition of such property by the taxpayer from the transferee or acquiring corporation in a transaction described in such section71 to the extent that the basis of the property in the hands of the taxpayer is determined by reference to its basis in the hands of the transferor or distributor4 7#d7 ,qualified restaurant property ,for purposes of this subsection1 the term qualified restaurant property means any section #abej property which is-- 7,a7 a building1 or 7,b7 an improvement to a building1 if more than #ej percent of the building's square footage is devoted to preparation of1 and seating for on-premises consumption of1 prepared meals4 7#e7 ,qualified retail improvement property 7,a7 ,in general ,the term qualified retail improvement property means any improvement to an interior portion of a building which is nonresidential real property if-- 7i7 such portion is open to the general public and is used in the retail trade or business of selling tangible personal property to the general public1 and 7ii7 such improvement is placed in service more than #c years after the date the building was first placed in service4 7,b7 ,improvements made by owner ,in the case of an improvement made by the owner of such improvement1 such improvement shall be qualified retail improvement property 7if at all7 only so long as such improvement is held by such owner4 ,rules similar to the rules under paragraph 7#c77;,e7 shall apply for purposes of the preceding sentence4 7,c7 ,certain improvements not included ,such term shall not include any improvement for which the expenditure is attributable to-- 7i7 the enlargement of the building1 7ii7 any elevator or escalator1 7iii7 any structural component benefitting a common area1 or 7iv7 the internal structural framework of the building4 4 7,e7 ,section #bhj;,f7b7 is amended-- 7i7 by striking paragraph 7#a7 and by redesignating paragraphs 7#b7 and 7#c7 as paragraphs 7#a7 and 7#b71 respectively1 and 7ii7 by striking 1 and the depreciation deduction and all that follows through alternative depreciation system7 in paragraph 7#a7 7as redesignated by clause 7i774 7,f7 ,section #bhj;,f7d77#d77;,a77iv7 is amended by striking section #afh7;i77#b77;,b7 and inserting section #afh7;e77#f77;,b74 7,g7 ,section #cab7k77#c7 is amended by striking ,exception for tangible property and all that follows through ,for purposes of computing the earnings and profits and inserting ,exception for certain tangible property4--,for purposes of computing the earnings and profits4 7,h7 ,section #dfj7;c7 is amended by striking paragraph 7#f74 7,i7 ,section #dfj7;d77#b7 is amended by striking section #afh7;h77#b77;,d7 and inserting section #afh7;g77#b77;,d74 7,j7 ,section #dfj7;e77#f7 is amended by striking section #afh7;e77#b77;,a77ii7 each place it appears and inserting section #afh7;e77#b77;,b74 7,k7 7i7 ,subparagraphs 7,a7 and 7,c7 of section #dgj7;c77#b7 are each amended by striking section #afh7;h7 and inserting section #afh7;g74 7ii7 ,section #dgj7;c77#b77;,b7 is amended by striking section #afh7;h77#f7 and inserting section #afh7;g77#f74 7,l7 ,section #eab7;b77#ag77;,b77ii77,i7 is amended by striking section #afh7;h77#d77;,b7 and inserting section #afh7;g77#d77;,b74 7,m7 ,section #ead7;c77#i77;,b77vi77,,ii7 is amended by striking section #afh7;h77#f7 and inserting section #afh7;g77#f74 7,n7 ,section #ebg7;i77#c77;,d7 is amended by striking section #afh7;h77#d7 and inserting section #afh7;g77#d74 7,o7 ,the second sentence of section #hfj;,e7e77#e7 is amended by striking section #afh7;h77#b77;,d7 and inserting section #afh7;g77#b77;,d74 7,p7 ,section #abde7;a7 is amended-- 7i7 in paragraph 7#c77;,d71 by striking section #afh7;i77#ac7 and inserting paragraph 7#d71 and 7ii7 by adding at the end the following new paragraph3 7#d7 ,single purpose agricultural or horticultural structure ,for purposes of this subsection-- 7,a7 ,in general ,the term single purpose agricultural or horticultural structure means-- 7i7 a single purpose livestock structure1 and 7ii7 a single purpose horticultural structure4 7,b7 ,definitions ,for purposes of this paragraph-- 7i7 ,single purpose livestock structure ,the term single purpose livestock structure means any enclosure or structure specifically designed1 constructed1 and used-- 7,i7 for housing1 raising1 and feeding a particular type of livestock and their produce1 and 7,,ii7 for housing the equipment 7including any replacements7 necessary for the housing1 raising1 and feeding referred to in subclause 7,i74 7ii7 ,single purpose horticultural structure ,the term single purpose horticultural structure means-- 7,i7 a greenhouse specifically designed1 constructed1 and used for the commercial production of plants1 and 7,,ii7 a structure specifically designed1 constructed1 and used for the commercial production of mushrooms4 7iii7 ,structures which include work space ,an enclosure or structure which provides work space shall be treated as a single purpose agricultural or horticultural structure only if such work space is solely for-- 7,i7 the stocking1 caring for1 or collecting of livestock or plants 7as the case may be7 or their produce1 7,,ii7 the maintenance of the enclosure or structure1 and 7,,iii7 the maintenance or replacement of the equipment or stock enclosed or housed therein4 7iv7 ,livestock ,the term 8livestock0 includes poultry4 4 7,q7 ,section #abde7;a77#c77;,f7 is amended to read as follows3 7,f7 any clearing and grading land improvements or tunnel bore 7within the meaning of section #afh7;c77#b77,p774 4 7,r7 ,section #fjej,v7d77#c7 is amended by striking section #afh7;h77#b77;,a77iv7 and inserting section #afh7;g77#b77;,a77iv74 7,s7 ,section #fbaa7;b77#d77;,a7 is amended by striking #afh7k77#d714 7,t7 ,the second sentence of section #ggja7;e77#d77;,a7 is amended by striking section #afh7;h7 and inserting section #afh7;g74 7,u7 ,section #ghga7;f77#c7 is amended-- 7i7 by striking 7as defined in section #afh7;j77#f77 in subparagraph 7,b77ii71 and 7ii7 by adding at the end the following new subparagraph3 7,d7 ,indian reservation ,for purposes of this paragraph1 the term ,indian reservation means a reservation1 as defined in-- 7i7 section #c7;d7 of the ,indian ,financing ,act of #aigd 7#be ,u4,s4,c4 #adeb7;d771 or 7ii7 section #d7aj7 of the ,indian ,child ,welfare ,act of #aigh 7#be ,u4,s4,c4 #aijc7aj774 ,for purposes of the preceding sentence1 such section #c7;d7 shall be applied by treating the term former ,indian reservations in ,oklahoma as including only lands which are within the jurisdictional area of an ,oklahoma ,indian tribe 7as determined by the ,secretary of the ,interior7 and are recognized by such ,secretary as eligible for trust land status under #be ,,cfr ,part #aea 7as in effect on ,august #e1 #aiig74 4 7g7 ,normalization requirements 7#a7 ,in general ,a normalization method of accounting shall not be treated as being used with respect to any public utility property for purposes of section #afg or #afh of the ,internal ,revenue ,code of #aihf if the taxpayer1 in computing its cost of service for ratemaking purposes and reflecting operating results in its regulated books of account1 reduces the excess tax reserve more rapidly or to a greater extent than such reserve would be reduced under the average rate assumption method4 7#b7 ,alternative ,method for ,certain ,taxpayers ,if1 as of the first day of the taxable year that includes the date of enactment of this ,act-- 7,a7 the taxpayer was required by a regulatory agency to compute depreciation for public utility property on the basis of an average life or composite rate method1 and 7,b7 the taxpayer's books and underlying records did not contain the vintage account data necessary to apply the average rate assumption method1 the taxpayer will be treated as using a normalization method of accounting if1 with respect to such jurisdiction1 the taxpayer uses the alternative method for public utility property that is subject to the regulatory authority of that jurisdiction4 7#c7 ,definitions ,for purposes of this subsection-- 7,a7 ,excess tax reserve ,the term excess tax reserve means the excess of-- 7i7 the reserve for deferred taxes 7as described in section #afh7;i77#i77;,a77ii7 of the ,internal ,revenue ,code of #aihf as in effect on the day before the date of the enactment of this ,act71 over 7ii7 the amount which would be the balance in such reserve if the amount of such reserve were determined by assuming that the corporate rate reductions provided in this ,act were in effect for all prior periods4 7,b7 ,average rate assumption method ,the average rate assumption method is the method under which the excess in the reserve for deferred taxes is reduced over the remaining lives of the property as used in its regulated books of account which gave rise to the reserve for deferred taxes4 ,under such method1 if timing differences for the property reverse1 the amount of the adjustment to the reserve for the deferred taxes is calculated by multiplying-- 7i7 the ratio of the aggregate deferred taxes for the property to the aggregate timing differences for the property as of the beginning of the period in question1 by 7ii7 the amount of the timing differences which reverse during such period4 7,c7 ,alternative method ,the alternative method is the method in which the taxpayer-- 7i7 computes the excess tax reserve on all public utility property included in the plant account on the basis of the weighted average life or composite rate used to compute depreciation for regulatory purposes1 and 7ii7 reduces the excess tax reserve ratably over the remaining regulatory life of the property4 7#d7 ,tax increased for normalization violation ,if1 for any taxable year ending after the date of the enactment of this ,act1 the taxpayer does not use a normalization method of accounting1 the taxpayer's tax for the taxable year shall be increased by the amount by which it reduces its excess tax reserve more rapidly than permitted under a normalization method of accounting4 7h7 ,effective date ,the amendments made by this section shall apply to property placed in service after ,december #ca1 #bjaf4 #caje4 ,repeal of amortization of pollution control facilities 7a7 ,in general ,part ,,vi of subchapter ,b of chapter #a is amended by striking section #afi 7and by striking the item relating to such section in the table of sections for such part74 7b7 ,conforming amendments 7#a7 ,section #fdb7;f7 is amended by striking the deductions for amortization provided by sections #afi and #aig and inserting the deduction for amortization provided by section #aig4 7#b7 ,section #abej7;b77#c7 is amended by inserting 7as in effect before its repeal by the ,tax ,reform ,act of #bjad7 after #afi4 7c7 ,effective date ,the amendments made by this section shall apply to facilities placed in service after ,december #ca1 #bjad4 #cajf4 ,net operating loss deduction 7a7 ,limitation on net operating losses of corporations 7#a7 ,in general ,section #agb7;a7 is amended to read as follows3 7a7 ,deduction allowed 7#a7 ,in general ,there shall be allowed as a deduction for the taxable year an amount equal to the aggregate of-- 7,a7 the net operating loss carryovers to such year1 plus 7,b7 the net operating loss carrybacks to such year4 7#b7 ,limitation in case of corporations ,in the case of a corporation-- 7,a7 the deduction allowed under paragraph 7#a7 for the taxable year shall not exceed #ij percent of the taxable income for such year computed without regard to the deduction allowable under this section1 and 7,b7 appropriate adjustments in the application of subsection 7b77#b7 shall be made to take into account the limitation of subparagraph 7,a74 7#c7 ,net operating loss deduction defined ,for purposes of this subtitle1 the term net operating loss deduction means the deduction allowed by this subsection4 4 7#b7 ,coordination with limitation on deduction for charitable contributions 7,a7 ,in general ,section #agj7;b77#b77;,c7 is amended by redesignating clauses 7iv7 and 7v7 as clauses 7v7 and 7vi71 respectively1 and by inserting after clause 7iii7 the following new clause3 7iv7 the limitation imposed under section #agb7;a77#b77;,a71 4 7,b7 ,life insurance companies ,section #hje7;b77#b77;,a7 is amended by redesignating clauses 7ii7 through 7v7 as clauses 7iii7 through 7vi71 respectively1 and by inserting after clause 7i7 the following new clause3 7ii7 the limitation imposed under section #agb7;a77#b77;,a71 4 7b7 ,repeal of special carryback provisions 7#a7 ,in general ,section #agb7;b77#a7 is amended by striking subparagraphs 7,c71 7,d71 7,e71 7,g71 7,h71 7,i71 and 7,j7 and by redesignating subparagraph 7,f7 as subparagraph 7,c74 7#b7 ,conforming amendments 7,a7 ,section #agb7;b77#a77;,c71 as redesignated by paragraph 7#a71 is amended-- 7i7 in clause 7ii71 by striking the last sentence1 and 7ii7 in clause 7iv71 by striking in a manner similar to the manner in which a specified liability loss is treated and inserting as a separate net operating loss for such taxable year to be taken into account after the remaining portion of the net operating loss for such taxable year4 7,b7 ,section #agb is amended by striking subsections 7f71 7g71 7h71 7i71 and 7j7 and by redesignating subsection 7k7 as subsection 7f74 7c7 ,effective dates 7#a7 ,limitation on ,n,o,ls of corporations ,the amendments made by subsection 7a7 shall apply to-- 7,a7 taxable years beginning after ,december #ca1 #bjad1 and 7,b7 to carrybacks of losses arising in taxable years beginning after ,december #ca1 #bjad1 to taxable years beginning on or before such date4 7#b7 ,repeal of special carrybacks 7,a7 ,in general ,except as otherwise provided in this paragraph1 the amendments made by subsection 7b7 shall apply to losses arising in taxable years beginning after ,december #ca1 #bjad4 7,b7 ,expired provisions ,so much of the amendments made by subsection 7b7 as relate to striking subparagraphs 7,d71 7,h71 7,i71 and 7,j7 of section #agb7;b77#a7 of the ,internal ,revenue ,code of #aihf shall take effect on the date of the enactment of this ,act4 #cajg4 ,circulation expenditures 7a7 ,in general ,section #agc is amended to read as follows3 #agc4 ,circulation expenditures 7a7 ,in general ,in the case of a taxpayer's specified circulation expenditures-- 7#a7 except as provided in paragraph 7#b71 no deduction shall be allowed for such expenditures1 and 7#b7 the taxpayer shall-- 7,a7 charge such expenditures to capital account1 and 7,b7 be allowed an amortization deduction of such expenditures ratably over the #cf-month period beginning with the midpoint of the month in which such expenditures are paid or incurred4 7b7 ,specified circulation expenditures ,for purposes of this section1 the term specified circulation expenditures means all expenditures 7other than expenditures for the purchase of land or depreciable property or for the acquisition of circulation through the purchase of any part of the business of another publisher of a newspaper1 magazine1 or other periodical7 to establish1 maintain1 or increase the circulation of a newspaper1 magazine1 or other periodical4 7c7 ,treatment upon abandonment ,if any property with respect to which specified circulation expenditures are paid or incurred is disposed1 retired1 or abandoned during the period during which such expenditures are allowed as an amortization deduction under this section1 no deduction shall be allowed with respect to such expenditures on account of such disposition1 retirement1 or abandonment and such amortization deduction shall continue with respect to such expenditures4 7d7 ,phase-,in for taxable years beginning before #bjai 7#a7 ,in general ,in the case of specified circulation expenditures paid or incurred in taxable years beginning before #bjai-- 7,a7 notwithstanding subsection 7a71 the applicable percentage of such expenditures shall be allowed as a deduction for the taxable year in which paid or incurred1 and 7,b7 subsection 7a7 shall apply to the remainder of such expenditures4 7#b7 ,applicable percentage ,for purposes of paragraph 7#a71 the applicable percentage shall be determined in accordance with the following table3 ,in the case of taxable years beginning in3,the applicable percentage is3 #bjafge #bjagej #bjahbe 7#c7 ,election out of phase-in ,the taxpayer may elect1 at such time and in such form and manner as the ,secretary shall prescribe1 for paragraph 7#a7 not to apply for all taxable years beginning before #bjai4 ,such election1 once made1 shall be irrevocable4 4 7b7 ,effective date ,the amendments made by this section shall apply to amounts paid or incurred in taxable years beginning after ,december #ca1 #bjae4 #cajh4 ,amortization of research and experimental expenditures 7a7 ,in general ,section #agd is amended to read as follows3 #agd4 ,amortization of research and experimental expenditures 7a7 ,in general ,in the case of a taxpayer's specified research or experimental expenditures for any taxable year-- 7#a7 except as provided in paragraph 7#b71 no deduction shall be allowed for such expenditures1 and 7#b7 the taxpayer shall-- 7,a7 charge such expenditures to capital account1 and 7,b7 be allowed an amortization deduction of such expenditures ratably over the #e-year period 7#ae-year period in the case of any specified research or experimental expenditures which are attributable to foreign research 7within the meaning of section #da7;d77#d77;,f777 beginning with the midpoint of the taxable year in which such expenditures are paid or incurred4 7b7 ,specified research or experimental expenditures ,for purposes of this section1 the term specified research or experimental expenditures means1 with respect to any taxable year1 research or experimental expenditures which are paid or incurred by the taxpayer during such taxable year in connection with the taxpayer's trade or business4 7c7 ,special rules 7#a7 ,land and other property ,this section shall not apply to any expenditure for the acquisition or improvement of land1 or for the acquisition or improvement of property to be used in connection with the research or experimentation and of a character which is subject to the allowance under section #afg 7relating to allowance for depreciation1 etc47 or section #faa 7relating to allowance for depletion72 but for purposes of this section allowances under section #afg1 and allowances under section #faa1 shall be considered as expenditures4 7#b7 ,exploration expenditures ,this section shall not apply to any expenditure paid or incurred for the purpose of ascertaining the existence1 location1 extent1 or quality of any deposit of ore or other mineral 7including oil and gas74 7#c7 ,software development ,for purposes of this section1 any amount paid or incurred in connection with the development of any software shall be treated as a research or experimental expenditure4 7d7 ,treatment upon disposition1 retirement1 or abandonment ,if any property with respect to which specified research or experimental expenditures are paid or incurred is disposed1 retired1 or abandoned during the period during which such expenditures are allowed as an amortization deduction under this section1 no deduction shall be allowed with respect to such expenditures on account of such disposition1 retirement1 or abandonment and such amortization deduction shall continue with respect to such expenditures4 7e7 ,special rules for expenditures for domestic research during taxable years beginning before #bjba 7#a7 ,in general ,in the case of domestic research or experimental expenditures paid or incurred during any taxable year beginning before #bjba-- 7,a7 notwithstanding subsection 7a71 the applicable percentage of such expenditures shall be allowed as a deduction in the taxable year in which paid or incurred1 and 7,b7 subsection 7a7 shall apply to the remainder of such expenditures by substituting the applicable period for the #e-year period4 7#b7 ,domestic research or experimental expenditures ,for purposes of this subsection1 the term domestic research or experimental expenditures means any expenditures-- 7,a7 to which subsection 7a7 applies 7determined without regard to this subsection71 and 7,b7 which are not attributable to foreign research 7within the meaning of section #da7;d77#d77;,f774 7#c7 ,applicable percentage ,for purposes of this subsection1 the applicable percentage shall be determined in accordance with the following table3 ,in the case of taxable years beginning in3,the applicable percentage is3 #bjaefj #bjaf or #bjagdj #bjah1 #bjai1 or #bjbjbj 7#d7 ,applicable period ,for purposes of this subsection1 the applicable period shall be determined in accordance with the following table3 ,in the case of taxable years beginning in3,the applicable period is the3 #bjaeb-year period #bjaf or #bjagc-year period #bjah1 #bjai1 or #bjbjd-year period 7#e7 ,election out of phase-in ,the taxpayer may elect1 at such time and in such form and manner as the ,secretary shall prescribe1 for paragraph 7#a7 not to apply to all domestic research or experimental expenditures of the taxpayer for any taxable years beginning before #bjba4 ,such election1 once made1 shall be irrevocable4 4 7b7 ,clerical amendment ,the table of sections for part ,,vi of subchapter ,b of chapter #a is amended by striking the item relating to section #agd and inserting the following new item3 ,sec4 #agd4 ,amortization of research and experimental expenditures4 4 7c7 ,effective date ,the amendments made by this section shall apply to amounts paid or incurred in taxable years beginning after ,december #ca1 #bjad4 #caji4 ,repeal of deductions for soil and water conservation expenditures and endangered species recovery expenditures 7a7 ,in general ,part ,,vi of subchapter ,b of chapter #a is amended by striking section #age 7and by striking the item relating to such section in the table of sections for such part74 7b7 ,conforming amendments ,paragraphs 7#a77;,a7 and 7#b7 of section #abeb7;a7 are each amended by striking relating to soil and water conservation expenditures and inserting as in effect before its repeal by the ,tax ,reform ,act of #bjad4 7c7 ,effective date 7#a7 ,in general ,the amendments made by this section shall apply to amounts paid or incurred after ,december #ca1 #bjad4 7#b7 ,assessments treated as paid or incurred ,in the case of any amount paid or incurred before ,december #ca1 #bjad1 and treated as paid or incurred in any succeeding taxable year by reason of section #age7;f7 of the ,internal ,revenue ,code of #aihf 7as in effect on the day before the date of the enactment of this ,act71 paragraph 7#a7 shall not apply4 #caaj4 ,amortization of certain advertising expenses 7a7 ,in general ,part ,,vi of subchapter ,b of chapter #a is amended by inserting after section #agf the following new section3 #agg4 ,amortization of certain advertising expenses 7a7 ,in general ,in the case of a taxpayer's amortizable advertising expenses for any taxable year-- 7#a7 except as provided in paragraph 7#b71 no deduction shall be allowed for such expenses1 and 7#b7 the taxpayer shall-- 7,a7 charge such expenses to capital account1 and 7,b7 be allowed an amortization deduction of such expenses ratably over the #aj-year period beginning with the midpoint of the taxable year in which such expenses are paid or incurred4 7b7 ,exemption 7#a7 ,in general ,so much of the taxpayer's otherwise deductible advertising expenses for any taxable year as do not exceed #a1jjj1jjj shall not be taken into account in determining such taxpayer's amortizable advertising expenses for such taxable year4 7#b7 ,phaseout of exemption ,in the case of a taxpayer whose otherwise deductible advertising expenses for any taxable year exceed #a1ejj1jjj1 the dollar amount in effect under paragraph 7#a7 with respect to such taxpayer for such taxable year shall be reduced 7but not below zero7 by twice such excess4 7#c7 ,aggregation2 short taxable years ,for purposes of this subsection1 rules similar to the rules of paragraphs 7#b7 and 7#c77;,b7 of section #ddh7;b7 shall apply4 7c7 ,amortizable advertising expenses 7#a7 ,in general ,for purposes of this section1 the term amortizable advertising expenses means1 with respect to any taxpayer for any taxable year1 the applicable percentage of the taxpayer's otherwise deductible advertising expenses for such taxable year4 7#b7 ,applicable percentage ,for purposes of this subsection1 the term applicable percentage means 7with respect to the taxpayer's otherwise deductible advertising expenses for any taxable year7 the percentage determined in accordance with the following table3 ,for taxable years beginning in3,the applicable percentage is3 #bjaebj percent #bjafcj percent #bjagdj percent #bjah or thereafter#ej percent4 7#c7 ,election out of phase-in ,the taxpayer may elect1 at such time and in such form and manner as the ,secretary shall prescribe1 to treat the applicable percentage as being equal to #ej percent for all taxable years beginning before #bjah4 ,such election1 once made1 shall be irrevocable4 7d7 ,otherwise deductible advertising expenses ,for purposes of this section-- 7#a7 ,in general ,the term otherwise deductible advertising expenses means1 with respect to any taxpayer for any taxable year1 the deductions which would 7but for this section7 be allowable to the taxpayer for such taxable year with respect to specified advertising expenses4 7#b7 ,specified advertising expenses ,the term specified advertising expenses means any amount paid or incurred for the development1 production1 or placement 7including any form of transmission1 broadcast1 publication1 display1 or distribution7 of any communication to the general public 7or portions thereof7 which is intended to promote the taxpayer or a trade or business of the taxpayer 7or any service1 facility1 or product provided pursuant to such trade or business74 7#c7 ,exceptions ,the term specified advertising expenses shall not include-- 7,a7 ,certain wages ,wages paid or incurred to any employee unless the services rendered by such employee are primarily related to-- 7i7 an activity described in paragraph 7#b7 7other than the direct sale of goods or services to customers of the taxpayer71 or 7ii7 the direct supervision of employees rendering services primarily related to such an activity4 7,b7 ,depreciation of tangible property ,in the case of any tangible property1 any amount for which a deduction is allowed for depreciation under section #afg4 7,c7 ,amortizable section #aig intangibles ,any amount for which a deduction is allowed for amortization under section #aig4 7,d7 ,discounts1 etc ,any discount1 coupon1 rebate1 slotting allowance1 sample1 prize1 loyalty reward point1 or any item determined by the ,secretary to be similar to any of the foregoing 7other than any amount paid or incurred to promote any of the foregoing74 7,e7 ,certain communications on taxpayer's property ,any amount paid or incurred with respect to any communication appearing on tangible property of the taxpayer which-- 7i7 is of a character subject to the allowance for depreciation1 or 7ii7 is properly treated as inventory for purposes of section #dga4 7,f7 ,creation of logos1 trade names1 etc ,any amount paid or incurred for the creation of any logo1 trademark1 or trade name4 7,g7 ,package design ,any amount to which section #bfc;,a7i7 applies4 7,h7 ,marketing research ,any amount paid or incurred for marketing research4 7,i7 ,business meals ,any amount paid or incurred for meals4 7,j7 ,qualified sponsorship payments ,any amount paid or incurred as a qualified sponsorship payment 7as defined in section #eac7;i77#b77 with respect to an organization subject to the tax imposed by section #eaa4 7e7 ,treatment upon abandonment ,if any property with respect to which specified advertising expenses are paid or incurred is disposed1 retired1 or abandoned during the period during which such expenses are allowed as an amortization deduction under this section1 no deduction shall be allowed with respect such expenses on account of such disposition1 retirement1 or abandonment and such amortization deduction shall continue with respect to such expenses4 7f7 ,inflation adjustment 7#a7 ,in general ,in the case of any taxable year beginning after #bjae1 each of the dollar amounts in subsection 7b7 shall be increased by an amount equal to-- 7,a7 such dollar amount1 multiplied by 7,b7 the cost-of-living adjustment determined under section #a7;c77#b77;,a7 for such calendar year1 determined by substituting calendar year #bjad for calendar year #bjab in clause 7ii7 thereof4 7#b7 ,rounding ,the amount of any increase under paragraph 7#a7 shall be rounded to the nearest multiple of #aj1jjj4 4 7b7 ,capitalization of package design expenses ,section #bfc;,a is amended by redesignating subsection 7i7 as subsection 7j7 and by inserting after subsection 7h7 the following new subsection3 7i7 ,capitalization of package design expenses ,for purposes of this section1 in the case of any amount paid or incurred for package design1 such amounts shall be treated as an indirect cost described in subsection 7a77#b77;,b7 with respect to packages which utilize such design4 4 7c7 ,clerical amendment ,the table of sections for part ,,vi of subchapter ,b of chapter #a is amended by inserting after the item relating to section #agf the following new item3 ,sec4 #agg4 ,amortization of certain advertising expenses4 4 7d7 ,effective date ,the amendments made by this section shall apply to amounts paid or incurred in taxable years beginning after ,december #ca1 #bjad4 #caaa4 ,expensing certain depreciable business assets for small business 7a7 ,in general 7#a7 ,dollar limitation ,paragraph 7#a7 of section #agi7;b7 is amended by striking shall not exceed-- and all that follows and inserting shall not exceed #bej1jjj44 7#b7 ,reduction in limitation ,paragraph 7#b7 of section #agi7;b7 is amended by striking exceeds-- and all that follows and inserting exceeds #hjj1jjj44 7b7 ,computer software ,clause 7ii7 of section #agi7;d77#a77;,a7 is amended by striking to which section #afg applies1 and which is placed in service in a taxable year beginning after #bjjb and before #bjad and inserting and to which section #afg applies4 7c7 ,election ,paragraph 7#b7 of section #agi7;c7 is amended-- 7#a7 by striking may not be revoked and all that follows through and before #bjad1 and 7#b7 by striking irrevocable in the heading thereof4 7d7 ,air conditioning and heating units ,paragraph 7#a7 of section #agi7;d7 is amended by striking and shall not include air conditioning or heating units4 7e7 ,qualified real property ,section #agi7;f7 is amended-- 7#a7 by striking beginning in #bjaj1 #bjaa1 #bjab1 or #bjac in paragraph 7#a71 and 7#b7 by striking paragraphs 7#c7 and 7#d74 7f7 ,inflation adjustment ,subsection 7b7 of section #agi is amended by adding at the end the following new paragraph3 7#f7 ,inflation adjustment 7,a7 ,in general ,in the case of any taxable year beginning after #bjad1 the dollar amounts in paragraphs 7#a7 and 7#b7 shall each be increased by an amount equal to-- 7i7 such dollar amount1 multiplied by 7ii7 the cost-of-living adjustment determined under section #a7;c77#b77;,a7 for such calendar year1 determined by substituting calendar year #bjac for calendar year #bjab in clause 7ii7 thereof4 7,b7 ,rounding ,the amount of any increase under subparagraph 7,a7 shall be rounded to the nearest multiple of #aj1jjj4 4 7g7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjac4 #caab4 ,repeal of election to expense certain refineries 7a7 ,in general ,part ,,vi of subchapter ,b of chapter #a is amended by striking section #agi;,c 7and by striking the item relating to such section in the table of sections for such part74 7b7 ,conforming amendment ,section #cab7k77#c71 as amended by the preceding provisions of this ,act1 is amended by striking 1 #agi;,c each place it appears4 7c7 ,effective date ,the amendments made by this section shall apply to property placed in service after ,december #ca1 #bjac4 #caac4 ,repeal of deduction for energy efficient commercial buildings 7a7 ,in general ,part ,,vi of subchapter ,b of chapter #a is amended by striking section #agi;,d 7and by striking the item relating to such section in the table of sections for such part74 7b7 ,conforming amendment 7#a7 ,section #ajaf7;a7 is amended by striking paragraph 7#ca74 7#b7 ,section #cab7k77#c71 as amended by the preceding provisions of this ,act1 is amended by striking 1 #agi;,d each place it appears4 7c7 ,effective date ,the amendments made by this section shall apply to property placed in service after ,december #ca1 #bjac4 #caad4 ,repeal of election to expense advanced mine safety equipment 7a7 ,in general ,part ,,vi of subchapter ,b of chapter #a is amended by striking section #agi;,e 7and by striking the item relating to such section in the table of sections for such part74 7b7 ,conforming amendment ,section #cab7k77#c71 as amended by the preceding provisions of this ,act1 is amended-- 7#a7 by striking 1 or #agi;,e1 as the case may be1 and 7#b7 by striking 1 or #agi;,e each place it appears4 7c7 ,effective date ,the amendments made by this section shall apply to property placed in service after ,december #ca1 #bjac4 #caae4 ,repeal of deduction for expenditures by farmers for fertilizer1 etc 7a7 ,in general ,part ,,vi of subchapter ,b of chapter #a is amended by striking section #ahj 7and by striking the item relating to such section in the table of sections for such part74 7b7 ,effective date ,the amendments made by this section shall apply to expenses paid or incurred in taxable years beginning after ,december #ca1 #bjad4 #caaf4 ,repeal of special treatment of certain qualified film and television productions 7a7 ,in general ,part ,,vi of subchapter ,b of chapter #a is amended by striking section #aha 7and by striking the item relating to such section in the table of sections for such part74 7b7 ,effective date ,the amendments made by this section shall apply to productions commencing after ,december #ca1 #bjac4 #caag4 ,repeal of special rules for recoveries of damages of antitrust violations1 etc 7a7 ,in general ,part ,,vi of subchapter ,b of chapter #a is amended by striking section #ahf 7and by striking the item relating to such section in the table of sections for such part74 7b7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 #caah4 ,treatment of reforestation expenditures 7a7 ,elimination of expensing election ,section #aid is amended by striking subsections 7a7 and 7b71 by redesignating subsection 7c7 and 7d7 as subsections 7b7 and 7c71 respectively1 and by inserting before subsection 7b7 7as so redesignated7 the following new subsection3 7a7 ,in general ,in the case of a taxpayer's qualified reforestation expenditures for any taxable year-- 7#a7 except as provided in paragraph 7#b71 no deduction shall be allowed for such expenditures1 and 7#b7 the taxpayer shall-- 7,a7 charge such expenditures to capital account1 and 7,b7 be allowed an amortization deduction of such expenditures ratably over the #g-year period beginning with the midpoint of the taxable year in which such expenditures are paid or incurred4 4 7b7 ,qualified reforestation expenditures ,section #aid7;b71 as redesignated by subsection 7a71 is amended by striking paragraph 7#b71 by redesignating paragraph 7#a7 as paragraph 7#b71 and by inserting before paragraph 7#b7 7as so redesignated the following new paragraph3 7#a7 ,qualified reforestation expenditures ,the term qualified reforestation expenditures means1 with respect to any taxable year1 the reforestation expenditures paid or incurred by the taxpayer during such taxable year with respect to qualified timber property4 4 7c7 ,qualified timber property limited to ornamental trees ,section #aid7;b77#b71 as redesignated by subsections 7a7 and 7b71 is amended to read as follows3 7#b7 ,qualified timber property ,the term qualified timber property means a woodlot or other site located in the ,united ,states which-- 7,a7 will contain evergreen trees in significant commercial quantities which are reasonably expected to be more than #f years old at the time severed from the roots1 and 7,b7 is held by the taxpayer for the planting1 cultivating1 caring for1 and cutting of such trees for sale for ornamental purposes4 4 7d7 ,determination of recomputed basis ,section #abde7;b7 is amended by striking paragraph 7#g74 7e7 ,effective date ,the amendments made by this section shall apply to expenditures paid or incurred in taxable years beginning after ,december #ca1 #bjad4 #caai4 #bj-year amortization of goodwill and certain other intangibles 7a7 ,in general ,subsection 7a7 of section #aig is amended by striking #ae-year period and inserting #bj-year period4 7b7 ,mortgage servicing rights ,subsection 7e7 of section #aig is amended by striking paragraph 7#f7 and by redesignating paragraph 7#g7 as paragraph 7#f74 7c7 ,conforming amendments 7#a7 ,clause 7i7 of section #aig7;e77#d77;,d7 is amended by striking #ae years and inserting #bj years4 7#b7 ,section #afg7;f7 is amended by striking paragraph 7#c74 7d7 ,effective date ,the amendments made by this section shall apply to property acquired after ,december #ca1 #bjad4 #cabj4 ,treatment of environmental remediation costs 7a7 ,in general ,subsection 7a7 of section #aih is amended to read as follows3 7a7 ,in general ,in the case of a taxpayer's qualified environmental remediation expenditures for any taxable year-- 7#a7 except as provided in paragraph 7#b71 no deduction shall be allowed for such expenditures1 and 7#b7 the taxpayer shall-- 7,a7 charge such expenditures to capital account1 and 7,b7 be allowed an amortization deduction of such expenditures ratably over the #dj-year period beginning with the midpoint of the taxable year in which such expenditures are paid or incurred4 4 7b7 ,made permanent ,section #aih is amended by striking subsection 7h74 7c7 ,conforming amendments 7#a7 ,section #aih1 as amended by subsection 7b71 is amended by striking subsection 7f7 and by redesignating subsection 7g7 as subsection 7f74 7#b7 ,section #aih 7and the item relating to such section in the table of sections for part ,,vi of subchapter ,b of chapter #a7 is amended by striking ,expensing in the heading thereof and inserting ,amortization4 7d7 ,effective date ,the amendments made by this section shall apply to expenditures paid or incurred after ,december #ca1 #bjad4 #caba4 ,repeal of expensing of qualified disaster expenses 7a7 ,in general ,part ,,vi of subchapter ,b of chapter #a is amended by striking section #aih;,a 7and by striking the item relating to such section in the table of sections for such part74 7b7 ,effective date ,the amendments made by this section shall apply to amounts paid or incurred after ,december #ca1 #bjad4 #cabb4 ,phaseout and repeal of deduction for income attributable to domestic production activities 7a7 ,phaseout 7#a7 ,in general ,subsection 7a7 of section #aii is amended by adding at the end the following new paragraph3 7#c7 ,phaseout ,in the case of any taxable year beginning after #bjad1 paragraph 7#a7 shall be applied by substituting for the percentage contained therein the phaseout percentage determined under the following table3 ,for taxable years beginning in3,the phaseout percentage is3 #bjaef #bjafc 4 7#b7 ,coordination with oil related qualified production activities income ,section #aii7;d7 is amended by striking paragraph 7#i74 7#c7 ,effective date ,the amendments made by this subsection shall apply to taxable years beginning after ,december #ca1 #bjad4 7b7 ,repeal 7#a7 ,in general ,part ,,vi of subchapter ,b of chapter #a is amended by striking section #aii 7and by striking the item relating to such section in the table of sections for such part74 7#b7 ,conforming amendments 7,a7 ,sections #hf7;b77#b77;,a71 #acg7;b77#c77;,a71 #bdf7;b77#a71 and #dfi7;i77#c77;,f77iii7 are each amended by striking #aii14 7,b7 ,section #afc7;j77#f77;,a77i71 as amended by the preceding provisions of this ,act1 is amended by striking subclause 7,,iii7 and by redesignating subclauses 7,,iv7 and 7,v7 as subclauses 7,,iii7 and 7,,iv71 respectively4 7,c7 ,section #agj7;b77#b77;,c71 as amended by the preceding provisions of this ,act1 is amended by striking clause 7v71 by redesignating clause 7vi7 as clause 7v71 and by inserting and at the end of clause 7iv74 7,d7 ,section #agb7;d7 is amended by striking paragraph 7#g74 7,e7 ,section #adjb7;a7 is amended by adding and at the end of paragraph 7#ae7 and by striking paragraph 7#af74 7#c7 ,effective date ,the amendments made by this subsection shall apply to taxable years beginning after ,december #ca1 #bjaf4 #cabc4 ,unification of deduction for organizational expenditures 7a7 ,in general ,subsections 7a7 and 7b7 of section #aie is amended by inserting and organizational after start-up each place it appears4 7b7 ,organizational expenditures ,subsection 7c7 of section #aie is amended by adding at the end the following new paragraph3 7#c7 ,organizational expenditures ,the term organizational expenditures means any expenditure which-- 7,a7 is incident to the creation of a corporation or a partnership1 7,b7 is chargeable to capital account1 and 7,c7 is of a character which1 if expended incident to the creation of a corporation or a partnership having a limited life1 would be amortizable over such life4 4 7c7 ,dollar amounts ,clause 7ii7 of section #aie7;b77#a77;,a7 is amended-- 7#a7 by striking #e1jjj and inserting #aj1jjj1 and 7#b7 by striking #ej1jjj and inserting #fj1jjj4 7d7 ,mid-,year convention ,subparagraph 7,b7 of section #aie7;b77#a71 as amended by subsection 7a71 is amended to read as follows3 7,b7 the remainder of such start-up and organizational expenditures shall be charged to capital account and allowed as an amortization deduction determined by amortizing such expenditures ratably over the #ae-year period beginning with the midpoint of the taxable year in which the active trade or business begins4 4 7e7 ,conforming amendments 7#a7 ,section #aie7;b77#a7 is amended-- 7,a7 by inserting 7or1 in the case of a partnership1 the partnership elects7 after ,if a taxpayer elects1 and 7,b7 by inserting 7or the partnership1 as the case may be7 after the taxpayer in subparagraph 7,a74 7#b7 ,section #aie7;b77#b7 is amended-- 7,a7 by striking amortization period4--,in any case and inserting the following3 amortization period4-- 7,a7 ,in general ,in any case 1 and 7,b7 by adding at the end the following new subparagraph3 7,b7 ,special partnership rule ,in the case of a partnership1 subparagraph 7,a7 shall be applied at the partnership level4 4 7#c7 ,section #aie7;b7 is amended by striking paragraph 7#c74 7#d7 7,a7 ,part ,,viii of subchapter ,b of chapter #a is amended by striking section #bdh 7and by striking the item relating to such section in the table of sections for such part74 7,b7 ,section #agj7;b77#b77;,c77ii7 is amended by striking 7except section #bdh74 7,c7 ,section #cab7n77#c7 is amended by striking ,sections #agc and #bdh and inserting ,section #agc4 7,d7 ,section #ece7;b77#c7 is amended by striking 7except section #bdh74 7,e7 ,section #ede7;b77#c7 is amended by striking 7except section #bdh74 7,f7 ,section #hcd7;c77#g7 is amended by striking 7except section #bdh74 7,g7 ,section #heb7;b77#b77;,c7 is amended by striking 7except section #bdh74 7,h7 ,section #heg7;b77#b77;,a7 is amended by striking 7except section #bdh74 7,i7 ,section #acfc7;b7 is amended by inserting and at the end of paragraph 7#b71 by striking paragraph 7#c71 and by redesignating paragraph 7#d7 as paragraph 7#c74 7,j7 ,section #acge7;b77#a77;,b77i7 is amended by striking 7other than the deduction allowed by section #bdh1 relating to organization expenditures74 7#e7 ,part ,i of subchapter ,k of chapter #a is amended by striking section #gji 7and by striking the item relating to such section in the table of sections for such part74 7#f7 ,the heading of section #aie 7and the item relating to such section in the table of sections for part ,,vi of subchapter ,b of chapter #a7 are each amended by inserting and organizational after ,start-up4 7f7 ,effective date ,the amendments made by this section shall apply to expenses paid or incurred in taxable years beginning after ,december #ca1 #bjad4 #cabd4 ,prevention of arbitrage of deductible interest expense and tax-exempt interest income 7a7 ,pro rata allocation rules applicable to financial institutions modified and made applicable to all ,c corporations 7#a7 ,application to corporations ,so much of section #bfe7;b7 as precedes paragraph 7#c7 is amended to read as follows3 7b7 ,pro rata allocation of interest expense of corporations and financial institutions to tax-,exempt interest 7#a7 ,in general ,in the case of a ,c corporation or a financial institution1 no deduction shall be allowed for that portion of the taxpayer's interest expense which is allocable to tax-exempt interest4 7#b7 ,allocation ,for purposes of paragraph 7#a71 the portion of the taxpayer's interest expense which is allocable to tax-exempt interest is an amount which bears the same ratio to such interest expense as-- 7,a7 the taxpayer's average adjusted bases 7within the meaning of section #ajaf7 of tax-exempt obligations acquired on or after ,february #bf1 #bjad 7,august #g1 #aihf1 in the case of a financial institution71 bears to 7,b7 such average adjusted bases for all assets of the taxpayer4 4 7#b7 ,repeal of exceptions ,section #bfe7;b7 is amended by striking paragraphs 7#c7 and 7#g74 7b7 ,limitation on investment interest 7#a7 ,in general ,section #afc7;d77#a7 is amended to read as follows3 7#a7 ,in general ,in the case of a taxpayer other than a corporation1 the amount allowed as a deduction under this chapter for investment interest for any taxable year-- 7,a7 shall be reduced by the amount of tax-exempt interest received by the taxpayer during such taxable year1 and 7,b7 shall not 7after any reduction under subparagraph 7,a77 exceed the net investment income of the taxpayer for such taxable year4 4 7#b7 ,reductions for tax-exempt interest not carried forward ,section #afc7;d77#b7 is amended by striking paragraph 7#a7 and inserting paragraph 7#a77;,b74 7#c7 ,clarification that property held for investment includes property producing tax-exempt interest ,section #afc7;d77#e77;,a7 is amended by striking and at the end of clause 7i71 by striking the period at the end of clause 7ii77,,ii7 and inserting 1 and1 and by adding at the end the following new clause3 7iii7 any property held for the production of tax-exempt interest 7including any shares of stock of a regulated investment company which during the taxable year of the holder thereof distributes exempt-interest dividends74 4 7#d7 ,coordination with section #bfe 7,a7 ,in general ,section #bfe7;a7 is amended by-- 7i7 striking paragraph 7#b7 and inserting the following new paragraph3 7#b7 ,interest 7,a7 ,corporations and financial institutions ,for pro rata allocation rules in the case of corporations and financial institutions1 see subsection 7b74 7,b7 ,other taxpayers ,for limitation on investment interest in the case of other taxpayers1 see section #afc7;d74 1 and 7ii7 by striking paragraphs 7#d7 and 7#e7 and by redesignating paragraph 7#f7 as paragraph 7#d74 7,b7 ,conforming amendments 7i7 ,section #bfe7;b71 as amended by subsection 7a71 is amended by inserting after paragraph 7#b7 the following new paragraph3 7#c7 ,special rules for short sales 7,a7 ,in general ,for purposes of this subsection1 interest includes any amount paid or incurred-- 7i7 by any person making a short sale in connection with personal property used in such short sale1 or 7ii7 by any other person for the use of any collateral with respect to such short sale4 7,b7 ,exception where no return on cash collateral ,if-- 7i7 the taxpayer provides cash as collateral for any short sale1 and 7ii7 the taxpayer receives no material earnings on such cash during the period of the sale1 subparagraph 7,a77i7 shall not apply to such short sale4 4 7ii7 ,section #bfe7;b77#f7 is amended to read as follows3 7#f7 ,coordination with section #bfc;,a ,this section shall be applied before the application of section #bfc;,a 7relating to capitalization of certain expenses where taxpayer produces property74 4 7iii7 ,section #afc7n77#b7 is amended to read as follows3 7#b7 ,for disallowance of deduction for interest relating to tax-exempt income1 see sections #afc7;d7 and #bfe7;b7 4 7c7 ,effective dates 7#a7 ,application of pro rata allocation rules 7,a7 ,application to ,c corporations ,the amendments made by subsection 7a77#a7 shall apply to taxable years ending on or after ,february #bf1 #bjad4 7,b7 ,repeal of exceptions ,the amendments made by subsection 7a77#b7 shall apply to obligations issued on or after ,february #bf1 #bjad4 7#b7 ,limitation on investment interest ,the amendments made by subsection 7b7 shall apply to taxable years beginning after ,december #ca1 #bjad4 #cabe4 ,prevention of transfer of certain losses from tax indifferent parties 7a7 ,in general ,section #bfg7;d7 is amended to read as follows3 7d7 ,amount of gain where loss previously disallowed 7#a7 ,in general ,if-- 7,a7 in the case of a sale or exchange of property to the taxpayer a loss sustained by the transferor is not allowable to the transferor as a deduction by reason of subsection 7a77#a71 and 7,b7 the taxpayer sells or otherwise disposes of such property 7or of other property the basis of which in the taxpayer's hands is determined directly or indirectly by reference to such property7 at a gain1 then such gain shall be recognized only to the extent that it exceeds so much of such loss as is properly allocable to the property sold or otherwise disposed of by the taxpayer4 7#b7 ,exception for wash sales ,paragraph 7#a7 shall not apply if the loss sustained by the transferor is not allowable to the transferor as a deduction by reason of section #ajia 7relating to wash sales74 7#c7 ,exception for transfers from tax indifferent parties ,paragraph 7#a7 shall not apply to the extent any loss sustained by the transferor 7if allowed7 would not be taken into account in determining a tax imposed under section #a or #aa or a tax computed as provided by either of such sections4 4 7b7 ,effective date ,the amendment made by this section shall apply to sales and exchanges after ,december #ca1 #bjad4 #cabf4 ,entertainment1 etc4 expenses 7a7 ,denial of deduction ,subsection 7a7 of section #bgd is amended to read as follows3 7a7 ,entertainment1 amusement1 or recreation 7#a7 ,in general ,no deduction otherwise allowable under this chapter shall be allowed for amounts paid or incurred for any of the following items3 7,a7 ,activity ,with respect to an activity which is of a type generally considered to constitute entertainment1 amusement1 or recreation4 7,b7 ,membership dues ,with respect to membership in any club organized for business1 pleasure1 recreation or other social purposes4 7,c7 ,amenity ,with respect to a de minimis fringe 7as defined in section #acb7;e77#a77 that is primarily personal in nature and involving property or services that are not directly related to the taxpayer's trade or business4 7,d7 ,facility ,with respect to a facility or portion thereof used in connection with an activity referred to in subparagraph 7,a71 membership dues or similar amounts referred to in subparagraph 7,b71 or an amenity referred to in subparagraph 7,c74 7,e7 ,qualified transportation fringe and parking facility ,which is a qualified transportation fringe 7as defined in section #acb7;f77 or which is a parking facility used in connection with qualified parking 7as defined in section #acb7;f77#e77;,c774 7#b7 ,special rules ,for purposes of applying paragraph 7#a71 an activity described in section #bab shall be treated as a trade or business4 7#c7 ,regulations ,under the regulations prescribed to carry out this section1 the ,secretary shall include regulations-- 7,a7 defining entertainment1 amenities1 recreation1 amusement1 and facilities for purposes of this subsection1 7,b7 providing for the appropriate allocation of depreciation and other costs with respect to facilities used for parking1 and 7,c7 specifying arrangements a primary purpose of which is the avoidance of this subsection4 4 7b7 ,exception for certain expenses includible in income of recipient 7#a7 ,expenses treated as compensation ,paragraph 7#b7 of section #bgd7;e7 is amended to read as follows3 7#b7 ,expenses treated as compensation ,expenses for goods1 services1 and facilities1 to the extent that the expenses do not exceed the amount of the expenses which are treated by the taxpayer1 with respect to the recipient of the entertainment1 amusement1 or recreation1 as compensation to an employee on the taxpayer's return of tax under this chapter and as wages to such employee for purposes of chapter #bd 7relating to withholding of income tax at source on wages74 4 7#b7 ,expenses includible in income of persons who are not employees ,paragraph 7#i7 of section #bgd7;e7 is amended by striking to the extent that the expenses and inserting to the extent that the expenses do not exceed the amount of the expenses that4 7c7 ,exceptions for reimbursed expenses ,paragraph 7#c7 of section #bgd7;e7 is amended to read as follows3 7#c7 ,reimbursed expenses 7,a7 ,in general ,expenses paid or incurred by the taxpayer1 in connection with the performance by him of services for another person 7whether or not such other person is the taxpayer's employer71 under a reimbursement or other expense allowance arrangement with such other person1 but this paragraph shall apply-- 7i7 where the services are performed for an employer1 only if the employer has not treated such expenses in the manner provided in paragraph 7#b71 or 7ii7 where the services are performed for a person other than an employer1 only if the taxpayer accounts 7to the extent provided by subsection 7d77 to such person4 7,b7 ,exception ,except as provided by the ,secretary1 subparagraph 7,a7 shall not apply-- 7i7 in the case of an arrangement in which the person other than the employer is an entity described in section #afh7;g77#b77;,a71 or 7ii7 to any other arrangement designated by the ,secretary as having the effect of avoiding the limitation under subparagraph 7,a74 4 7d7 #ej-,percent limitation on meals and entertainment expenses ,subsection 7n7 of section #bgd is amended to read as follows3 7n7 ,limitation on certain expenses 7#a7 ,in general ,the amount allowable as a deduction under this chapter for any expense for food or beverages 7pursuant to subsection 7e77#a77 or business meals 7pursuant to subsection 7k77#a77 shall not exceed #ej percent of the amount of such expense or item which would 7but for this paragraph7 be allowable as a deduction under this chapter4 7#b7 ,exceptions ,paragraph 7#a7 shall not apply to any expense if-- 7,a7 such expense is described in paragraph 7#b71 7#c71 7#f71 7#g71 or 7#h7 of subsection 7e71 7,b7 in the case of an expense for food or beverages1 such expense is excludable from the gross income of the recipient under section #acb by reason of subsection 7e7 thereof 7relating to de minimis fringes7 or under section #aai 7relating to meals and lodging furnished for convenience of employer71 or 7,c7 in the case of an employer who pays or reimburses moving expenses of an employee1 such expenses are includible in the income of the employee under section #hb4 7#c7 ,special rule for individuals subject to ,federal hours of service ,in the case of any expenses for food or beverages consumed while away from home 7within the meaning of section #afb7;a77#b77 by an individual during1 or incident to1 the period of duty subject to the hours of service limitations of the ,department of ,transportation1 paragraph 7#a7 shall be applied by substituting #hj percent for #ej percent4 4 7e7 ,conforming amendments 7#a7 ,section #bgd7;d7 is amended-- 7,a7 by striking paragraph 7#b7 and redesignating paragraphs 7#c7 and 7#d7 as paragraphs 7#b7 and 7#c71 respectively1 and 7,b7 in the flush material following paragraph 7#c7 7as so redesignated7-- 7i7 by striking 1 entertainment1 amusement1 recreation1 or in item 7,b71 and 7ii7 by striking 7,d7 the business relationship to the taxpayer of persons entertained1 using the facility or property1 or receiving the gift and inserting 7,d7 the business relationship to the taxpayer of the person receiving the benefit4 7#b7 ,section #bgd7;e7 is amended by striking paragraph 7#d7 and redesignating paragraphs 7#e71 7#f71 7#g71 7#h71 and 7#i7 as paragraphs 7#d71 7#e71 7#f71 7#g71 and 7#h71 respectively4 7#c7 ,section #bgd7k77#b77;,a7 is amended by striking 7#d71 7#g71 7#h71 or 7#i7 and inserting 7#f71 7#g71 or 7#h74 7#d7 ,section #bgd is amended by striking subsection 7l74 7#e7 ,section #bgd7m77#a77;,b77ii7 is amended by striking 7#d71 7#g71 7#h71 or 7#i7 and inserting 7#f71 7#g71 or 7#h74 7f7 ,effective date ,the amendments made by this section shall apply to amounts paid or incurred after ,december #ca1 #bjad4 #cabg4 ,repeal of limitation on corporate acquisition indebtedness 7a7 ,in general ,part ,,ix of subchapter ,b of chapter #a is amended by striking section #bgi 7and by striking the item relating to such section in the table of sections for such part74 7b7 ,effective date ,the amendments made by this section shall apply to interest paid or incurred with respect to indebtedness incurred after ,december #ca1 #bjad4 #cabh4 ,denial of deductions and credits for expenditures in illegal businesses 7a7 ,in general ,section #bhj;,e is amended to read as follows3 #bhj;,e4 ,expenditures in connection with illegal businesses ,no deduction or credit shall be allowed for any amount paid or incurred during the taxable year in carrying on any trade or business if-- 7#a7 such trade or business 7or the activities which comprise such trade or business7 consists of trafficking in controlled substances 7within the meaning of schedule ,i and ,,ii of the ,controlled ,substances ,act7 which is prohibited by ,federal law or the law of any ,state in which such trade or business is conducted1 or 7#b7 the carrying out of such trade or business is a felony under ,federal law or the law of any ,state in which such trade or business is conducted4 4 7b7 ,clerical amendment ,the table of sections for part ,,ix of subchapter ,b of chapter #a is amended by striking the item relating to section #bhj;,e and inserting the following new item3 ,sec4 #bhj;,e4 ,expenditures in connection with illegal businesses4 4 7c7 ,effective date ,the amendments made by this section shall apply to amounts paid or incurred after the date of the enactment of this ,act in taxable years ending after the date of the enactment of this ,act4 #cabi4 ,limitation on deduction for ,,fdic premiums 7a7 ,in general ,section #afb is amended by redesignating subsection 7q7 as subsection 7r7 and by inserting after subsection 7p7 the following new subsection3 7q7 ,disallowance of ,,fdic premiums paid by certain large financial institutions 7#a7 ,in general ,no deduction shall be allowed for the applicable percentage of any ,,fdic premium paid or incurred by the taxpayer4 7#b7 ,exception for small institutions ,paragraph 7#a7 shall not apply to any taxpayer for any taxable year if the total consolidated assets of such taxpayer 7determined as of the close of such taxable year7 do not exceed #aj1jjj1jjj1jjj4 7#c7 ,applicable percentage ,for purposes of this subsection1 the term applicable percentage means1 with respect to any taxpayer for any taxable year1 the ratio 7expressed as a percentage but not greater than #ajj percent7 which-- 7,a7 the excess of-- 7i7 the total consolidated assets of such taxpayer 7determined as of the close of such taxable year71 over 7ii7 #aj1jjj1jjj1jjj1 bears to 7,b7 #dj1jjj1jjj1jjj4 7#d7 ,,fdic premiums ,for purposes of this subsection1 the term ,,fdic premium means any assessment imposed under section #g7;b7 of the ,federal ,deposit ,insurance ,act 7#ab ,u4,s4,c4 #ahag7;b774 7#e7 ,total consolidated assets ,for purposes of this subsection1 the term total consolidated assets has the meaning given such term under section #afe of the ,dodd-,frank ,wall ,street ,reform and ,consumer ,protection ,act 7#ab ,u4,s4,c4 #ecfe74 7#f7 ,aggregation rule 7,a7 ,in general ,members of an expanded affiliated group shall be treated as a single taxpayer for purposes of applying this subsection4 7,b7 ,expanded affiliated group ,for purposes of this paragraph1 the term expanded affiliated group means an affiliated group as defined in section #aejd7;a71 determined-- 7i7 by substituting more than #ej percent for at least #hj percent each place it appears1 and 7ii7 without regard to paragraphs 7#b7 and 7#c7 of section #aejd7;b74 ,a partnership or any other entity 7other than a corporation7 shall be treated as a member of an expanded affiliated group if such entity is controlled 7within the meaning of section #ied7;d77#c77 by members of such group 7including any entity treated as a member of such group by reason of this sentence74 4 7b7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 #cacj4 ,repeal of percentage depletion 7a7 ,in general ,part ,i of subchapter ,i of chapter #a is amended by striking sections #fac and #fac;,a 7and by striking the items relating to such sections in the table of sections for such part74 7b7 ,conforming amendments 7#a7 7,a7 ,such part is amended by redesignating section #fad as section #fac 7and1 in the table of sections for such part1 by redesignating the item relating to section #fad as an item relating to section #fac74 7,b7 ,clauses 7iv7 and 7v7 of section #dfe7;c77#b77;,a7 are each amended by striking section #fad and inserting section #fac4 7,c7 ,section #ajaf7;e7 is amended by striking section #fad and inserting section #fac4 7,d7 ,section #abed7;a77#c7 is amended by striking section #fad and inserting section #fac4 7#b7 ,section #de7;c77#d7 is amended to read as follows3 7#d7 ,geothermal energy 7,a7 ,in general ,the term geothermal energy means energy derived from a geothermal deposit4 7,b7 ,geothermal deposit ,the term geothermal deposit means a geothermal reservoir consisting of natural heat which is stored in rocks or in an aqueous liquid or vapor 7whether or not under pressure74 4 7#c7 ,section #dh7;a77#c77;,a77iii7 is amended by striking section #fac7;e77#b7 and inserting section #de7;c77#d77;,b7 7#d7 ,section #cha7;c7 is amended by striking paragraph 7#ah74 7#e7 ,section #dfe7;c77#a77;,e7 is amended by striking section #fac7;e77#b7 and inserting section #de7;c77#d77;,b74 7#f7 ,section #dfh7;d77#c7 is amended by striking section #fad and inserting section #fac4 7#g7 ,section #faa7;a7 is amended by striking the second sentence4 7#h7 ,section #fac7;d71 as redesignated by paragraph 7#a71 is amended by striking includes only and all that follows and inserting includes only an interest burdened by the costs of production44 7#i7 ,section #fcf7;a7 is amended by striking 7for purposes of section #fac74 7#aj7 ,section #fcf7;d7 is amended by striking section #fad7;a7 and inserting section #fac7;a74 7#aa7 ,section #gje7;a7 is amended-- 7,a7 in paragraph 7#a71 by adding and at the end of subparagraph 7,a71 by striking 2 and at the end of subparagraph 7,b7 and inserting a period1 and by striking subparagraph 7,c71 7,b7 in paragraph 7#b71 by striking 2 and at the end of subparagraph 7,b7 and inserting a period1 and 7,c7 by striking paragraph 7#c74 7#ab7 ,section #ija7;e77#a77;,a7 is amended by striking 7or1 if smaller and all that follows through under section #fac74 7#ac7 ,section #iic7;c77#b77;,c7 is amended by inserting 7as each such section was in effect before its repeal by the ,tax ,reform ,act of #bjad7 after section #fac or #fac;,a4 7#ad7 ,section #abjb7;e77#c77;,d7 is amended by inserting 7as each such section was in effect before its repeal by the ,tax ,reform ,act of #bjad7 after section #fac or #fac;,a4 7#ae7 ,section #acfg7;a7 is amended-- 7,a7 in paragraph 7#a71 by adding and at the end of subparagraph 7,a71 by striking 1 and at the end of subparagraph 7,b7 and inserting a period1 and by striking subparagraph 7,c71 and 7,b7 in paragraph 7#b71 by adding and at the end of subparagraph 7,c71 by striking 1 and at the end of subparagraph 7,d7 and inserting a period1 and by striking subparagraph 7,e74 7#af7 ,section #addf7;c7 is amended by striking paragraph 7#b7 and by redesignating paragraph 7#c7 as paragraph 7#b74 7#ag7 ,section #dfab7;a77#g7 is amended by inserting 7as in effect before its repeal by the ,tax ,reform ,act of #bjad7 after section #fac4 7#ah7 ,section #didj7;c77#c77;,b7 is amended-- 7,a7 by striking clause 7ii71 and 7,b7 by striking all that precedes ,the deduction provided and inserting the following3 7,b7 ,modifications ,for purposes of subparagraph 7,a71 the deduction provided 4 7c7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 #caca4 ,repeal of passive activity exception for working interests in oil and gas property 7a7 ,in general ,subsection 7c7 of section #dfi is amended by striking paragraph 7#c74 7b7 ,conforming amendments ,section #dfi is amended-- 7#a7 by striking paragraph 7#d7 and by redesignating paragraphs 7#e71 7#f71 and 7#g7 as paragraphs 7#c71 7#d71 and 7#e71 respectively1 and 7#b7 in paragraph 7#b7-- 7,a7 by striking paragraph 7#g7 and inserting paragraph 7#e71 and 7,b7 by inserting 1 without regard to whether or not the taxpayer materially participates in the activity before the period at the end4 7c7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 #cacb4 ,repeal of special rules for gain or loss on timber1 coal1 or domestic iron ore 7a7 ,in general ,subchapter ,i of chapter #a is amended by striking part ,,iii 7and by striking the item relating to such part in the table of parts for such subchapter74 7b7 ,conforming amendments 7#a7 ,section #eab7;b77#e7 is amended by striking the last sentence4 7#b7 ,section #hga7;a77#a77;,b7 is amended by striking gains described in section #fca7;b7 or 7c71 and4 7#c7 ,section #hga7;d77#a77;,a7 is amended-- 7,a7 by striking 1 7ii7 rents and inserting and 7ii7 rents1 and 7,b7 by striking 1 and 7iii7 gains described in section #fca7;b7 or 7c74 7#d7 7,a7 ,section #hha7;a7 is amended by striking paragraph 7#b7 and by redesignating paragraphs 7#c7 and 7#d7 as paragraphs 7#b7 and 7#c71 respectively4 7,b7 ,section #addb7;a7 is amended-- 7i7 by striking #hha7;a77#c7 and 7#d7 and inserting #hha7;a77#b7 and 7#c71 7ii7 by striking #hha7;a77#c71 and inserting #hha7;a77#b711 and 7iii7 by striking #hha7;a77#d7 and inserting #hha7;a77#c74 7#e7 ,section #hhb7;d77#a77;,a7 is amended-- 7,a7 by striking 1 7ii7 rents and inserting and 7ii7 rents1 and 7,b7 by striking 1 and 7iii7 gains described in section #fca7;b7 or 7c74 7#f7 ,section #abca7;b7 is amended by striking paragraph 7#b74 7#g7 ,section #adjb7;a77#c7 is amended by inserting or at the end of subparagraph 7,a7 and by striking subparagraph 7,b7 and redesignating subparagraph 7,c7 as subparagraph 7,b74 7#h7 ,section #adda is amended-- 7,a7 in subsection 7b71 by striking 1 gains described in section #fca7;b7 or 7c71 and 7,b7 in subsection 7c77#e71 by striking gains described in section #fca7;b7 or 7c71 gains subject to tax under section #hga7;a77#a77;,d71 and inserting gains subject to tax under section #hga7;a77#a77;,d74 7#i7 7,a7 ,part ,,ix of subchapter ,b of chapter #a is amended by striking section #bgb 7and by striking the item relating to such section in the table of sections for such subpart74 7,b7 ,section #ajaf7;a7 is amended by striking paragraph 7#ae74 7c7 ,effective date 7#a7 ,in general ,except as otherwise provided in this subsection1 the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 7#b7 ,basis adjustments ,the amendment made by subsection 7b77#i77;,b7 shall apply to deductions determined for taxable years beginning after ,december #ca1 #bjad4 #cacc4 ,repeal of like-kind exchanges 7a7 ,in general ,part ,,iii of subchapter ,o of chapter #a is amended by striking section #ajca 7and by striking the item relating to such section in the table of sections for such part74 7b7 ,conforming amendments 7#a7 ,section #aba7;d77#aj7 is amended by inserting 7as in effect before its repeal by the ,tax ,reform ,act of #bjad7 after section #ajca4 7#b7 ,section #aig7;f77#b77;,b77i7 is amended by inserting 7as in effect before its repeal by the ,tax ,reform ,act of #bjad7 after #ajca4 7#c7 ,section #dec7;f7 is amended by striking paragraph 7#f74 7#d7 ,section #dgj7;e77#d7 is amended-- 7,a7 by striking ,sections #ajca7;a7 and in subparagraph 7,a7 and inserting ,section1 7i7 by striking #ajca or in subparagraph 7,b71 and 7ii7 by striking sections #ajca and in the heading thereof and inserting section4 7#e7 7,a7 ,section #eja7;c77#ab77;,c77v7 is amended by striking asset exchange or conversion transaction and inserting specified involuntary conversion4 7,b7 ,section #eja7;c77#ab77;,g7 is amended-- 7i7 by striking asset exchange or conversion transaction and inserting specified involuntary conversion1 7ii7 by striking voluntary exchange or1 and 7iii7 by striking #ajca or4 7#f7 7,a7 ,section #gjd7;c7 is amended by striking paragraph 7#b7 and by redesignating paragraph 7#c7 as paragraph 7#b74 7,b7 ,section #gjd7;c77#b71 as so redesignated1 is amended by striking or 7#b74 7#g7 ,section #heg7;e77#b7 is amended by striking subparagraph 7,b7 and by redesignating subparagraphs 7,c7 and 7,d7 as subparagraphs 7,b7 and 7,c71 respectively4 7#h7 7,a7 ,section #ajce is amended by striking subsection 7d7 and inserting the following new subsections3 7d7 ,gain from exchanges not solely in kind ,if an exchange would be within the provisions of subsection 7a71 of section #ajcf7;a71 or of section #ajcg7;a71 if it were not for the fact that the property received in exchange consists not only of property permitted by such provisions to be received without the recognition of gain1 but also of other property or money1 then the gain1 if any1 to the recipient shall be recognized1 but in an amount not in excess of the sum of such money and the fair market value of such other property4 7e7 ,loss from exchanges not solely in kind ,if an exchange would be within the provisions of subsection 7a71 of section #ajcf7;a71 or of section #ajcg7;a71 if it were not for the fact that the property received in exchange consists not only of property permitted by such provisions to be received without the recognition of gain or loss1 but also of other property or money1 then no loss from the exchange shall be recognized4 7f7 ,basis ,if property was acquired on an exchange described in this section1 section #ajcf7;a71 or section #ajcg7;a71 then the basis shall be the same as that of the property exchanged1 decreased in the amount of any money received by the taxpayer and increased in the amount of gain or decreased in the amount of loss to the taxpayer that was recognized on such exchange4 ,if the property so acquired consisted in part of the type of property permitted by this section1 section #ajcf7;a71 or section #ajcg7;a71 to be received without the recognition of gain or loss1 and in part of other property1 the basis provided in this subsection shall be allocated between the properties 7other than money7 received1 and for the purpose of the allocation there shall be assigned to such other property an amount equivalent to its fair market value at the date of the exchange4 ,for purposes of this section and section #ajcf7;a71 where as part of the consideration to the taxpayer another party to the exchange assumed 7as determined under section #ceg7;d77 a liability of the taxpayer1 such assumption shall be considered as money received by the taxpayer on the exchange4 4 7,b7 ,section #ajcf7;c7 is amended-- 7i7 in paragraph 7#a71 by striking subsections 7b7 and 7c7 of section #ajca and inserting subsections 7d7 and 7e7 of section #ajce1 and 7ii7 in paragraph 7#b71 by striking subsection 7d7 of section #ajca and inserting subsection 7f7 of section #ajce4 7,c7 ,section #ajcg7;c7 is amended-- 7i7 in paragraph 7#a71 by striking subsections 7b7 and 7c7 of section #ajca and inserting subsections 7d7 and 7e7 of section #ajce1 and 7ii7 in paragraph 7#b71 by striking subsection 7d7 of section #ajca and inserting subsection 7f7 of section #ajce4 7,d7 ,section #hc7;g7 is amended by striking section #ajca and inserting section #ajce4 7,e7 ,section #dbd7;b7 is amended by striking section #ajca and inserting section #ajce4 7,f7 ,section #dbd7;c77#a77;,b7 is amended by striking section #ajca and inserting section #ajce4 7#i7 ,section #ajfj7;c7 is amended by striking the second sentence thereof4 7#aj7 ,section #abde7;b77#d7 is amended-- 7,a7 by striking ,like kind exchanges2 involuntary and inserting ,involuntary1 and 7,b7 by striking #ajca or4 7#aa7 ,section #abej7;d77#d7 is amended-- 7,a7 by striking ,like kind exchanges2 involuntary and inserting ,involuntary1 7,b7 by striking #ajca or in subparagraph 7,a71 and 7,c7 by striking #ajca or in subparagraph 7,e74 7#ab7 ,section #bjcb;,a7e77#ad77;,c7 is amended-- 7,a7 in clause 7i77,i71 by inserting 7as in effect before its repeal by the ,tax ,reform ,act of #bjad7 after section #ajca1 and 7,b7 in clause 7ii77,i71 by inserting 7as so in effect7 after section #ajca4 7#ac7 ,section #didj7;c77#d7 is amended by striking subparagraph 7,d74 7c7 ,effective date 7#a7 ,in general ,the amendments made by this section shall apply to transfers after ,december #ca1 #bjad4 7#b7 ,exception for transfers pursuant to binding contracts ,notwithstanding paragraph 7#a71 the amendments made by this section shall not apply to any transfer if-- 7,a7 such transfer is pursuant to a written binding contract entered into before ,january #a1 #bjae1 and 7,b7 the exchange of which such transfer is a part is completed before ,january #a1 #bjag4 #cacd4 ,restriction on trade or business property treated as similar or related in service to involuntarily converted property in disaster areas 7a7 ,class life of replacement property not ,to exceed converted property ,section #ajcc7;h77#b7 is amended by inserting if the class life of such tangible property does not exceed the class life of the property so converted before the period at the end4 7b7 ,effective date ,the amendment made by this section shall apply to disasters declared after ,december #ca1 #bjad4 #cace4 ,repeal of rollover of publicly traded securities gain into specialized small business investment companies 7a7 ,in general ,part ,,iii of subchapter ,o of chapter #a is amended by striking section #ajdd 7and by striking the item relating to such section in the table of sections of such part74 7b7 ,conforming amendments 7#a7 ,section #de;,d7c77#b77;,a7 is amended to read as follows3 7,a7 any partnership or corporation which is licensed by the ,small ,business ,administration under section #cja7;d7 of the ,small ,business ,investment ,act of #aieh 7as in effect on ,may #ac1 #aiic71 and 4 7#b7 ,section #ajaf7;a77#bc7 is amended-- 7,a7 by striking #ajdd11 and 7,b7 by striking #ajdd7;d714 7c7 ,effective date ,the amendments made by this section shall apply to sales after ,december #ca1 #bjad4 #cacf4 ,termination of special rules for gain from certain small business stock 7a7 ,termination of partial exclusion ,section #abjb is amended-- 7#a7 by inserting and before the date of the enactment of the ,tax ,reform ,act of #bjad after ,revenue ,reconciliation ,act of #aiic in subsection 7c77#a71 and 7#b7 by adding at the end the following new subsection3 7l7 ,termination ,for termination with respect to qualified small business stock issued after the date of the enactment of the ,tax ,reform ,act of #bjad1 see subsection 7c77#a74 4 7b7 ,repeal of rollover rules 7#a7 ,in general ,part ,,iii of subchapter ,o of chapter #a is amended by striking section #ajde 7and by striking the item relating to such section in the table of sections of such part74 7#b7 ,conforming amendments 7,a7 ,section #ajaf7;a77#bc7 is amended-- 7i7 by striking #ajde11 and 7ii7 by striking #ajde7;b77#c714 7,b7 ,section #abbc is amended by striking paragraph 7#ac74 7c7 ,effective dates 7#a7 ,termination of partial exclusion ,the amendments made by subsection 7a7 shall apply to sales and exchanges after the date of the enactment of this ,act4 7#b7 ,repeal of rollover rules 7,a7 ,in general ,except as provided in subparagraph 7,b71 the amendments made by subsection 7b7 shall apply to sales after the date of the enactment of this ,act4 7,b7 ,savings provision ,the amendments made by subsection 7b77#b7 shall not apply with respect to property the acquisition of which was before the date of the enactment of this ,act4 #cacg4 ,certain self-created property not treated as a capital asset 7a7 ,patents1 etc ,section #abba7;a77#c7 is amended by inserting a patent1 invention1 model or design 7whether or not patented71 a secret formula or process1 before a copyright4 7b7 ,self-,created musical works ,section #abba7;b7 is amended by striking paragraph 7#c74 7c7 ,effective date ,the amendments made by this section shall apply to dispositions after ,december #ca1 #bjad4 #cach4 ,repeal of special rule for sale or exchange of patents 7a7 ,in general ,part ,,iv of subchapter ,p of chapter #a is amended by striking section #abce 7and by striking the item relating to such section in the table of sections of such part74 7b7 ,conforming amendments 7#a7 ,section #dhc7;d7 is amended by striking paragraph 7#d74 7#b7 7,a7 ,section #hga7;a77#a71 as amended by the preceding provisions of this ,act1 is amended by striking subparagraph 7,b7 and by redesignating subparagraphs 7,c7 and 7,d7 as subparagraphs 7,b7 and 7,c71 respectively4 7,b7 ,section #hga7;g77#c7 is amended by striking 7a77#a77;,c7 and inserting 7a77#a77;,b74 7,c7 ,subsections 7h77#a7 and 7i77#a7 of section #hga are each amended by striking 7#a77;,c7 and inserting 7#a77;,b74 7,d7 ,section #adda1 as amended by the preceding provisions of this ,act1 is amended-- 7i7 in subsections 7b7 and 7c77#h71 by striking #hga7;a77#a77;,c7 and inserting #hga7;a77#a77;,b71 and 7ii7 in subsections 7b7 and 7c77#e71 by striking #hga7;a77#a77;,d7 and inserting #hga7;a77#a77;,c74 7,e7 ,section #addb7;a71 as amended by the preceding provisions of this ,act1 is amended-- 7i7 by striking #hga7;a77#a77;,c7 and 7,d7 and inserting #hga7;a77#a77;,b7 and 7,c71 and 7ii7 by striking #hga7;a77#a77;,d7 and inserting #hga7;a77#a77;,c74 7#c7 ,section #ija7l77#e7 is amended by striking without regard to section #abce or any similar rule and inserting without regard to any provision which treats a disposition as a sale or exchange of a capital asset held for more than #a year or any similar provision4 7#d7 ,section #abgd7;c77#c7 is amended by striking subparagraph 7,e7 and redesignating subparagraph 7,f7 as subparagraph 7,e74 7#e7 ,subsections 7b7 and 7c77#e7 of section #adda1 as amended by the preceding provisions of this ,act1 are each amended by striking gains subject to tax under section #hga7;a77#a77;,c71 and gains on transfers described in section #abce made on or before ,october #d1 #aiff and inserting and gains subject to tax under section #hga7;a77#a77;,c74 7c7 ,effective date ,the amendments made by this section shall apply to dispositions after ,december #ca1 #bjad4 #caci4 ,depreciation recapture on gain from disposition of certain depreciable realty 7a7 ,in general ,subsection 7a7 of section #abej is amended to read as follows3 7a7 ,in general ,except as otherwise provided in this section1 if section #abej property is disposed of after ,december #ca1 #bjad1 the amount of gain with respect to such property which is treated as ordinary income shall be an amount equal to the lesser of-- 7#a7 the sum of-- 7,a7 the amount of additional depreciation attributable to periods before ,january #a1 #bjae1 in respect of such property1 and 7,b7 the amount of depreciation adjustments attributable to periods after ,december #ca1 #bjad1 in respect of such property1 or 7#b7 the excess of the amount realized 7or1 in the case of a disposition other than a sale1 exchange1 or involuntary conversion1 the fair market value of such property71 over the adjusted basis of such property4 4 7b7 ,conforming amendments 7#a7 ,section #bfg7;e77#e77;,d77i7 is amended to read as follows3 7i7 any interest in-- 7,i7 any section #abej property with respect to which a mortgage is insured under section #bba7;d77#c7 or #bcf of the ,national ,housing ,act1 or housing financed or assisted by direct loan or tax abatement under similar provisions of ,state or local laws and with respect to which the owner is subject to the restrictions described in section #ajci7;b77#a77;,b7 7as in effect on the day before the date of the enactment of the ,revenue ,reconciliation ,act of #aiij71 7,,ii7 dwelling units which1 on the average1 were held for occupancy by families or individuals eligible to receive subsidies under section #h of the ,united ,states ,housing ,act of #aicg1 as amended1 or under the provisions of ,state or local law authorizing similar levels of subsidy for lower-income families1 7,,iii7 any section #abej property with respect to which a depreciation deduction for rehabilitation expenditures was allowed under section #afg7k71 or 7,,iv7 any section #abej property with respect to which a loan is made or insured under title ,v of the ,housing ,act of #aidi1 and 4 7#b7 ,section #abej7;b7 is amended by striking paragraph 7#d7 and by redesignating paragraph 7#e7 as paragraph 7#d74 7#c7 ,section #abej7;c7 is amended by striking ,for purposes of this section and inserting ,for purposes of this title 7#d7 7,a7 ,section #abej7;d77#e77;,b77i7 is amended by striking and the applicable percentage for the property had been #ajj percent4 7,b7 ,section #abej7;d77#e77;,b77ii7 is amended to read as follows3 7ii7 the amount of such gain 7if any7 to which section #gea7;b7 applied4 4 7#e7 ,section #abej7;d7 is amended by striking paragraph 7#g74 7#f7 ,section #abej is amended by striking subsections 7e7 and 7f7 and by redesignating subsections 7g7 and 7h7 as subsections 7e7 and 7f71 respectively4 7c7 ,effective date ,the amendments made by this section shall apply to dispositions after ,december #ca1 #bjad4 #cadj4 ,common deduction conforming amendments 7a7 ,in general 7#a7 ,section #abde7;a77#b77;,c7 is amended by striking section #agi1 and all that follows through or #aid and inserting section #agi or 7as in effect before repeal by the ,tax ,reform ,act of #bjad7 section #agi;,a1 #agi;,b1 #agi;,c1 #agi;,d1 #agi;,e1 #aha1 #aij1 #aic1 or #aid1 7#b7 ,section #abde7;a77#c77;,c7 is amended by striking section #afi and all that follows through or #aid and inserting section #agi1 #ahe1 #ahh 7as in effect before its repeal by the ,revenue ,reconciliation ,act of #aiij71 or 7as in effect before repeal by the ,tax ,reform ,act of #bjad7 section #afi1 #agi;,a1 #agi;,b1 #agi;,c1 #agi;,d1 #agi;,e1 #aij1 #aic1 or #aid4 7#c7 ,section #bfc7;a77#a7 is amended by striking subparagraphs 7,c71 7,d71 7,f71 7,h71 7,i71 7,j71 7,k71 and 7,l7 and by redesignating subparagraphs 7,e7 and 7,g7 as subparagraphs 7,c7 and 7,d71 respectively4 7#d7 ,section #bhj;,c1 as amended by the preceding provisions of this ,act1 is amended by redesignating subsections 7c7 and 7g7 as subsections 7b7 and 7c71 respectively4 7b7 ,effective date ,each portion of each amendment made by this section shall take effect as if included in the provision of this subtitle to which such portion relates4 ,c ,reform of business credits #cbja4 ,repeal of credit for alcohol1 etc41 used as fuel 7a7 ,in general ,subpart ,d of part ,,iv of subchapter ,a of chapter #a is amended by striking section #dj 7and by striking the item relating to such section in the table of sections for such subpart74 7b7 ,repeal of corresponding excise tax credits 7#a7 ,credit ,subchapter ,b of chapter #fe is amended by striking section #fdbf 7and by striking the item relating to such section in the table of sections for such subchapter74 7#b7 ,payment ,section #fdbg is amended by striking subsection 7e74 7c7 ,conforming amendments 7#a7 ,section #ch7;b7 is amended by striking paragraph 7#c74 7#b7 ,section #fdaf7;a77#d77;,c7 is amended-- 7,a7 by striking section #fdbg7;i77#d7 and inserting section #fdbg7;i77#c71 and 7,b7 by striking section #fdbg7;i77#c77;,b7 and inserting subparagraph 7,b7 thereof4 7#c7 ,section #fdbg7;i7 is amended by striking paragraph 7#c7 and by redesignating paragraph 7#d7 as paragraph 7#c74 7#d7 ,section #fdbg7;i77#c71 as redesignated by paragraph 7#b71 is amended-- 7,a7 by striking the sentence at the end of subparagraph 7,a71 7,b7 by redesignating subparagraph 7,b7 as subparagraph 7,c71 and 7,c7 by inserting after subparagraph 7,a7 the following new subparagraph3 7,b7 ,payment of claim ,notwithstanding subsection 7l77#a71 if the ,secretary has not paid pursuant to a claim filed under subsection 7b77#d71 7l77#d77;,c77ii71 or 7l77#e7 within #de days of the date of the filing of such claim 7#bj days in the case of an electronic claim71 the claim shall be paid with interest from such date determined by using the overpayment rate and method under section #ffba4 4 7#e7 ,subpart ,b of part ,,iii of subchapter ,a of chapter #cb is amended by striking section #dajd 7and by striking the item relating to such section in the table of sections for such subpart74 7#f7 ,section #feja7m7 is amended by striking #dj7;f714 7#g7 ,section #iejc7;b77#a7 is amended by striking the second sentence4 7d7 ,effective date ,the amendments made by this section shall apply to fuels sold or used after ,december #ca1 #bjac4 #cbjb4 ,repeal of credit for biodiesel and renewable diesel used as fuel 7a7 ,in general ,subpart ,d of part ,,iv of subchapter ,a of chapter #a is amended by striking section #dj;,a 7and by striking the item relating to such section in the table of sections for such subpart74 7b7 ,conforming amendments 7#a7 ,section #ch7;b7 is amended by striking paragraph 7#ag74 7#b7 ,part ,,ii of subchapter ,b of chapter #a is amended by striking section #hg 7and by striking the item relating to such section in the table of sections for such subpart74 7#c7 ,section #daja7;a77#a7 is amended by striking 1 every person producing and all that follows through section #dj7;b77#f77;,e774 7c7 ,effective date ,the amendments made by this section shall apply to fuels sold or used after ,december #ca1 #bjac4 #cbjc4 ,research credit modified and made permanent 7a7 ,permanent simplification of incremental research credit and elimination of credit for energy research consortium payments 7#a7 ,in general ,subsection 7a7 of section #da is amended to read as follows3 7a7 ,in general ,for purposes of section #ch1 the research credit determined under this section for the taxable year shall be an amount equal to the sum of-- 7#a7 #ae percent of so much of the qualified research expenses for the taxable year as exceeds #ej percent of the average qualified research expenses for the #c taxable years preceding the taxable year for which the credit is being determined1 plus 7#b7 #ae percent of so much of the basic research payments for the taxable year as exceeds #ej percent of the average basic research payments for the #c taxable years preceding the taxable year for which the credit is being determined4 4 7#b7 ,repeal of termination ,section #da is amended by striking subsection 7h74 7#c7 ,conforming amendments 7,a7 ,subsection 7c7 of section #da is amended to read as follows3 7c7 ,determination of average research expenses for prior years 7#a7 ,special rule in case of no qualified research expenditures in any of #c preceding taxable years ,in any case in which the taxpayer has no qualified research expenses in any one of the #c taxable years preceding the taxable year for which the credit is being determined1 the amount determined under subsection 7a77#a7 for such taxable year shall be equal to #aj percent of the qualified research expenses for the taxable year4 7#b7 ,consistent treatment of expenses 7,a7 ,in general ,notwithstanding whether the period for filing a claim for credit or refund has expired for any taxable year taken into account in determining the average qualified research expenses1 or average basic research payments1 taken into account under subsection 7a71 the qualified research expenses and basic research payments taken into account in determining such averages shall be determined on a basis consistent with the determination of qualified research expenses and basic research payments1 respectively1 for the credit year4 7,b7 ,prevention of distortions ,the ,secretary may prescribe regulations to prevent distortions in calculating a taxpayer's qualified research expenses or basic research payments caused by a change in accounting methods used by such taxpayer between the current year and a year taken into account in determining the average qualified research expenses or average basic research payments taken into account under subsection 7a74 4 7,b7 ,section #da7;e7 is amended-- 7i7 by striking all that precedes paragraph 7#f7 and inserting the following3 7e7 ,basic research payments ,for purposes of this section-- 7#a7 ,in general ,the term basic research payment means1 with respect to any taxable year1 any amount paid in cash during such taxable year by a corporation to any qualified organization for basic research but only if-- 7,a7 such payment is pursuant to a written agreement between such corporation and such qualified organization1 and 7,b7 such basic research is to be performed by such qualified organization4 7#b7 ,exception to requirement that research be performed by the organization ,in the case of a qualified organization described in subparagraph 7,c7 or 7,d7 of paragraph 7#c71 subparagraph 7,b7 of paragraph 7#a7 shall not apply4 1 7ii7 by redesignating paragraphs 7#f7 and 7#g7 as paragraphs 7#c7 and 7#d71 respectively1 and 7iii7 in paragraph 7#d7 as so redesignated1 by striking subparagraphs 7,b7 and 7,c7 and by redesignating subparagraphs 7,d7 and 7,e7 as subparagraphs 7,b7 and 7,c71 respectively4 7,c7 7i7 ,section #da7;f77#a7 is amended by striking 1 basic research payments1 and amounts paid or incurred to energy research consortiums1 in subparagraphs 7,a77ii7 and 7,b77ii7 and inserting and basic research payments4 7ii7 ,section #da7;f7 is amended by striking paragraph 7#f74 7#d7 ,effective date 7,a7 ,in general ,except as provided in subparagraph 7,b71 the amendments made by this subsection shall apply to taxable years beginning after ,december #ca1 #bjac4 7,b7 ,paragraph 7#b7 ,the amendment made by paragraph 7#b7 shall apply to amounts paid or incurred after ,december #ca1 #bjac4 7b7 ,other reforms 7#a7 ,elimination of credit for computer software ,subparagraph 7,e7 of section #da7;d77#d7 is amended-- 7,a7 by striking ,except to the extent provided in regulations1 any research and inserting ,any research1 and 7,b7 by striking which is developed by and all that follows through the end and inserting a period4 7#b7 ,elimination of increased credit for amounts paid to certain entities ,paragraph 7#c7 of section #da7;b7 is amended by striking subparagraphs 7,c7 and 7,d74 7#c7 ,elimination of credit for supplies ,subparagraph 7,a7 of section #da7;b77#b7 is amended by inserting and at the end of clause 7i71 by striking clause 7ii71 and by redesignating clause 7iii7 as clause 7ii74 7#d7 ,elimination of election of reduced credit ,section #bhj;,c7c7 is amended by striking paragraphs 7#c7 and 7#d74 7#e7 ,conforming amendments 7,a7 ,the second sentence of section #da7;b77#b77;,a7 is amended by striking ,clause 7iii7 and inserting ,clause 7ii74 7,b7 ,section #da7;b77#b7 is amended by striking subparagraph 7,c7 and by redesignating subparagraph 7,d7 as subparagraph 7,c74 7,c7 ,section #da7;d77#b77;,b7 is amended by striking 1 computer software4 7#f7 ,effective date ,the amendments made by this subsection shall apply to taxable years beginning after ,december #ca1 #bjac4 #cbjd4 ,low-income housing tax credit 7a7 ,reform of limitation and allocation rules 7#a7 ,allocations of eligible basis amounts rather than credit amounts2 elimination of national reallocations ,subsection 7h7 of section #db is amended to read as follows3 7h7 ,limitation on qualified basis with respect to projects located in a ,state 7#a7 ,qualified basis may not exceed limitation amount allocated to building 7,a7 ,in general ,the qualified basis of any building which is taken into account under subsection 7a7 for any taxable year shall not exceed the limitation amount allocated to such building under this subsection4 7,b7 ,time for making allocation ,except in the case of an allocation which meets the requirements of subparagraph 7,c71 7,d71 7,e71 or 7,f71 an allocation shall be taken into account under subparagraph 7,a7 only if it is made not later than the close of the calendar year in which the building is placed in service4 7,c7 ,exception where binding commitment ,an allocation meets the requirements of this subparagraph if there is a binding commitment 7not later than the close of the calendar year in which the building is placed in service7 by the housing credit agency to allocate a specified limitation amount to such building beginning in a specified later taxable year4 7,d7 ,exception where increase in qualified basis 7i7 ,in general ,an allocation meets the requirements of this subparagraph if such allocation is made not later than the close of the calendar year in which ends the taxable year to which it will #ast apply but only to the extent the amount of such allocation does not exceed the limitation under clause 7ii74 7ii7 ,limitation ,the limitation under this clause is the excess of-- 7,i7 the qualified basis of such building as of the close of the #ast taxable year to which such allocation will apply1 over 7,,ii7 the qualified basis of such building as of the close of the #ast taxable year to which the most recent prior allocation with respect to such building applied4 7iii7 ,housing credit basis limitation reduced by full allocation ,notwithstanding clause 7i71 the full amount of the allocation shall be taken into account under paragraph 7#b74 7,e7 ,exception where #aj percent of cost incurred 7i7 ,in general ,an allocation meets the requirements of this subparagraph if such allocation is made with respect to a qualified building which is placed in service not later than the close of the second calendar year following the calendar year in which the allocation is made4 7ii7 ,qualified building ,for purposes of clause 7i71 the term qualified building means any building which is part of a project if the taxpayer's basis in such project 7as of the date which is #a year after the date that the allocation was made7 is more than #aj percent of the taxpayer's reasonably expected basis in such project 7as of the close of the second calendar year referred to in clause 7i774 ,such term does not include any existing building unless a credit is allowable under subsection 7e7 for rehabilitation expenditures paid or incurred by the taxpayer with respect to such building for a taxable year ending during the second calendar year referred to in clause 7i7 or the prior taxable year4 7,f7 ,allocation of credit on a project basis 7i7 ,in general ,in the case of a project which includes 7or will include7 more than #a building1 an allocation meets the requirements of this subparagraph if-- 7,i7 the allocation is made to the project for a calendar year during the project period1 7,,ii7 the allocation only applies to buildings placed in service during or after the calendar year for which the allocation is made1 and 7,,iii7 the portion of such allocation which is allocated to any building in such project is specified not later than the close of the calendar year in which the building is placed in service4 7ii7 ,project period ,for purposes of clause 7i71 the term project period means the period-- 7,i7 beginning with the #ast calendar year for which an allocation may be made for the #ast building placed in service as part of such project1 and 7,,ii7 ending with the calendar year the last building is placed in service as part of such project4 7#b7 ,allocated limitation amount to apply to all taxable years ending during or after allocation year ,any limitation amount allocated to any building for any calendar year-- 7,a7 shall apply to such building for all taxable years in the compliance period ending during or after such calendar year1 and 7,b7 shall reduce the aggregate limitation amount of the allocating agency only for such calendar year4 7#c7 ,limitation amount for agencies 7,a7 ,in general ,the limitation amount which a housing credit agency may allocate for any calendar year is the portion of the ,state limitation allocated under this paragraph for such calendar year to such agency4 7,b7 ,state limitation initially allocated to ,state housing credit agencies ,except as provided in subparagraph 7,f71 the ,state limitation for each calendar year shall be allocated to the housing credit agency of such ,state4 ,if there is more than #a housing credit agency of a ,state1 all such agencies shall be treated as a single agency4 7,c7 ,state limitation ,the ,state limitation applicable to any ,state for any calendar year shall be an amount equal to the sum of-- 7i7 the unused ,state limitation 7if any7 of such ,state for the preceding calendar year1 7ii7 the greater of-- 7,i7 #ca4bj multiplied by the ,state population1 or 7,,ii7 #cf1cjj1jjj1 plus 7iii7 the amount of ,state limitation returned in the calendar year4 7,d7 ,unused ,state limitation ,for purposes of subparagraph 7,c77i71 the unused ,state limitation for any calendar year is the excess 7if any7 of the sum of the amounts described in clauses 7ii7 and 7iii7 of subparagraph 7,c7 over the aggregate limitation amount allocated for such year4 7,e7 ,state limitation returned in the calendar year ,for purposes of subparagraph 7,c77iii71 the amount of ,state limitation returned in the calendar year equals the limitation amount previously allocated within the ,state to any project-- 7i7 which fails to meet the #aj percent test under paragraph 7#a77;,e77ii7 on a date after the close of the calendar year in which the allocation was made1 7ii7 which does not become a qualified low-income housing project within the period required by this section or the terms of the allocation1 or 7iii7 with respect to which an allocation is cancelled by mutual consent of the housing credit agency and the allocation recipient4 7,f7 ,state may provide for different allocation ,for purposes of this paragraph1 a ,state may by law provide 7or a ,governor of a ,state may proclaim7 a different formula for allocating the ,state limitation among the ,state housing credit agencies in such ,state4 7,g7 ,population ,for purposes of this paragraph1 determinations of the population of any ,state shall be made with respect to any calendar year on the basis of the most recent census estimate of the resident population of such ,state released by the ,bureau of ,census before the beginning of such calendar year4 7,h7 ,cost-of-living adjustment 7i7 ,in general ,in the case of a calendar year after #bjae1 the dollar amounts in subparagraph 7,c77ii7 shall each be increased by an amount equal to-- 7,i7 such dollar amount1 multiplied by 7,,ii7 the cost-of-living adjustment determined under section #a7;c77#b77;,a7 for such calendar year1 determined by substituting calendar year #bjad for calendar year #bjab in clause 7ii7 thereof4 7ii7 ,rounding 7,i7 ,in the case of the dollar amount in subparagraph 7,c77ii77,i71 any increase under clause 7i7 which is not a multiple of #bj cents shall be rounded to the next lowest multiple of #bj cents4 7,,ii7 ,in the case of the dollar amount in subparagraph 7,c77ii77,,ii71 any increase under clause 7i7 which is not a multiple of #ajj1jjj shall be rounded to the next lowest multiple of #ajj1jjj4 7#d7 ,portion of ,state limitation set-aside for certain projects involving qualified nonprofit organizations 7,a7 ,in general ,not more than #ij percent of the ,state limitation for any ,state for any calendar year shall be allocated to projects other than qualified low-income housing projects described in subparagraph 7,b74 7,b7 ,projects involving qualified nonprofit organizations ,for purposes of subparagraph 7,a71 a qualified low-income housing project is described in this subparagraph if a qualified nonprofit organization is to own an interest in the project 7directly or through a partnership7 and materially participate 7within the meaning of section #dfi7;h77 in the development and operation of the project throughout the credit period4 7,c7 ,qualified nonprofit organization ,for purposes of this paragraph1 the term qualified nonprofit organization means any organization if-- 7i7 such organization is described in paragraph 7#c7 or 7#d7 of section #eja7;c7 and is exempt from tax under section #eja7;a71 7ii7 such organization is determined by the ,state housing credit agency not to be affiliated with or controlled by a for-profit organization2 and 7iii7 #a of the exempt purposes of such organization includes the fostering of low-income housing4 7,d7 ,treatment of certain subsidiaries 7i7 ,in general ,for purposes of this paragraph1 a qualified nonprofit organization shall be treated as satisfying the ownership and material participation test of subparagraph 7,b7 if any qualified corporation in which such organization holds stock satisfies such test4 7ii7 ,qualified corporation ,for purposes of clause 7i71 the term qualified corporation means any corporation if #ajj percent of the stock of such corporation is held by #a or more qualified nonprofit organizations at all times during the period such corporation is in existence4 7,e7 ,state may not override set-aside ,nothing in subparagraph 7,f7 of paragraph 7#c7 shall be construed to permit a ,state not to comply with subparagraph 7,a7 of this paragraph4 7#e7 ,buildings eligible for credit only if minimum long-term commitment to low-income housing 7,a7 ,in general ,no credit shall be allowed by reason of this section with respect to any building for the taxable year unless an extended low-income housing commitment is in effect as of the end of such taxable year4 7,b7 ,extended low-income housing commitment ,for purposes of this paragraph1 the term extended low-income housing commitment means any agreement between the taxpayer and the housing credit agency-- 7i7 which requires that the applicable fraction 7as defined in subsection 7c77#a77 for the building for each taxable year in the extended use period will not be less than the applicable fraction specified in such agreement and which prohibits the actions described in subclauses 7,i7 and 7,,ii7 of subparagraph 7,e77ii71 7ii7 which allows individuals who meet the income limitation applicable to the building under subsection 7g7 7whether prospective1 present1 or former occupants of the building7 the right to enforce in any ,state court the requirement and prohibitions of clause 7i71 7iii7 which prohibits the disposition to any person of any portion of the building to which such agreement applies unless all of the building to which such agreement applies is disposed of to such person1 7iv7 which prohibits the refusal to lease to a holder of a voucher or certificate of eligibility under section #h of the ,united ,states ,housing ,act of #aicg because of the status of the prospective tenant as such a holder1 7v7 which is binding on all successors of the taxpayer1 and 7vi7 which1 with respect to the property1 is recorded pursuant to ,state law as a restrictive covenant4 7,c7 ,allocation of limitation amount may not exceed amount necessary to support commitment ,the limitation amount allocated to any building may not exceed the amount necessary to support the applicable fraction specified in the extended low-income housing commitment for such building4 7,d7 ,extended use period ,for purposes of this paragraph1 the term extended use period means the period-- 7i7 beginning on the #ast day in the credit period on which such building is part of a qualified low-income housing project1 and 7ii7 ending on the later of-- 7,i7 the date specified by such agency in such agreement1 or 7,,ii7 the date which is #ae years after the close of the credit period4 7,e7 ,exceptions if foreclosure or if no buyer willing to maintain low-income status 7i7 ,in general ,the extended use period for any building shall terminate-- 7,i7 on the date the building is acquired by foreclosure 7or instrument in lieu of foreclosure7 unless the ,secretary determines that such acquisition is part of an arrangement with the taxpayer a purpose of which is to terminate such period1 or 7,,ii7 on the last day of the period specified in subparagraph 7,i7 if the housing credit agency is unable to present during such period a qualified contract for the acquisition of the low-income portion of the building by any person who will continue to operate such portion as a qualified low-income building4 ,subclause 7,,ii7 shall not apply to the extent more stringent requirements are provided in the agreement or in ,state law4 7ii7 ,eviction1 etc41 of existing low-income tenants not permitted ,the termination of an extended use period under clause 7i7 shall not be construed to permit before the close of the #c-year period following such termination-- 7,i7 the eviction or the termination of tenancy 7other than for good cause7 of an existing tenant of any low-income unit1 or 7,,ii7 any increase in the gross rent with respect to such unit not otherwise permitted under this section4 7,f7 ,qualified contract ,for purposes of subparagraph 7,e71 the term qualified contract means a bona fide contract to acquire 7within a reasonable period after the contract is entered into7 the nonlow-income portion of the building for fair market value and the low-income portion of the building for an amount not less than the applicable fraction 7specified in the extended low-income housing commitment7 of-- 7i7 the sum of-- 7,i7 the outstanding indebtedness secured by1 or with respect to1 the building1 7,,ii7 the adjusted investor equity in the building1 plus 7,,iii7 other capital contributions not reflected in the amounts described in subclause 7,i7 or 7,,ii71 reduced by 7ii7 cash distributions from 7or available for distribution from7 the project4 ,the ,secretary shall prescribe such regulations as may be necessary or appropriate to carry out this paragraph1 including regulations to prevent the manipulation of the amount determined under the preceding sentence4 7,g7 ,adjusted investor equity 7i7 ,in general ,for purposes of subparagraph 7,f71 the term adjusted investor equity means1 with respect to any calendar year1 the aggregate amount of cash taxpayers invested with respect to the project increased by the amount equal to-- 7,i7 such amount1 multiplied by 7,,ii7 the cost-of-living adjustment for such calendar year1 determined under section #a7;c77#b77;,a7 by substituting the base calendar year for calendar year #bjab in clause 7ii7 thereof4 ,an amount shall be taken into account as an investment in the project only to the extent there was an obligation to invest such amount as of the beginning of the credit period and to the extent such amount is reflected in the adjusted basis of the project4 7ii7 ,cost-of-living increases in excess of #e percent not taken into account ,under regulations prescribed by the ,secretary1 if the ,c-,,cpi-,u for any calendar year 7within the meaning of section #a7;c77 exceeds the ,c-,,cpi-,u for the preceding calendar year by more than #e percent1 the ,c-,,cpi-,u for the base calendar year shall be increased such that such excess shall never be taken into account under clause 7i74 7iii7 ,base calendar year ,for purposes of this subparagraph1 the term base calendar year means the calendar year with or within which the #ast taxable year of the credit period ends4 7,h7 ,low-income portion ,for purposes of this paragraph1 the low-income portion of a building is the portion of such building equal to the applicable fraction specified in the extended low-income housing commitment for the building4 7,i7 ,period for finding buyer ,the period referred to in this subparagraph is the #a-year period beginning on the date 7after the #adth year of the credit period7 the taxpayer submits a written request to the housing credit agency to find a person to acquire the taxpayer's interest in the low-income portion of the building4 7,j7 ,effect of noncompliance ,if1 during a taxable year1 there is a determination that an extended low-income housing agreement was not in effect as of the beginning of such year1 such determination shall not apply to any period before such year and subparagraph 7,a7 shall be applied without regard to such determination if the failure is corrected within #a year from the date of the determination4 7,k7 ,projects which consist of more than #a building ,the application of this paragraph to projects which consist of more than #a building shall be made under regulations prescribed by the ,secretary4 7#f7 ,special rules 7,a7 ,building must be located within jurisdiction of credit agency ,a housing credit agency may allocate its limitation amount only to buildings located in the jurisdiction of the governmental unit of which such agency is a part4 7,b7 ,agency allocations in excess of limit ,if the limitation amounts allocated by a housing credit agency for any calendar year exceed the portion of the ,state limitation allocated to such agency for such calendar year1 the limitation amounts so allocated shall be reduced 7to the extent of such excess7 for buildings in the reverse of the order in which the allocations of such amounts were made4 7,c7 ,credit reduced if credit is less than credit which would be allowable without regard to placed in service convention1 etc 7i7 ,in general ,the amount of the credit determined under this section with respect to any building shall not exceed the clause 7ii7 percentage of the amount of the credit which would 7but for this subparagraph7 be determined under this section with respect to such building4 7ii7 ,determination of percentage ,for purposes of clause 7i71 the clause 7ii7 percentage with respect to any building is the percentage which-- 7,i7 the credit amount which would be determined under this section with respect to the building if the limitation amount allocated to such building were equal to the qualified basis of such building1 bears to 7,,ii7 the credit amount determined in accordance with clause 7iii74 7iii7 ,determination of credit amount ,the credit amount determined in accordance with this clause is the amount of the credit which would 7but for this subparagraph7 be determined under this section with respect to the building if this section were applied without regard to subsection 7f77#b77;,a74 7#g7 ,other definitions ,for purposes of this subsection-- 7,a7 ,housing credit agency ,the term housing credit agency means any agency authorized to carry out this subsection4 7,b7 ,possessions treated as ,states ,the term ,state includes a possession of the ,united ,states4 4 7#b7 ,conforming amendments 7,a7 ,section #db7;f7 is amended by striking paragraph 7#c74 7,b7 ,section #db7;i77#c77;,b77iii77,,ii7 is amended by striking subsection 7h77#e7 and inserting subsection 7h77#d74 7,c7 ,section #db7;i77#g77;,a7 is amended by striking subsection 7h77#e77;,c7 and inserting subsection 7h77#d77;,c74 7,d7 ,section #db7;i77#h7 is amended by striking the last sentence4 7,e7 ,section #db7;i7 is amended by striking paragraph 7#i74 7,f7 ,section #db7k77#b77;,a7 is amended by striking subsection 7h77#e7 and inserting subsection 7h77#d74 7,g7 ,section #db7l77#c7 is amended by striking housing credit amount both places it appears and inserting limitation amount4 7,h7 ,section #db7m77#a77;,a7 is amended by striking housing credit dollar amount both places it appears and inserting limitation amount4 7,i7 ,section #db7m77#a77;,b77ii7 is amended by striking housing credit dollar amounts and inserting limitation amounts4 7,j7 ,section #db7m77#a7 is amended by striking subparagraph 7,d74 7,k7 ,subparagraphs 7,a71 7,b77iii71 7,c77i77,i71 and 7,c77i77,,ii7 of section #db7m77#b7 are each amended by striking housing credit dollar amount and inserting limitation amount4 7,l7 ,section #db7m77#b7 is amended by striking subparagraph 7,d74 7b7 #ae-,year credit period 7#a7 ,in general ,section #db7;f77#a7 is amended by striking #aj taxable years and inserting #ae taxable years4 7#b7 ,repeal of recapture ,section #db is amended by striking subsection 7j74 7#c7 ,conforming amendments 7,a7 ,section #db7;d77#g7 is amended-- 7i7 by striking compliance period in the heading thereof and inserting credit period1 and 7ii7 by striking compliance period in subparagraph 7,b77ii7 and inserting credit period4 7,b7 ,section #db7;f77#d7 is amended by striking the last sentence thereof4 7,c7 ,section #db7;i7 is amended by striking paragraph 7#a74 7,d7 ,section #db7;i77#f7 is amended by striking and any increase in tax under subsection 7j74 7,e7 ,section #db7k77#d77;,c7 is amended to read as follows3 7,c7 ,special rules 7i7 ,tax benefit rule ,the tax for the taxable year shall be increased under subparagraph 7,a7 only with respect to credits allowed by reason of this section which were used to reduce tax liability4 ,in the case of credits not so used to reduce tax liability1 the carryforwards and carrybacks under section #ci shall be appropriately adjusted4 7ii7 ,no credits against tax ,any increase in tax under this paragraph shall not be treated as a tax imposed by this chapter for purposes of determining the amount of any credit under this chapter4 4 7c7 ,determination of applicable percentage 7#a7 ,elimination of #cj percent credit2 modification of discount rate ,subsection 7b7 of section #db is amended to read as follows3 7b7 ,applicable percentage 7#a7 ,in general ,for purposes of this section1 the term applicable percentage means with respect to any building1 the appropriate percentage prescribed by the ,secretary for the earlier of-- 7,a7 the month in which such building is placed in service1 or 7,b7 at the election of the taxpayer1 the month in which the taxpayer and the housing credit agency enter into an agreement with respect to such building 7which is binding on such agency1 the taxpayer1 and all successors in interest7 as to the limitation amount to be allocated to such building4 ,a month may be elected under subparagraph 7,b7 only if the election is made not later than the #eth day after the close of such month4 ,such an election1 once made1 shall be irrevocable4 7#b7 ,method of prescribing percentages ,the percentages prescribed by the ,secretary for any month shall be percentages which will yield over a #ae-year period amounts of credit under subsection 7a7 which have a present value equal to #gj percent of the qualified basis of the building4 7#c7 ,method of discounting 7,a7 ,in general ,the present value under paragraph 7#b7 shall be determined-- 7i7 as of the last day of the #ast year of the #ae-year period referred to in paragraph 7#b71 7ii7 by using a discount rate equal to the applicable discount percentage of the average of the annual ,federal mid-term rate and the annual ,federal long-term rate applicable under section #abgd7;d77#a7 to the month applicable under subparagraph 7,a7 or 7,b7 of paragraph 7#a7 and compounded annually1 and 7iii7 by assuming that the credit allowable under this section for any year is received on the last day of such year4 7,b7 ,applicable discount percentage ,for purposes of this paragraph1 the term applicable discount percentage means1 with respect to any month referred to in subparagraph 7,a77ii7 the number of percentage points by which #ajj percent exceeds the highest rate of tax in effect under section #aa for a taxable year which begins in such month4 7#d7 ,cross reference ,for treatment of certain rehabilitation expenditures as separate new buildings1 see subsection 7e74 4 7#b7 ,existing and ,federally subsidized buildings ineligible for credit ,section #db7;d7 is amended-- 7,a7 by striking paragraphs 7#a71 7#b71 and 7#f71 and redesignating paragraphs 7#c71 7#d71 7#e71 and 7#g7 as paragraphs 7#b71 7#c71 7#d71 and 7#e71 respectively1 and 7,b7 by inserting before paragraph 7#b7 7as so redesignated7 the following new paragraph3 7#a7 ,in general ,the eligible basis of any building is-- 7,a7 in the case a new building which is not ,federally subsidized for the taxable year1 its adjusted basis as of the close of the #ast taxable year of the credit period1 and 7,b7 zero in any other case4 4 7#c7 ,conforming amendments 7,a7 ,section #db7;e7 is amended-- 7i7 in paragraph 7#b77;,b71 by striking paragraph 7#c7 or 7#d7 and inserting paragraph 7#b7 or 7#c74 7ii7 in paragraph 7#c71 by striking subparagraph 7,b7 and redesignating subparagraphs 7,c7 and 7,d7 as subparagraphs 7,b7 and 7,c71 respectively1 7iii7 in paragraph 7#d71 by striking the last sentence thereof1 and 7iv7 by striking paragraph 7#e7 and redesignating paragraph 7#f7 as paragraph 7#e74 7,b7 ,section #db7;f7 is amended by striking paragraph 7#e74 7,c7 ,section #db7;i77#b77;,a7 is amended by striking for purposes of subsection 7b77#a714 7,d7 ,section #db7;i77#c7 is amended-- 7i7 by striking 7as defined in subsection 7d77#b77;,d77iii77 in subparagraph 7,c77ii7 and inserting 7within the meaning of subparagraph 7,f771 and 7ii7 by adding at the end the following new subparagraph3 7,f7 ,related person ,for purposes of subparagraph 7,c71 a person 7hereinafter in this subparagraph referred to as the related person7 is related to any person if the related person bears a relationship to such person specified in section #bfg7;b7 or #gjg7;b77#a71 or the related person and such person are engaged in trades or businesses under common control 7within the meaning of subsections 7a7 and 7b7 of section #eb74 4 7,e7 ,section #db7;i7 is amended by striking paragraph 7#e74 7,f7 ,section #db7k77#b77;,b7 is amended by striking 1 except that and all that follows and inserting a period4 7d7 ,repeal of special rules for buildings in high cost and difficult development areas 7#a7 ,in general ,paragraph 7#d7 of section #db7;d71 as redesignated by subsection 7c77#b71 is amended to read as follows3 7#d7 ,federal grants not taken into account in determining eligible basis ,the eligible basis of a building shall not include any costs financed with the proceeds of a federally funded grant4 4 7#b7 ,conforming amendments 7,a7 ,paragraph 7#c7 of section #db7;d71 as redesignated by subsection 7c77#b71 is amended-- 7i7 by striking 7as defined in paragraph 7#e77;,c77 in subparagraph 7,c77i71 and 7ii7 by adding at the end the following new subparagraph3 7,e7 ,qualified census tract ,for purposes of this paragraph-- 7i7 ,in general ,the term qualified census tract means any census tract which is designated by the ,secretary of ,housing and ,urban ,development and1 for the most recent year for which census data are available on household income in such tract1 either in which #ej percent or more of the households have an income which is less than #fj percent of the area median gross income for such year or which has a poverty rate of at least #be percent4 ,if the ,secretary of ,housing and ,urban ,development determines that sufficient data for any period are not available to apply this subparagraph on the basis of census tracts1 such ,secretary shall apply this subparagraph for such period on the basis of enumeration districts4 7ii7 ,limit on ,,msa's designated ,the portion of a metropolitan statistical area which may be designated for purposes of this subparagraph shall not exceed an area having #bj percent of the population of such metropolitan statistical area4 7iii7 ,determination of areas ,for purposes of this subparagraph1 each metropolitan statistical area shall be treated as a separate area and all nonmetropolitan areas in a ,state shall be treated as #a area4 4 7,b7 ,clause 7i7 of section #db7;d77#e77;,a71 as redesignated by subsection 7c77#b71 is amended to read as follows3 7i7 such building shall be treated as a new building1 but 4 7e7 ,repeal of certain exceptions to rules against preferential treatment ,section #db7;g77#i7 is amended-- 7#a7 by adding or at the end of subparagraph 7,a71 and 7#b7 by striking subparagraphs 7,b7 and 7,c7 and inserting the following new subparagraph3 7,b7 who are veterans 7as defined in section #aja of title #ch1 ,united ,states ,code74 4 7f7 ,modification of selection criteria ,section #db7m77#a77;,c7 is amended-- 7#a7 by adding and at the end of clause 7vii71 7#b7 by striking the comma at the end of clause 7viii7 and inserting a period1 and 7#c7 by striking clauses 7ix7 and 7x74 7g7 ,effective date 7#a7 ,in general ,the amendments made by this section shall apply with respect to ,state limitation amounts determined for calendar years after #bjad 7and to determinations with respect to allocations of such limitation amounts74 7#b7 ,transition rule ,for purposes of determining the ,state limitation amount for calendar year #bjae under section #db7;h77#c77;,c7 of the ,internal ,revenue ,code of #aihf1 as amended by this section1 the amount described in clause 7i7 of such section shall be treated as being equal to the quotient of-- 7,a7 the amount which would be described in section #db7;h77#c77;,c77i7 of such ,code 7determined without regard to the amendments made by this section71 divided by 7,b7 the applicable percentage determined under section #db7;b77#a77;,b77i7 for ,december #bjad 7determined without regard to the amendments made by this section74 #cbje4 ,repeal of enhanced oil recovery credit 7a7 ,in general ,subpart ,d of part ,,iv of subchapter ,a of chapter #a is amended by striking section #dc 7and by striking the item relating to such section in the table of sections for such subpart74 7b7 ,conforming amendments 7#a7 ,section #ch7;b7 is amended by striking paragraph 7#f74 7#b7 ,section #feja7m7 is amended by striking #dc14 7c7 ,effective date ,the amendments made by this section shall take effect on the date of the enactment of this ,act4 #cbjf4 ,phaseout and repeal of credit for electricity produced from certain renewable resources 7a7 ,reduction of credit and phaseout amounts 7#a7 ,in general ,section #de7;b7 is amended by striking paragraph 7#b74 7#b7 ,conforming amendments ,section #de7;e77#b7 is amended-- 7,a7 by striking the inflation adjustment factor and in subparagraph 7,a71 and 7,b7 by striking subparagraph 7,b7 and redesignating subparagraph 7,c7 as subparagraph 7,b74 7#c7 ,effective date ,the amendments made by this subsection shall apply to electricity1 and refined coal1 produced and sold after ,december #ca1 #bjad4 7b7 ,special rule for determining beginning of construction 7#a7 ,in general ,section #de7;e7 is amended by adding at the end the following new paragraph3 7#ab7 ,special rule for determining beginning of construction ,for purposes of subsection 7d7 and section #dh7;a77#e71 the construction of any facility1 modification1 improvement1 addition1 or other property shall not be treated as beginning before any date unless there is a continuous program of construction which begins before such date and ends on the date that such property is placed in service4 4 7#b7 ,effective date ,the amendment made by this subsection shall apply to taxable years beginning before1 on1 or after the date of the enactment of this ,act4 7c7 ,repeal of credit 7#a7 ,in general ,subpart ,d of part ,,iv of subchapter ,a of chapter #a is amended by striking section #de 7and by striking the item relating to such section in the table of sections for such subpart74 7#b7 ,conforming amendment ,section #ch7;b7 is amended by striking paragraph 7#h74 7#c7 ,effective date ,the amendments made by this subsection shall apply to electricity1 and refined coal1 produced and sold after ,december #ca1 #bjbd4 #cbjg4 ,repeal of ,indian employment credit 7a7 ,in general ,subpart ,d of part ,,iv of subchapter ,a of chapter #a is amended by striking section #de;,a 7and by striking the item relating to such section in the table of sections for such subpart74 7b7 ,conforming amendment 7#a7 ,section #ch7;b7 is amended by striking paragraph 7#aj74 7#b7 ,section #aci;,d7c77#a7 is amended to read as follows3 7#a7 ,indian tribe ,the term ,indian tribe means any ,indian tribe1 band1 nation1 pueblo1 or other organized group or community1 including any ,alaska ,native village or regional or village corporation1 as defined in1 or established pursuant to1 the ,alaska ,native ,claims ,settlement ,act 7#dc ,u4,s4,c4 #afja et seq47 which is recognized as eligible for the special programs and services provided by the ,united ,states to ,indians because of their status as ,indians4 4 7#c7 ,section #bhj;,c7a7 is amended by striking #de;,a14 7#d7 ,section #ejjj;,a7e77#c7 is amended by striking section #de;,a7c77#f7 and inserting section #aci;,d7c77#a74 7c7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjac4 #cbjh4 ,repeal of credit for portion of employer ,social ,security taxes paid with respect to employee cash tips 7a7 ,in general ,subpart ,d of part ,,iv of subchapter ,a of chapter #a is amended by striking section #de;,b 7and by striking the item relating to such section in the table of sections for such subpart74 7b7 ,conforming amendments 7#a7 ,section #ch7;b7 is amended by striking paragraph 7#aa74 7#b7 ,section #feja7m7 is amended by striking #de;,b14 7c7 ,effective date ,the amendments made by this section shall apply with respect to tips received for services performed after ,december #ca1 #bjad4 #cbji4 ,repeal of credit for clinical testing expenses for certain drugs for rare diseases or conditions 7a7 ,in general ,subpart ,d of part ,,iv of subchapter ,a of chapter #a is amended by striking section #de;,c 7and by striking the item relating to such section in the table of sections for such subpart74 7b7 ,conforming amendments 7#a7 ,section #ch7;b7 is amended by striking paragraph 7#ab74 7#b7 ,section #bhj;,c is amended by striking subsection 7b74 7#c7 ,section #feja7m7 is amended by striking #de;,c7d77#d714 7c7 ,effective date ,the amendments made by this section shall apply to amounts paid or incurred in taxable years beginning after ,december #ca1 #bjad4 #cbaj4 ,repeal of credit for small employer pension plan startup costs 7a7 ,in general ,subpart ,d of part ,,iv of subchapter ,a of chapter #a is amended by striking section #de;,e 7and by striking the item relating to such section in the table of sections for such subpart74 7b7 ,conforming amendments ,section #ch7;b7 is amended by striking paragraph 7#ad74 7c7 ,effective date ,the amendments made by this section shall apply to costs paid or incurred after ,december #ca1 #bjad1 with respect to qualified employer plans first effective after such date4 #cbaa4 ,repeal of employer-provided child care credit 7a7 ,in general ,subpart ,d of part ,,iv of subchapter ,a of chapter #a is amended by striking section #de;,f 7and by striking the item relating to such section in the table of sections for such subpart74 7b7 ,conforming amendments 7#a7 ,section #ch7;b7 is amended by striking paragraph 7#ae74 7#b7 ,section #ajaf7;a7 is amended by striking paragraph 7#bh74 7c7 ,effective date 7#a7 ,in general ,except as otherwise provided in this subsection1 the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 7#b7 ,basis adjustments ,the amendment made by subsection 7b77#b7 shall apply to credits determined for taxable years beginning after ,december #ca1 #bjad4 #cbab4 ,repeal of railroad track maintenance credit 7a7 ,in general ,subpart ,d of part ,,iv of subchapter ,a of chapter #a is amended by striking section #de;,g 7and by striking the item relating to such section in the table of sections for such subpart74 7b7 ,conforming amendments 7#a7 ,section #ch7;b7 is amended by striking paragraph 7#af74 7#b7 ,section #ajaf7;a7 is amended by striking paragraph 7#bi74 7c7 ,effective date 7#a7 ,in general ,except as otherwise provided in this subsection1 the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjac4 7#b7 ,basis adjustments ,the amendment made by subsection 7b77#b7 shall apply to credits determined for taxable years beginning after ,december #ca1 #bjac4 #cbac4 ,repeal of credit for production of low sulfur diesel fuel 7a7 ,in general ,subpart ,d of part ,,iv of subchapter ,a of chapter #a is amended by striking section #de;,h 7and by striking the item relating to such section in the table of sections for such subpart74 7b7 ,conforming amendments 7#a7 ,section #ch7;b7 is amended by striking paragraph 7#ah74 7#b7 ,section #bhj;,c is amended by striking subsection 7d74 7#c7 ,section #feja7m7 is amended by striking #de;,h7g714 7#d7 ,section #fgbj;,a is amended-- 7,a7 by striking 7as defined in section #de;,h7c77#c77 in subsection 7a71 and 7,b7 by adding at the end the following new subsection3 7c7 ,applicable ,,epa regulations ,the term applicable ,,epa regulations means the ,highway ,diesel ,fuel ,sulfur ,control ,requirements of the ,environmental ,protection ,agency4 4 7c7 ,effective date ,the amendments made by this section shall apply to expenses paid or incurred in taxable years beginning after ,december #ca1 #bjad4 #cbad4 ,repeal of credit for producing oil and gas from marginal wells 7a7 ,in general ,subpart ,d of part ,,iv of subchapter ,a of chapter #a is amended by striking section #de;,i 7and by striking the item relating to such section in the table of sections for such subpart74 7b7 ,conforming amendment ,section #ch7;b7 is amended by striking paragraph 7#ai74 7c7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 #cbae4 ,repeal of credit for production from advanced nuclear power facilities 7a7 ,in general ,subpart ,d of part ,,iv of subchapter ,a of chapter #a is amended by striking section #de;,j 7and by striking the item relating to such section in the table of sections for such subpart74 7b7 ,conforming amendment ,section #ch7;b7 is amended by striking paragraph 7#ba74 7c7 ,effective date ,the amendments made by this section shall apply to electricity produced and sold after ,december #ca1 #bjad4 #cbaf4 ,repeal of credit for producing fuel from a nonconventional source 7a7 ,in general ,subpart ,d of part ,,iv of subchapter ,a of chapter #a is amended by striking section #de,k 7and by striking the item relating to such section in the table of sections for such subpart74 7b7 ,conforming amendments 7#a7 ,section #ch7;b7 is amended by striking paragraph 7#bb74 7#b7 ,section #de7;e77#i7 is amended-- 7,a7 in subparagraph 7,a7-- 7i7 by inserting 1 as in effect before its repeal after within the meaning of section #de,k1 and 7ii7 by inserting 7as in effect before its repeal7 after under section #de,k1 and 7,b7 in subparagraph 7,b71 by inserting 7as in effect before its repeal7 after section #de,k4 7#c7 ,section #djda7;a77#b7 is amended-- 7,a7 by striking 7as defined in section #de,k7c77#c77 in subparagraph 7,b77ii71 and 7,b7 by adding at the end the following new subparagraph3 7,c7 ,biomass ,the term 8biomass0 means any organic material other than-- 7i7 oil and natural gas 7or any product thereof71 and 7ii7 coal 7including lignite7 or any product thereof4 4 7c7 ,effective date ,the amendments made by this section shall apply to fuel produced and sold after ,december #ca1 #bjac4 #cbag4 ,repeal of new energy efficient home credit 7a7 ,in general ,subpart ,d of part ,,iv of subchapter ,a of chapter #a is amended by striking section #de,l 7and by striking the item relating to such section in the table of sections for such subpart74 7b7 ,conforming amendments 7#a7 ,section #ch7;b7 is amended by striking paragraph 7#bc74 7#b7 ,section #ajaf7;a7 is amended by striking paragraph 7#cb74 7c7 ,effective date ,the amendments made by this section shall apply to homes acquired after ,december #ca1 #bjac4 #cbah4 ,repeal of energy efficient appliance credit 7a7 ,in general ,subpart ,d of part ,,iv of subchapter ,a of chapter #a is amended by striking section #de,m 7and by striking the item relating to such section in the table of sections for such subpart74 7b7 ,conforming amendment ,section #ch7;b7 is amended by striking paragraph 7#bd74 7c7 ,effective date ,the amendments made by this section shall apply to appliances produced after ,december #ca1 #bjac4 #cbai4 ,repeal of mine rescue team training credit 7a7 ,in general ,subpart ,d of part ,,iv of subchapter ,a of chapter #a is amended by striking section #de,n 7and by striking the item relating to such section in the table of sections for such subpart74 7b7 ,conforming amendments 7#a7 ,section #ch7;b7 is amended by striking paragraph 7#ca74 7#b7 ,section #bhj;,c is amended by striking subsection 7e74 7c7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjac4 #cbbj4 ,repeal of agricultural chemicals security credit 7a7 ,in general ,subpart ,d of part ,,iv of subchapter ,a of chapter #a is amended by striking section #de,o 7and by striking the item relating to such section in the table of sections for such subpart74 7b7 ,conforming amendments 7#a7 ,section #ch7;b7 is amended by striking paragraph 7#cb74 7#b7 ,section #bhj;,c is amended by striking subsection 7f74 7c7 ,effective date ,the amendments made by this section shall apply to amounts paid or incurred after ,december #ca1 #bjab4 #cbba4 ,repeal of credit for carbon dioxide sequestration 7a7 ,in general ,subpart ,d of part ,,iv of subchapter ,a of chapter #a is amended by striking section #de,q 7and by striking the item relating to such section in the table of sections for such subpart74 7b7 ,conforming amendment ,section #ch7;b7 is amended by striking paragraph 7#cd74 7c7 ,effective date ,the amendments made by this section shall apply to credits determined for taxable years beginning after ,december #ca1 #bjad4 #cbbb4 ,repeal of credit for employee health insurance expenses of small employers 7a7 ,in general ,subpart ,d of part ,,iv of subchapter ,a of chapter #a is amended by striking section #de,r 7and by striking the item relating to such section in the table of sections for such subpart74 7b7 ,conforming amendments 7#a7 ,section #ch7;b7 is amended by striking paragraph 7#cf74 7#b7 ,section #bhj;,c is amended by striking subsection 7h74 7#c7 ,section #fjee7;b77#b7 is amended by inserting and at the end of subparagraph 7,a71 by striking 1 and at the end of subparagraph 7,b7 and inserting a period1 and by striking subparagraph 7,c74 7c7 ,effective date ,the amendments made by this section shall apply to amounts paid or incurred for taxable years beginning after ,december #ca1 #bjad4 #cbbc4 ,repeal of rehabilitation credit 7a7 ,in general ,subpart ,e of part ,,iv of subchapter ,a of chapter #a is amended by striking section #dg 7and by striking the item relating to such section in the table of sections for such subpart74 7b7 ,conforming amendments 7#a7 ,section #agj7;f77#ad77;,a7 is amended by inserting 7as in effect before its repeal by the ,tax ,reform ,act of #bjad7 after section #dg4 7#b7 ,section #agj7;h77#d7 is amended-- 7,a7 by striking 7as defined in section #dg7;c77#c77;,b77 in subparagraph 7,c77ii71 and 7,b7 by adding at the end the following new subparagraph3 7,d7 ,registered historic district ,the term registered historic district means-- 7i7 any district listed in the ,national ,register1 and 7ii7 any district-- 7,i7 which is designated under a statute of the appropriate ,state or local government1 if such statute is certified by the ,secretary of the ,interior to the ,secretary as containing criteria which will substantially achieve the purpose of preserving and rehabilitating buildings of historic significance to the district1 and 7,,ii7 which is certified by the ,secretary of the ,interior to the ,secretary as meeting substantially all of the requirements for the listing of districts in the ,national ,register4 4 7#c7 ,section #dfi7;i77#c7 is amended by striking subparagraph 7,b74 7#d7 ,section #dfi7;i77#f77;,b7 is amended-- 7,a7 by striking in the case of-- and all that follows and inserting in the case of any credit determined under section #db for any taxable year41 and 7,b7 by striking 1 rehabilitation credit1 in the heading thereof4 7#e7 ,section #dfi7k77#a7 is amended by striking 1 or any rehabilitation credit determined under section #dg14 7c7 ,effective date 7#a7 ,in general ,except as provided in paragraph 7#b71 the amendments made by this section shall apply to amounts paid after ,december #ca1 #bjad4 7#b7 ,transition rule ,in the case of qualified rehabilitation expenditures 7within the meaning of section #dg of the ,internal ,revenue ,code of #aihf as in effect before its repeal7 with respect to any building-- 7,a7 acquired by the taxpayer before ,january #a1 #bjae1 and 7,b7 with respect to which the #bd-month period selected by the taxpayer under section #dg7;c77#a77;,c7 of such ,code begins not later than ,january #a1 #bjae1 the amendments made by this section shall apply to amounts paid after ,december #ca1 #bjaf4 #cbbd4 ,repeal of energy credit 7a7 ,termination ,section #dh is amended by adding at the end the following new subsection3 7e7 ,application of section ,this section shall not apply to any energy property placed in service after ,december #ca1 #bjaf4 4 7b7 ,conforming amendments 7#a7 ,paragraph 7#b77;,a77i77,,ii71 and clauses 7ii7 and 7vii7 of paragraph 7#c77;,a71 of section #dh7;a7 are each amended by striking but only with respect to periods ending before ,january #a1 #bjag4 7#b7 ,paragraph 7#a7 of section #dh7;c7 is amended by striking subparagraph 7,d74 7#c7 ,paragraph 7#b7 of section #dh7;c7 is amended by striking subparagraph 7,d74 7#d7 ,subparagraph 7,a7 of section #dh7;c77#c7 is amended by inserting and at the end of clause 7ii71 by striking 1 and at the end of clause 7iii7 and inserting a period1 and by striking clause 7iv74 7#e7 ,paragraph 7#d7 of section #dh7;c7 is amended by striking subparagraph 7,c74 7c7 ,effective date ,the amendments made by this section shall apply to property placed in service after ,december #ca1 #bjaf4 #cbbe4 ,repeal of qualifying advanced coal project credit 7a7 ,in general ,subpart ,e of part ,,iv of subchapter ,a of chapter #a is amended by striking section #dh;,a 7and by striking the item relating to such section in the table of sections for such subpart74 7b7 ,effective date ,the amendments made by this section shall apply to allocations and reallocations after ,december #ca1 #bjad4 #cbbf4 ,repeal of qualifying gasification project credit 7a7 ,in general ,subpart ,e of part ,,iv of subchapter ,a of chapter #a is amended by striking section #dh;,b 7and by striking the item relating to such section in the table of sections for such subpart74 7b7 ,effective date ,the amendments made by this section shall apply to allocations and reallocations after ,december #ca1 #bjad4 #cbbg4 ,repeal of qualifying advanced energy project credit 7a7 ,in general ,subpart ,e of part ,,iv of subchapter ,a of chapter #a is amended by striking section #dh;,c 7and by striking the item relating to such section in the table of sections for such subpart74 7b7 ,effective date ,the amendments made by this section shall apply to allocations and reallocations after ,december #ca1 #bjad4 #cbbh4 ,repeal of qualifying therapeutic discovery project credit 7a7 ,in general ,subpart ,e of part ,,iv of subchapter ,a of chapter #a is amended by striking section #dh;,d 7and by striking the item relating to such section in the table of sections for such subpart74 7b7 ,conforming amendments ,section #bhj;,c is amended by striking the second subsection 7g7 7as added by the ,patient ,protection and ,affordable ,care ,act74 7c7 ,effective date ,the amendments made by this section shall apply to allocations and reallocations after ,december #ca1 #bjad4 #cbbi4 ,repeal of work opportunity tax credit 7a7 ,in general ,subpart ,f of part ,,iv of subchapter ,a of chapter #a is amended by striking section #ea 7and by striking the item relating to such section in the table of sections for such subpart74 7b7 ,clerical amendment ,the heading of such subpart ,f 7and the item relating to such subpart in the table of subparts for part ,,iv of subchapter ,a of chapter #a7 are each amended by striking ,rules for ,computing ,work ,opportunity ,credit and inserting ,special ,rules4 7c7 ,effective date ,the amendments made by this section shall apply to amounts paid or incurred to individuals who begin work for the employer after ,december #ca1 #bjac4 #cbcj4 ,repeal of deduction for certain unused business credits 7a7 ,in general ,part ,,vi of subchapter ,b of chapter #a is amended by striking section #aif 7and by striking the item relating to such section in the table of sections for such part74 7b7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 ,d ,accounting methods #ccja4 ,limitation on use of cash method of accounting 7a7 ,in general ,section #ddh is amended to read as follows3 #ddh4 ,limitation on use of cash method of accounting 7a7 ,in general ,the cash receipts and disbursements method of accounting may only be used by-- 7#a7 a natural person1 7#b7 a farming business1 and 7#c7 any other entity which meets the gross receipts test of subsection 7b7 for the taxable year4 ,such method may not be used by a tax shelter 7as defined in subsection 7d774 7b7 ,gross receipts test ,for purposes of this section-- 7#a7 ,in general ,an entity meets the gross receipts test of this subsection for any taxable year if the average annual gross receipts of such entity for the #c-taxable-year period ending with the taxable year which precedes such taxable year does not exceed #aj1jjj1jjj4 7#b7 ,aggregation rules ,all persons treated as a single employer under subsection 7a7 or 7b7 of section #eb or subsection 7m7 or 7o7 of section #dad shall be treated as one entity for purposes of paragraph 7#a74 7#c7 ,special rules ,for purposes of this subsection-- 7,a7 ,not in existence for entire #c-year period ,if the entity was not in existence for the entire #c-year period referred to in paragraph 7#a71 such paragraph shall be applied on the basis of the period during which such entity 7or trade or business7 was in existence4 7,b7 ,short taxable years ,gross receipts for any taxable year of less than #ab months shall be annualized by multiplying the gross receipts for the short period by #ab and dividing the result by the number of months in the short period4 7,c7 ,gross receipts ,gross receipts for any taxable year shall be reduced by returns and allowances made during such year4 7,d7 ,treatment of predecessors ,any reference in this subsection to an entity shall include a reference to any predecessor of such entity4 7c7 ,farming business ,for purposes of this section-- 7#a7 ,in general ,the term farming business means the trade or business of farming4 7#b7 ,certain trades and businesses included 7,a7 ,in general ,the term farming business shall include the trade or business of-- 7i7 operating a nursery or sod farm1 or 7ii7 the raising or harvesting of trees bearing fruit1 nuts1 or other crops1 or ornamental trees4 7,b7 ,certain evergreen trees not treated as ornamental ,for purposes of subparagraph 7,a77ii71 an evergreen tree which is more than #f years old at the time severed from the roots shall not be treated as an ornamental tree4 7d7 ,tax shelter defined ,for purposes of this section1 the term tax shelter has the meaning given such term by section #dfa7;i77#b7 7determined after application of paragraph 7#c7 thereof74 ,an ,s corporation shall not be treated as a tax shelter for purposes of this section merely by reason of being required to file a notice of exemption from registration with a ,state agency described in section #dfa7;i77#b77;,a71 but only if there is a requirement applicable to all corporations offering securities for sale in the ,state that to be exempt from such registration the corporation must file such a notice4 7e7 ,special rules ,for purposes of this section-- 7#a7 ,coordination with section #dha ,in the case of any person required by this section to change its method of accounting for any taxable year-- 7,a7 such change shall be treated as initiated by such person1 and 7,b7 such change shall be treated as made with the consent of the ,secretary4 7#b7 ,use of related parties1 etc ,the ,secretary shall prescribe such regulations as may be necessary to prevent the use of related parties1 pass-thru entities1 or intermediaries to avoid the application of this section4 4 7b7 ,conforming amendments 7#a7 ,section #ddf7;c77#a7 is amended by inserting to the extent provided in section #ddh1 before the cash receipts4 7#b7 ,section #dea is amended by adding at the end the following new subsection3 7j7 ,special rule for losses of certain service providers on accrual method of accounting 7#a7 ,in general ,in the case of any person using an accrual method of accounting with respect to amounts to be received for the performance of services by such person1 such person shall not be required to accrue any portion of such amounts which 7on the basis of such person's experience7 will not be collected if such services are in the fields of health1 law1 engineering1 architecture1 accounting1 actuarial science1 performing arts1 consulting1 or any other field identified by the ,secretary for purposes of this subsection4 7#b7 ,exception ,paragraph 7#a7 shall not apply to any amount if interest is required to be paid on such amount or there is any penalty for failure to timely pay such amount4 7#c7 ,regulations ,the ,secretary shall prescribe regulations to permit taxpayers to determine amounts referred to in paragraph 7#a7 using computations or formulas which1 based on experience1 accurately reflect the amount of income that will not be collected by such person4 ,a taxpayer may adopt1 or request consent of the ,secretary to change to1 a computation or formula that clearly reflects the taxpayer's experience4 ,a request under the preceding sentence shall be approved if such computation or formula clearly reflects the taxpayer's experience4 4 7c7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 7d7 ,change in method of accounting 7#a7 ,in general ,in the case of any qualified change in method of accounting for the taxpayer's first taxable year beginning after ,december #ca1 #bjad-- 7,a7 such change shall be treated as initiated by the taxpayer1 7,b7 such change shall be treated as made with the consent of the ,secretary of the ,treasury1 and 7,c7 if the net amount of the adjustments required to be taken into account by the taxpayer under section #dha of the ,internal ,revenue ,code of #aihf by reason of such change is positive-- 7i7 such amount shall be taken into account during the #d-taxable year period beginning with the earlier of the taxpayer's elected taxable year or the taxpayer's first taxable year beginning after ,december #ca1 #bjah1 as follows3 7,i7 #aj percent of such amount in the first taxable year in such period1 7,,ii7 #ae percent of such amount in the second taxable year in such period1 7,,iii7 #be percent of such amount in the third taxable year in such period1 and 7,,iv7 #ej percent of such amount in the fourth taxable year in such period1 and 7ii7 for purposes of applying the regulations and other guidance issued under such section 7including any provisions which require accelerated inclusion71 the period beginning with the taxpayer's first taxable year beginning after ,december #ca #bjad1 and ending with the taxable year before the first taxable year referred to in clause 7i7 shall not fail to be taken into account as part of the period of the adjustment merely because such amount is not otherwise taken into account under clause 7i7 during such period4 7#b7 ,qualified change in method of accounting ,for purposes of this subsection1 the term qualified change in method of accounting means any change in method of accounting which-- 7,a7 is required by the amendments made by this section1 or 7,b7 was prohibited under the ,internal ,revenue ,code of #aihf prior to such amendments and is permitted under such ,code after such amendments4 7#c7 ,elected taxable year ,for purposes of this subsection1 the term elected taxable year means such taxable year as the taxpayer may elect 7at such time and in such form and manner as the ,secretary may provide7 which begins after ,december #ca1 #bjad1 and is before the taxpayer's second taxable year beginning after ,december #ca1 #bjah4 #ccjb4 ,rules for determining whether taxpayer has adopted a method of accounting 7a7 ,in general ,section #ddf is amended by adding at the end the following new subsection3 7g7 ,rules for treating accounting method as adopted by taxpayer ,if the taxpayer uses a method of accounting with respect to any item on any return of tax-- 7#a7 in the case of any method of accounting which the taxpayer is permitted to use with respect to such item1 such method shall be treated as having been adopted by the taxpayer with respect to such item1 and 7#b7 in the case of any method of accounting which the taxpayer is not permitted to use with respect to such item1 such method shall be treated as having been adopted by the taxpayer with respect to such item if the taxpayer used the same method with respect to such item on the return of tax for the preceding taxable year4 4 7b7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 #ccjc4 ,certain special rules for taxable year of inclusion 7a7 ,inclusion not later than for financial accounting purposes ,section #dea is amended by redesignating subsections 7b7 through 7j7 as subsection 7c7 through 7k71 respectively1 and by inserting after subsection 7a7 the following new subsection3 7b7 ,inclusion not later than for financial accounting purposes 7#a7 ,in general ,in the case of a taxpayer the taxable income of which is computed under the accrual method of accounting1 the amount of any portion of any item of income shall be included in gross income not later than the taxable year with respect to which such amount is taken into account as income in-- 7,a7 an audited financial statement of the taxpayer described in section #abba7;b77#c77;,b71 or 7,b7 such other financial statement as the ,secretary may specify for purposes of this subsection4 7#b7 ,coordination with special rules for long-term contracts ,paragraph 7#a7 shall not apply with respect to any item of income to which section #dfj applies4 4 7b7 ,treatment of advance payments ,section #dea1 as amended by subsection 7a71 is amended by redesignating subsections 7c7 through 7k7 as subsections 7d7 through 7l71 respectively1 and by inserting after subsection 7b7 the following new subsection3 7c7 ,treatment of advance payments 7#a7 ,in general ,a taxpayer which computes taxable income under the accrual method of accounting1 and receives any advance payment during the taxable year1 shall-- 7,a7 except as provided in subparagraph 7,b71 include such advance payment in gross income for such taxable year1 or 7,b7 if the taxpayer elects the application of this subparagraph with respect to the category of advance payments to which such advance payment belongs1 the taxpayer shall-- 7i7 to the extent that any portion of such advance payment is required under subsection 7b7 to be included in gross income in the taxable year in which such payment is received1 so include such portion1 and 7ii7 include the remaining portion of such advance payment in gross income in the taxable year following the taxable year in which such payment is received4 7#b7 ,election 7,a7 ,in general ,except as otherwise provided in this paragraph1 the election under paragraph 7#a77;,b7 shall be made at such time1 in such form and manner1 and with respect to such categories of advance payments1 as the ,secretary may provide4 7,b7 ,period to which election applies ,an election under paragraph 7#a77;,b7 shall be effective for the taxable year with respect to which it is first made and for all subsequent taxable years1 unless the taxpayer secures the consent of the ,secretary to revoke such election4 ,for purposes of this title1 the computation of taxable income under an election made under paragraph 7#a77;,b7 shall be treated as a method of accounting4 7#c7 ,advance payment ,for purposes of this subsection-- 7,a7 ,in general ,the term advance payment means any payment-- 7i7 the full inclusion of which in the gross income of the taxpayer for the taxable year of receipt is a permissible method of accounting under this section 7determined without regard to this subsection71 and 7ii7 which is for goods1 services1 or such other items as may be identified by the ,secretary for purposes of this clause4 7,b7 ,exclusions ,except as otherwise provided by the ,secretary1 such term shall not include-- 7i7 rent1 7ii7 insurance premiums1 7iii7 payments with respect to financial instruments1 7iv7 payments with respect to warranty or guarantee contracts under which a third party is the primary obligor1 7v7 payments subject to section #hga7;a71 #hha1 #adda1 or #addb1 7vi7 payments in property to which section #hc applies1 and 7vii7 any other payment identified by the ,secretary for purposes of this subparagraph4 4 7c7 ,crop insurance proceeds and disaster payments ,section #dea1 as amended by subsections 7a7 and 7b71 is amended by striking subsection 7f74 7d7 ,livestock sold on account of drought1 flood1 and other weather-,related conditions ,section #dea1 as amended by subsections 7a7 and 7b71 is amended by striking subsection 7g74 7e7 ,sales or dispositions ,to implement ,federal ,energy ,regulatory ,commission or ,state electric restructuring policy ,section #dea1 as amended by subsections 7a7 and 7b71 is amended by striking subsection 7k74 7f7 ,conforming amendments ,section #dea1 as amended by subsections 7a71 7b71 7c71 7d71 and 7e71 is amended by redesignating subsections 7h71 7i71 7j71 and 7l7 as subsections 7f71 7g71 7h71 and 7i71 respectively4 7g7 ,effective dates 7#a7 ,in general ,except as otherwise provided in this subsection1 the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 7#b7 ,crop insurance proceeds and disaster payments -- 7,a7 ,in general ,except as provided in subparagraph 7,b71 the amendments made by subsection 7c7 shall apply to destruction and damage of crops occurring after ,december #ca1 #bjad4 7,b7 ,inability to plant ,in the case of inability to plant crops because of a natural disaster1 the amendments made by subsection 7c7 shall apply to natural disasters occurring after ,december #ca1 #bjad4 7#c7 ,livestock ,the amendments made by subsection 7d7 shall apply to sales and exchanges after ,december #ca1 #bjad4 7#d7 ,sales or dispositions to implement electric restructuring policy ,the amendments made by subsection 7e7 shall apply to sales and dispositions after ,december #ca1 #bjac4 7#e7 ,change in method of accounting ,in the case of any taxpayer required by the amendments made by subsections 7a7 and 7b7 to change its method of accounting for its first taxable year beginning after ,december #ca1 #bjad-- 7,a7 such change shall be treated as initiated by the taxpayer1 and 7,b7 such change shall be treated as made with the consent of the ,secretary of the ,treasury4 #ccjd4 ,installment sales 7a7 ,repeal of exceptions to treatment as dealer dispositions ,section #dec7l7 is amended to read as follows3 7l7 ,dealer dispositions ,for purposes of subsection 7b77#b77;,a71 the term dealer disposition means any of the following dispositions3 7#a7 ,personal property ,any disposition of personal property by a person who regularly sells or otherwise disposes of personal property of the same type on the installment plan4 7#b7 ,real property ,any disposition of real property which is held by the taxpayer for sale to customers in the ordinary course of the taxpayer's trade or business4 4 7b7 ,modification of rules for nondealers 7#a7 ,repeal of special rule for interest payments ,section #dec;,a7b77#b7 is amended to read as follows3 7#b7 ,interest payment exception for obligations not outstanding at close of taxable year ,subsection 7a77#a7 shall apply to an obligation described in paragraph 7#a7 arising during any taxable year only if such obligation is outstanding as of the close of such taxable year4 4 7#b7 ,repeal of exception for farm property ,section #dec;,a7b77#c7 is amended-- 7,a7 by striking from the disposition-- and all that follows and inserting from the disposition by an individual of personal use property 7within the meaning of section #abge7;b77#c7741 and 7,b7 by striking and farm in the heading4 7#c7 ,repeal of special rule for timeshares and residential lots ,section #dec;,a7b7 is amended by striking paragraph 7#d7 and by redesignating paragraph 7#e7 as paragraph 7#d74 7#d7 ,conforming amendment ,section #dec;,a7c7 is amended-- 7,a7 by striking the applicable percentage of in paragraph 7#b77;,a71 and 7,b7 by striking paragraph 7#d7 and by redesignating paragraphs 7#e7 and 7#f7 as paragraphs 7#d7 and 7#e71 respectively4 7c7 ,effective date ,the amendments made by this section shall apply to sales and other dispositions after ,december #ca1 #bjad4 #ccje4 ,repeal of special rule for prepaid subscription income 7a7 ,in general ,subpart ,b of part ,,ii of subchapter ,e of chapter #a is amended by striking section #dee 7and by striking the item relating to such section in the table of sections for such subpart74 7b7 ,effective date ,the amendments made by this section shall apply to payments received after ,december #ca1 #bjad4 #ccjf4 ,repeal of special rule for prepaid dues income of certain membership organizations 7a7 ,in general ,subpart ,b of part ,,ii of subchapter ,e of chapter #a is amended by striking section #def 7and by striking the item relating to such section in the table of sections for such subpart74 7b7 ,conforming amendment ,section #bgg7;b77#b7 is amended by inserting 7as in effect before its repeal7 after section #def7;c74 7c7 ,effective date ,the amendments made by this section shall apply to payments received after ,december #ca1 #bjad4 #ccjg4 ,repeal of special rule for magazines1 paperbacks1 and records returned after close of the taxable year 7a7 ,in general ,subpart ,b of part ,,ii of subchapter ,e of chapter #a is amended by striking section #deh 7and by striking the item relating to such section in the table of sections for such subpart74 7b7 ,effective date 7#a7 ,in general ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 7#b7 ,change in method of accounting ,in the case of any taxpayer required by the amendments made by this section to change its method of accounting for its first taxable year beginning after ,december #ca1 #bjad-- 7,a7 such change shall be treated as initiated by the taxpayer1 and 7,b7 such change shall be treated as made with the consent of the ,secretary of the ,treasury4 #ccjh4 ,modification of rules for long-term contracts 7a7 ,repeal of exception for home construction contracts ,paragraph 7#a7 of section #dfj7;e7 is amended to read as follows3 7#a7 ,exception for certain construction contracts ,subsections 7a71 7b71 and 7c77#a7 and 7#b7 shall not apply to any construction contract entered into by a taxpayer-- 7,a7 who estimates 7at the time such contract is entered into7 that such contract will be completed within the #b-year period beginning on the contract commencement date of such contract1 and 7,b7 whose average annual gross receipts for the #c taxable years preceding the taxable year in which such contract is entered into do not exceed #aj1jjj1jjj4 ,for purposes of this paragraph1 rules similar to the rules of paragraphs 7#b7 and 7#c7 of section #ddh7;b7 shall apply4 4 7b7 ,repeal of special rule for other residential construction contracts ,section #dfj7;e7 is amended by striking paragraphs 7#e7 and 7#f74 7c7 ,repeal of special rules for qualified ship contracts 7#a7 ,in general ,section #ajbjc7;b7 of the ,revenue ,act of #aihg is amended by striking paragraph 7#b74 7#b7 ,qualified naval ship contracts ,the ,american ,jobs ,creation ,act of #bjjd is amended by striking section #gjh4 7d7 ,conforming amendments ,section #dfj7;e7 is amended by striking paragraphs 7#b7 and 7#c7 and by redesignating paragraph 7#d7 as paragraph 7#b74 7e7 ,effective date ,the amendments made by this section shall apply to contracts entered into after ,december #ca1 #bjad4 #ccji4 ,nuclear decommissioning reserve funds 7a7 ,gross income on nuclear decommissioning reserve funds taxed at corporate rate ,section #dfh;,a7e77#b7 is amended by striking at the rate of #bj percent and inserting at a rate equal to the maximum rate in effect for such taxable year under section #aa4 7b7 ,income inclusion upon disqualified distribution ,section #dfh;,a7c77#a7 is amended by striking and at the end of subparagraph 7,a71 by striking the period at the end of subparagraph 7,b7 and inserting 1 and1 and by adding at the end the following new subparagraph3 7,c7 if any distribution is made from the ,fund during such taxable year which is not used as provided in subsection 7e77#d71 the balance of the ,fund determined immediately before such distribution4 4 7c7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 #ccaj4 ,repeal of last-in1 first-out method of inventory 7a7 ,in general ,section #dga is amended by redesignating subsection 7c7 as subsection 7d7 and by inserting after subsection 7b7 the following new subsection3 7c7 ,last-,in1 first-,out method not permissible ,the last-in1 first-out method of determining inventories shall in no event be treated as clearly reflecting income4 4 7b7 ,conforming amendments 7#a7 ,subpart ,d of part ,,ii of subchapter ,e of chapter #a is amended by striking sections #dgb1 #dgc1 and #dgd 7and by striking the items relating to such sections in the table of sections for such subpart74 7#b7 7,a7 ,section #cab7n71 as amended by the preceding provisions of this ,act1 is amended by striking paragraph 7#c7 and by redesignating paragraphs 7#d7 through 7#g7 as paragraphs 7#c7 through 7#f71 respectively4 7,b7 ,section #cab7n77#f71 as amended by the preceding provisions of this ,act1 is amended-- 7i7 by striking paragraphs 7#d7 and 7#f7 in subparagraph 7,a7 and inserting paragraph 7#d71 and 7ii7 by striking paragraph 7#e7 in subparagraph 7,b7 and inserting paragraph 7#c74 7,c7 ,section #cja7;e77#c71 as amended by the preceding provisions of this ,act1 is amended-- 7i7 by striking paragraph 7#f7 and inserting paragraph 7#e71 and 7ii7 by striking section #cab7n77#f7 in the heading and inserting section #cab7n77#e74 7,d7 ,section #ieb7;c77#c71 as amended by the preceding provisions of this ,act1 is amended by striking paragraphs 7#c71 7#d71 and 7#e7 and inserting paragraphs 7#b71 7#c71 and 7#d74 7,e7 ,section #abic7;e77#c71 as amended by the preceding provisions of this ,act1 is amended by striking paragraphs 7#c71 7#d71 and 7#e7 and inserting paragraphs 7#b71 7#c71 and 7#d74 7,f7 ,section #aejc7;e77#b77;,c71 as amended by the preceding provisions of this ,act1 is amended-- 7i7 by striking paragraph 7#f7 and inserting paragraph 7#e71 and 7ii7 by striking section #cab7n77#f7 in the heading and inserting section #cab7n77#e74 7#c7 ,section #acfc is amended by striking subsection 7d74 7c7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 7d7 ,change in method of accounting 7#a7 ,in general ,in the case of any taxpayer required by the amendments made by this section to change its method of accounting for its first taxable year beginning after ,december #ca1 #bjad-- 7,a7 such change shall be treated as initiated by the taxpayer1 7,b7 such change shall be treated as made with the consent of the ,secretary of the ,treasury1 and 7,c7 if the net amount of the adjustments required to be taken into account by the taxpayer under section #dha of the ,internal ,revenue ,code of #aihf by reason of such change is positive-- 7i7 such amount shall be taken into account during the #d-taxable year period beginning with the earlier of the taxpayer's elected taxable year or the taxpayer's first taxable year beginning after ,december #ca1 #bjah1 as follows3 7,i7 #aj percent of such amount in the first taxable year in such period1 7,,ii7 #ae percent of such amount in the second taxable year in such period1 7,,iii7 #be percent of such amount in the third taxable year in such period1 and 7,,iv7 #ej percent of such amount in the fourth taxable year in such period1 and 7ii7 for purposes of applying the regulations and other guidance issued under such section 7including any provisions which require accelerated inclusion71 the period beginning with the taxpayer's first taxable year beginning after ,december #ca #bjad1 and ending with the taxable year before the first taxable year referred to in clause 7i7 shall not fail to be taken into account as part of the period of the adjustment merely because such amount is not otherwise taken into account under clause 7i7 during such period4 7#b7 ,elected taxable year ,for purposes of this subsection1 the term elected taxable year means such taxable year as the taxpayer may elect 7at such time and in such form and manner as the ,secretary may provide7 which begins after ,december #ca1 #bjad1 and is before the taxpayer's second taxable year beginning after ,december #ca1 #bjah4 7#c7 ,reduction in amount of adjustment for closely-held entities 7,a7 ,in general ,in the case of any closely-held entity1 paragraph 7#a77;,c7 shall be applied by treating any reference to such amount as a reference to #bj percent 7#bh percent in the case of a ,c corporation7 of such amount4 7,b7 ,closely-held entity ,for purposes of this paragraph-- 7i7 ,in general ,the term closely-held entity means any domestic corporation or domestic partnership which-- 7,i7 is not an ineligible entity1 7,,ii7 does not have more than #ajj shareholders or partners 7as the case may be71 and 7,,iii7 does not have as a shareholder or partner a person 7other than an estate1 a trust described in section #acfa7;c77#b7 of the ,internal ,revenue ,code of #aihf1 or an organization described section #acfa7;c77#f7 of such ,code7 who is not an individual4 7ii7 ,certain subsidiaries ,an entity shall not fail to be treated as a closely-held entity by reason of clause 7i77,,iii7 if all of the interests in such entity are held by a single closely-held entity 7determined without regard to this clause7 and individuals taken into account under clause 7i77,,ii7 with respect to such entity4 ,in the case of tiered entities 7other than the top tier entity71 the preceding sentence shall be applied-- 7,i7 by substituting 7determined after application of this clause7 for 7determined without regard to this clause71 and 7,,ii7 by substituting with respect to the top tier entity for with respect to such entity4 7iii7 ,ineligible entity ,the term ineligible entity means any entity described in section #acfa7;b77#b7 of the ,internal ,revenue ,code of #aihf applied by substituting corporation or partnership for corporation each place it appears4 7iv7 ,date of determination ,the status of any entity as a closely-held entity shall be determined as of ,february #bf1 #bjad4 7v7 ,sole proprietors ,an individual operating a trade or business shall be treated as a closely-held entity4 7,c7 ,certain transfers disregarded 7i7 ,in general ,in the case of any specified inventory transfer1 the adjustments referred to in paragraph 7#a77;,c7 shall be determined-- 7,i7 with respect to the transferor1 as though the property transferred continued to be held at all times by such transferor1 and 7,,ii7 with respect to the transferee1 as though such property was never transferred to such transferee4 7ii7 ,specified inventory transfer ,the term specified inventory transfer means any transfer of property described in section #abba7;a77#a7 if-- 7,i7 such transfer is to a closely-held entity from any person who is not a closely-held entity1 7,,ii7 such transfer is on or after ,february #bf1 #bjad1 and before the beginning of the transferor's first taxable year beginning after ,december #ca1 #bjad1 and 7,,iii7 the basis of such property in the hands of the transferee immediately after such transfer is either determined by reference to the basis of such property in the hands of the transferor or is less than the fair market value of such property at the time of such transfer4 #ccaa4 ,repeal of lower of cost or market method of inventory 7a7 ,in general ,section #dga1 as amended by the preceding provisions of this ,act1 is amended by redesignating subsection 7d7 as subsection 7e7 and by inserting after subsection 7c7 the following new subsection3 7d7 ,lower of cost or market method not permissible ,the lower of cost or market method of determining inventories shall in no event be treated as clearly reflecting income4 ,for purposes of the preceding sentence1 the lower of cost or market shall include the lower of cost or bona fide net selling price4 4 7b7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 7c7 ,change in method of accounting 7#a7 ,in general ,in the case of any taxpayer required by the amendments made by this section to change its method of accounting for its first taxable year beginning after ,december #ca1 #bjad-- 7,a7 such change shall be treated as initiated by the taxpayer1 7,b7 such change shall be treated as made with the consent of the ,secretary of the ,treasury1 and 7,c7 if the net amount of the adjustments required to be taken into account by the taxpayer under section #dha of the ,internal ,revenue ,code of #aihf by reason of such change is positive-- 7i7 such amount shall be taken into account during the #d-taxable year period beginning with the earlier of the taxpayer's elected taxable year or the taxpayer's first taxable year beginning after ,december #ca1 #bjah1 as follows3 7,i7 #aj percent of such amount in the first taxable year in such period1 7,,ii7 #ae percent of such amount in the second taxable year in such period1 7,,iii7 #be percent of such amount in the third taxable year in such period1 and 7,,iv7 #ej percent of such amount in the fourth taxable year in such period1 and 7ii7 for purposes of applying the regulations and other guidance issued under such section 7including any provisions which require accelerated inclusion71 the period beginning with the taxpayer's first taxable year beginning after ,december #ca #bjad1 and ending with the taxable year before the first taxable year referred to in clause 7i7 shall not fail to be taken into account as part of the period of the adjustment merely because such amount is not otherwise taken into account under clause 7i7 during such period4 7#b7 ,elected taxable year ,for purposes of this subsection1 the term elected taxable year means such taxable year as the taxpayer may elect 7at such time and in such form and manner as the ,secretary may provide7 which begins after ,december #ca1 #bjad1 and is before the taxpayer's second taxable year beginning after ,december #ca1 #bjah4 #ccab4 ,modification of rules for capitalization and inclusion in inventory costs of certain expenses 7a7 #aj1jjj1jjj gross receipts exception ,to apply to property produced by the taxpayer ,section #bfc;,a7b7 is amended by striking all that follows paragraph 7#a7 and inserting the following new paragraphs3 7#b7 ,property acquired for resale ,real or personal property described in section #abba7;a77#a7 which is acquired by the taxpayer for resale4 7#c7 ,exception for taxpayer with gross receipts of #aj1jjj1jjj or less ,this section shall not apply to any property produced or acquired by the taxpayer during any taxable year if the average annual gross receipts of the taxpayer 7or any predecessor7 for the #c-taxable year period ending with the taxable year preceding such taxable year do not exceed #aj1jjj1jjj4 ,for purposes of this paragraph1 rules similar to the rules of paragraphs 7#b7 and 7#c7 of section #ddh7;b7 shall apply4 7#d7 ,films1 sound recordings1 books1 etc ,for purposes of this subsection1 the term tangible personal property shall include a film1 sound recording1 video tape1 book1 or similar property4 4 7b7 ,repeal of exceptions for timber and certain ornamental trees ,section #bfc;,a7c7 is amended by striking paragraph 7#e74 7c7 ,repeal of exception for qualified creative expenses ,section #bfc;,a is amended by striking subsection 7h74 7d7 ,effective date 7#a7 ,in general ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 7#b7 ,change in method of accounting ,in the case of any taxpayer required by the amendments made by this section to change its method of accounting for its first taxable year beginning after ,december #ca1 #bjad-- 7,a7 such change shall be treated as initiated by the taxpayer1 and 7,b7 such change shall be treated as made with the consent of the ,secretary of the ,treasury4 #ccac4 ,modification of income forecast method 7a7 ,extension of forecast period 7#a7 ,in general ,paragraph 7#a7 of section #afg7;g7 is amended by striking #ajth each place it appears and inserting #bjth4 7#b7 ,modification of recomputation years ,paragraph 7#d7 of section #afg7;g7 is amended by striking the #c;d and the #ajth and inserting the #eth1 #ajth1 #aeth1 and #bjth4 7b7 ,modification of rules for treatment of participations and residuals ,paragraph 7#g7 of section #afg7;g7 is amended to read as follows3 7#g7 ,treatment of participations and residuals 7,a7 ,in general ,in the case of any participation or residual with respect to any property to which this subsection applies 7including any property to which section #afh applies by reason of paragraph 7#h771 the taxpayer-- 7i7 shall exclude such participation or residual from the adjusted basis of such property1 and 7ii7 shall be allowed a deduction for such participation or residual in the taxable year in which such participation or residual is paid4 7,b7 ,participations and residuals ,for purposes of this paragraph1 the term participation or residual means1 with respect to any property1 any cost the amount of which by contract varies with the amount of income earned in connection with such property4 4 7c7 ,election ,to utilize #bj-,year straight line recovery ,subsection 7g7 of section #afg is amended by redesignating 7#h7 as paragraph 7#i7 and by inserting after paragraph 7#g7 the following new paragraph3 7#h7 ,election to utilize #bj-year straight line recovery ,if the taxpayer elects the application of this paragraph for any taxable year1 the depreciation deduction allowable with respect to any property placed in service by the taxpayer during such taxable year which would otherwise be determined under paragraph 7#a7 shall be determined under section #afh-- 7,a7 by treating the straight line method as the applicable depreciation method1 and 7,b7 by treating #bj years as the applicable recovery period4 4 7d7 ,repeal of special rules for certain musical works and copyrights ,subsection 7g7 of section #afg1 as amended by subsection 7c71 is amended by striking paragraph 7#i74 7e7 ,safe harbor amortization of certain intangible assets ,effective for property placed in service after ,december #ca1 #bjad1 the ,secretary of the ,treasury1 or the ,secretary's designee1 shall revise ,treasury ,regulation section #a4afg7;a7-#c7;b7 7and such regulation shall be applied7 such that the safe harbor amortization for certain intangible assets to which such regulation applies shall allow the taxpayer to treat such asset as having a useful life equal to #bj years 7and not #ae years74 7f7 ,effective date ,the amendments made by this section shall apply to property placed in service after ,december #ca1 #bjad4 #ccad4 ,repeal of averaging of farm income 7a7 ,in general ,subchapter ,q of chapter #a is amended by striking part ,i 7and by striking the item relating to such part in the table of parts for such subchapter74 7b7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 #ccae4 ,treatment of patent or trademark infringement awards 7a7 ,in general ,part ,,ii of subchapter ,b of chapter #a is amended by adding at the end the following new section3 #ia4 ,patent or trademark infringement awards 7a7 ,in general ,except as provided in subsection 7b71 any payment received for infringement of any patent or trademark 7whether by reason of judgment or settlement7 shall be included in gross income as ordinary income4 7b7 ,impairment of capital ,if the taxpayer demonstrates to the satisfaction of the ,secretary that a payment described in subsection 7a7 constitutes damages received by reason of the reduction in value of property of the taxpayer caused by the infringement referred to in subsection 7a7-- 7#a7 the taxpayer's basis in such property shall be reduced 7but not below zero7 by the amount of such payment1 and 7#b7 subsection 7a7 shall apply to so much of such payment as exceeds the amount of the reduction under paragraph 7#a74 4 7b7 ,conforming amendments 7#a7 ,section #ajaf7;a7 is amended by adding at the end the following new paragraph3 7#ch7 to the extent provided in section #ia7;b77#a71 4 7#b7 ,the table of sections for part ,,ii of subchapter ,b of chapter #a is amended by adding at the end the following new item3 ,sec4 #ia4 ,patent or trademark infringement awards4 4 7c7 ,effective date ,the amendments made by this section shall apply to payments received pursuant to judgments and settlements after ,december #ca1 #bjad4 #ccaf4 ,repeal of redundant rules with respect to carrying charges 7a7 ,in general ,part ,,ix of subchapter ,b of chapter #a is amended by striking section #bff 7and by striking the item relating to such section in the table of sections for such subpart74 7b7 ,conforming amendments 7#a7 ,section #afc7n7 is amended by striking paragraph 7#c7 and by redesignating paragraphs 7#d7 and 7#e7 as paragraphs 7#c7 and 7#d71 respectively4 7#b7 ,section #ajaf7;a77#a77;,a77i71 as amended by section #cead1 is amended by striking described in section #bff4 7c7 ,effective date ,the amendments made by this section shall apply to amounts paid or incurred after ,december #ca1 #bjad4 #ccag4 ,repeal of recurring item exception for spudding of oil or gas wells 7a7 ,in general ,section #dfa7;i7 is amended by striking paragraph 7#b7 and by redesignating paragraphs 7#c71 7#d71 and 7#e7 as paragraphs 7#b71 7#c71 and 7#d71 respectively4 7b7 ,effective date ,the amendment made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 ,e ,financial ,instruments #a ,derivatives and hedges #cdja4 ,treatment of certain derivatives 7a7 ,in ,general ,subchapter ,e of chapter #a is amended by adding at the end the following new part3 ,,iv ,derivatives ,sec4 #dhe4 ,treatment of certain derivatives4 ,sec4 #dhf4 ,derivative defined4 #dhe4 ,treatment of certain derivatives 7a7 ,in general ,for purposes of this subtitle-- 7#a7 any derivative held by a taxpayer at the close of the taxable year shall be treated as sold for its fair market value on the last business day of such taxable year 7and any gain or loss shall be taken into account for the taxable year71 and 7#b7 proper adjustment shall be made in the amount of any gain or loss subsequently realized for gain or loss taken into account by reason of paragraph 7#a74 7b7 ,treatment as ordinary income or loss2 allowance as net operating loss ,all items of income1 gain1 loss1 and deduction with respect to any derivative-- 7#a7 shall be treated as ordinary income or loss1 and 7#b7 shall be treated for purposes of section #agb7;d77#d7 as attributable to a trade or business of the taxpayer4 7c7 ,mark to market of certain offsetting positions 7#a7 ,in general ,in the case of any straddle which includes any derivative1 subsections 7a7 and 7b7 shall apply to all positions comprising such straddle in the same manner as such subsections apply to such derivative4 7#b7 ,application to built-in gain positions 7,a7 ,in general ,in the case of any built-in gain position to which subsection 7a7 applies by reason of paragraph 7#a7-- 7i7 in addition to any other time at which such position is treated as sold under subsection 7a77#a71 such position shall be treated as sold for its fair market value at the time that the straddle is established with respect to such position1 7ii7 proper adjustment shall be made in the amount of any gain or loss subsequently realized for gain taken into account by reason of clause 7i71 and 7iii7 subsection 7b7 shall not apply to any gain taken into account by reason of clause 7i74 7,b7 ,built-in gain position ,for purposes of this subsection1 the term built-in gain position means any position 7other than a derivative to which subsection 7a7 applies7 with respect to which a gain would be realized if such position were sold for its fair market value at the time that the straddle is established with respect to such position4 7,c7 ,exception for straight debt ,subparagraph 7,a7 shall not apply to any position with respect to debt if-- 7i7 the interest payments 7or other similar amounts7 with respect to such position meet the requirements of section #hfj;,g7a77#a77;,b77i71 and 7ii7 such position is not convertible 7directly or indirectly7 into stock of the issuer or any related person4 7,d7 ,exception for straddles consisting of qualified covered call options and the optioned stock ,subparagraph 7,a7 shall not apply to any position which is part of a straddle if-- 7i7 all the offsetting positions which are part of such straddle consist of #a or more qualified covered call options 7as defined in paragraph 7#f77 and the stock to be purchased from the taxpayer under such options1 and 7ii7 such straddle is not part of a larger straddle4 7#c7 ,application to built-in loss positions 7,a7 ,in general ,in the case of any built-in loss position to which subsection 7a7 applies by reason of paragraph 7#a71 any gain or loss realized under subsection 7a77#a7 shall be properly adjusted so as not to take into account the loss referred to in subparagraph 7,b7 with respect to such position4 7,b7 ,built-in loss position ,for purposes of subparagraph 7,a71 the term built-in loss position means any position 7other than a derivative to which subsection 7a7 applies7 with respect to which a loss would be realized if such position were sold for its fair market value at the time that the straddle is established with respect to such position4 7#d7 ,holding period of non-derivatives ,for purposes of section #abbb1 in the case of any position to which subsection 7a7 applies by reason of paragraph 7#a71 the holding period of such position shall not include-- 7,a7 the period during which subsection 7a7 applies to such position1 and 7,b7 in the case of a built-in gain position1 the period before such position is treated as sold under paragraph 7#b77;,a74 7#e7 ,straddle ,for purposes of this section-- 7,a7 the term straddle has the meaning given such term by section #ajib7;c7 applied by treating all offsetting positions as being with respect to personal property1 and 7,b7 the term position includes any derivative4 7#f7 ,qualified covered call options 7,a7 ,in general ,for purposes of paragraph 7#b77;,d71 the term qualified covered call option means any option granted by the taxpayer to purchase stock held by the taxpayer 7or stock acquired by the taxpayer in connection with the granting of the option7 but only if-- 7i7 such option is traded on a national securities exchange which is registered with the ,securities and ,exchange ,commission or other market which the ,secretary determines has rules adequate to carry out the purposes of this paragraph1 7ii7 such option is granted-- 7,i7 more than #cj days before the day on which the option expires1 and 7,,ii7 not more than #ij days before the day on which the option expires1 7iii7 such option is not granted by an options dealer 7as defined in subparagraph 7,b77 in connection with such dealer's activity of dealing in options1 and 7iv7 gain or loss with respect to such option would not be ordinary income or loss if determined without regard to this section4 7,b7 ,options dealer ,for purposes of subparagraph 7,a71 the term options dealer means-- 7i7 any person registered with an appropriate national securities exchange as a market maker or specialist in listed options1 and 7ii7 to the extent provided by the ,secretary consistent with the purposes of this paragraph1 any person whom the ,secretary determines performs functions similar to the persons described in clause 7i74 7,c7 ,regulations ,the ,secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this paragraph and paragraph 7#b77;,d74 ,such regulations may include modifications to the provisions of this paragraph and paragraph 7#b77;,d7 which are appropriate to take account of changes in the practices of option exchanges or to prevent the use of options for tax avoidance purposes4 7d7 ,terminations1 etc 7#a7 ,in general ,the rules of subsections 7a7 and 7b7 shall also apply to the termination 7or transfer7 during the taxable year of the taxpayer's obligation 7or rights7 with respect to a derivative by offsetting1 by taking or making delivery1 by exercise or being exercised1 by assignment or being assigned1 by lapse1 by expiration1 by settlement1 or otherwise4 7#b7 ,mark to market of all positions in straddle if any position terminated or transferred ,if paragraph 7#a7 applies with respect to any position which is part of a straddle1 the rules of subsections 7a7 and 7b7 shall apply to every position which is part of such straddle4 7e7 ,determination of fair market value ,for purposes of this section-- 7#a7 ,terminations1 etc ,for purposes of subsection 7d71 fair market value shall be determined at the time of the termination 7or transfer74 7#b7 ,blockage factor not taken into account ,to the extent provided in regulations prescribed by the ,secretary1 fair market value shall be determined without regard to any premium or discount based on the proportion of the total available trading units which are held4 7f7 ,coordination with certain rules ,the rules of sections #bfc7;g7 and #bfc;,a shall not apply to any derivative or other position to which subsection 7a7 applies1 and section #ajia shall not apply 7and section #ajib shall apply7 to any loss recognized under subsection 7a74 #dhf4 ,derivative defined 7a7 ,in general ,for purposes of this part1 except as otherwise provided in this section1 the term derivative means any contract 7including any option1 forward contract1 futures contract1 short position1 swap1 or similar contract7 the value of which1 or any payment or other transfer with respect to which1 is 7directly or indirectly7 determined by reference to one or more of the following3 7#a7 ,any share of stock in a corporation4 7#b7 ,any partnership or beneficial ownership interest in a partnership or trust4 7#c7 ,any evidence of indebtedness4 7#d7 ,except as provided in subsection 7d71 any real property4 7#e7 ,any commodity which is actively traded 7within the meaning of section #ajib7;d77#a774 7#f7 ,any currency4 7#g7 ,any rate1 price1 amount1 index1 formula1 or algorithm4 7#h7 ,any other item as the ,secretary may prescribe4 ,such term shall not include any item described in paragraphs 7#a7 through 7#h74 7b7 ,exceptions 7#a7 ,certain real property 7,a7 ,in general ,for purposes of subsection 7a77#d71 the term real property shall not include-- 7i7 a tract of real property 7as defined in section #abcg7;c771 or 7ii7 any real property which would be property described in section #abba7;a77#a7 with respect to the taxpayer if held directly by the taxpayer4 7,b7 ,regulations ,the ,secretary shall prescribe regulations or other guidance under which multiple tracts of real property may be treated as a single tract of real property for purposes of subparagraph 7,a77i7 if the contract referred to in subsection 7a7 is of a type which is designed to facilitate the acquisition or disposition of such real property4 7#b7 ,hedging transactions 7,a7 ,in general ,for purposes of this part1 the term derivative shall not include any contract which is part of a hedging transaction 7as defined in section #abba7;b774 7,b7 ,section #ihh hedging transactions ,for exception for section #ihh hedging transactions1 see section #ihh7;d77#a74 7#c7 ,securities lending1 sale-repurchase1 and similar financing transactions ,to the extent provided by the ,secretary1 for purposes of this part1 the term derivative shall not include the right to the return of the same or substantially identical securities transferred in a securities lending transaction1 sale-repurchase transaction1 or similar financing transaction4 7#d7 ,options received in connection with the performance of services ,for purposes of this part1 the term derivative shall not include any option described in section #hc7;e77#c7 received in connection with the performance of services4 7#e7 ,insurance contracts1 annuities1 and endowments ,for purposes of this part1 the term derivative shall not include any insurance1 annuity1 or endowment contract issued by an insurance company to which subchapter ,l applies 7or issued by any foreign corporation to which such subchapter would apply if such foreign corporation were a domestic corporation74 7#f7 ,derivatives with respect to stock of members of same worldwide affiliated group ,for purposes of this part1 the term derivative shall not include1 and subsections 7c7 and 7d77#b7 of section #dhe shall not apply to1 any derivative 7determined without regard to this subsection7 with respect to stock issued by any member of the same worldwide affiliated group 7as defined in section #hfd7;f77 in which the taxpayer is a member4 7#g7 ,commodities used in normal course of trade or business ,for purposes of this part1 the term derivative shall not include any contract with respect to any commodity if-- 7,a7 such contract requires physical delivery with the option of cash settlement only in unusual and exceptional circumstances1 and 7,b7 such commodity is used 7and is used in quantities with respect to which such derivative relates7 in the normal course of the taxpayer's trade or business 7or1 in the case of an individual1 for personal consumption74 7c7 ,contracts with embedded derivative components 7#a7 ,in general ,if a contract has derivative and nonderivative components1 then each derivative component shall be treated as a derivative for purposes of this part4 ,if the derivative component cannot be separately valued1 then the entire contract shall be treated as a derivative for purposes of this part4 7#b7 ,exception for certain embedded derivative components of debt instruments ,a debt instrument shall not be treated as having a derivative component merely because-- 7,a7 such debt instrument is denominated in a nonfunctional currency 7as defined in section #ihh7;c77#a77;,c77ii771 7,b7 payments with respect to such debt instrument are determined by reference to the value of a nonfunctional currency 7as so defined71 or 7,c7 such debt instrument is a convertible debt instrument1 contingent payment debt instrument1 a variable rate debt instrument1 an integrated debt instrument1 an investment unit1 a debt instrument with alternative payment schedules1 or other debt instrument with respect to which the regulations under section #abge7;d7 apply4 7d7 ,treatment of ,american ,depository ,receipts and similar instruments ,except as otherwise provided by the ,secretary1 for purposes of this part1 ,american depository receipts 7and similar instruments7 with respect to shares of stock in foreign corporations shall be treated as shares of stock in such foreign corporations4 4 7b7 ,coordination with rules for dealers and traders 7#a7 ,derivatives not treated as securities ,section #dge7;c77#b7 is amended-- 7,a7 by adding and at the end of subparagraph 7,c71 7,b7 by striking subparagraphs 7,d7 and 7,e7 and by redesignating subparagraph 7,f7 as subparagraph 7,d71 7,c7 by striking subparagraph 7,a71 7,b71 7,c71 7,d71 or 7,e7 in subparagraph 7,d77i71 as so redesignated1 and inserting subparagraph 7,a71 7,b71 or 7,c71 and 7,d7 by amending the last sentence to read as follows3 ,such term shall not include any position to which section #dhe7;a7 applies4 7#b7 ,derivatives not treated as commodities ,section #dge7;e77#b7 is amended-- 7,a7 by adding and at the end of subparagraph 7,a71 7,b7 by striking subparagraphs 7,b7 and 7,c7 and by redesignating subparagraph 7,d7 as subparagraph 7,b71 and 7,c7 by striking subparagraph 7,a71 7,b7 or 7,c7 in subparagraph 7,b77i71 as so redesignated1 and inserting subparagraph 7,a74 7#c7 ,conforming amendments 7,a7 ,section #dge7;b7 is amended by striking paragraph 7#d74 7,b7 ,section #dge7;d77#b77;,b7 is amended-- 7i7 by striking subsection 7c77#b77;,f77iii7 and inserting subsection 7c77#b77;,d77iii71 and 7ii7 by striking subsection 7c77#b77;,f7 and inserting subsection 7c77#b77;,d74 7,c7 ,section #dge7;f77#a77;,d7 is amended by striking subsections 7b77#d7 and 7d7 and inserting subsection 7d74 7c7 ,coordination with straddle rules 7#a7 ,in general ,section #ajib7;e7 is amended to read as follows3 7e7 ,exception for hedging transactions and straddles with derivatives ,this section shall not apply in the case of-- 7#a7 any hedging transaction 7as defined in section #abba7;b771 and 7#b7 any straddle 7as defined in section #dhe7 which includes any derivative 7as defined in section #dhf74 4 7#b7 ,conforming amendments 7,a7 ,section #bfc7;g77#c7 is amended to read as follows3 7#c7 ,exception for hedging transactions and straddles with derivatives ,this subsection shall not apply in the case of-- 7,a7 any hedging transaction 7as defined in section #abba7;b771 and 7,b7 any straddle 7as defined in section #dhe7 which includes any derivative 7as defined in section #dhf74 4 7,b7 ,section #ajib7;b7 is amended-- 7i7 by striking paragraph 7#b71 and 7ii7 by striking all that precedes ,the ,secretary shall and inserting the following3 7b7 ,regulations ,the ,secretary shall 4 7,c7 ,section #ajib7;c7 is amended by striking paragraph 7#d74 7,d7 ,section #ajib is amended by striking subsection 7f7 and by redesignating subsection 7g7 as subsection 7f74 7d7 ,treatment of convertible debt instruments ,the ,secretary of the ,treasury1 or the ,secretary's designee1 shall modify the regulations issued under section #abge7;d7 of the ,internal ,revenue ,code of #aihf to provide that convertible debt instruments are treated in a manner similar to contingent payment debt instruments4 7e7 ,repeal of certain other superceded rules for determining capital gains and losses 7#a7 ,in general ,part ,,iv of subchapter ,p of chapter #a is amended by striking sections #abcc1 #abcd1 #abcd;,a1 #abcd;,b1 #abcf1 #abef1 #abeh1 #abei1 and #abfj 7and by striking the items relating to such sections in the table of sections for such part74 7#b7 ,conforming amendments related to repeal of section #abcc ,section #ajib7;b7 is amended by inserting 7as in effect before their repeal7 after section #abcc4 7#c7 ,conforming amendments related to repeal of section #abcd ,section #fjde7;h77#b7 is amended-- 7,a7 by striking 7as defined in section #abcd7;b77#b77;,a71 and 7,b7 by adding at the end the following3 ,for purposes of the preceding sentence1 the term closing transaction means any termination of the taxpayer's obligation under an option in property other than through the exercise or lapse of the option44 7#d7 ,conforming amendments related to repeal of section #abcf 7,a7 ,section #dge7;d77#c77;,a7 is amended by striking or section #abcf7;b74 7,b7 ,section #eab7;b77#e7 is amended by striking section #abcf7;c7 and inserting section #ajeh7;c74 7,c7 ,section #ajeh is amended-- 7i7 by striking 7as defined in section #abcf7;c77 in subsection 7a71 and 7ii7 by redesignating subsection 7c7 as subsection 7d7 and by inserting after subsection 7b7 the following new subsection3 7c7 ,securities ,for purposes of this section1 the term security means any share of stock in any corporation1 certificate of stock or interest in any corporation1 note1 bond1 debenture1 or evidence of indebtedness1 or any evidence of an interest in or right to subscribe to or purchase any of the foregoing4 4 7#e7 ,conforming amendments related to repeal of section #abef 7,a7 ,section #dfa7;i77#b77;,b71 as amended by the preceding provisions of this ,act1 is amended to read as follows3 7,b7 any partnership or other entity 7other than a corporation which is not an ,s corporation7 if more than #ce percent of the losses of such entity during the taxable year are allocable to limited partners or limited entrepreneurs 7within the meaning of section #dfa7;j77#d771 and 4 7,b7 ,section #dge7;d77#a7 is amended by striking sections #bfc7;g71 #bfc;,a1 and #abef7;a7 and inserting sections #bfc7;g7 and #bfc;,a4 7,c7 ,section #ihh7;c77#a7 is amended by striking subparagraphs 7,d7 and 7,e74 7,d7 ,section #ajib7;a77#c77;,c77ii77,,ii7 is amended by striking section #abef7;e7 and inserting section #abba7;b74 7,e7 ,section #ajib7;d7 is amended by striking paragraphs 7#e7 and 7#f7 and by redesignating paragraphs 7#g7 and 7#h7 as paragraphs 7#e7 and 7#f71 respectively4 7,f7 ,section #abab is amended by striking subsection 7c74 7,g7 ,section #abbc is amended by striking paragraphs 7#g7 and 7#ad74 7,h7 ,section #abha7;b77#a77;,e7 is amended to read as follows3 7,e7 is a hedging transaction 7as defined in section #abba7;b771 or 4 7,i7 ,section #adjb is amended by striking subsection 7i74 7,j7 ,section #dihb7;e77#f77;,b7 is amended by striking sections #abef and #abif and inserting sections #dhe and #abif4 7#f7 ,conforming amendments related to repeal of section #abei ,section #dge7;f77#a7 is amended by striking subparagraph 7,c7 and by redesignating subparagraph 7,d7 as subparagraph 7,c74 7f7 ,other conforming amendments 7#a7 ,section #cee7;g77#b77;,b77i77,v7 is amended to read as follows3 7,v7 any derivative 7as defined in section #dhf71 4 7#b7 ,section #hef7n77#d7 is amended by inserting or derivatives 7as defined in section #dhf7 after securities 7as defined in section #dge7;c77#b774 7#c7 ,section #heg7;e77#b77;,b77i71 as amended by the preceding provisions of this ,act1 is amended by striking section #hfj;,e or #abgb and inserting section #dhe1 #hfj;,e1 or #abgb4 7#d7 ,section #ihh7;d77#a7 is amended-- 7,a7 by striking or #abef and inserting or #dhe1 and 7,b7 by striking #ajib1 and #abef and inserting #dhe1 and #ajib4 7#e7 ,section #ajia7;e7 is amended to read as follows3 7e7 ,coordination with mark to market of derivatives ,notwithstanding any other provision of this section1 a derivative 7as defined in section #dhf7 shall not be treated as a security for purposes of this section4 4 7#f7 7,a7 ,section #abba7;a77#f7 is amended to read as follows3 7#f7 any derivative 7as defined in section #dhf71 4 7,b7 ,section #abba7;b7 is amended by striking paragraph 7#a74 7#g7 ,section #dige7;f77#aa77;,d7 is amended by striking clauses 7i7 and 7ii7 and inserting the following3 7i7 ,security ,the term security means any security described in section #dge7;c77#b7 7without regard to subparagraph 7,d77iii7 thereof7 and any derivative with respect to such a security 7within the meaning of section #dhf74 7ii7 ,commodity ,the term commodity means any commodity described in section #dge7;e77#b7 7without regard to subparagraph 7,b77iii7 thereof7 and any derivative with respect to such a commodity 7within the meaning of section #dhf74 4 7#h7 ,the table of parts for subchapter ,e of chapter #a is amended by adding at the end the following new item3 ,part ,,iv4 ,derivatives 4 7g7 ,effective dates ,the amendments made by this section shall apply to-- 7#a7 taxable years ending after ,december #ca1 #bjad1 in the case of property acquired and positions established after ,december #ca1 #bjad1 and 7#b7 taxable years ending after ,december #ca1 #bjai1 in the case of any other property or position4 ,for purposes of this subsection1 any property acquired on or before ,december #ca1 #bjad1 which becomes part of a straddle 7as defined in section #dhe1 as added by this section7 after such date shall be treated as a position established after such date4 #cdjb4 ,modification of certain rules related to hedges 7a7 ,treatment of hedges identified for financial accounting purposes 7#a7 ,in general ,section #abba7;b71 as amended by the preceding provisions of this ,act1 is amended to read as follows3 7b7 ,hedging transaction ,for purposes of this section-- 7#a7 ,in general ,the term hedging transaction means any transaction described in paragraph 7#b7 and identified under paragraph 7#c74 7#b7 ,transaction described ,a transaction is described in this paragraph if such transaction is entered into by the taxpayer in the normal course of the taxpayer's trade or business primarily-- 7,a7 to manage risk of price changes or currency fluctuations with respect to ordinary property which is held or to be held by the taxpayer1 7,b7 to manage risk of interest rate or price changes or currency fluctuations with respect to borrowings made or to be made1 or ordinary obligations incurred or to be incurred1 by the taxpayer1 or 7,c7 to manage such other risks as the ,secretary may prescribe in regulations4 7#c7 ,identification ,a transaction is identified under this paragraph if-- 7,a7 such transaction is clearly identified as a hedging transaction for purposes of this paragraph before the close of the day on which it was acquired1 originated1 or entered into 7or such other time as the ,secretary may by regulations prescribe71 or 7,b7 such transaction is treated as a hedging transaction 7within the meaning of generally accepted accounting principles7 for purposes of an audited financial statement of the taxpayer which-- 7i7 is certified as being prepared in accordance with generally accepted accounting principles1 and 7ii7 is used for the purposes of a statement or report-- 7,i7 to shareholders1 partners1 or other proprietors1 or to beneficiaries1 or 7,,ii7 for credit purposes4 7#d7 ,treatment of nonidentification or improper identification of hedging transactions ,the ,secretary shall prescribe regulations to properly characterize any income1 gain1 expense1 or loss arising from a transaction-- 7,a7 which would be a hedging transaction if identified under paragraph 7#c71 or 7,b7 which is identified under paragraph 7#c7 but is not a transaction described in paragraph 7#b74 ,in the case of a transaction identified under paragraph 7#c7 solely by reason of paragraph 7#c77;,b71 subparagraph 7,b7 of this paragraph shall not apply with respect to such transaction unless the taxpayer treats such transaction as a hedging transaction for purposes of any provision of this title4 7#e7 ,bonds held by an insurance company ,for purposes of paragraph 7#b77;,a71 in the case of an insurance company to which subchapter ,l applies1 any bond1 debenture1 note1 certificate1 or other evidence of indebtedness held by the taxpayer shall be treated as ordinary property4 7#f7 ,regulations ,the ,secretary shall prescribe such regulations as are appropriate to carryout the purposes of this subsection and subsection 7a77#g7 in the case of transactions involving related parties4 4 7#b7 ,conforming amendments 7,a7 ,section #hef7;c77#e77;,g77i7 is amended by striking 7as defined in clause 7ii7 or 7iii7 of section #abba7;b77#b77;,a77 which is clearly identified pursuant to section #abba7;a77#g7 and inserting 7as defined in section #abba7;b7 7determined without regard to paragraph 7#b77;,a7 thereof74 7,b7 ,section #ied7;c77#e77;,a7 is amended to read as follows3 7,a7 ,commodity hedging transactions 7i7 ,in general ,for purposes of paragraph 7#a77;,c77i71 the term commodity hedging transaction means any transaction with respect to a commodity if such transaction would be a hedging transaction under section #abba7;b7 if-- 7,i7 the only transactions described in paragraph 7#b7 thereof were transactions described in clause 7ii71 and 7,,ii7 paragraphs 7#c7 and 7#d7 thereof were applied by substituting controlled foreign corporation for taxpayer each place it appears4 7ii7 ,transaction described ,a transaction is described in this clause if such transaction is entered into by the controlled foreign corporation in the normal course of the controlled foreign corporation's trade or business primarily-- 7,i7 to manage risk of price changes or currency fluctuations with respect to ordinary property or property described in section #abca7;b7 which is held or to be held by the controlled foreign corporation1 or 7,,ii7 to manage such other risks as the ,secretary may prescribe in regulations4 4 7,c7 ,section #abba7;a77#g7 is amended by striking which is clearly and all that follows through regulations prescribe74 7b7 ,special rule for commodity hedging transactions involving related controlled foreign corporations ,section #ied7;c77#e77;,a71 as amended by subsection 7a71 is amended by adding at the end the following new clause3 7iii7 ,application to related controlled foreign corporations 7,i7 ,in general ,in the case of qualified property1 clause 7ii77,i7 shall be applied by substituting the controlled foreign corporation or another controlled foreign corporation which is a related person 7within the meaning of subsection 7d77#c77 for the controlled foreign corporation4 7,,ii7 ,qualified property ,for purposes of this clause1 the term qualified property means ordinary property or property described in section #abca7;b7 7if disposed of at a gain7 the income from the disposition of which would be neither subpart ,f income nor income treated as effectively connected with the conduct of a trade or business in the ,united ,states4 4 7c7 ,effective date ,the amendments made by this section shall apply to transactions entered into after ,december #ca1 #bjad4 #b ,treatment of debt instruments #cdaa4 ,current inclusion in income of market discount 7a7 ,in general ,subpart ,b of part ,v of subchapter ,p of chapter #a is amended by redesignating section #abgh as section #abgi and by inserting after section #abgg the following new section3 #abgh4 ,current inclusion in income of market discount on bonds acquired after #bjad 7a7 ,in general ,there shall be included in the gross income of the holder of any market discount bond acquired after ,december #ca1 #bjad1 an amount equal to the sum of the daily portions of the market discount for each day during the taxable year on which such holder held such bond4 7b7 ,determination of daily portions 7#a7 ,in general ,for purposes of subsection 7a71 the daily portion of the market discount on any market discount bond shall be an amount equal to the daily portion of original issue discount which would be includible in gross income under section #abgb7;a7 7determined without regard to paragraph 7#b7 thereof7 if such bond had been-- 7,a7 originally issued on the date on which such bond was acquired by the taxpayer1 7,b7 for an issue price equal to the basis of such bond immediately after such acquisition4 7#b7 ,coordination where bond has original issue discount ,in the case of any bond having original issue discount1 the daily portion determined under paragraph 7#a7 shall be reduced by the daily portion of original issue discount includible in gross income under section #abgb7;a7 7determined without regard to paragraph 7#b7 thereof7 with respect to such bond4 7#c7 ,special rule where partial principal payments ,in the case of a bond the principal of which may be paid in #b or more payments1 the daily portions of market discount shall be determined under regulations prescribed by the ,secretary4 7c7 ,limitation 7#a7 ,in general ,the amount of market discount allocable to any accrual period for purposes of determining the sum of the daily portions under subsection 7a7 shall not exceed the excess 7if any7 of-- 7,a7 the product of-- 7i7 the maximum accrual rate determined under paragraph 7#b71 properly adjusted for the length of the accrual period1 multiplied by 7ii7 the adjusted basis of such bond at the beginning of such accrual period1 over 7,b7 the sum of the qualified stated interest and original issue discount allocable to such accrual period4 7#b7 ,maximum accrual rate ,the maximum accrual rate determined under this paragraph with respect to any bond is the greater of-- 7,a7 such bonds's yield to maturity 7determined as of the date of the issuance of such bond7 plus #e percentage points1 or 7,b7 the applicable ,federal rate for such bond 7determined under section #abgd7;d7 as of the date of the acquisition of such bond and on the basis of the remaining term of such bond as of such date7 plus #aj percentage points4 7#c7 ,application to pools ,in the case of debt instruments to which section #abgb7;a77#f7 applies1 rules similar to the rules of such section shall apply for purposes of determining the daily portions of market discount4 7#d7 ,accrual period ,for purposes of this subsection1 the term accrual period has the meaning given such term in section #abgb7;a77#e74 7d7 ,special rules 7#a7 ,accruals treated as interest ,except for purposes of sections #ajc1 #hga7;a71 #hha1 #adda1 #addb1 and #fjdi 7and such other provisions as may be specified in regulations71 any amount included in gross income under this section shall be treated as interest for purposes of this title4 7#b7 ,basis adjustment ,the basis of any market discount bond in the hands of the taxpayer shall be increased by the amount included in gross income pursuant to this section4 7#c7 ,treatment of loss on disposition ,so much of any loss recognized by the taxpayer on the disposition of a market discount bond as does not exceed the aggregate amounts included in the taxpayer's gross income under subsection 7a7 with respect to such bond shall be treated for purposes of this title as an ordinary loss4 4 7b7 ,treatment of market discount on short-,term nongovernmental bonds 7#a7 ,accrual basis taxpayers1 etc ,section #abhc is amended by striking subsection 7c7 and redesignating subsection 7d7 as subsection 7c74 7#b7 ,other taxpayers 7,a7 ,section #abga7;a77#c7 is amended-- 7i7 by striking all that precedes subparagraph 7,c7 and inserting the following3 7#c7 ,certain short-term obligations 7,a7 ,in general ,on the sale or exchange of any short-term obligation 7as defined in section #abhc7;a77#a771 any gain realized which does not exceed an amount equal to the ratable share of the acquisition discount shall be treated as ordinary income4 1 and 7ii7 by redesignating subparagraphs 7,c71 7,d71 and 7,e7 as subparagraphs 7,b71 7,c71 and 7,d71 respectively4 7,b7 ,section #abga7;a7 is amended by striking paragraph 7#d74 7,c7 ,section #abhc7;c77#c71 as redesignated by paragraph 7#a71 is amended by striking paragraphs 7#c7 and 7#d7 of section #abga7;a7 and inserting section #abga7;a77#c74 7c7 ,coordination with rules related ,to treating market discount as ordinary income upon disposition 7#a7 ,in general ,section #abgf is amended by adding at the end the following new subsection3 7e7 ,coordination with rules for current inclusion of market discount ,this section shall not apply to any market discount bond to which section #abgh applies4 4 7#b7 ,coordination with deferral of interest deduction ,section #abgg is amended by adding at the end the following new subsection3 7d7 ,coordination with rules for current inclusion of market discount ,this section shall not apply to any market discount bond to which section #abgh applies4 4 7#c7 ,coordination with election to include market discount currently ,section #abgi7;b71 as redesignated by subsection 7a71 is amended by adding at the end the following new paragraph3 7#e7 ,coordination with rules for current inclusion of market discount ,this subsection shall not apply to any market discount bond to which section #abgh applies4 4 7d7 ,treatment of certain bonds held by partnerships 7#a7 ,transfers of partnership interests ,section #abgi7;a71 as redesignated by subsection 7a71 is amended by adding at the end the following new paragraph3 7#f7 ,transfers of partnership interests ,in the case of a transfer described in section #gdc of an interest in a partnership holding a bond1 the partnership shall be treated as acquiring the transferee partner's proportionate share of such bond at the time of such transfer4 4 7#b7 ,distribution of bonds by partnerships ,section #abgi7;a77#b71 as redesignated by subsection 7a71 is amended by adding at the end the following new subparagraph3 7,d7 ,distribution by partnership ,if the basis of the taxpayer in a bond is determined under section #gcd7;a77#b7 or 7b71 for purposes of subparagraph 7,a77ii71 the basis of such bond shall not be less than its fair market value immediately after its acquisition by the taxpayer4 4 7e7 ,modernization of certain definitions 7#a7 ,repeal of superceded exception for market discount bonds acquired at issue ,section #abgi7;a77#a71 as redesignated by subsection 7a71 is amended by striking subparagraph 7,d7 7#b7 ,revised issue price ,section #abgi7;a77#d71 as redesignated by subsection 7a71 is amended-- 7,a7 by redesignating subparagraphs 7,a7 and 7,b7 as clauses 7i7 and 7ii7 and by indenting such clauses appropriately1 7,b7 by striking means the sum of-- and inserting means the excess of-- 7,a7 the sum of-- 1 7,c7 by striking the period at the end and inserting 1 over1 and 7,d7 by adding at the end the following new subparagraph3 7,b7 the sum of-- 7i7 any payments other than qualified stated interest made under the bond during periods before the acquisition of the bond by the taxpayer1 and 7ii7 any premium which has accrued during such periods 7determined as if owned at all times by the original holder74 4 7#c7 ,redemption price 7,a7 ,in general ,section #abgc7;a77#b7 is amended to read as follows3 7#b7 ,redemption price 7,a7 ,in general ,the term redemption price means the sum of all payments provided by the debt instrument other than qualified stated interest4 7,b7 ,qualified stated interest ,the term qualified stated interest means stated interest that is unconditionally payable in money and other property 7other than a debt instrument of the issuer7 at least annually at a fixed rate 7or to the extent provided by regulations1 at a variable rate74 7,c7 ,basis adjustment ,the basis of any debt instrument shall be reduced by the amount of any payment received other than qualified stated interest4 4 7,b7 ,conforming amendments 7i7 ,each of the following provisions is amended by striking stated redemption price at maturity and inserting redemption price3 7,i7 ,section #abga7;a77#c77;,b7 7as redesignated by subsection 7b774 7,,ii7 ,section #abgc7;a77#a77;,a74 7,,iii7 ,section #abgc7;a77#c74 7,,iv7 ,section #abgc7;b77#d74 7,v7 ,section #abgd7;c77#a77;,a74 7,,vi7 ,section #abgi7;a77#e7 7as redesignated by subsection 7a774 7,,vii7 ,section #abhc7;a77#b77;,a74 7,,viii7 ,section #abhf7;a77#a74 7,,ix7 ,the heading and text of section #abhf7;e77#d74 7ii7 ,section #ajh7;e77#aj77;,b7 is amended by striking stated both places it appears4 7iii7 ,section #abgb7;a77#f77;,a77i7 is amended by striking stated4 7iv7 ,subparagraphs 7,a77i7 and 7,c7 of section #abgi7;a77#b7 7as redesignated by subsection 7a77 are each amended by striking the stated redemption price of the bond at maturity and inserting the redemption price of the bond4 7v7 ,section #abgi7;a77#b77;,b7 7as redesignated by subsection 7a77 is amended by striking the stated redemption price of such bond at maturity and inserting the redemption price of such bond4 7#d7 ,adjusted issue price ,section #abge7;a7 is amended by adding at the end the following new paragraph3 7#e7 ,adjusted issue price 7,a7 ,in general ,for purposes of this part1 the adjusted issue price of any debt instrument is its issue price-- 7i7 increased by the aggregate of the original issue discount includible in the gross income of all holders for prior periods 7determined without regard to paragraph 7#g7 of section #abgb7;a771 or1 in the case of a tax-exempt obligation1 the aggregate amount which accrued in the manner provided by this subsection 7determined without regard to such paragraph 7#g77 for all prior periods1 and 7ii7 reduced by the sum of-- 7,i7 any payments other than qualified stated interest previously made on the debt instrument1 and 7,,ii7 in the case of a debt instrument which was issued with amortizable bond premium 7as defined in section #aga7;b771 the aggregate amount by which the basis of such instrument would have been reduced under section #ajaf7;a77#e7 for prior periods if the instrument had been held by the original holder at all times4 7,b7 ,de minimis rule ,the adjusted issue price of the issuer shall be properly adjusted to take into account that section #abgc7;a77#c7 does not apply to the deduction under section #afc for original issue discount4 4 7#e7 ,certain other terms ,paragraphs 7#c71 7#d71 and 7#e7 of section #abgb7;a7 are amended to read as follows3 7#c7 ,determination of daily portions ,for purposes of paragraph 7#a71 the daily portion of the original issue discount on any debt instrument shall be determined by allocating to each day in any accrual period its ratable share of the original issue discount allocable to such accrual period4 ,for purposes of the preceding sentence1 the original issue discount allocable to any accrual period is the excess 7if any7 of-- 7,a7 the product of-- 7i7 the adjusted issue price of the debt instrument at the beginning of such accrual period1 multiplied by 7ii7 the yield to maturity of the debt instrument properly adjusted for the length of the accrual period1 over 7,b7 the amount of any qualified stated interest allocable to such accrual period4 7#d7 ,yield to maturity ,for purposes of this subsection1 the term yield to maturity means the discount rate that1 when used in computing the present value of all principal and interest payments to be made under the debt instrument produces an amount equal to the issue price of the debt instrument4 7#e7 ,accrual period ,for purposes of this subsection1 the term accrual period shall be determined under regulations prescribed by the ,secretary1 provided that an accrual period shall in no event be longer than one year4 4 7f7 ,broker reporting of includible discount on bonds 7#a7 ,in general ,section #fjde is amended by adding at the end the following new subsection3 7i7 ,discount on bonds 7#a7 ,in general ,if any customer of a broker holds a covered bond in an account with such broker at any time during a calendar year-- 7,a7 such broker shall file a return under subsection 7a7 for such calendar year1 and 7,b7 such return shall include with respect to each such covered bond-- 7i7 the amount 7if any7 includible in the gross income of such customer as original issue discount with respect to such bond under section #abgb for periods during such calendar year1 and4 7ii7 the amount 7if any7 includible in the gross income of such customer as market discount with respect to such bond under section #abgh7;a7 for periods during such calendar year4 7#b7 ,covered bond ,for purposes of this subsection1 the term covered bond means any obligation to which section #abgb or #abgh7;a7 applies if such obligation-- 7,a7 was acquired after ,december #ca1 #bjad1 through a transaction in the account in which such obligation is held1 or 7,b7 was transferred to such account from an account in which such obligation was a covered bond1 but only if the broker received a statement under section #fjde;,a with respect to the transfer4 7#c7 ,statements to customers ,the requirements of subsections 7b7 shall apply with respect to any return filed under subsection 7a7 by reason of this subsection4 4 7#b7 ,information required in connection with transfers of covered bonds to brokers ,subsection 7a7 of section #fjde;,a is amended-- 7,a7 by inserting or a covered bond 7as defined in section #fjde7;i77#b77 after covered security 7as defined in section #fjde7;g77#c771 and 7,b7 by striking section #fjde7;g7 and inserting subsections 7g7 and 7i7 of section #fjde4 7#c7 ,coordination with reporting by issuer of original issue discount ,paragraph 7#f7 of section #fjdi7;d7 is amended by adding at the end the following new subparagraph3 7,c7 ,prevention of double reporting ,except as otherwise provided by the ,secretary1 original issue discount with respect to any obligation shall not be required to be reported under this section if such original issue discount is required to be reported with respect to such obligation under section #fjde7;i74 4 7g7 ,conforming amendments 7#a7 ,section #heg7;e77#b77;,b77i71 as amended by the preceding provisions of this ,act1 is amended by striking or #abgb and inserting #abgb1 or #abgh4 7#b7 ,section #ajdb7;d7 is amended by striking section #abgh7;a77#b77;,a77ii7 in the matter following paragraph 7#b7 and inserting section #abgi7;a77#b77;,a77ii74 7#c7 ,section #ajaf7;a71 as amended by the preceding provisions of this ,act1 is amended by adding at the end the following new paragraph3 7#ci7 in the case of any debt instrument1 to extend provided in sections #abgb7;d77#a71 #abgc7;a77#b77;,c71 and #abgh7;d77#b74 4 7#d7 ,section #abgf is amended by inserting on bonds not subject to current inclusion after accrued market discount in the heading thereof4 7#e7 ,section #abgg is amended by inserting on bonds not subject to current inclusion after accrued market discount in the heading thereof4 7#f7 ,section #abha is amended by striking subsection 7c74 7#g7 ,section #abhb is amended by striking subsection 7d74 7#h7 ,the table of sections for subpart ,b of part ,v of subchapter ,p of chapter #a is amended to read as follows3 ,sec4 #abgf4 ,disposition gain representing accrued market discount on bonds not subject to current inclusion treated as ordinary income4 ,sec4 #abgg4 ,deferral of interest deduction allocable to accrued market discount on bonds not subject to current inclusion4 ,sec4 #abgh4 ,current inclusion in income of market discount on bonds acquired after #bjad4 ,sec4 #abgi4 ,definitions and special rules4 4 7h7 ,effective date 7#a7 ,in general ,except as provided in paragraph 7#b71 the amendments made by this section shall apply to obligations acquired after ,december #ca1 #bjad4 7#b7 ,modernization of terms ,the amendments made by subsection 7e7 shall take effect on ,january #a1 #bjae4 #cdab4 ,treatment of certain exchanges of debt instruments 7a7 ,determination of issue price 7#a7 ,in general ,subpart ,a of part ,v of subchapter ,p is amended by inserting after section #abgd;,a the following new section3 #abgd;,b4 ,determination of issue price in the case of an exchange of debt instruments 7a7 ,in general ,in the case of an exchange 7including by significant modification7 by an issuer of a new debt instrument for an existing debt instrument issued by the same issuer1 the issue price of the new debt instrument shall be the least of-- 7#a7 the adjusted issue price of the existing debt instrument1 7#b7 the stated principal amount of the new debt instrument1 or 7#c7 the imputed principal amount of the new debt instrument4 7b7 ,applicable rate ,the discount rate used to determine the imputed principal amount of the new debt instrument under subsection 7a77#c7 shall be the lesser of-- 7#a7 the applicable ,federal rate determined under section #abgd7;d7 with respect to the new debt instrument1 or 7#b7 the greater of-- 7,a7 the rate of qualified stated interest with respect to the existing debt instrument1 or 7,b7 the applicable ,federal rate determined under section #abgd7;d7 with respect to the existing debt instrument4 7c7 ,treatment of investment units ,rules similar to the rules of section #abgc7;c77#b7 shall apply for purposes of this section4 4 7#b7 ,conforming amendments 7,a7 ,section #ajh7;e77#aj77;,b7 is amended by striking and #abgd and inserting 1 #abgd1 and #abgd;,b4 7,b7 ,section #abgd7;c77#c71 as amended by the preceding provisions of this ,act1 is amended by adding at the end the following new subparagraph3 7,f7 ,certain modified debt ,any debt instrument the issue price of which is determined under section #abgd;,b4 4 7,c7 ,the table of sections for subpart ,a of part ,v of subchapter ,p is amended by inserting after the item relating to section #abgd;,a the following new item3 ,sec4 #abgd;,b4 ,determination of issue price in the case of an exchange of debt instruments4 4 7b7 ,nonrecognition of gain or loss by holder 7#a7 ,in general ,section #ajcg is amended to read as follows3 #ajcg4 ,certain exchanges of debt instruments 7a7 ,nonrecognition of gain or loss ,no gain or loss shall be recognized to the holder of a debt instrument if such existing debt instrument is exchanged solely for a new debt instrument 7whether by exchange or significant modification7 issued by the same issuer4 7b7 ,property attributable to accrued interest ,subsection 7a7 shall not apply to the extent that any property received is attributable to interest which accrued on the existing debt instrument on or after the beginning of the holder's holding period of such instrument4 7c7 ,limitation on gain recognition in case of exchange not solely for a new debt instrument ,in the case of an exchange of a debt instrument to which section #ajce7;d7 applies1 the amount of gain recognized shall not exceed the amount of gain which would have been recognized if section #abgd;,b did not apply4 7d7 ,cross references 7#a7 ,for rules relating to securities exchanged or distributed in a reorganization1 etc41 see sections #ced1 #cee1 and #cef4 7#b7 ,for rules relating to recognition of gain or loss where exchange was not made solely for another debt instrument of the issuer1 see subsections 7d7 and 7e7 of section #ajce4 7#c7 ,for rules relating to basis of obligations acquired in an exchange described in subsection 7a71 see subsection 7f7 of section #ajce4 4 7#b7 ,clerical amendment ,the table of sections for part ,,iii of subchapter ,o of chapter #a is amended by striking the item relating to section #ajcg and inserting the following new item3 ,sec4 #ajcg4 ,certain exchanges of debt instruments4 4 7c7 ,application to excess principal rules for corporate reorganizations 7#a7 ,exchanges of securities in reorganizations 7,a7 ,in general ,section #ced7;a77#b77;,a77i7 is amended to read as follows3 7i7 the issue price of any such securities received exceeds the adjusted issue price of any such securities surrendered1 or 4 7,b7 ,definitions ,section #ced7;a77#b7 is amended by inserting after subparagraph 7,c7 the following new subparagraph3 7,d7 ,definitions ,for purposes of this paragraph-- 7i7 ,issue price ,the issue price of any security shall be determined under sections #abgc1 #abgd1 and #abgd;,b4 7ii7 ,adjusted issue price ,the adjusted issue price of any security shall be determined under section #abge7;a77#e74 4 7#b7 ,section #cee transactions ,section #cee7;a77#c77;,a77i7 is amended to read as follows3 7i7 the issue price 7as defined in section #ced7;a77#b77;,d77 of the securities in the controlled corporation which are received exceeds the adjusted issue price 7as so defined7 of the securities which are surrendered in connection with such distribution1 or 4 7#c7 ,section #cef transactions 7,a7 ,in general ,section #cef7;d77#b77;,b77ii7 is amended to read as follows3 7ii7 the issue price 7as defined in section #ced7;a77#b77;,d77 of such securities received exceeds the adjusted issue price 7as so defined7 of such securities surrendered1 4 7,b7 ,conforming amendments 7i7 ,section #cef7;d77#b77;,b7 is amended in the matter following clause 7ii7-- 7,i7 by striking 8the fair market value of such excess0 and inserting 8the amount of such excess01 and 7,,ii7 by striking 8the entire principal amount0 and inserting 8the entire issue price 7as so defined704 7ii7 ,section #cef7;d77#b77;,c7 is amended to read as follows3 7,c7 ,greater principal amount in section #cee transaction ,if1 in an exchange or distribution described in section #cee1 the issue price 7as defined in section #ced7;a77#b77;,d77 of the securities in the controlled corporation which are received exceeds the adjusted issue price 7as so defined7 of the securities in the distributing corporation which are surrendered1 then1 with respect to such securities received1 the term other property means only the amount of such excess4 4 7d7 ,effective date ,the amendments made by this section shall apply to transactions after ,december #ca1 #bjad4 #cdac4 ,coordination with rules for inclusion not later than for financial accounting purposes 7a7 ,in general ,section #dea7;b71 as amended by the preceding provisions of this ,act1 is amended by inserting immediately after the heading thereof 7and before paragraph 7#a7 thereof7 the following3 ,notwithstanding any other provision of law 7including part ,v of subchapter ,p7--4 7b7 ,effective date2 change in method of accounting ,the amendment made by subsection 7a7 shall be treated for purposes of section #ccjc7;g7 as though such amendment were made by section #ccjc7;a74 #cdad4 ,rules regarding certain government debt 7a7 ,repeal of certain superceded rules ,subpart ,b of part ,,ii of subchapter ,e of chapter #a is amended by striking section #ded 7and by striking the item relating to such section in the table of sections for such subpart74 7b7 ,preservation of rules related to ,united ,states savings bonds ,subpart ,a of part ,v of subchapter ,p of chapter #a is amended by inserting after section #abgb the following new section3 #abgb;,a4 ,united ,states savings bonds 7a7 ,election ,to include increase in redemption price in income ,a taxpayer holding a ,united ,states savings bond may elect 7on the taxpayer's return for the taxable year7 to treat any increase in the redemption price as income received in the taxable year4 ,if any such election is made with respect to any such obligation1 it shall apply also to all such obligations owned by the taxpayer at the beginning of the first taxable year to which it applies and to all such obligations thereafter acquired by the taxpayer and shall be binding for all subsequent taxable years1 unless revoked with the consent of the ,secretary4 ,in the case of any such obligations owned by the taxpayer at the beginning of the first taxable year to which the taxpayer's election applies1 the increase in the redemption price of such obligations occurring between the date of acquisition and the first day of such taxable year shall also be treated as income received in such taxable year4 7b7 ,treatment upon redemption or final maturity ,the increase in redemption value of a ,united ,states savings bond 7to the extent not previously included in gross income7 in excess of the adjusted basis of such bond shall be included in gross income in the earlier of the taxable year in which the bond is redeemed or in the taxable year of final maturity4 7c7 ,cross references 7#a7 ,for exception from current inclusion of original issue discount1 see section #abgb7;a77#b77;,b74 7#b7 ,for exception from market discount rules1 see section #abgi7;a77#a77;,b77iii74 4 7c7 ,conforming amendments 7#a7 ,section #heb7;b77#b71 as amended by the preceding provisions of this ,act1 is amended by striking subparagraph 7,e7 and redesignating subparagraphs 7,f7 and 7,g7 as subparagraphs 7,e7 and 7,f71 respectively4 7#b7 ,section #abhc7;c77#c71 as amended by the preceding provisions of this ,act1 is amended by striking all that precedes shall not apply and inserting the following3 7#c7 ,coordination with section #abga ,section #abga7;a77#c7 4 7#c7 ,section #ghga7;a77#f7 is amended by adding and at the end of subparagraph 7,a7 and by striking subparagraph 7,c74 7#d7 ,the table of sections for subpart ,a of part ,v of subchapter ,p of chapter #a is amended by inserting after the item relating to section #abgb the following new item3 ,sec4 #abgb;,a4 ,united ,states savings bonds4 4 7d7 ,effective date ,the amendments made by this section shall take effect on the date of the enactment of this ,act4 #c ,certain rules for determining gain and loss #cdba4 ,cost basis of specified securities determined without regard to identification 7a7 ,in general ,section #ajab is amended by adding at the end the following new subsection3 7e7 ,cost basis of specified securities determined without regard to identification ,except to the extent otherwise provided in this section or in regulations thereunder permitting the use of an average basis method for determining cost1 in the case of the sale1 exchange1 or other disposition of a specified security 7within the meaning of section #fjde7;g77#c77;,b771 the basis 7and holding period7 of such security shall be determined on a first-in first-out basis4 4 7b7 ,conforming amendments 7#a7 ,section #ajab7;c77#a7 is amended by striking the conventions prescribed by regulations under this section and inserting the method applicable for determining the cost of such security4 7#b7 ,section #ajab7;c77#b77;,a7 is amended by striking section #ajab and inserting this section 7as in effect prior to the enactment of the ,tax ,reform ,act of #bjad74 7#c7 ,section #fjde7;g77#b77;,b77i77,i7 is amended by striking unless the customer notifies the broker by means of making an adequate identification of the stock sold or transferred4 7c7 ,effective date ,the amendments made by this section shall apply to sales1 exchanges1 and other dispositions after ,december #ca1 #bjad4 #cdbb4 ,wash sales by related parties 7a7 ,application of wash sale rules to related parties ,subsection 7a7 of section #ajia is amended by striking the taxpayer has acquired and inserting the taxpayer 7or a related party7 has acquired4 7b7 ,modification of basis adjustment rule ,to prevent transfer of losses to related parties ,subsection 7d7 of section #ajia is amended to read as follows3 7d7 ,adjustment to basis in case of wash sale ,if the taxpayer 7or the taxpayer's spouse7 acquires substantially identical stock or securities during the period which-- 7#a7 begins #cj days before the disposition with respect to which a deduction was disallowed under subsection 7a71 and 7#b7 ends with the close of the taxpayer's first taxable year which begins after such disposition1 the basis of such stock or securities shall be increased by the amount of the deduction so disallowed 7reduced by any amount of such deduction taken into account under this subsection to increase the basis of stock or securities previously acquired74 4 7c7 ,related party ,section #ajia is amended by adding at the end the following new subsection3 7g7 ,related party ,for purposes of this section-- 7#a7 ,in general ,the term related party means-- 7,a7 the taxpayer's spouse1 7,b7 any dependent of the taxpayer and any other taxpayer with respect to whom the taxpayer is a dependent1 7,c7 any individual1 corporation1 partnership1 trust1 or estate which controls1 or is controlled by1 7within the meaning of section #ied7;d77#c77 the taxpayer or any individual described in subparagraph 7,a7 or 7,b7 with respect to the taxpayer 7or any combination thereof71 7,d7 any individual retirement plan1 ,archer ,,msa 7as defined in section #bbj7;d771 or health savings account 7as defined in section #bbc7;d771 of the taxpayer or of any individual described in subparagraph 7,a7 or 7,b7 with respect to the taxpayer1 7,e7 any account under a qualified tuition program described in section #ebi or a ,coverdell education savings account 7as defined in section #ecj7;b77 if the taxpayer1 or any individual described in subparagraph 7,a7 or 7,b7 with respect to the taxpayer1 is the designated beneficiary of such account or has the right to make any decision with respect to the investment of any amount in such account1 and 7,f7 any account under-- 7i7 a plan described in section #dja7;a71 7ii7 an annuity plan described in section #djc7;a71 7iii7 an annuity contract described in section #djc7;b71 or 7iv7 an eligible deferred compensation plan described in section #deg7;b7 and maintained by an employer described in section #deg7;e77#a77;,a71 if the taxpayer or any individual described in subparagraph 7,a7 or 7,b7 with respect to the taxpayer has the right to make any decision with respect to the investment of any amount in such account4 7#b7 ,rules for determining status 7,a7 ,relationships determined at time of acquisition ,determinations under paragraph 7#a7 shall be made as of the time of the purchase or exchange referred to in subsection 7a7 except that determinations under subparagraphs 7,a7 and 7,b7 of paragraph 7#a7 shall be made for the taxable year which includes such purchase or exchange4 7,b7 ,determination of marital status 7i7 ,in general ,except as provided in clause 7ii71 marital status shall be determined under section #ggjc4 7ii7 ,special rule for married individuals filing separately and living apart ,a husband and wife who-- 7,i7 file separate returns for any taxable year1 and 7,,ii7 live apart at all times during such taxable year1 shall not be treated as married individuals4 7#c7 ,regulations ,the ,secretary shall issue such regulations or other guidance as may be necessary to prevent the avoidance of the purposes of this subsection1 including regulations which treat persons as related parties if such persons are formed or availed of to avoid the purposes of this subsection4 4 7d7 ,effective date ,the amendments made by this section shall apply to sales and other dispositions after ,december #ca1 #bjad4 #cdbc4 ,nonrecognition for derivative transactions by a corporation with respect to its stock 7a7 ,in general ,section #ajcb is amended to read as follows3 #ajcb4 ,derivative transactions by a corporation with respect to its stock 7a7 ,in general ,except as otherwise provided in this section or section #gf1 section #ajcb derivative items of a corporation shall not be taken into account in determining such corporation's liability for tax under this subtitle4 7b7 ,income recognition on certain forward contracts 7#a7 ,in general ,if-- 7,a7 a corporation acquires its stock1 and 7,b7 such acquisition is part of a plan 7or series of related transactions7 pursuant to which the corporation enters into a forward contract with respect to its stock1 such corporation shall include amounts in income as if the excess of the amount to be received under the forward contract over the fair market value of the stock as of the date the corporation entered into the forward contract were original issue discount on a debt instrument acquired on such date4 ,the preceding sentence shall apply only to the extent that the amount of stock involved in the forward contract does not exceed the amount acquired as described in subparagraph 7,a74 7#b7 ,plan presumed to exist ,if a corporation enters into a forward contract with respect to its stock within the #fj-;day period beginning on the date which is #cj days before the date that the corporation acquires its stock1 such acquisition shall be treated as pursuant to a plan described in paragraph 7#a77;,b7 unless it is established that entering into such contract and such acquisition are not pursuant to a plan or series of related transactions4 7c7 ,section #ajcb derivative items ,for purposes of this section1 the term section #ajcb derivative item means any item of income1 gain1 loss1 or deduction if-- 7#a7 such item arises out of the rights or obligations under any derivative 7as defined in section #dhf7 to the extent such derivative relates to the corporation's stock 7or is attributable to any transfer or extinguishment of any such right or obligation71 or 7#b7 such item arises under any other contract or position but only to the extent that such item reflects 7or is determined by reference to7 changes in the value of such stock or distributions thereon4 ,such term shall not include any deduction with respect to which section #hc7;h7 applies and shall not include any deduction for any item which is in the nature of compensation for services rendered4 ,for purposes of this subparagraph1 de minimis relationships1 as determined by the ,secretary1 shall be disregarded4 7d7 ,treasury stock treated as stock ,any reference in this section to stock shall be treated as including a reference to treasury stock4 7e7 ,regulations ,the ,secretary shall prescribe such regulations or other guidance as may be appropriate to carry out the purposes of this section1 including regulations or other guidance which-- 7#a7 treat the portion of an instrument which is described in subsection 7c77#a7 separately from the portion of such instrument which is not so described1 and 7#b7 treat section #ajcb derivative items as contributions to the capital of the corporation to the extent that the application of this section would be inconsistent with the purposes of section #gf7;b74 4 7b7 ,clerical amendment ,the item relating to section #ajcb in the table of sections for part ,,iii of subchapter ,o of chapter #a is amended to read as follows3 ,sec4 #ajcb4 ,derivative transactions by a corporation with respect to its stock4 4 7c7 ,effective date ,the amendments made by this section shall apply to transactions entered into after the date of the enactment of this ,act4 #d ,tax favored bonds #cdca4 ,termination of private activity bonds 7a7 ,in general ,paragraph 7#a7 of section #ajc7;b7 is amended-- 7#a7 by striking which is not a qualified bond 7within the meaning of section #ada71 and 7#b7 by striking which is not a qualified bond in the heading thereof4 7b7 ,conforming amendments 7#a7 ,section #ada is amended by striking subsection 7e74 7#b7 ,subpart ,a of part ,,iv of subchapter ,b of chapter #a is amended by striking sections #adb1 #adc1 #add1 #ade1 #adf1 and #adg 7and by striking each of the items relating to such sections in the table of sections for such subpart74 7#c7 ,section #be is amended by adding at the end the following new subsection3 7j7 ,coordination with repeal of private activity bonds ,any reference to section #adc1 #add1 or #adf shall be treated as a reference to such section as in effect before its repeal by the ,tax ,reform ,act of #bjad4 4 7#d7 ,section #bf7;b77#b7 is amended by striking subparagraph 7,d74 7#e7 ,section #ada7;b7 is amended by striking paragraphs 7#e7 and 7#i7 and by redesignating paragraphs 7#f71 7#g71 and 7#h7 as paragraphs 7#e71 7#f71 and 7#g71 respectively4 7#f7 ,section #ada7;d7 is amended by striking paragraph 7#e7 and by redesignating paragraphs 7#f7 and 7#g7 as paragraphs 7#e7 and 7#f74 7#g7 ,section #adh7;b77#b77;,e7 is amended by striking in the case of a bond other than a private activity bond14 7#h7 ,section #adh7;b77#c7 is amended to read as follows3 7#c7 ,tax-exempt bonds not treated as investment property ,the term investment property does not include any tax-exempt bond4 4 7#i7 ,section #adh7;f77#c7 is amended by striking or is a private activity bond in the fourth sentence4 7#aj7 ,section #adh7;f77#d7 is amended-- 7,a7 by striking 7determined in accordance with section #adg7;b77#b77;,a77 in the flush matter following subparagraph 7,a77ii71 7,b7 by striking the last sentence of subparagraph 7,d77v71 and 7,c7 by adding at the end the following new subparagraph3 7,e7 ,average maturity ,for purposes of this paragraph1 the average maturity of any issue shall be determined by taking into account the respective issue prices of the bonds issued as part of such issue4 4 7#aa7 ,section #adh7;f77#d77;,a7 is amended in the flush matter after clause 7ii7 by striking ,in the case of an issue no bond of which is a private activity bond1 clause and inserting ,clause4 7#ab7 ,section #adh7;f77#d77;,b77ii7 is amended-- 7,a7 by striking subclause 7,,ii71 and 7,b7 by striking certain bonds4-- and all that follows through issue described in subclause 7,,ii7 and inserting certain bonds4--,in the case of an issue no bond of which is a tax or revenue anticipation bond4 7#ac7 7,a7 ,section #adh7;f77#d77;,c77iv7 is amended to read as follows3 7iv7 ,construction issue ,for purposes of this subparagraph1 the term construction issue means any issue if at least #ge percent of the available construction proceeds of such issue are to be used for construction expenditures with respect to property which is to be owned by a governmental unit4 4 7,b7 ,section #adh7;f77#d77;,c7 is amended by redesignating clauses 7v7 through 7xvii7 as clauses 7viii7 through 7xx71 respectively1 and by inserting after clause 7iv7 the following new clauses3 7v7 ,construction ,for purposes of this subparagraph1 the term construction includes reconstruction and rehabilitation4 7vi7 ,safe harbor for leases and management contracts ,for purposes of this subparagraph1 property leased by a governmental unit shall be treated as owned by such governmental unit if-- 7,i7 the lessee makes an irrevocable election 7binding on the lessee and all successors in interest under the lease7 not to claim depreciation or an investment credit with respect to such property1 7,,ii7 the lease term 7as defined in section #afh7;h77#a77 is not more than #hj percent of the reasonably expected economic life of the property1 and 7,,iii7 the lessee has no option to purchase the property other than at fair market value 7as of the time such option is exercised74 7vii7 ,determination of economic life ,for purposes of clause 7vi71 the reasonably expected economic life of any facility shall be determined as of the later of-- 7,i7 the date on which the bonds are issued1 or 7,,ii7 the date on which the facility is placed in service 7or expected to be placed in service74 4 7,c7 ,section #adh7;f77#d77;,d7 is amended by striking subparagraph 7,c77iv7 each place it appears and inserting subparagraph 7,c77v74 7#ad7 ,section #adh7;f77#d77;,d77i7 is amended-- 7,a7 by striking subclause 7,,ii71 7,b7 by striking 7other than private activity bonds7 in subclause 7,,iv71 and 7,c7 by redesignating subclauses 7,,iii7 and 7,,iv7 7as amended by subparagraph 7,b77 as subclauses 7,,ii7 and 7,,iii74 7#ae7 ,section #adh7;f77#d77;,d77ii7 is amended by striking subclause 7,,iv7 both places it appears and inserting subclause 7,,iii74 7#af7 ,section #adh7;f77#d77;,d77iii7 is amended by striking subclause 7,,iv7 and inserting subclause 7,,iii74 7#ag7 ,section #adh7;f77#d77;,d77iv77,,ii7 is amended by striking clause 7i77,,iv7 and inserting clause 7i77,,iii74 7#ah7 ,section #adh7;f77#d77;,d77vi7 is amended by striking the last sentence4 7#ai7 ,section #adh7;f77#g7 is amended by striking subparagraph 7,a7 and by redesignating subparagraphs 7,b7 and 7,c7 as subparagraphs 7,a7 and 7,b74 7#bj7 ,section #adi7;b77#c7 is amended-- 7,a7 by striking subparagraph 7,c7 and by redesignating subparagraphs 7,d7 and 7,e7 as subparagraphs 7,c7 and 7,d71 and 7,b7 by striking subparagraph 7,e7 in subparagraph 7,a77iv7 and inserting subparagraph 7,d74 7#ba7 ,section #adi7;e77#b7 is amended-- 7,a7 by striking subparagraphs 7,c71 7,d71 and 7,f7 and by redesignating subparagraphs 7,e7 and 7,g7 as subparagraphs 7,c7 and 7,d71 respectively1 and 7,b7 by striking the second sentence4 7#bb7 ,section #adi7;f77#f7 is amended-- 7,a7 by striking subparagraph 7,b71 and 7,b7 by striking ,for purposes of this subsection and all that follows through ,the term and inserting the following3 ,for purposes of this subsection1 the term4 7#bc7 ,section #aej is amended by striking subsections 7b7 and 7c7 and by redesignating subsections 7d7 and 7e7 as subsections 7b7 and 7c71 respectively4 7#bd7 ,section #aej7;e77#c7 is amended to read as follows3 7#c7 ,public approval requirement ,a bond shall not be treated as part of an issue which meets the requirements of paragraph 7#a7 unless such bond satisfies the requirements of section #adg7;f77#b7 7as in effect before its repeal by the ,tax ,reform ,act of #bjad74 4 7#be7 ,section #bfi;,a7b77#c7 is amended by striking #add7;a77#c7 and inserting #dad7n77#f77;,a74 7#bf7 ,section #dad7m77#e7 is amended by striking section #add7;a77#c7 and inserting subsection 7n77#f77;,a74 7#bg7 ,section #dad7n77#f77;,a7 is amended to read as follows3 7,a7 ,related persons ,a person is a related person to another person if-- 7i7 the relationship between such persons would result in a disallowance of losses under section #bfg or #gjg7;b71 or 7ii7 such persons are members of the same controlled group of corporations 7as defined in section #aefc7;a71 except that more than #ej percent shall be substituted for at least #hj percent each place it appears therein74 4 7#bh7 ,section #fjde7;e77#d77;,b7 is amended by inserting 7as in effect before its repeal by the ,tax ,reform ,act of #bjad7 after section #adc7m77#c74 7#bi7 ,section #ffed7;f77#a7 is amended by inserting 7as in effect before its repeal by the ,tax ,reform ,act of #bjad7 after section #adc7m74 7#cj7 ,section #ghga7;c7 is amended-- 7,a7 by striking paragraphs 7#b7 and 7#c71 and 7,b7 by striking tax-exempt bonds4-- and all that follows through ,subsection 7a7 of section #ajc and inserting the following3 tax-exempt bonds4--,subsection 7a7 of section #ajc4 7c7 ,effective date ,the amendments made by this section shall apply to bonds issued after ,december #ca1 #bjad4 #cdcb4 ,termination of credit for interest on certain home mortgages 7a7 ,in general ,section #be1 as amended by the preceding provisions of this ,act1 is amended by adding at the end the following new subsection3 7k7 ,termination ,no credit shall be allowed under this section with respect to any mortgage credit certificate issued after ,december #ca1 #bjad4 4 7b7 ,effective date ,the amendments made by this section shall apply to taxable years ending after ,december #ca1 #bjad4 #cdcc4 ,repeal of advance refunding bonds 7a7 ,in general ,paragraph 7#a7 of section #adi7;d7 is amended by striking as part of an issue described in paragraph 7#b71 7#c71 or 7#d74 and inserting to advance refund a bond44 7b7 ,conforming amendments 7#a7 ,section #adi7;d7 is amended by striking paragraphs 7#b71 7#c71 7#d71 and 7#f7 and by redesignating paragraphs 7#e7 and 7#g7 as paragraphs 7#b7 and 7#c74 7#b7 ,section #adh7;f77#d77;,c71 as amended by the preceding provisions of this ,act1 is amended by striking clause 7xvii7 and by redesignating clauses 7xviii71 7xix71 and 7xx7 as clauses 7xvii71 7xviii71 and 7xix71 respectively4 7c7 ,effective date ,the amendments made by this section shall apply to advance refunding bonds issued after ,december #ca1 #bjad4 #cdcd4 ,repeal of tax credit bond rules 7a7 ,in general ,part ,,iv of subchapter ,a of chapter #a is amended by striking subparts ,h1 ,i1 and ,j 7and by striking the items relating to such subparts in the table of subparts for such part74 7b7 ,payments to issuers ,subchapter ,b of chapter #fe is amended by striking section #fdca 7and by striking the item relating to such section in the table of sections for such subchapter74 7c7 ,conforming amendments 7#a7 ,section #fbaa7;b77#d77;,a7 is amended by striking and #fdca4 7#b7 ,section #fdja7;b77#a7 is amended by striking ,g1 ,h1 ,i1 and ,j and inserting and ,g4 7d7 ,effective date ,the amendments made by this section shall apply to bonds issued after the date of the enactment of this ,act4 ,f ,insurance reforms #ceja4 ,exception to pro rata interest expense disallowance for corporate-owned life insurance restricted to #bj-percent owners 7a7 ,in general ,subparagraph 7,a7 of section #bfd7;f77#d7 is amended-- 7#a7 by striking policy or contract7-- and all that follows through ,a policy or contract and inserting policy or contract7 a #bj-percent owner of such entity4 ,a policy or contract1 and 7#b7 by striking 1 officers1 directors1 and employees in the heading4 7b7 ,conforming amendment ,section #bfd7;f77#d7 is amended by striking subparagraph 7,e74 7c7 ,effective date ,the amendment made by this section shall apply to contracts issued after ,december #ca1 #bjad4 ,for purposes of the preceding sentence1 any material increase in the death benefit or other material change in the contract shall be treated as a new contract4 #cejb4 ,net operating losses of life insurance companies 7a7 ,in general ,paragraph 7#e7 of section #hje7;a7 is amended to read as follows3 7#e7 ,net operating loss deduction ,the deduction allowed under section #agb1 determined-- 7,a7 by treating the net operating loss for any taxable year as equal to the excess 7if any7 of-- 7i7 the life insurance deductions for such taxable year1 over 7ii7 the life insurance gross income for such taxable year1 and 7,b7 by applying subsection 7d77#e7 thereof with the modifications described in paragraph 7#d7 of this subsection4 4 7b7 ,conforming amendments 7#a7 ,part ,i of subchapter ,l of chapter #a is amended by striking section #haj 7and by striking the item relating to such section in the table of sections for such part74 7#b7 ,part ,,iii of subchapter ,l of chapter #a is amended by striking section #hdd 7and by striking the item relating to such section in the table of sections for such part74 7#c7 ,section #cha is amended by striking subsection 7d74 7#d7 ,section #hje7;a77#d77;,b77i71 as redesignated by the preceding provisions of this ,act1 is amended to read as follows3 7ii7 the net operating loss deduction provided by paragraph 7#e71 4 7#e7 ,section #hje7;b77#b77;,a77iii71 as redesignated by the preceding provisions of this ,act1 is amended to read as follows3 7iv7 any net operating loss carryback to the taxable year under section #agb 7as applied pursuant to subsection 7a77#e771 and 4 7#f7 ,section #hje7;b7 is amended by striking paragraph 7#d7 and redesignating paragraph 7#e7 as paragraph 7#d74 7#g7 ,section #iec7;b77#a77;,a71 as redesignated by the preceding provisions of this ,act1 is amended by striking operations and inserting net operating4 7#h7 ,section #acea7;i77#c7 is amended by striking or the operations loss deduction under section #haj14 7c7 ,effective date ,the amendments made by this section shall apply to losses arising in taxable years beginning after ,december #ca1 #bjad4 #cejc4 ,repeal of small life insurance company deduction 7a7 ,in general ,part ,i of subchapter ,l of chapter #a is amended by striking section #hjf 7and by striking the item relating to such section in the table of sections for such part74 7b7 ,conforming amendments 7#a7 ,section #dec;,b7e7 is amended-- 7,a7 by striking 7as defined in section #hjf7;b77#c77 in paragraph 7#b77;,b71 and 7,b7 by adding at the end the following new paragraph3 7#c7 ,noninsurance business 7,a7 ,in general ,for purposes of this subsection1 the term noninsurance business means any activity which is not an insurance business4 7,b7 ,certain activities treated as insurance businesses ,for purposes of subparagraph 7,a71 any activity which is not an insurance business shall be treated as an insurance business if-- 7i7 it is of a type traditionally carried on by life insurance companies for investment purposes1 but only if the carrying on of such activity 7other than in the case of real estate7 does not constitute the active conduct of a trade or business1 or 7ii7 it involves the performance of administrative services in connection with plans providing life insurance1 pension1 or accident and health benefits4 4 7#b7 ,section #dfe7;c77#g77;,d77v77,,ii7 is amended by striking section #hjf7;b77#c7 and inserting section #dec;,b7e77#c74 7#c7 ,section #hja7;a77#b7 is amended by striking subparagraph 7,c74 7#d7 ,section #hjd is amended by striking means-- and all that follows and inserting means the general deductions provided in section #hje44 7#e7 ,section #hje7;a77#d77;,b7 is amended by striking clause 7i7 and by redesignating clauses 7ii71 7iii71 and 7iv7 as clauses 7i71 7ii71 and 7iii71 respectively4 7#f7 ,section #hje7;b77#b77;,a7 is amended by striking clause 7iii7 and by redesignating clauses 7iv7 and 7v7 as clauses 7iii7 and 7iv71 respectively4 7#g7 ,section #hae7;c77#b77;,a7 is amended by inserting and at the end of clause 7i71 by striking clause 7ii71 and by redesignating clause 7iii7 as clause 7ii74 7#h7 ,section #hdb7;c7 is amended by striking paragraph 7#a7 and by redesignating paragraphs 7#b7 and 7#c7 as paragraphs 7#a7 and 7#b71 respectively4 7#i7 ,section #iec7;b77#a7 is amended by striking subparagraph 7,a7 and by redesignating subparagraphs 7,b7 and 7,c7 as subparagraphs 7,a7 and 7,b71 respectively4 7c7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 #cejd4 ,computation of life insurance tax reserves 7a7 ,in general ,subparagraph 7,b7 of section #hjg7;d77#b7 is amended to read as follows3 7,b7 an interest rate equal to the sum of-- 7i7 the applicable ,federal interest rate1 plus 7ii7 #c4e percentage points1 and 4 7b7 ,conforming amendments 7#a7 ,paragraph 7#d7 of section #hjg7;d7 is amended to read as follows3 7#d7 ,applicable ,federal interest rate 7,a7 ,in general ,except as provided in subparagraph 7,b71 the term applicable ,federal interest rate means the annual rate determined by the ,secretary under subparagraph 7,c7 for the calendar year in which the contract was issued4 7,b7 ,election to recompute ,federal interest rate every #e years ,for purposes of this subsection-- 7i7 ,in general ,in computing the amount of the reserve with respect to any contract to which an election under this subparagraph applies for periods during any recomputation period1 the applicable ,federal interest rate shall be the annual rate determined by the ,secretary under subparagraph 7,c7 for the #ast year of such period4 ,no change in the applicable ,federal interest rate shall be made under the preceding sentence unless such change would equal or exceed #a_/b of #a percentage point4 7ii7 ,recomputation period ,for purposes of clause 7i71 the term recomputation period means1 with respect to any contract1 the #e calendar year period beginning with the #eth calendar year beginning after the calendar year in which the contract was issued 7and each subsequent #e calendar year period74 7iii7 ,election ,an election under this subparagraph shall apply to all contracts issued during the calendar year for which the election was made or during any subsequent calendar year unless such election is revoked with the consent of the ,secretary4 7iv7 ,spread not available ,subsection 7f7 shall not apply to any adjustment required under this paragraph4 7,c7 ,rate of interest 7i7 ,in general ,for purposes of this paragraph1 the rate of interest determined under this subparagraph shall be the annual rate determined by the ,secretary under clause 7ii74 7ii7 ,determination of annual rate 7,i7 ,in general ,the annual rate determined by the ,secretary under this clause for any calendar year shall be a rate equal to the average of the applicable ,federal mid-term rates 7as defined in section #abgd7;d7 but based on annual compounding7 effective as of the beginning of each of the calendar months in the test period4 7,,ii7 ,test period ,for purposes of subclause 7,i71 the test period is the most recent #fj-;calendar-month period ending before the beginning of the calendar year for which the determination is made4 4 7#b7 ,the first sentence following paragraph 7#f7 in section #hjg7;c7 is amended by striking the applicable ,federal interest rate under subsection 7d77#b77;,b77i71 the prevailing ,state assumed interest rate under subsection 7d77#b77;,b77ii71 and inserting the interest rate determined under subsection 7d77#b77;,b74 7#c7 ,section #hjh is amended by adding at the end the following new subsection3 7g7 ,prevailing ,state assumed interest rate ,for purposes of this subchapter-- 7#a7 ,in general ,the term prevailing ,state assumed interest rate means1 with respect to any contract1 the highest assumed interest rate permitted to be used in computing life insurance reserves for insurance contracts or annuity contracts 7as the case may be7 under the insurance laws of at least #bf ,states4 ,for purposes of the preceding sentence1 the effect of nonforfeiture laws of a ,state on interest rates for reserves shall not be taken into account4 7#b7 ,when rate determined ,the prevailing ,state assumed interest rate with respect to any contract shall be determined as of the beginning of the calendar year in which the contract was issued4 4 7#d7 ,paragraph 7#a7 of section #haa7;d7 is amended by striking the greater of the prevailing ,state assumed interest rate or applicable ,federal interest rate in effect under section #hjg and inserting the interest rate in effect under section #hjg7;d77#b77;,b74 7#e7 ,subparagraph 7,a7 of section #hdf7;f77#f7 is amended by striking except that and all that follows and inserting except that the limitation of subsection 7a77#c7 shall apply in lieu of the limitation of the last sentence of section #hjg7;d77#a71 and4 7#f7 ,subparagraph 7,b7 of section #ied7;i77#e7 is amended by striking shall be substituted for the prevailing ,state assumed interest rate and inserting shall1 if higher1 be substituted for the interest rate in effect under section #hjg7;d77#b77;,b74 7c7 ,effective date 7#a7 ,in general ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 7#b7 ,transition rule ,for the first taxable year beginning after ,december #ca1 #bjad1 the reserve with respect to any contract 7as determined under section #hjg7;d77#b7 of the ,internal ,revenue ,code of #aihf7 at the end of the preceding taxable year shall be determined as if the amendments made by this section had applied to such reserve in such preceding taxable year and by using the interest rate applicable to such reserves under section #hjg7;d77#b7 of the ,internal ,revenue ,code of #aihf for calendar year #bjae4 ,for subsequent taxable years1 such amendments shall be applied with respect to such reserve by using the interest rate applicable under such section for calendar year #bjae4 7#c7 ,transition relief 7,a7 ,in general ,if-- 7i7 the reserve determined under section #hjg7;d77#b7 of the ,internal ,revenue ,code of #aihf with respect to any contract as of the close of the year preceding the first taxable year beginning after ,december #ca1 #bjad1 differs from 7ii7 the reserve which would have been determined with respect to such contract as of the close of such taxable year under such section determined without regard to paragraph 7#b71 then the difference between the amount of the reserve described in clause 7i7 and the amount of the reserve described in clause 7ii7 shall be taken into account under the method provided in subparagraph 7,b74 7,b7 ,method ,the method provided in this subparagraph is as follows3 7i7 if the amount determined under subparagraph 7,a77i7 exceeds the amount determined under subparagraph 7,a77ii71 #a_/h of such excess shall be taken into account1 for each of the #h succeeding taxable years1 as a deduction under section #hje7;a77#b7 of such ,code1 or 7ii7 if the amount determined under subparagraph 7,a77ii7 exceeds the amount determined under subparagraph 7,a77i71 #a_/h of such excess shall be included in gross income1 for each of the #h succeeding taxable years1 under section #hjc7;a77#b7 of such ,code4 #ceje4 ,adjustment for change in computing reserves 7a7 ,in general ,paragraph 7#a7 of section #hjg7;f7 is amended to read as follows3 7#a7 ,treatment as change in method of accounting ,if the basis for determining any item referred to in subsection 7c7 as of the close of any taxable year differs from the basis for such determination as of the close of the preceding taxable year1 then so much of the difference between-- 7,a7 the amount of the item at the close of the taxable year1 computed on the new basis1 and 7,b7 the amount of the item at the close of the taxable year1 computed on the old basis1 as is attributable to contracts issued before the taxable year shall be taken into account under section #dha as adjustments attributable to a change in method of accounting initiated by the taxpayer and made with the consent of the ,secretary4 4 7b7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 #cejf4 ,modification of rules for life insurance proration for purposes of determining the dividends received deduction 7a7 ,in general ,section #hab is amended to read as follows3 #hab4 ,determination of company's and policyholder's share on account by account basis 7a7 ,determination on account by account basis ,sections #hje7;a77#d7 and #hjg shall be applied on an account by account basis4 7b7 ,company's share ,for purposes of section #hje7;a77#d71 the term company's share means1 with respect to any account for any taxable year1 the ratio 7expressed as a percentage7 of-- 7#a7 the excess of-- 7,a7 the mean assets of such account for such taxable year1 over 7,b7 the mean reserves with respect to such account for such taxable year1 divided by 7#b7 the mean assets of such account for such taxable year4 7c7 ,policyholder's share ,for purposes of section #hjg1 the term policyholder's share means1 with respect to any account for any taxable year1 the excess of #ajj percent over the percentage determined under paragraph 7#b74 7d7 ,mean assets and mean reserves defined ,for purposes of this subsection-- 7#a7 ,mean assets ,the term mean assets means1 with respect to any account for any taxable year1 #ej percent of the sum of-- 7,a7 the fair market value of the assets of such account determined as of the beginning of such taxable year1 and 7,b7 the fair market value of the assets of such account determined as of the close of such taxable year4 7#b7 ,mean reserves ,the term mean reserves means1 with respect to any account for any taxable year1 #ej percent of the sum of-- 7,a7 the reserves with respect to such account as determined under section #hjg as of the beginning of such taxable year1 and 7,b7 the reserves with respect to such account as determined under section #hjg as of the close of such taxable year4 7#c7 ,certain dividends not taken into account ,dividends described in section #bdf7;c7 shall not be taken into account for purposes of determining mean assets or mean reserves4 7#d7 ,fees and expenses not taken into account ,fees and expenses shall not be taken into account for purposes of determining mean assets or mean reserves4 4 7b7 ,conforming amendment ,section #hag;,a7e77#b7 is amended by striking 1 #hjg7;d77#b77;,b71 and #hab and inserting and #hjg7;d77#b77;,b7 7c7 ,clerical amendment ,the table of sections for subpart ,d of part ,i of subchapter ,l of chapter #a is amended by striking the item relating to section #hab and inserting the following3 ,sec4 #hab4 ,determination of company's and policyholder's share on account by account basis4 4 7d7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 #cejg4 ,repeal of special rule for distributions to shareholders from pre-#aihd policyholders surplus account 7a7 ,in general ,subpart ,d of part ,i of subchapter ,l is amended by striking section #hae 7and by striking the item relating to such section in the table of sections for such subpart74 7b7 ,conforming amendment ,section #hja is amended by striking subsection 7c74 7c7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 7d7 ,phased inclusion of remaining balance of policyholders surplus accounts ,in the case of any stock life insurance company which has a balance 7determined as of the close of such company's last taxable year beginning before ,january #a1 #bjae7 in an existing policyholders surplus account 7as defined in section #hae of the ,internal ,revenue ,code of #aihf1 as in effect before its repeal71 the tax imposed by section #hja of such ,code for the first #h taxable years beginning after ,december #ca1 #bjad1 shall be the amount which would be imposed by such section for such year on the sum of-- 7#a7 life insurance company taxable income for such year 7within the meaning of such section #hja but not less than zero71 plus 7#b7 #a_/h of such balance4 #cejh4 ,modification of proration rules for property and casualty insurance companies 7a7 ,in general ,section #hcb7;b77#e77;,b7 is amended by striking #ae percent and inserting the percentage determined under subparagraph 7,f774 7b7 ,determination of percentage ,section #hcb7;b77#e7 is amended by adding at the end the following new subparagraph3 7,f7 ,determination of percentage 7i7 ,in general ,for purposes of subparagraph 7,b71 the percentage determined under this subparagraph is the ratio 7expressed as a percentage7 of-- 7,i7 the average adjusted bases 7within the meaning of section #ajaf7 of tax-exempt assets of the company1 to 7,,ii7 such average adjusted bases of all assets of the company4 7ii7 ,tax-exempt assets ,for purposes of clause 7i77,i71 the term tax-exempt assets means assets of the type which give rise to income described in subparagraph 7,b74 4 7c7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 #ceji4 ,repeal of special treatment of ,blue ,cross and ,blue ,shield organizations1 etc 7a7 ,transitional repeal of special rules 7#a7 ,in general ,section #hcc is amended by striking subsection 7b71 by redesignating subsection 7c7 as subsection 7b71 and by amending subsection 7a7 to read as follows3 7a7 ,in general ,an organization to which this section applies shall be taxable under this part in the same manner as if it were a stock insurance company4 4 7#b7 ,tax status not dependent on medical loss ratio ,subsection 7b7 of section #hcc1 as redesignated by subsection 7a71 is amended by striking paragraph 7#e74 7#c7 ,effective date ,the amendments made by this subsection shall apply to taxable years beginning after ,december #ca1 #bjad4 7b7 ,repeal of statutory treatment as a stock insurance company 7#a7 ,in general ,part ,,ii of subchapter ,l of chapter is amended by striking section #hcc 7and by striking the item relating to such section in the table of sections for such part74 7#b7 ,effective date ,the amendments made by this subsection shall apply to taxable years beginning after ,december #ca1 #bjaf4 #ceaj4 ,modification of discounting rules for property and casualty insurance companies 7a7 ,modification of rate of interest used ,to discount unpaid losses ,paragraph 7#b7 of section #hdf7;c7 is amended to read as follows3 7#b7 ,determination of annual rate ,the annual rate determined by the ,secretary under this paragraph for any calendar year shall be a rate determined on the basis of the corporate bond yield curve 7as defined in section #dcj7;h77#b77;,d77i774 4 7b7 ,modification of computational rules for loss payment patterns ,section #hdf7;d77#c7 is amended by striking subparagraphs 7,b7 through 7,g7 and inserting the following new subparagraphs3 7,b7 ,treatment of certain losses ,losses which would have been treated as paid in the last year of the period applicable under subparagraph 7,a77i7 or 7,a77ii7 shall be treated as paid in the following manner3 7i7 #c-year loss payment pattern 7,i7 ,in general ,the period taken into account under subparagraph 7,a77i7 shall be extended to the extent required under subclause 7,,ii74 7,,ii7 ,computation of extension ,the amount of losses which would have been treated as paid in the #c;d year after the accident year shall be treated as paid in such #c;d year and each subsequent year in an amount equal to the amount of the losses treated as paid in the #b;d year after the accident year 7or1 if lesser1 the portion of the unpaid losses not theretofore taken into account74 7ii7 #aj-year loss payment pattern 7,i7 ,in general ,the period taken into account under subparagraph 7,a77ii7 shall be extended to the extent required under subclause 7,,ii74 7,,ii7 ,computation of extension ,the amount of losses which would have been treated as paid in the #ajth year after the accident year shall be treated as paid in such #ajth year and each subsequent year in an amount equal to the amount of the losses treated as paid in the #ith year after the accident year 7or1 if lesser1 the portion of the unpaid losses not theretofore taken into account74 7,c7 ,special rule for international and reinsurance lines of business ,except as otherwise provided by regulations1 any determination made under subsection 7a7 with respect to unpaid losses relating to the international or reinsurance lines of business shall be made using1 in lieu of the loss payment pattern applicable to the respective lines of business1 a pattern determined by the ,secretary under paragraphs 7#a7 and 7#b7 based on the combined losses for all lines of business described in subparagraph 7,a77ii74 7,d7 ,special rule for #b;d or #ith year if negative or zero 7i7 #c-year loss payment pattern ,if the amount of the losses treated as paid in the #b;d year after the accident year is zero or a negative amount1 subparagraph 7,b77i77,,ii7 shall be applied by substituting the average of the losses treated as paid in the #ast and #b;d years after the accident year for the losses treated as paid in the #b;d year after the accident year4 7ii7 #aj-year loss payment pattern ,if the amount of the losses treated as paid in the #ith year after the accident year is zero or a negative amount1 subparagraph 7,b77ii77,,ii7 shall be applied by substituting the average of the losses treated as paid in the #gth1 #hth1 and #ith years after the accident year for the losses treated as paid in the #ith year after the accident year4 4 7c7 ,repeal of historical payment pattern election ,section #hdf is amended by striking subsection 7e7 and by redesignating subsections 7f7 and 7g7 as subsections 7e7 and 7f71 respectively4 7d7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 7e7 ,transitional rule ,for the first taxable year beginning after ,december #ca1 #bjad-- 7#a7 the unpaid losses and the expenses unpaid 7as defined in paragraphs 7#e77;,b7 and 7#f7 of section #hcb7;b7 of the ,internal ,revenue ,code of #aihf7 at the end of the preceding taxable year1 and 7#b7 the unpaid losses as defined in sections #hjg7;c77#b7 and #hje7;a77#a7 of such ,code at the end of the preceding taxable year1 shall be determined as if the amendments made by this section had applied to such unpaid losses and expenses unpaid in the preceding taxable year and by using the interest rate and loss payment patterns applicable to accident years ending with calendar year #bjae1 and any adjustment shall be taken into account ratably in such first taxable year and the #g succeeding taxable years4 ,for subsequent taxable years1 such amendments shall be applied with respect to such unpaid losses and expenses unpaid by using the interest rate and loss payment patterns applicable to accident years ending with calendar year #bjae4 #ceaa4 ,repeal of special estimated tax payments 7a7 ,in general ,part ,,iii of subchapter ,l of chapter #a is amended by striking section #hdg 7and by striking the item relating to such section in the table of sections for such part74 7b7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 #ceab4 ,capitalization of certain policy acquisition expenses 7a7 ,in general ,paragraph 7#a7 of section #hdh7;c7 is amended by striking subparagraphs 7,a71 7,b71 and 7,c7 and inserting the following new subparagraphs3 7,a7 #e percent of the net premiums for such taxable year on specified insurance contracts which are group contracts1 and 7,b7 #ab percent of the net premiums for such taxable year on specified insurance contracts not described in subparagraph 7,a74 4 7b7 ,group contracts ,so much of paragraph 7#b7 of section #hdh7;e7 as precedes subparagraph 7,a7 thereof is amended to read as follows3 7#b7 ,group contract ,the term group contract means any specified insurance contract-- 4 7c7 ,conforming amendments ,section #hdh7;e7 is amended by striking paragraphs 7#c7 and 7#f7 and by redesignating paragraphs 7#d7 and 7#e7 as paragraphs 7#c7 and 7#d71 respectively4 7d7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 #ceac4 ,tax reporting for life settlement transactions 7a7 ,in general ,subpart ,b of part ,,iii of subchapter ,a of chapter #fa is amended by adding at the end the following new section3 #fjej,x4 ,returns relating to certain life insurance contract transactions 7a7 ,requirement of reporting of certain payments 7#a7 ,in general ,every person who acquires a life insurance contract or any interest in a life insurance contract in a reportable policy sale during any taxable year shall make a return for such taxable year 7at such time and in such manner as the ,secretary shall prescribe7 setting forth-- 7,a7 the name1 address1 and ,,tin of such person1 7,b7 the name1 address1 and ,,tin of each recipient of payment in the reportable policy sale1 7,c7 the date of such sale1 7,d7 the name of the issuer of the life insurance contract sold and the policy number of such contract1 and 7,e7 the amount of each payment4 7#b7 ,statement to be furnished to persons with respect to whom information is required ,every person required to make a return under this subsection shall furnish to each person whose name is required to be set forth in such return a written statement showing-- 7,a7 the name1 address1 and phone number of the information contact of the person required to make such return1 and 7,b7 the information required to be shown on such return with respect to such person1 except that in the case of an issuer of a life insurance contract1 such statement is not required to include the information specified in paragraph 7#a77;,e74 7b7 ,requirement of reporting of seller's basis in life insurance contracts 7#a7 ,in general ,upon receipt of the statement required under subsection 7a77#b7 or upon notice of a transfer of a life insurance contract to a foreign person1 each issuer of a life insurance contract shall make a return 7at such time and in such manner as the ,secretary shall prescribe7 setting forth-- 7,a7 the name1 address1 and ,,tin of the seller who transfers any interest in such contract in such sale1 7,b7 the investment in the contract 7as defined in section #gb7;e77#f77 with respect to such seller1 and 7,c7 the policy number of such contract4 7#b7 ,statement to be furnished to persons with respect to whom information is required ,every person required to make a return under this subsection shall furnish to each person whose name is required to be set forth in such return a written statement showing-- 7,a7 the name1 address1 and phone number of the information contact of the person required to make such return1 and 7,b7 the information required to be shown on such return with respect to each seller whose name is required to be set forth in such return4 7c7 ,requirement of reporting with respect to reportable death benefits 7#a7 ,in general ,every person who makes a payment of reportable death benefits during any taxable year shall make a return for such taxable year 7at such time and in such manner as the ,secretary shall prescribe7 setting forth-- 7,a7 the name1 address1 and ,,tin of the person making such payment1 7,b7 the name1 address1 and ,,tin of each recipient of such payment1 7,c7 the date of each such payment1 and 7,d7 the amount of each such payment4 7#b7 ,statement to be furnished to persons with respect to whom information is required ,every person required to make a return under this subsection shall furnish to each person whose name is required to be set forth in such return a written statement showing-- 7,a7 the name1 address1 and phone number of the information contact of the person required to make such return1 and 7,b7 the information required to be shown on such return with respect to each recipient of payment whose name is required to be set forth in such return4 7d7 ,definitions ,for purposes of this section3 7#a7 ,payment ,the term payment means the amount of cash and the fair market value of any consideration transferred in a reportable policy sale4 7#b7 ,reportable policy sale ,the term reportable policy sale has the meaning given such term in section #aja7;a77#c77;,b74 7#c7 ,issuer ,the term issuer means any life insurance company that bears the risk with respect to a life insurance contract on the date any return or statement is required to be made under this section4 7#d7 ,reportable death benefits ,the term reportable death benefits means amounts paid by reason of the death of the insured under a life insurance contract that has been transferred in a reportable policy sale4 4 7b7 ,clerical amendment ,the table of sections for subpart ,b of part ,,iii of subchapter ,a of chapter #fa is amended by inserting after the item relating to section #fjej,w the following new item3 ,sec4 #fjej,x4 ,returns relating to certain life insurance contract transactions4 4 7c7 ,conforming amendments 7#a7 ,subsection 7d7 of section #fgbd is amended-- 7,a7 by striking or at the end of clause 7xxiv7 of paragraph 7#a77;,b71 by striking and at the end of clause 7xxv7 of such paragraph and inserting or1 and by inserting after such clause 7xxv7 the following new clause3 7xxvi7 section #fjej,x 7relating to returns relating to certain life insurance contract transactions71 and 1 and 7,b7 by striking or at the end of subparagraph 7,,gg7 of paragraph 7#b71 by striking the period at the end of subparagraph 7,,hh7 of such paragraph and inserting 1 or1 and by inserting after such subparagraph 7,,hh7 the following new subparagraph3 7,,ii7 subsection 7a77#b71 7b77#b71 or 7c77#b7 of section #fjej,x 7relating to returns relating to certain life insurance contract transactions74 4 7#b7 ,section #fjdg is amended-- 7,a7 by redesignating subsection 7g7 as subsection 7h71 7,b7 by inserting after subsection 7f7 the following new subsection3 7g7 ,information relating to life insurance contract transactions ,this section shall not apply to any information which is required to be reported under section #fjej,x4 1 and 7,c7 by adding at the end of subsection 7h71 as so redesignated1 the following new paragraph3 7#d7 ,for provisions requiring reporting of information relating to certain life insurance contract transactions1 see section #fjej,x4 4 7d7 ,effective date ,the amendments made by this section shall apply to-- 7#a7 reportable policy sales 7as defined in section #fjej,x7d77#b7 of the ,internal ,revenue ,code of #aihf 7as added by subsection 7a77 after ,december #ca1 #bjad1 and 7#b7 reportable death benefits 7as defined in section #fjej,x7d77#d7 of such ,code 7as added by subsection 7a77 paid after ,december #ca1 #bjad4 #cead4 ,clarification of tax basis of life insurance contracts 7a7 ,clarification with respect to adjustments ,paragraph 7#a7 of section #ajaf7;a7 is amended by striking subparagraph 7,a7 and all that follows and inserting the following3 7,a7 for-- 7i7 taxes or other carrying charges described in section #bff2 or 7ii7 expenditures described in section #agc 7relating to circulation expenditures71 for which deductions have been taken by the taxpayer in determining taxable income for the taxable year or prior taxable years2 or 7,b7 for mortality1 expense1 or other reasonable charges incurred under an annuity or life insurance contract2 4 7b7 ,effective date ,the amendment made by this section shall apply to transactions entered into after ,august #be1 #bjji4 #ceae4 ,exception to transfer for valuable consideration rules 7a7 ,in general ,subsection 7a7 of section #aja is amended by inserting after paragraph 7#b7 the following new paragraph3 7#c7 ,exception to valuable consideration rules for commercial transfers 7,a7 ,in general ,the second sentence of paragraph 7#b7 shall not apply in the case of a transfer of a life insurance contract1 or any interest therein1 which is a reportable policy sale4 7,b7 ,reportable policy sale ,for purposes of this paragraph1 the term reportable policy sale means the acquisition of an interest in a life insurance contract1 directly or indirectly1 if the acquirer has no substantial family1 business1 or financial relationship with the insured apart from the acquirer's interest in such life insurance contract4 ,for purposes of the preceding sentence1 the term indirectly applies to the acquisition of an interest in a partnership1 trust1 or other entity that holds an interest in the life insurance contract4 4 7b7 ,conforming amendment ,paragraph 7#a7 of section #aja7;a7 is amended by striking paragraph 7#b7 and inserting paragraphs 7#b7 and 7#c74 7c7 ,effective date ,the amendments made by this section shall apply to transfers after ,december #ca1 #bjad4 ,g ,pass-,thru and certain other entities #a ,s ,corporations #cfja4 ,reduced recognition period for built-in gains made permanent 7a7 ,in general ,paragraph 7#g7 of section #acgd7;d7 7relating to definitions and special rules7 is amended to read as follows3 7#g7 ,recognition period 7,a7 ,in general ,the term recognition period means the #e-year period beginning with the #ast day of the #ast taxable year for which the corporation was an ,s corporation4 ,for purposes of applying this section to any amount includible in income by reason of distributions to shareholders pursuant to section #eic7;e71 the preceding sentence shall be applied without regard to the phrase #e-year4 7,b7 ,installment sales ,if an ,s corporation sells an asset and reports the income from the sale using the installment method under section #dec1 the treatment of all payments received shall be governed by the provisions of this paragraph applicable to the taxable year in which such sale was made4 4 7b7 ,effective date ,the amendment made by this section shall apply to taxable years beginning after ,december #ca1 #bjac4 #cfjb4 ,modifications to ,s corporation passive investment income rules 7a7 ,increased percentage limit ,paragraph 7#b7 of section #acge7;a7 is amended by striking #be percent and inserting #fj percent4 7b7 ,repeal of excessive passive income as a termination event ,section #acfb7;d7 is amended by striking paragraph 7#c74 7c7 ,conforming amendments 7#a7 ,subsection 7b7 of section #acge is amended by striking paragraphs 7#c7 and 7#d7 and inserting the following new paragraph3 7#c7 ,passive investment income defined 7,a7 ,in general ,except as otherwise provided in this paragraph1 the term passive investment income means gross receipts derived from royalties1 rents1 dividends1 interest1 and annuities4 7,b7 ,exception for interest on notes from sales of inventory ,the term passive investment income shall not include interest on any obligation acquired in the ordinary course of the corporation's trade or business from its sale of property described in section #abba7;a77#a74 7,c7 ,treatment of certain lending or finance companies ,if the ,s corporation meets the requirements of section #edb7;c77#f7 for the taxable year1 the term passive investment income shall not include gross receipts for the taxable year which are derived directly from the active and regular conduct of a lending or finance business 7as defined in section #edb7;d77#a774 7,d7 ,treatment of certain dividends ,if an ,s corporation holds stock in a ,c corporation meeting the requirements of section #aejd7;a77#b71 the term passive investment income shall not include dividends from such ,c corporation to the extent such dividends are attributable to the earnings and profits of such ,c corporation derived from the active conduct of a trade or business4 7,e7 ,exception for banks1 etc ,in the case of a bank 7as defined in section #eha7 or a depository institution holding company 7as defined in section #c7w77#a7 of the ,federal ,deposit ,insurance ,act 7#ab ,u4,s4,c4 #ahac7w77#a771 the term passive investment income shall not include-- 7i7 interest income earned by such bank or company1 or 7ii7 dividends on assets required to be held by such bank or company1 including stock in the ,federal ,reserve ,bank1 the ,federal ,home ,loan ,bank1 or the ,federal ,agricultural ,mortgage ,bank or participation certificates issued by a ,federal ,intermediate ,credit ,bank4 7,f7 ,gross receipts from the sales of certain assets ,for purposes of this paragraph-- 7i7 ,capital assets other than stock and securities ,in the case of dispositions of capital assets 7other than stock and securities71 gross receipts from such dispositions shall be taken into account only to the extent of capital gain net income therefrom4 7ii7 ,stock and securities ,in the case of sales or exchanges of stock or securities1 gross receipts shall be taken into account only to the extent of the gain therefrom4 7,g7 ,coordination with section #acgd ,the amount of passive investment income shall be determined by not taking into account any recognized built-in gain or loss of the ,s corporation for any taxable year in the recognition period4 ,terms used in the preceding sentence shall have the same respective meanings as when used in section #acgd4 4 7#b7 7,a7 ,subparagraph 7,j7 of section #bf7;b77#b7 is amended by striking #be percent and inserting #fj percent4 7,b7 ,clause 7i7 of section #acge7;b77#a77;,a7 is amended by striking #be percent and inserting #fj percent4 7,c7 ,the heading for section #acge is amended by striking #be percent and inserting #fj percent4 7,d7 ,the item relating to section #acge in the table of sections for part ,,iii of subchapter ,s of chapter #a is amended by striking #be percent and inserting #fj percent4 7#c7 ,subparagraph 7,b7 of section #acfb7;f77#a7 is amended by striking paragraph 7#b7 or 7#c7 of subsection 7d7 and inserting subsection 7d77#b74 7d7 ,effective ,date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 #cfjc4 ,expansion of qualifying beneficiaries of an electing small business trust 7a7 ,no look-,through for eligibility purposes ,subparagraph 7,c7 of section #acfa7;b77#a7 is amended by inserting 7determined without regard to subsection 7c77#b77;,b77v77 after shareholder4 7b7 ,effective date ,the amendment made by this section shall take effect on ,january #a1 #bjae4 #cfjd4 ,charitable contribution deduction for electing small business trusts 7a7 ,in general ,paragraph 7#b7 of section #fda7;c71 as amended by the preceding provisions of this ,act1 is amended by inserting after subparagraph 7,c7 the following new subparagraph3 7,d7 7i7 ,section #fdb7;c7 shall not apply4 7ii7 ,for purposes of section #agj7;b77#a77;,e71 adjusted gross income shall be computed in the same manner as in the case of an individual1 except that the deductions for costs which are paid or incurred in connection with the administration of the trust and which would not have been incurred if the property were not held in such trust shall be treated as allowable in arriving at adjusted gross income4 4 7b7 ,effective date ,the amendment made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 #cfje4 ,permanent rule regarding basis adjustment to stock of ,s corporations making charitable contributions of property 7a7 ,in general ,section #acfg7;a77#b7 7relating to decreases in basis7 is amended by striking the last sentence4 7b7 ,effective date ,the amendment made by this section shall apply to contributions made in taxable years beginning after ,december #ca1 #bjac4 #cfjf4 ,extension of time for making ,s corporation elections 7a7 ,in general ,subsection 7b7 of section #acfb is amended to read as follows3 7b7 ,when made 7#a7 ,in general ,an election under subsection 7a7 may be made by a small business corporation for any taxable year not later than the due date for filing the return of the ,s corporation for such taxable year 7including extensions74 7#b7 ,certain elections treated as made for next taxable year ,if-- 7,a7 an election under subsection 7a7 is made for any taxable year within the period described in paragraph 7#a71 but 7,b7 either-- 7i7 on #a or more days in such taxable year and before the day on which the election was made the corporation did not meet the requirements of subsection 7b7 of section #acfa1 or 7ii7 #a or more of the persons who held stock in the corporation during such taxable year and before the election was made did not consent to the election1 then such election shall be treated as made for the following taxable year4 7#c7 ,authority to treat late elections1 etc41 as timely ,if-- 7,a7 an election under subsection 7a7 is made for any taxable year after the date prescribed by this subsection for making such election for such taxable year or no such election is made for any taxable year1 and 7,b7 the ,secretary determines that there was reasonable cause for the failure to timely make such election1 the ,secretary may treat such an election as timely made for such taxable year4 7#d7 ,election on timely filed returns ,except as otherwise provided by the ,secretary1 an election under subsection 7a7 for any taxable year may be made on a timely filed return of the ,s corporation for such taxable year4 7#e7 ,secretarial authority ,the ,secretary may prescribe such regulations1 rules1 or other guidance as may be necessary or appropriate for purposes of applying this subsection4 4 7b7 ,coordination with certain other provisions 7#a7 ,qualified subchapter ,s subsidiaries ,section #acfa7;b77#c77;,b7 is amended by adding at the end the following flush sentence3 ,rules similar to the rules of section #acfb7;b7 shall apply with respect to any election under clause 7ii74 4 7#b7 ,qualified subchapter ,s trusts ,section #acfa7;d77#b7 is amended by striking subparagraph 7,d74 7c7 ,revocations ,paragraph 7#a7 of section #acfb7;d7 is amended-- 7#a7 by striking subparagraph 7,d7 in subparagraph 7,c7 and inserting subparagraphs 7,d7 and 7,e71 and 7#b7 by adding at the end the following new subparagraph3 7,e7 ,authority to treat late revocations as timely ,if-- 7i7 a revocation under subparagraph 7,a7 is made for any taxable year after the date prescribed by this paragraph for making such revocation for such taxable year or no such revocation is made for any taxable year1 and 7ii7 the ,secretary determines that there was reasonable cause for the failure to timely make such revocation1 the ,secretary may treat such a revocation as timely made for such taxable year4 4 7d7 ,effective date 7#a7 ,in general ,except as otherwise provided in this subsection1 the amendments made by this section shall apply to elections for taxable years beginning after ,december #ca1 #bjad4 7#b7 ,revocations ,the amendments made by subsection 7c7 shall apply to revocations after ,december #ca1 #bjad4 #cfjg4 ,relocation of ,c corporation definition 7a7 ,in general ,subsection 7a7 of section #acfa is amended-- 7#a7 by striking paragraph 7#b71 and 7#b7 by striking ,s corporation defined4-- and all that follows through ,for purposes of this title1 the term ,s corporation means and inserting the following3 ,in general4--,for purposes of this title1 the term ,s corporation means4 7b7 ,conforming amendment ,section #ggja7;a77#c7 is amended-- 7#a7 by striking ,corporation4--,the term corporation means and inserting the following3 ,corporations4-- 7#a7 ,in general ,the term corporation means 1 and 7#b7 by adding at the end the following new paragraph3 7#b7 ,c corporations ,the term ,c corporation means1 with respect to any taxable year1 a corporation which is not an ,s corporation for such year4 4 7c7 ,effective date ,the amendments made by this section shall take effect on the date of the enactment of this ,act4 #b ,partnerships #cfaa4 ,repeal of rules relating to guaranteed payments and liquidating distributions 7a7 ,payment to partner for services or use of capital 7#a7 ,in general ,section #gjg is amended by striking subsection 7c74 7#b7 ,conforming amendments 7,a7 ,section #bfg7;e7 is amended by striking paragraph 7#d74 7,b7 ,section #gjf7;a7 is amended by striking and #gjg7;c74 7,c7 ,section #adjb7;a7 is amended1 in the matter following paragraph 7#ag7-- 7i7 by striking 7after such gross income has been reduced by the sum of all payments to which section #gjg7;c7 applies7 in clauses 7iii7 and 7iv71 and 7ii7 by striking 7after such gross income has been so reduced7 in clause 7iv74 7,d7 ,section #bgja7;c77#a77;,b7 is amended by inserting or at the end of clause 7i71 by striking 1 or at the end of clause 7ii7 and inserting a period1 and by striking clause 7iii74 7,e7 ,section #geai7;d7 is amended by striking paragraph 7#e74 7#c7 ,effective dates 7,a7 ,in general ,except as otherwise provided in this paragraph1 the amendments made by this subsection shall apply to partnership taxable years beginning after ,december #ca1 #bjad4 7,b7 ,transfers ,the amendment made by paragraph 7#b77;,e7 shall apply to transfers after ,december #ca1 #bjad4 7b7 ,payments made in liquidation of retiring or deceased partner 7#a7 ,in general ,subpart ,b of part ,,ii of subchapter ,k of chapter #a is amended by striking section #gcf 7and by striking the item relating to such section in the table of sections for such subpart74 7#b7 ,retired partners and successors in interest of deceased partners treated as partners until liquidation ,section #gfa7;d7 is amended by adding at the end the following3 ,for purposes of this subchapter1 any retired partner or a deceased partner's successor in interest shall be treated as a partner until the complete liquidation of such interest4 7#c7 ,conforming amendment 7,a7 ,section #ceg7;c77#c77;,a7 is amended by striking payment of which either-- and all that follows through then1 for purposes of and inserting payment of which would give rise to a deduction1 then1 for purposes of4 7,b7 ,section #gca7;d7 is amended-- 7i7 by striking section #gcf 7relating to payments to a retiring partner or a deceased partner's successor in interest711 and 7ii7 by striking items71 and and inserting items7 and4 7,c7 ,section #gea7;b77#b7 is amended-- 7i7 by striking subparagraph 7,b71 and 7ii7 by striking shall not apply to-- and all that follows through a distribution of property and inserting the following3 shall not apply to a distribution of property4 7,d7 7i7 ,section #gec is amended by striking ,the amount includible and all that follows and inserting ,for treatment of income in respect of a decedent1 see section #fia4 7ii7 ,section #fia is amended by striking subsection 7e74 7#d7 ,effective date ,the amendments made by this subsection shall apply to partners retiring or dying after ,december #ca1 #bjad4 #cfab4 ,mandatory adjustments to basis of partnership property in case of transfer of partnership interests 7a7 ,in general ,section #gdc is amended-- 7#a7 by striking subsections 7a71 7c71 7d71 7e71 and 7f7 and by redesignating subsection 7b7 as subsection 7a71 7#b7 in subsection 7a7 7as so redesignated7 by striking with respect to which the election provided in section #ged is in effect or which has a substantial built-in loss immediately after such transfer1 and 7#c7 by adding at the end the following new subsection3 7b7 ,allocation of basis 7#a7 ,general rule ,any increase or decrease in the adjusted basis of partnership property under subsection 7a7 shall1 except as provided in paragraph 7#b71 be allocated-- 7,a7 in a manner which has the effect of reducing the difference between the fair market value and the adjusted basis of partnership properties1 or 7,b7 in any other manner permitted by regulations prescribed by the ,secretary4 7#b7 ,special rule ,in applying the allocation rules provided in paragraph 7#a71 increases or decreases in the adjusted basis of partnership property arising from a transfer of an interest attributable to property consisting of-- 7,a7 capital assets and property described in section #abca7;b71 or 7,b7 any other property of the partnership1 shall be allocated to partnership property of a like character except that the basis of any such partnership property shall not be reduced below zero4 4 7b7 ,conforming amendments 7#a7 ,section #gjd7;c77#a7 is amended-- 7,a7 by adding and at the end of subparagraph 7,a71 7,b7 by striking 1 and at the end of subparagraph 7,b7 and inserting a period1 and 7,c7 by striking all that follows subparagraph 7,b74 7#b7 ,section #gcb is amended by striking subsection 7d7 and by redesignating subsections 7e7 and 7f7 as subsections 7d7 and 7e71 respectively4 7#c7 ,section #gfa7;e77#b7 is amended by striking optional4 7#d7 ,section #fjca is amended by striking subsection 7f74 7#e7 ,the heading for section #gdc is amended to read as follows3 ,adjustment to basis of partnership property4 7#f7 ,the heading for subsection 7a7 7as redesignated by the preceding provisions of this ,act7 of section #gdc is amended by striking ,adjustment to basis of partnership property and inserting ,in general4 7c7 ,effective date ,the amendments made by this section shall apply to transfers after ,december #ca1 #bjad4 #cfac4 ,mandatory adjustments to basis of undistributed partnership property 7a7 ,in general ,section #gcd is amended to read as follows3 #gcd4 ,adjustment to basis of undistributed partnership property 7a7 ,in general ,in the case of any distribution to a partner1 the partnership shall adjust the basis of partnership property such that each remaining partner's net liquidation amount immediately after such distribution is equal to such partner's net liquidation amount immediately before such distribution4 7b7 ,distributions other than in liquidation of a partner's interest ,in the case of any distribution to a partner other than in liquidation of such partner's interest1 proper adjustment shall be made under subsection 7a7 with respect to such partner to take into account-- 7#a7 the amount of any gain recognized by such partner with respect to such distribution under section #gca7;a71 and 7#b7 the amount of any gain or loss which would be recognized by such partner if such partner sold the property distributed at fair market value immediately after such distribution4 7c7 ,net liquidation amount ,for purposes of this section1 the term net liquidation amount means1 with respect to any partner1 the net amount of gain or loss 7if any7 which would be taken into account by the partner under section #gjb if the partnership sold all of its assets at fair market value 7and no other amounts were taken into account under such section74 7d7 ,allocation of basis 7#a7 ,decreases in basis ,any decrease in the adjusted basis of partnership property which is required under this section-- 7,a7 shall be made in accordance with paragraph 7#c7 of section #gcb7;c71 and 7,b7 shall be made first with respect to property other than unrealized receivables 7as defined in section #gea7;c77 and inventory 7as defined in section #gea7;d77 to the extent thereof4 ,if any such decrease is prevented by the absence of sufficient adjusted basis of partnership property1 each partner shall recognize gain in the amount of such partner's distributive share of such prevented decrease4 ,such gain shall be treated as gain from the sale of the partner's partnership interest4 7#b7 ,increases in basis ,any increase in the adjusted basis of partnership property which is required under this section-- 7,a7 shall be made in accordance with paragraph 7#b7 of section #gcb7;c71 and 7,b7 shall be made only with respect to property other than unrealized receivables 7as defined in section #gea7;c77 and inventory 7as defined in section #gea7;d774 ,if any such increase is prevented by the absence of property described in subparagraph 7,b71 each partners shall recognize a loss in the amount of such partner's distributive share of such prevented increase4 ,such loss shall be treated as a loss from the sale of the partner's partnership interest4 7e7 ,no allocation of basis decrease to stock of corporate partner ,in making an allocation under subsection 7d7 of any decrease in the adjusted basis of partnership property required under subsection 7a7-- 7#a7 no allocation may be made to stock in a corporation 7or any person related 7within the meaning of section #bfg7;b7 or #gjg7;b77#a77 to such corporation7 which is a partner in the partnership1 and 7#b7 any amount not allocable to stock by reason of paragraph 7#a7 shall be allocated under subsection 7d7 to other partnership property4 ,gain shall be recognized by the partnership to the extent that the amount required to be allocated to other partnership property under subsection 7e77#b7 exceeds the aggregate adjusted basis of such other property immediately before the allocation required by subsection 7a74 4 7b7 ,conforming amendments 7#a7 7,a7 ,subpart ,d of part ,,ii of subchapter ,k of chapter #a is amended by striking sections #ged and #gee 7and by striking items relating to such sections in the table of sections of such subpart74 7,b7 ,clause 7ii7 of section #gjf7;d77#b77;,d7 is amended by striking section #gee and inserting section #gdc7;b74 7#b7 ,subsection 7d7 of section #ajfj is amended-- 7,a7 by striking section #gee in paragraph 7#a7 and inserting sections #gcd and #gdc1 and 7,b7 by striking section #gee in paragraph 7#b7 and inserting section #gcd or #gdc4 7c7 ,effective date ,the amendments made by this section shall apply to distributions after ,december #ca1 #bjad4 #cfad4 ,corresponding adjustments to basis of properties held by partnership where partnership basis adjusted 7a7 ,in general ,subpart ,b of part ,,ii of subchapter ,k of chapter #a1 as amended by the preceding provisions of this ,act1 is amended by inserting after section #gce the following new section3 #gcf4 ,corresponding adjustment to basis of properties held by lower-tier partnership in case of upper-tier partnership basis adjustments 7a7 ,distributions by upper-,tier partnership ,in the case of any distribution of property to a partner by an upper-tier partnership1 if such distribution results in an adjustment in the upper-tier partnership's adjusted basis in an interest in a lower-tier partnership under section #gcd1 then such lower-tier partnership shall make a corresponding adjustment to the adjusted basis of its partnership property4 7b7 ,distributions of interests in lower-,tier partnership ,in the case of any distribution of an interest in a lower-tier partnership by an upper-tier partnership-- 7#a7 if the adjusted basis of such interest in the hands of the upper-tier partnership 7determined immediately before such distribution7 exceeds the adjusted basis of such interest in the hands of the distributee partner 7determined immediately after such distribution71 then such lower-tier partnership shall decrease the adjusted basis of its partnership property by the amount of such excess1 or 7#b7 if the adjusted basis of such interest in the hands of the distributee partner 7determined immediately after such distribution7 exceeds the adjusted basis of such interest in the hands of the upper-tier partnership 7determined immediately before such distribution71 then such lower-tier partnership shall increase the adjusted basis of its partnership property by the amount of such excess4 7c7 ,dispositions of interests in upper-,tier partnership ,in the case of a disposition of an interest in an upper-tier partnership which holds an interest in a lower-tier partnership1 if there is an adjustment to the adjusted basis of the lower-tier partnership under section #gdc1 then such lower-tier partnership shall make a corresponding adjustment to the adjusted basis of its partnership property4 7d7 ,multi-,tiered partnerships ,in the case of any adjustment under subsection 7a71 7b71 or 7c7 in the adjusted basis of an interest in another partnership1 such other partnership shall make a corresponding adjustment in the adjusted basis of its partnership property4 7e7 ,allocation of basis2 recognition of gain ,in the case of any adjustment in the adjusted basis of partnership property-- 7#a7 under subsection 7a71 7b71 7c71 or 7d71 such adjustment shall be made only with respect to the upper-tier partnership's proportionate share 7as determined under section #gdc7;a77 of the adjusted basis of the lower-tier partnership's property1 7#b7 under subsection 7a7 or 7b7 7or so much of subsection 7d7 as relates to either such subsection71 rules similar to the rules of section #gcd7;d7 shall apply1 and 7#c7 under subsection 7c7 7or so much of subsection 7d7 as relates to such subsection71 rules similar to the rules of section #gdc7;b7 shall apply4 7f7 ,reporting ,in the case of any adjustment in the adjusted basis of partnership property by a lower-tier partnership under this section by reason of a distribution by1 or a disposition of an interest in1 an upper-tier partnership1 such upper-tier partnership shall furnish 7in such manner as the ,secretary shall prescribe7 to such lower-tier partnership such information as is necessary to enable such lower-tier partnership to make such adjustment4 7g7 ,upper- and lower-,tier partnerships ,for purposes of this section-- 7#a7 ,upper-tier partnership ,the term upper-tier partnership means a partnership owning an interest in another partnership4 7#b7 ,lower-tier partnership ,the term lower-tier partnership means the partnership referred to in paragraph 7#a7 an interest in which is owned by the upper-tier partnership4 4 7b7 ,effective dates ,the amendments made by this section shall apply to distributions and transfers after ,december #ca1 #bjad4 #cfae4 ,charitable contributions and foreign taxes taken into account in determining limitation on allowance of partner's share of loss 7a7 ,in general ,subsection 7d7 of section #gjd is amended-- 7#a7 by striking ,a partner's distributive share and inserting the following3 7#a7 ,in general ,a partner's distributive share 1 7#b7 by striking ,any excess of such loss and inserting the following3 7#b7 ,carryover ,any excess of such loss 1 and 7#c7 by adding at the end the following new paragraph3 7#c7 ,special rules ,in determining the amount of any loss under paragraph 7#a71 there shall be taken into account as a deduction the partner's distributive share of-- 7,a7 the adjusted basis of charitable contributions described in paragraph 7#d7 of section #gjb7;a71 and 7,b7 the amount of taxes described in paragraph 7#f7 of such section4 4 7b7 ,effective date ,the amendments made by this section shall apply to partnership taxable years beginning after ,december #ca1 #bjad4 #cfaf4 ,revisions related to unrealized receivables and inventory items 7a7 ,repeal of requirement that inventory be substantially appreciated in certain partnership distributions treated as sale or exchange 7#a7 ,in general ,clause 7ii7 of section #gea7;b77#a77;,a7 is amended by striking which have appreciated substantially in value4 7#b7 ,conforming amendment ,section #gea7;b7 is amended by striking paragraph 7#c74 7#c7 ,effective date ,the amendments made by this subsection shall apply to distributions after ,december #ca1 #bjad4 7b7 ,revision of regulations relating to treatment of unrealized receivables and inventory items ,the ,secretary of the ,treasury shall revise regulations issued under section #gea7;b7 of the ,internal ,revenue ,code of #aihf to take into account the partner's share of income and gain rather than the partner's share of partnership assets4 7c7 ,simplification of definition of unrealized receivables 7#a7 ,in general ,section #gea7;c7 is amended by striking all that follows paragraph 7#b7 and inserting the following3 ,for purposes of this section and sections #gca1 #gcb1 #gcd1 and #gda1 such term also includes any property other than inventory items1 but only to the extent of the amount which would be treated as ordinary income if 7at the time of the transaction described in the applicable section7 such property had been sold by the partnership for its fair market value4 4 7#b7 ,effective date ,the amendment made by this subsection shall apply to partnership taxable years beginning after ,december #ca1 #bjad4 #cfag4 ,repeal of time limitation on taxing precontribution gain 7a7 ,in general ,subparagraph 7,b7 of section #gjd7;c77#a7 is amended by striking within #g years of being contributed4 7b7 ,conforming amendment ,paragraph 7#a7 of section #gcg7;b7 is amended by striking within #g years of the distribution4 7c7 ,effective date ,the amendments made by this section shall apply to property contributed to a partnership after ,december #ca1 #bjad4 #cfah4 ,partnership interests created by gift 7a7 ,in general ,section #gfa7;b7 is amended by adding at the end the following3 ,in the case of a capital interest in a partnership in which capital is a material income-producing factor1 whether a person is a partner with respect to such interest shall be determined without regard to whether such interest was derived by gift from any other person44 7b7 ,conforming amendments ,section #gjd7;e7 is amended-- 7#a7 by striking paragraph 7#a7 and by redesignating paragraphs 7#b7 and 7#c7 as paragraphs 7#a7 and 7#b71 respectively1 7#b7 by striking this section in paragraph 7#b7 7as so redesignated7 and inserting this subsection1 and 7#c7 by striking ,family partnerships in the heading and inserting ,partnership interests created by gift4 7c7 ,effective date ,the amendments made by this section shall apply to partnership taxable years beginning after ,december #ca1 #bjad4 #cfai4 ,repeal of technical termination 7a7 ,in general ,paragraph 7#a7 of section #gjh7;b7 is amended-- 7#a7 by striking 1 or and all that follows and inserting a period1 and 7#b7 by striking only if-- and all that follows through no part of any business and inserting the following3 only if no part of any business4 7b7 ,effective date ,the amendments made by this section shall apply to partnership taxable years beginning after ,december #ca1 #bjad4 #cfbj4 ,publicly traded partnership exception restricted to mining and natural resources partnerships 7a7 ,in general ,subsection 7d7 of section #ggjd is amended to read as follows3 7d7 ,qualifying income ,for purposes of this section1 the term qualifying income means-- 7#a7 income and gains derived from the exploration1 development1 mining or production1 processing1 refining1 transportation 7including pipelines transporting gas1 oil1 or products thereof71 or the marketing of any mineral or natural resource 7including geothermal energy and excluding fertilizer and timber7 or industrial source carbon dioxide1 and 7#b7 any gain from the sale or disposition of a capital asset 7or property described in section #abca7;b77 held for the production of income described in paragraph 7#a74 ,for purposes of this subsection1 the term mineral or natural resource means any product of a character with respect to which a deduction for depletion is allowable under section #faa 7other than minerals from sea water or the air 7or similar inexhaustible sources71 soil1 sod1 dirt1 turf1 water1 or mosses74 4 7b7 ,conforming amendments ,section #ihh7;c77#a77;,e7 is amended-- 7#a7 by striking income or gains described in subparagraph 7,a71 7,b71 or 7,g7 of section #ggjd7;d77#a7 in clause 7iii77,,iii7 and inserting qualifying income or gains1 7#b7 by striking subclause 7,,iii7 of clause 7vi7 and by redesignating subclause 7,,iv7 as subclause 7,,iii71 7#c7 by redesignating clause 7vi7 7as amended by this subparagraph7 as clause 7viii71 and 7#d7 by inserting after clause 7v7 the following new clauses3 7vi7 ,qualifying income or gains ,the term qualifying income or gains means-- 7,i7 interest1 7,,ii7 dividends1 and 7,,iii7 in the case of a partnership described in the second sentence of section #ggjd7;c77#c71 income and gains from commodities 7not described in section #abba7;a77#a77 or futures1 forwards1 and options with respect to commodities4 7vii7 ,inadvertent terminations ,if-- 7,i7 ,a partnership fails to meet the gross income requirements of this subparagraph1 7,,ii7 the ,secretary determines that such failure was inadvertent1 7,,iii7 no later than a reasonable time after the discovery of such failure1 steps are taken so that such partnership once more meets such gross income requirements1 and 7,,iv7 such partnership agrees to make such adjustments 7including adjustments with respect to the partners7 or to pay such amounts as may be required by the ,secretary with respect to such period1 then1 notwithstanding such failure1 such entity shall be treated as continuing to meet such gross income requirements for such period4 4 7c7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjaf4 #cfba4 ,ordinary income treatment in the case of partnership interests held in connection with performance of services 7a7 ,in general ,part ,,iv of subchapter ,o of chapter #a is amended-- 7#a7 by redesignating section #ajfa as section #ajfb1 and 7#b7 by inserting after section #ajfj the following new section3 #ajfa4 ,partnership interests held in connection with performance of services 7a7 ,in general ,if one or more applicable partnership interests are held by a taxpayer at any time during the taxable year1 so much of-- 7#a7 the taxpayer's net capital gain with respect to such interests for such taxable year1 as does not exceed 7#b7 the taxpayer's recharacterization account balance for such taxable year1 shall be treated as ordinary income4 7b7 ,net capital gain 7#a7 ,in general ,for purposes of subsection 7a77#a71 net capital gain shall be determined under section #abbb1 except that such section shall be applied-- 7,a7 without regard to the recharacterization of any item as ordinary income under this section1 7,b7 by only taking into account items of gain and loss-- 7i7 taken into account by the taxpayer under section #gjb with respect to any applicable partnership interest1 7ii7 recognized by the taxpayer on the disposition of any such interest1 or 7iii7 recognized by the taxpayer under paragraph 7#d7 on a distribution of property with respect to such interest1 and 7,c7 in the case of a taxable year for which section #abca gains 7as defined in section #abca7;a77#c77;,a77 exceed section #abca losses 7as defined in section #abca7;a77#c77;,b771 by treating property which is taken into account in determining such gains and losses as capital assets held for more than #a year4 7#b7 ,allocation to items of gain ,the amount treated as ordinary income under subsection 7a7 shall be allocated ratably among the items of long-term capital gain taken into account in determining net capital gain under paragraph 7#a74 7#c7 ,recognition of gain on disposition of applicable partnership interests ,any gain on the disposition of any applicable partnership interest shall be recognized notwithstanding any other provision of this title4 7#d7 ,recognition of gain on distributions of partnership property 7,a7 ,in general ,in the case of any distribution of property by a partnership with respect to any applicable partnership interest1 the partner receiving such property shall recognize gain equal to the excess 7if any7 of-- 7i7 the fair market value of such property at the time of such distribution1 over 7ii7 the adjusted basis of such property in the hands of such partner 7determined without regard to subparagraph 7,b774 7,b7 ,adjustment of basis ,in the case of a distribution to which subparagraph 7,a7 applies1 the basis of the distributed property in the hands of the distributee partner shall be the amount determined under subparagraph 7,a77i74 7c7 ,recharacterization account balance 7#a7 ,in general ,for purposes of this section1 the term recharacterization account balance means1 with respect to any taxpayer for any taxable year1 the excess 7if any7 of-- 7,a7 the sum of-- 7i7 the taxpayer's aggregate annual recharacterization amounts with respect to applicable partnership interests for such taxable year1 plus 7ii7 the taxpayer's recharacterization account balance for the taxable year preceding such taxable year1 over 7,b7 the sum of-- 7i7 the taxpayer's net ordinary income with respect to applicable partnership interests for such taxable year 7determined without regard to this section71 plus 7ii7 the amount treated as ordinary income of the taxpayer under this section for the taxable year preceding such taxable year4 7#b7 ,annual recharacterization amount ,for purposes of this subsection-- 7,a7 ,in general ,the term annual recharacterization amount means1 with respect to any applicable partnership interest for any partnership taxable year1 an amount equal to the product of-- 7i7 the specified rate determined under subparagraph 7,b7 for the calendar year in which such taxable year begins1 multiplied by 7ii7 the excess 7if any7 of-- 7,i7 an amount equal to the applicable percentage of the partnership's aggregate invested capital for such taxable year1 over 7,,ii7 the specified capital contribution of the partner with respect to the applicable partnership interest for such taxable year4 ,if a taxpayer holds an applicable partnership interest for less than the entire taxable year1 the amount determined under the preceding sentence shall be ratably reduced4 7,b7 ,specified rate ,for purposes of subparagraph 7,a71 the term specified rate means1 with respect to any calendar year1 a percentage equal to-- 7i7 the ,federal long-term rate determined under section #abgd7;d77#a7 for the last month of the calendar year1 plus 7ii7 #aj percentage points4 7,c7 ,applicable percentage 7i7 ,in general ,the term applicable percentage means1 with respect to any applicable partnership interest1 the highest percentage of profits of the partnership that could be allocated with respect to such interest for the taxable year 7consistent with the partnership agreement and assuming such facts and circumstances with respect to such taxable year as would result in such highest percentage74 7ii7 ,secretarial authority ,the ,secretary shall prescribe rules for the determination of the applicable percentage in cases in which the percentage of profits of a partnership that are to be allocated with respect to an applicable partnership interest varies on the basis of the aggregate amount of such profits4 ,such rules may provide a percentage which may be used in lieu of the highest percentage determined under clause 7i7 in cases where such other percentage is consistent with the purposes of this section4 7,d7 ,aggregate invested capital 7i7 ,in general ,the term aggregate invested capital means1 with respect to any taxable year1 the average daily amount of invested capital of the partnership for such taxable year4 7ii7 ,invested capital ,the term invested capital means1 with respect to any partnership as of any day1 the total cumulative value1 determined at the time of contribution1 of all money or other property contributed to the partnership on or before such day4 7iii7 ,reduction for liquidation of partnership interests ,the invested capital of a partnership shall be reduced by the aggregate amount distributed in liquidation of interests in the partnership4 7iv7 ,treatment of certain indebtedness as invested capital ,the following amounts shall be treated as invested capital3 7,i7 ,partner loans ,the aggregate value 7determined as of the time of the loan7 of money or other property which a partner loans to the partnership4 7,,ii7 ,indebtedness eligible to share in equity of the partnership ,the face amount of any convertible debt of the partnership or any debt obligation providing equity participation in the partnership4 7,e7 ,specified capital contribution 7i7 ,in general ,the term specified capital contribution means1 with respect to any applicable partnership interest for any taxable year1 the average daily amount of contributed capital with respect to such interest for such year4 7ii7 ,contributed capital ,the term contributed capital means1 with respect to applicable partnership interest as of any day1 the excess 7if any7 of-- 7,i7 the total cumulative value1 determined at the time of contribution1 of all money or other property contributed by the partner to the partnership with respect to such interest as of such day1 over 7,,ii7 the total cumulative value1 determined at the time of distribution1 of all money or other property distributed by the partnership to the partner with respect to such interest as of such day4 7iii7 ,treatment of related party borrowings ,any amount borrowed directly or indirectly from the partnership or any other partner of the partnership or any person related to such other partner or such partnership shall not be taken into account under this subparagraph4 ,for purposes of the preceding sentence1 a person shall be treated as related to another person if the relationship between such persons would be described in section #bfg7;b7 or #gjg7;b7 if such sections and section #bfg7;f7 were applied by substituting #aj percent for #ej percent each place it appears4 7,f7 ,multiple interests ,if at any time during a taxable year a taxpayer holds directly or indirectly more than #a applicable partnership interest in a single partnership1 such interests shall be treated as #a applicable partnership interest for purposes of applying this paragraph4 7#c7 ,net ordinary income ,for purposes of this subsection1 the net ordinary income with respect to applicable partnership interests for any taxable year is the excess 7if any7 of-- 7,a7 the taxpayer's distributive share of items of income and gain under section #gjb with respect to applicable partnership interests for such taxable year 7determined without regard to any items of gain taken into account in determining net capital gain under subsection 7b77#a771 over 7,b7 the taxpayer's distributive share of items of deduction and loss under section #gjb with respect to such interests for such taxable year 7determined without regard to any items of loss taken into account in determining net capital gain under subsection 7b77#a774 7d7 ,applicable partnership interest ,for purposes of this section-- 7#a7 ,in general ,the term applicable partnership interest means any interest in a partnership which1 directly or indirectly1 is transferred to 7or is held by7 the taxpayer in connection with the performance of services by the taxpayer1 or any other person1 in any applicable trade or business4 7#b7 ,applicable trade or business 7,a7 ,in general ,the term applicable trade or business means any trade or business conducted on a regular1 continuous1 and substantial basis which1 regardless of whether the activities are conducted in one or more entities1 consists1 in whole or in part1 of-- 7i7 raising or returning capital1 7ii7 investing in 7or disposing of7 trades or businesses 7or identifying trades or businesses for such investing or disposition71 and 7iii7 developing such trades or businesses4 7,b7 ,treatment of research and experimentation activities ,any activity involving research or experimentation 7within the meaning of section #dfi7;c77#d77 shall be treated as a trade or business for purposes of clauses 7ii7 and 7iii7 of subparagraph 7,a74 7e7 ,transfer of applicable partnership interest to related person 7#a7 ,in general ,if a taxpayer transfers any applicable partnership interest1 directly or indirectly1 to a person related to the taxpayer1 the taxpayer shall include in gross income 7as ordinary income7 so much of the taxpayer's recharacterization account balance for such taxable year as is allocable to such interest 7determined in such manner as the ,secretary may provide and reduced by any amount treated as ordinary income under subsection 7a7 with respect to the transfer of such interest74 7#b7 ,related person ,for purposes of this paragraph1 a person is related to the taxpayer if-- 7,a7 the person is a member of the taxpayer's family within the meaning of section #cah7;a77#a71 or 7,b7 the person performed a service within the current calendar year or the preceding three calendar years in any applicable trade or business in which or for which the taxpayer performed a service4 7f7 ,reporting by entity of taxpayer's annual recharacterization amount ,a partnership shall report to the ,secretary1 and include with the information required to be furnished under section #fjca7;b7 to each partner1 the amount of the partner's annual recharacterization amount for the taxable year1 if any4 ,a similar rule applies to any entity that receives a report of an annual recharacterization amount for the taxable year4 7g7 ,regulations ,the ,secretary shall issue such regulations or other guidance as necessary to carry out this section1 including regulations-- 7#a7 to prevent the abuse of the purposes of this section1 including through-- 7,a7 the allocation of income to tax indifferent parties1 or 7,b7 a reduction in the invested capital of the partnership 7including attempts to undervalue contributed or loaned property71 7#b7 which provide that partnership interests shall not fail to be treated as transferred or held in connection with the performance of services merely because the taxpayer also made contributions to the partnership1 7#c7 which provide for the application of this section in cases where the taxpayer has more than #a applicable interest in a partnership1 and 7#d7 which provide for the application of this section in cases of tiered structures of entities4 4 7b7 ,coordination with section #hc ,subsection 7e7 of section #hc is amended by striking or at the end of paragraph 7#d71 by striking the period at the end of paragraph 7#e7 and inserting 1 or1 and by adding at the end the following new paragraph3 7#f7 a transfer of a partnership interest to which section #ajfa applies4 4 7c7 ,clerical amendment ,the table of sections for part ,,iv of subchapter ,o of chapter #a is amended by striking the item relating to #ajfa and inserting the following new items3 ,sec4 #ajfa4 ,partnership interests held in connection with performance of services4 ,sec4 #ajfb4 ,cross references4 4 7d7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 #cfbb4 ,partnership audits and adjustments 7a7 ,repeal of ,,tefra partnership audit rules ,chapter #fc is amended by striking subchapter ,c 7and by striking the item relating to such subchapter in the table of subchapters for such chapter74 7b7 ,repeal of electing large partnership rules 7#a7 ,in general ,subchapter ,k of chapter #a is amended by striking part ,,iv 7and by striking the item relating to such part in the table of parts for such subchapter74 7#b7 ,assessment rules relating to electing large partnerships ,chapter #fc is amended by striking subchapter ,d 7and by striking the item relating to such subchapter in the table of subchapters for such chapter74 7#c7 ,effective date ,the amendments made by this section shall apply to returns filed after ,december #ca1 #bjad4 7c7 ,partnership audit reform 7#a7 ,in general ,chapter #fc1 as amended by the preceding provisions of this ,act1 is amended by inserting after subchapter ,b the following new subchapter3 ,c ,treatment of partnerships ,part ,i--,in general ,part ,,ii--,partnership adjustments ,part ,,iii--,procedure ,part ,,iv--,definitions and special rules ,i ,in general ,sec4 #fbba4 ,determination at partnership level4 ,sec4 #fbbb4 ,partner's return must be consistent with partnership return4 ,sec4 #fbbc4 ,designation of partnership representative4 #fbba4 ,determination at partnership level 7a7 ,in general ,items of income1 gain1 loss1 deduction1 or credit of a partnership for a partnership taxable year 7and any partner's distributive share thereof7 shall be audited1 any tax attributable thereto shall be assessed and collected1 and the applicability of any penalty1 addition to tax1 or additional amount which relates to an adjustment to any such item or share shall be determined1 at the partnership level pursuant to this subchapter4 7b7 ,election out for certain partnerships with #ajj or fewer partners ,this subchapter shall not apply with respect to any partnership for any taxable year if-- 7#a7 the partnership elects the application of this subsection for such taxable year1 7#b7 the partnership has #ajj or fewer partners on the last day of such taxable year1 7#c7 each of the partners of such partnership is an individual1 a ,c corporation 7other than a real estate investment trust or a regulated investment company71 any foreign entity that would be treated as a ,c corporation were it domestic1 or an estate of a deceased partner1 7#d7 the election-- 7,a7 is made with a timely filed return for such taxable year1 and 7,b7 includes 7in the manner prescribed by the ,secretary7 a disclosure of the name and taxpayer identification number of each partner of such partnership1 and 7#e7 the partnership notifies each such partner of such election in the manner prescribed by the ,secretary4 ,for purposes of paragraph 7#d77;,b71 the ,secretary may provide for alternative identification of any foreign partners4 #fbbb4 ,partner's return must be consistent with partnership return 7a7 ,in general ,a partner of any partnership shall1 on the partner's return1 treat each item of income1 gain1 loss1 deduction1 or credit attributable to such partnership in a manner which is consistent with the treatment of such income1 gain1 loss1 deduction1 or credit on the partnership return4 7b7 ,underpayment due to inconsistent treatment assessed as math error ,any underpayment of tax by a partner by reason of failing to comply with the requirements of subsection 7a7 shall be assessed and collected in the same manner as if such underpayment were on account of a mathematical or clerical error appearing on the partner's return4 ,paragraph 7#b7 of section #fbac7;b7 shall not apply to any assessment of an underpayment referred to in the preceding sentence4 7c7 ,addition to tax for failure ,to comply with section ,for addition to tax in the case of partner's disregard of the requirements of this section1 see part ,,ii of subchapter ,a of chapter #fh4 #fbbc4 ,partners bound by actions of partnership 7a7 ,designation of partner ,each partnership shall designate 7in the manner prescribed by the ,secretary7 a partner 7or other person7 as the partnership representative who shall have the sole authority to act on behalf of the partnership under this subchapter4 ,in any case in which such a designation is not in effect1 the ,secretary may select any partner as the partnership representative4 7b7 ,binding effect ,a partnership and all partners of such partnership shall be bound-- 7#a7 by actions taken under this subchapter by the partnership1 and 7#b7 by any decision in a proceeding brought under this subchapter4 ,,ii ,partnership adjustments ,sec4 #fbbe4 ,partnership adjustment by ,secretary4 ,sec4 #fbbf4 ,administrative adjustment request by partnership4 #fbbe4 ,partnership adjustment by ,secretary 7a7 ,in general ,in the case of any adjustment by the ,secretary in the amount of any item of income1 gain1 loss1 deduction1 or credit of a partnership1 or any partner's distributive share thereof-- 7#a7 the partnership shall pay any imputed underpayment with respect to such adjustment in the adjustment year as provided in section #fbcb1 and 7#b7 any imputed overpayment shall be taken into account by the partnership in the adjustment year as a reduction in non-separately stated income or an increase in non-separately stated loss 7whichever is appropriate7 under section #gjb7;a77#h74 7b7 ,determination of imputed underpayments and overpayments ,for purposes of this subchapter-- 7#a7 ,in general ,except as provided in subsection 7c71 any imputed underpayment or imputed overpayment with respect to any partnership adjustment for any reviewed year shall be determined-- 7,a7 by netting all adjustments of items of income1 gain1 loss1 or deduction and multiplying such net amount by the highest rate of tax in effect for the reviewed year under section #a or #aa1 7,b7 by treating any net increase or decrease in loss under subparagraph 7,a7 as a decrease or increase1 respectively1 in income1 and 7,c7 by taking into account any adjustments to items of credit as an increase or decrease1 as the case may be1 in the amount determined under subparagraph 7,a74 7#b7 ,adjustments to distributive shares of partners not netted ,in the case of any adjustment which reallocates the distributive share of any item from one partner to another1 such adjustment shall be taken into account under paragraph 7#a7 by disregarding-- 7,a7 any decrease in any item of income or gain1 and 7,b7 any increase in any item of deduction1 loss1 or credit4 7c7 ,modification of imputed underpayments 7#a7 ,method in general ,the ,secretary shall establish procedures under which the imputed underpayment amount may be modified consistent with the requirements of this subsection4 7#b7 ,amended returns of partners ,such procedures shall provide that if-- 7,a7 one or more partners file returns for the taxable year of the partners which includes the end of the reviewed year of the partnership1 7,b7 such returns take into account all adjustments under subsection 7a7 properly allocable to such partners 7and for any other taxable year with respect to which any tax attribute is affected by reason of such adjustments71 and 7,c7 payment of any tax due is included with such return1 then the imputed underpayment amount shall be determined without regard to the portion of the adjustments so taken into account4 7#c7 ,reallocation of distributive share ,in the case of any adjustment which reallocates the distributive share of any item from one partner to another1 paragraph 7#b7 shall apply only if returns are filed by all partners affected by such adjustment4 7#d7 ,year and day for submission to ,secretary ,anything required to be submitted pursuant to paragraph 7#a7 shall be submitted to the ,secretary not later than the close the #ahj-;day period beginning on the date on which the notice of a proposed partnership adjustment is mailed under section #fbca unless such period is extended with the consent of the ,secretary4 7#e7 ,decision of ,secretary ,any modification of the imputed underpayment amount under this subsection shall be made only upon approval of such modification by the ,secretary4 7d7 ,definitions and special rule ,for purposes of this subchapter-- 7#a7 ,reviewed year ,the term reviewed year means the partnership taxable year to which the item being adjusted relates4 7#b7 ,adjustment year ,the term adjustment year means the partnership taxable year in which-- 7,a7 in the case of an adjustment pursuant to the decision of a court in a proceeding brought under section #fbcd1 such decision becomes final1 7,b7 in the case of an administrative adjustment request under section #fbbf1 such administrative adjustment request is made1 or 7,c7 in any other case1 notice of the final partnership adjustment is mailed under section #fbca4 #fbbf4 ,administrative adjustment request by partnership 7a7 ,in general ,a partnership may file a request for an administrative adjustment in the amount of any item of income1 gain1 loss1 deduction1 or credit of the partnership for any partnership taxable year1 but only to the extent such adjustment results in an imputed underpayment4 7b7 ,adjustment ,any adjustment under subsection 7a7 shall be determined and taken into account by the partnership under rules similar to the rules of section #fbbe 7other than subsection 7c7 thereof7 for the partnership taxable year in which the administrative adjustment request is made4 7c7 ,period of limitations ,a partnership may not file such a request-- 7#a7 more than #c years after the later of-- 7,a7 the date on which the partnership return for such year is filed1 or 7,b7 the last day for filing the partnership return for such year 7determined without regard to extensions71 and 7#b7 after any notice of an administrative proceeding with respect to the taxable year is mailed under section #fbca4 ,,iii ,procedure ,sec4 #fbca4 ,notice of proceedings and adjustment4 ,sec4 #fbcb4 ,assessment1 collection1 and payment4 ,sec4 #fbcc4 ,penalties and interest4 ,sec4 #fbcd4 ,judicial review of partnership adjustment4 ,sec4 #fbce4 ,period of limitations on making adjustments4 #fbca4 ,notice of proceedings and adjustment 7a7 ,in general ,the ,secretary shall mail to the partnership and the partnership representative-- 7#a7 notice of any administrative proceeding initiated at the partnership level with respect to an adjustment of any item of income1 gain1 loss1 deduction1 or credit of a partnership for a partnership taxable year1 or any partner's distributive share thereof1 7#b7 notice of any proposed partnership adjustment resulting from such proceeding1 and 7#c7 notice of any final partnership adjustment resulting from such proceeding4 ,any notice of a final partnership adjustment shall not be mailed earlier than #ahj days after the date on which the notice of the proposed partnership adjustment is mailed4 ,such notices shall be sufficient if mailed to the last known address of the partnership representative or the partnership 7even if the partnership has terminated its existence74 ,the first sentence shall apply to any proceeding with respect to an administrative adjustment request filed by a partnership under section #fbbf4 7b7 ,further notices restricted ,if the ,secretary mails a notice of a final partnership adjustment to any partnership for any partnership taxable year and the partnership files a petition under section #fbcd with respect to such notice1 in the absence of a showing of fraud1 malfeasance1 or misrepresentation of a material fact1 the ,secretary shall not mail another such notice to such partnership with respect to such taxable year4 7c7 ,authority ,to rescind notice with partnership consent ,the ,secretary may1 with the consent of the partnership1 rescind any notice of a partnership adjustment mailed to such partnership4 ,any notice so rescinded shall not be treated as a notice of a partnership adjustment for purposes of this subchapter1 and the taxpayer shall have no right to bring a proceeding under section #fbcd with respect to such notice4 #fbcb4 ,assessment1 collection1 and payment 7a7 ,in general ,any imputed underpayment-- 7#a7 shall be assessed and collected in the same manner as if it were a tax imposed for the adjustment year by subtitle ,a1 and 7#b7 shall be paid on or before the return due date for the adjustment year4 7b7 ,limitation on assessment ,except as otherwise provided in this chapter1 no assessment of a deficiency may be made 7and no levy or proceeding in any court for the collection of any amount resulting from such adjustment may be made1 begun or prosecuted7 before-- 7#a7 the close of the #ijth day after the day on which a notice of a final partnership adjustment was mailed1 and 7#b7 if a petition is filed under section #fbcd with respect to such notice1 the decision of the court has become final4 7c7 ,premature action may be enjoined ,notwithstanding section #gdba7;a71 any action which violates subsection 7b7 may be enjoined in the proper court1 including the ,tax ,court4 ,the ,tax ,court shall have no jurisdiction to enjoin any action under this subsection unless a timely petition has been filed under section #fbcd and then only in respect of the adjustments that are the subject of such petition4 7d7 ,exceptions to restrictions on adjustments 7#a7 ,adjustments arising out of math or clerical errors 7,a7 ,in general ,if the partnership is notified that1 on account of a mathematical or clerical error appearing on the partnership return1 an adjustment to a partnership item is required1 rules similar to the rules of paragraphs 7#a7 and 7#b7 of section #fbac7;b7 shall apply to such adjustment4 7,b7 ,special rule ,if a partnership is a partner in another partnership1 any adjustment on account of such partnership's failure to comply with the requirements of section #fbbb7;a7 with respect to its interest in such other partnership shall be treated as an adjustment referred to in subparagraph 7,a71 except that paragraph 7#b7 of section #fbac7;b7 shall not apply to such adjustment4 7#b7 ,partnership may waive restrictions ,the partnership may at any time 7whether or not any notice of partnership adjustment has been issued71 by a signed notice in writing filed with the ,secretary1 waive the restrictions provided in subsection 7b7 on the making of any partnership adjustment4 7e7 ,limit where no proceeding begun ,if no proceeding under section #fbcd is begun with respect to any notice of a final partnership adjustment during the #ij-;day period described in subsection 7b7 thereof1 the amount for which the partnership is liable under section #fbbe shall not exceed the amount determined in accordance with such notice4 #fbcc4 ,penalties and interest 7a7 ,penalties and interest determined from reviewed year 7#a7 ,in general ,in the case of an imputed underpayment with respect to a partnership adjustment for a reviewed year1 the partnership-- 7,a7 shall pay to the ,secretary interest computed under paragraph 7#b71 and 7,b7 shall be liable for any penalty1 addition to tax1 or additional amount as provided in paragraph 7#c74 7#b7 ,determination of amount of interest ,the interest computed under this paragraph with respect to any partnership adjustment is the interest which would be determined under chapter #fg-- 7,a7 on the imputed underpayment determined with respect to such adjustment1 7,b7 for the period beginning on the day after the return due date for the reviewed year and ending on the return due date for the adjustment year 7or1 if earlier1 the date payment of the imputed underpayment is made74 ,proper adjustments in the amount determined under the preceding sentence shall be made for adjustments required for partnership taxable years after the reviewed year and before the adjustment year by reason of such partnership adjustment4 7#c7 ,penalties ,a partnership shall be liable for any penalty1 addition to tax1 or additional amount for which it would have been liable if such partnership had been an individual subject to tax under chapter #a for the reviewed year and the imputed underpayment were an actual underpayment 7or understatement7 for such year4 7b7 ,interest and penalties with respect to adjustment year return 7#a7 ,in general ,in the case of any failure to pay an imputed underpayment on the date prescribed therefor1 the partnership shall be liable-- 7,a7 for interest as determined under paragraph 7#b71 and 7,b7 for any penalty1 addition to tax1 or additional amount as determined under paragraph 7#c74 7#b7 ,interest ,interest determined under this paragraph is the interest that would be determined by treating the imputed underpayment as an underpayment of tax imposed in the adjustment year4 7#c7 ,penalties ,penalties1 additions to tax1 or additional amounts determined under this paragraph are the penalties1 additions to tax1 or additional amounts that would be determined-- 7,a7 by applying section #ffea7;a77#b7 to such failure to pay4 7,b7 by treating the imputed underpayment as an underpayment of tax for purposes of part ,,ii of subchapter ,a of chapter #fh4 #fbcd4 ,judicial review of partnership adjustment 7a7 ,in general ,within #ij days after the date on which a notice of a final partnership adjustment is mailed under section #fbca with respect to any partnership taxable year1 the partnership may file a petition for a readjustment for such taxable year with-- 7#a7 the ,tax ,court1 7#b7 the district court of the ,united ,states for the district in which the partnership's principal place of business is located1 or 7#c7 the ,claims ,court4 7b7 ,jurisdictional requirement for bringing action in district court or ,claims ,court 7#a7 ,in general ,a readjustment petition under this section may be filed in a district court of the ,united ,states or the ,claims ,court only if the partnership filing the petition deposits with the ,secretary1 on or before the date the petition is filed1 the amount of the imputed underpayment 7as of the date of the filing of the petition7 if the partnership adjustment was made as provided by the notice of final partnership adjustment4 ,the court may by order provide that the jurisdictional requirements of this paragraph are satisfied where there has been a good faith attempt to satisfy such requirement and any shortfall of the amount required to be deposited is timely corrected4 7#b7 ,interest payable ,any amount deposited under paragraph 7#a71 while deposited1 shall not be treated as a payment of tax for purposes of this title 7other than chapter #fg74 7c7 ,scope of judicial review ,a court with which a petition is filed in accordance with this section shall have jurisdiction to determine all items of income1 gain1 loss1 deduction1 or credit of the partnership for the partnership taxable year to which the notice of final partnership adjustment relates1 the proper allocation of such items among the partners1 and the applicability of any penalty1 addition to tax1 or additional amount for which the partnership may be liable under this subchapter4 7d7 ,determination of court reviewable ,any determination by a court under this section shall have the force and effect of a decision of the ,tax ,court or a final judgment or decree of the district court or the ,claims ,court1 as the case may be1 and shall be reviewable as such4 ,the date of any such determination shall be treated as being the date of the court's order entering the decision4 7e7 ,effect of decision dismissing action ,if an action brought under this section is dismissed other than by reason of a rescission under section #fbca7;c71 the decision of the court dismissing the action shall be considered as its decision that the notice of final partnership adjustment is correct1 and an appropriate order shall be entered in the records of the court4 #fbce4 ,period of limitations on making adjustments 7a7 ,in general ,except as otherwise provided in this section1 no adjustment under this subpart for any partnership taxable year may be made after the date which is #c years after the latest of-- 7#a7 the date on which the partnership return for such taxable year was filed1 7#b7 the return due date for the taxable year1 or 7#c7 the date on which the partnership filed an administrative adjustment request with respect to such year under section #fbbf4 7b7 ,extension by agreement ,the period described in subsection 7a7 7including an extension period under this subsection7 may be extended by an agreement entered into by the ,secretary and the partnership before the expiration of such period4 7c7 ,special rule in case of fraud1 etc 7#a7 ,false return ,in the case of a false or fraudulent partnership return with intent to evade tax1 the adjustment may be made at any time4 7#b7 ,substantial omission of income ,if any partnership omits from gross income an amount properly includible therein and such amount is described in section #feja7;e77#a77;,a71 subsection 7a7 shall be applied by substituting #f years for #c years4 7#c7 ,no return ,in the case of a failure by a partnership to file a return for any taxable year1 the adjustment may be made at any time4 7#d7 ,return filed by ,secretary ,for purposes of this section1 a return executed by the ,secretary under subsection 7b7 of section #fjbj on behalf of the partnership shall not be treated as a return of the partnership4 7d7 ,suspension when ,secretary mails notice of adjustment ,if notice of a final partnership adjustment with respect to any taxable year is mailed under section #fbca1 the running of the period specified in subsection 7a7 7as modified by the other provisions of this section7 shall be suspended-- 7#a7 for the period during which an action may be brought under section #fbcd 7and1 if a petition is filed under such section with respect to such notice1 until the decision of the court becomes final71 and 7#b7 for #a year thereafter4 ,,iv ,definitions and special rules ,sec4 #fbda4 ,definitions and special rules4 #fbda4 ,definitions and special rules 7a7 ,definitions and special rules ,for purposes of this subchapter-- 7#a7 ,partnership ,the term partnership means any partnership required to file a return under section #fjca7;a74 7#b7 ,partner ,the term partner means-- 7,a7 a partner in the partnership1 and 7,b7 any other person whose income tax liability under subtitle ,a is determined in whole or in part by taking into account directly or indirectly income1 gain1 deduction1 or loss of the partnership4 7b7 ,partnership adjustment ,the term partnership adjustment means any adjustment in the amount of any item of income1 gain1 loss1 deduction1 or credit of a partnership1 or any partner's distributive share thereof4 7c7 ,return due date ,the term return due date means1 with respect to the taxable year1 the date prescribed for filing the partnership return for such taxable year 7determined without regard to extensions74 7d7 ,joint and several liability 7#a7 ,in general ,the partnership and any partner of the partnership shall be jointly and severally liable for any imputed underpayment and any penalty1 addition to tax1 or additional amount attributable thereto4 7#b7 ,period for assessment of partners ,the period for assessment of an imputed underpayment with respect to a partner of a partnership shall not expire earlier than #c years after the date on which an assessment of such imputed underpayment was made with respect to the partnership4 7#c7 ,determining partners ,a person shall be treated as partner of the partnership if such person is a partner of such partnership at any time during the reviewed or adjustment year4 7e7 ,payments nondeductible ,no deduction shall be allowed under subtitle ,a for any payment required to be made by a partnership under this subchapter4 7f7 ,special rule for deductions1 losses1 and credits of foreign partnerships ,except to the extent otherwise provided in regulations1 in the case of any partnership the partnership representative of which resides outside the ,united ,states or the books of which are maintained outside the ,united ,states1 no deduction1 loss1 or credit shall be allowable to any partner unless section #fjca is complied with for the partnership's taxable year in which such deduction1 loss1 or credit arose at such time as the ,secretary prescribes by regulations4 7g7 ,partnerships having principal place of business outside ,united ,states ,for purposes of sections #fbcd1 a principal place of business located outside the ,united ,states shall be treated as located in the ,district of ,columbia4 7h7 ,partnerships in cases under title #aa of ,united ,states ,code 7#a7 ,suspension of period of limitations on making adjustment1 assessment1 or collection ,the running of any period of limitations provided in this subchapter on making a partnership adjustment 7or provided by section #feja or #fejb on the assessment or collection of any imputed underpayment determined under this subchapter7 shall1 in a case under title #aa of the ,united ,states ,code1 be suspended during the period during which the ,secretary is prohibited by reason of such case from making the adjustment 7or assessment or collection7 and-- 7,a7 for adjustment or assessment1 #fj days thereafter1 and 7,b7 for collection1 #f months thereafter4 ,a rule similar to the rule of section #fbac7;f77#b7 shall apply for purposes of section #fbcb7;b74 7#b7 ,suspension of period of limitation for filing for judicial review ,the running of the period specified in section #fbcd shall1 in a case under title #aa of the ,united ,states ,code1 be suspended during the period during which the partnership is prohibited by reason of such case from filing a petition under section #fbcd and for #fj days thereafter4 4 7#b7 ,clerical amendment ,the table of subchapters for chapter #fc is amended by inserting after the item relating to subchapter ,b the following new items3 ,subchapter ,c4 ,treatment of partnerships4 4 7d7 ,conforming amendments 7#a7 ,section #fdbb is amended by striking paragraph 7#ab74 7#b7 ,section #feja7n7 is amended by striking paragraphs 7#b7 and 7#c7 and by striking ,cross references and all that follows through ,for period of limitations and inserting ,cross reference4--,for period of limitations4 7#c7 ,section #fejc7;a77#a7 is amended by striking 7or section #fbbi and all that follows through of section #fbcj7;a774 7#d7 ,section #fejd is amended by striking paragraph 7#aa74 7#e7 ,section #feaa is amended by striking subsection 7g74 7#f7 ,section #feab7;b77#c7 is amended by striking the second sentence4 7#g7 ,section #feae is amended by striking paragraph 7#f74 7#h7 ,section #ffja7;c7 is amended by striking the last sentence4 7#i7 ,section #gdba7;a7 is amended by striking #fbbe7;b71 #fbdf7;b7 and inserting #fbcb7;c74 7#aj7 ,section #gdbb is amended by striking subsection 7h74 7#aa7 ,section #gdei7;c7 is amended by striking section #fbbf and all that follows through or #fbeb and inserting section #fbcd4 7#ab7 ,section #gdhb7;b77#a7 is amended-- 7,a7 in subparagraph 7,e71 by striking section #fbbf1 #fbbh1 #fbdg1 or #fbeb and inserting section #fbcd1 7,b7 by striking subparagraph 7,f71 by striking or at the end of subparagraph 7,e7 and inserting a period1 and by inserting or at the end of subparagraph 7,d71 and 7,c7 in the last sentence1 by striking section #fbbf1 #fbbh7;a71 or #fbcd7;c7 and inserting section #fbcd4 7#ac7 ,section #gdhe7;b7 is amended by striking section #fbbf1 #fbbh7;a71 #fbdg1 or #fbeb and inserting section #fbcd4 7e7 ,effective date ,the amendments made by this section shall apply to returns filed for partnership taxable years ending after ,december #ca1 #bjad1 except that a partnership may elect 7at such time and in such form and manner as the ,secretary of the ,treasury may prescribe7 for such amendments to apply to any return of the partnership filed for partnership taxable years ending after the date of the enactment of this ,act and before ,january #a1 #bjae4 #c ,r,e,i,ts and ,r,i,cs #cfca4 ,prevention of tax-free spinoffs involving ,r,e,i,ts 7a7 ,in general ,section #cee is amended by adding at the end the following new subsection3 7h7 ,section not ,to apply to distributions involving real estate investment trusts ,this section 7and so much of section #cef as relates to this section7 shall not apply to any distribution if either the distributing corporation or controlled corporation is a real estate investment trust4 4 7b7 ,prevention of ,,reit election following tax-,free spin off ,section #hef7;c7 is amended by redesignating paragraph 7#h7 as paragraph 7#i7 and by inserting after paragraph 7#g7 the following new paragraph3 7#h7 ,election after tax-free reorganization ,if a corporation was a distributing corporation or a controlled corporation with respect to any distribution to which section #cee applied1 such corporation 7and any successor corporation7 shall not be eligible to make any election under subsection 7c77#a7 for any taxable year prior to the #ajth taxable year which begins after the taxable year in which such distribution was made4 4 7c7 ,effective date 7#a7 ,in general ,except as otherwise provided in this subsection1 the amendments made by this section shall apply to distributions on or after ,february #bf1 #bjad4 7#b7 ,transition rule ,the amendments made by this section shall not apply to any distribution made pursuant to an agreement which was binding on ,february #bf1 #bjad1 and at all times thereafter4 #cfcb4 ,extension of period for prevention of ,,reit election following revocation or termination 7a7 ,in general ,section #hef7;g77#c7 is amended by striking fifth and inserting #ajth4 7b7 ,effective date ,the amendments made by this section shall apply to terminations and revocations after ,december #ca1 #bjad4 #cfcc4 ,certain short-life property not treated as real property for purposes of ,,reit provisions 7a7 ,in general ,section #hef7;c77#e7 is amended by adding at the end the following new subparagraph3 7,l7 ,real property ,the term real property shall not include any tangible property with a class life of less than #bg4e years4 ,for purposes of the preceding sentence1 class life of tangible property for any taxable year shall be the greater of-- 7i7 the class life of such property in the hands of the real estate investment trust1 or 7ii7 the class life which would be applicable to such property if such property was placed in service in the taxable year4 4 7b7 ,effective date ,the amendment made by this section shall apply to taxable years beginning after ,december #ca1 #bjaf4 #cfcd4 ,repeal of special rules for timber held by ,r,e,i,ts 7a7 ,in general ,section #hef7;c77#e77,l71 as added by this ,act1 is amended by inserting timber or after shall not include4 7b7 ,conforming amendments 7#a7 ,section #hef7;c77#b7 is amended by inserting and at the end of subparagraph 7,g71 by striking and at the end of subparagraph 7,h71 and by striking subparagraph 7,i74 7#b7 ,section #hef7;c77#e71 as amended by the preceding provisions of this ,act1 is amended by striking subparagraphs 7,h7 and 7,i7 and by redesignating subparagraphs 7,j71 7,k71 and 7,l7 as subparagraphs 7,h71 7,i7 and 7,j71 respectively4 7#c7 ,section #hef7;c71 as amended by the preceding provisions of this ,act1 is amended by striking paragraph 7#i74 7#d7 ,section #heg7;b77#f7 is amended by striking subparagraphs 7,d71 7,g71 and 7,h71 and by redesignating subparagraphs 7,e7 and 7,f7 as subparagraphs 7,d7 and 7,e71 respectively4 7#e7 ,section #heg7;b77#f77;,d71 as redesignated by paragraph 7#d71 is amended by striking subparagraphs 7,c7 and 7,d7 and inserting subparagraph 7,c74 7#f7 ,section #heg7;b77#f77;,e71 as redesignated by paragraph 7#d71 is amended-- 7,a7 by striking subparagraph 7,c7 or 7,d7 and inserting subparagraph 7,c71 and 7,b7 by striking subparagraphs 7,c71 7,d71 and 7,e7 and inserting subparagraphs 7,c7 and 7,d74 7c7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjaf4 #cfce4 ,limitation on fixed percentage rent and interest exceptions for ,,reit income tests 7a7 ,in general ,section #hef is amended by adding at the end the following new subsection3 7o7 ,limitation on fixed percentage rent and interest exceptions 7#a7 ,in general ,if the fixed percentage rent and interest income received or accrued by a real estate investment trust from a single ,c corporation 7other than a taxable ,,reit subsidiary of such real estate investment trust7 for any taxable year exceeds either-- 7,a7 #be percent of the fixed percentage rent income received or accrued by such real estate investment trust for such taxable year1 or 7,b7 #be percent of the fixed percentage interest income received or accrued by such real estate investment trust for such taxable year1 then1 notwithstanding subsection 7d77#b71 none of the fixed percentage rent income received or accrued from such corporation which is attributable to leases entered into after ,december #ca1 #bjad1 shall be treated as rents from real property and1 notwithstanding subsection 7f71 none of the fixed percentage interest income received or accrued from such corporation which is attributable to debt instruments acquired after ,december #ca1 #bjad1 shall be treated as interest4 7#b7 ,fixed percentage rent and interest income ,for purposes of this subsection-- 7,a7 ,fixed percentage rent and interest income ,the term fixed percentage rent and interest income means the sum of the fixed percentage rent income plus the fixed percentage interest income4 7,b7 ,fixed percentage rent income ,the term fixed percentage rent income means amounts described in subsection 7d77#b77;,a7 which are based on a fixed percentage or percentages of receipts or sales4 7,c7 ,fixed percentage interest income ,the term fixed percentage interest income means amounts described in subsection 7f77#a7 which are based on a fixed percentage or percentages of receipts or sales4 7#c7 ,aggregation rule ,members of the same affiliated group 7as defined in section #aejd1 applied by substituting #ej percent for #hj percent each place it appears therein7 shall be treated as #a corporation for purposes of paragraph 7#a74 7#d7 ,treatment of modifications ,for purposes of paragraph 7#a71 any material modification 7including any extension of the term7 of a lease or debt instrument shall be treated as a new lease or debt instrument1 as the case may be1 entered into on the date of such modification4 4 7b7 ,effective date ,the amendment made by this section shall apply to taxable years ending after ,december #ca1 #bjad4 #cfcf4 ,repeal of preferential dividend rule for publicly offered ,r,e,i,ts 7a7 ,in general ,paragraph 7#a7 of section #efb7;c71 as amended by the preceding provisions of this ,act1 is amended by inserting or a publicly offered ,,reit after a publicly offered regulated investment company4 7b7 ,publicly offered ,,reit ,subsection 7c7 of section #efb1 as so amended1 is amended by adding at the end the following new paragraph3 7#c7 ,publicly offered ,,reit ,for purposes of this subsection1 the term publicly offered ,,reit means a real estate investment trust which is required to file annual and periodic reports with the ,securities and ,exchange ,commission under the ,securities ,exchange ,act of #aicd4 4 7c7 ,effective date ,the amendment made by this section shall apply to distributions in taxable years beginning after ,december #ca1 #bjad4 #cfcg4 ,authority for alternative remedies to address certain ,,reit distribution failures 7a7 ,in general ,subsection 7e7 of section #efb is amended-- 7#a7 by striking ,in the case of a real estate investment trust and inserting the following3 7#a7 ,determination of earnings and profits for purposes of dividends paid deduction ,in the case of a real estate investment trust 1 and 7#b7 by adding at the end the following new paragraph3 7#b7 ,authority to provide alternative remedies for certain failures ,in the case of a failure of a distribution by a real estate investment trust to comply with the requirements of subsection 7c71 the ,secretary may provide an appropriate remedy to cure such failure in lieu of not considering the distribution to be a dividend for purposes of computing the dividends paid deduction if-- 7,a7 the ,secretary determines that such failure is inadvertent or is due to reasonable cause and not due to willful neglect1 or 7,b7 such failure is of a type of failure which the ,secretary has identified for purposes of this paragraph as being described in subparagraph 7,a74 4 7b7 ,effective date ,the amendments made by this section shall apply to distributions in taxable years beginning after ,december #ca1 #bjad4 #cfch4 ,limitations on designation of dividends by ,r,e,i,ts 7a7 ,in general ,section #heg is amended by redesignating subsection 7g7 as subsection 7h7 and by inserting after subsection 7f7 the following new subsection3 7g7 ,limitations on designation of dividends 7#a7 ,overall limitation ,the aggregate amount of dividends designated by a real estate investment trust under subsections 7b77#c77;,c7 and 7c77#b77;,a7 with respect to any taxable year may not exceed the dividends paid by such trust with respect to such year4 ,for purposes of the preceding sentence1 dividends paid after the close of the taxable year described in section #heh shall be treated as paid with respect to such year4 7#b7 ,proportionality ,the ,secretary may prescribe regulations or other guidance requiring the proportionality of the designation of particular types of dividends among shares or beneficial interests of a real estate investment trust4 4 7b7 ,effective date ,the amendments made by this section shall apply to distributions in taxable years beginning after ,december #ca1 #bjad4 #cfci4 ,non-,,reit earnings and profits required to be distributed by ,,reit in cash 7a7 ,in general ,section #heg1 as amended by the preceding provisions of this ,act1 is amended by redesignating subsection 7h7 as subsection 7i7 and by inserting after subsection 7g7 the following new subsection3 7h7 ,determination of earnings and profits accumulated in non-,,reit years 7#a7 ,in general ,for purposes of subsection 7a77#b77;,b71 distributions during the transition period shall be taken into account in determining accumulated earning and profits only if such distributions are made in cash4 7#b7 ,transition period ,for purposes of this subsection1 the term transition period means the period of taxable years beginning with the last taxable year 7other than a short taxable year7 which was a non-,,reit year 7as defined in subsection 7a77 and ending with the first taxable year to which the provisions of this part apply4 4 7b7 ,conforming amendment ,section #heg7;a77#b77;,b7 is amended by inserting 7determined as provided in subsection 7h77 before the period at the end4 7c7 ,effective date ,the amendments made by this section shall apply to distributions made on or after ,february #bf1 #bjad4 #cfdj4 ,debt instruments of publicly offered ,r,e,i,ts and mortgages treated as real estate assets 7a7 ,debt instruments of publicly offered ,r,e,i,ts treated as real estate assets 7#a7 ,in general ,subparagraph 7,b7 of section #hef7;c77#e7 is amended-- 7,a7 by striking and shares and inserting 1 shares1 and 7,b7 by inserting 1 and debt instruments issued by publicly offered ,r,e,i,ts before the period at the end of the first sentence4 7#b7 ,income from nonqualified debt instruments of publicly offered ,r,e,i,ts not qualified for purposes of satisfying the #ge percent gross income test ,subparagraph 7,h7 of section #hef7;c77#c7 is amended by inserting 7other than a nonqualified publicly offered ,,reit debt instrument7 after real estate asset4 7#c7 #be percent asset limitation on holding of nonqualified debt instruments of publicly offered ,r,e,i,ts ,subparagraph 7,b7 of section #hef7;c77#d7 is amended by redesignating clause 7iii7 as clause 7iv7 and by inserting after clause 7ii7 the following new clause3 7iii7 not more than #be percent of the value of its total assets is represented by nonqualified publicly offered ,,reit debt instruments1 and 4 7#d7 ,definitions related to debt instruments of publicly offered ,r,e,i,ts ,paragraph 7#e7 of section #hef7;c71 as amended by the preceding provisions of this ,act1 is amended by adding at the end the following new subparagraph3 7,k7 ,definitions related to debt instruments of publicly offered ,r,e,i,ts 7i7 ,publicly offered ,,reit ,the term publicly offered ,,reit has the meaning given such term by section #efb7;c77#c74 7ii7 ,nonqualified publicly offered ,,reit debt instrument ,the term nonqualified publicly offered ,,reit debt instrument means any real estate asset which would cease to be a real estate asset if subparagraph 7,b7 were applied without regard to the reference to debt instruments issued by publicly offered ,r,e,i,ts4 4 7b7 ,interests in mortgages on interests in real property treated as real estate assets ,subparagraph 7,b7 of section #hef7;c77#e7 is amended by inserting or on interests in real property after interests in mortgages on real property4 7c7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 #cfda4 ,asset and income test clarification regarding ancillary personal property 7a7 ,in general ,subsection 7c7 of section #hef is amended by adding at the end the following new paragraph3 7#i7 ,special rules for certain personal property which is ancillary to real property 7,a7 ,certain personal property leased in connection with real property ,personal property shall be treated as a real estate asset for purposes of paragraph 7#d77;,a7 to the extent that rents attributable to such personal property are treated as rents from real property under subsection 7d77#a77;,c74 7,b7 ,certain personal property mortgaged in connection with real property ,in the case of an obligation secured by a mortgage on both real property and personal property1 if the fair market value of such personal property does not exceed #ae percent of the total fair market value of all such property1 such personal property shall be treated as real property for purposes of applying paragraphs 7#c77;,b7 and 7#d77;,a74 ,for purposes of the preceding sentence1 the fair market value of all such property shall be determined in the same manner as the fair market value of real property is determined for purposes of apportioning interest income between real property and personal property under paragraph 7#c77;,b74 4 7b7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 #cfdb4 ,hedging provisions 7a7 ,modification ,to permit the termination of a hedging transaction using an additional hedging instrument ,subparagraph 7,g7 of section #hef7;c77#e7 is amended by striking and at the end of clause 7i71 by striking the period at the end of clause 7ii7 and inserting 1 and1 and by adding at the end the following new clause3 7iii7 if-- 7,i7 a real estate investment trust enters into one or more positions described in clause 7i7 with respect to indebtedness described in clause 7i7 or one or more positions described in clause 7ii7 with respect to property which generates income or gain described in paragraph 7#b7 or 7#c71 7,,ii7 any portion of such indebtedness is extinguished or any portion of such property is disposed of1 and 7,,iii7 in connection with such extinguishment or disposition1 such trust enters into one or more transactions which would be hedging transactions described in subparagraph 7,b7 or 7,c7 of section #abba7;b77#b7 with respect to any position referred to in subclause 7,i7 if such position were ordinary property1 any income of such trust from any position referred to in subclause 7,i7 and from any transaction referred to in subclause 7,,iii7 7including gain from the termination of any such position or transaction7 shall not constitute gross income under paragraphs 7#b7 and 7#c7 to the extent that such transaction hedges such position4 4 7b7 ,identification requirements 7#a7 ,in general ,subparagraph 7,g7 of section #hef7;c77#e71 as amended by subsection 7a71 is amended by striking and at the end of clause 7ii71 by striking the period at the end of clause 7iii7 and inserting 1 and1 and by adding at the end the following new clause3 7iv7 clauses 7i71 7ii71 and 7iii7 shall not apply with respect to any transaction unless such transaction satisfies the identification requirement described in section #abba7;b77#c77;,a7 7determined after taking into account any curative provisions provided under the regulations referred to therein74 4 7#b7 ,conforming amendments ,subparagraph 7,g7 of section #hef7;c77#e7 is amended-- 7,a7 by striking which is clearly identified pursuant to section #abba7;a77#g7 in clause 7i71 and 7,b7 by striking 1 but only if such transaction is clearly identified as such before the close of the day on which it was acquired1 originated1 or entered into 7or such other time as the ,secretary may prescribe7 in clause 7ii74 7c7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 #cfdc4 ,modification of ,,reit earnings and profits calculation to avoid duplicate taxation 7a7 ,earnings and profits not increased by amounts allowed in computing taxable income in prior years 7#a7 ,in general ,paragraph 7#a7 of section #heg7;d7 is amended to read as follows3 7#a7 ,in general ,the earnings and profits of a real estate investment trust for any taxable year 7but not its accumulated earnings7 shall not be reduced by any amount which-- 7,a7 is not allowable in computing its taxable income for such taxable year1 and 7,b7 was not allowable in computing its taxable income for any prior taxable year4 4 7#b7 ,exception for purposes of determining dividends paid deduction ,paragraph 7#a7 of section #efb7;e71 as amended by the preceding provisions of this ,act1 is amended-- 7,a7 by striking deduction1 the earnings and inserting the following3 deduction-- 7,a7 the earnings 1 7,b7 by striking the period at the end and inserting 1 and1 and 7,c7 by adding at the end the following new subparagraph3 7,b7 section #heg7;d77#a7 shall be applied without regard to subparagraph 7,b7 thereof4 4 7#c7 ,conforming amendments ,subsection 7d7 of section #heg is amended by adding at the end the following new paragraphs3 7#d7 ,real estate investment trust ,for purposes of this subsection1 the term real estate investment trust includes a domestic corporation1 trust1 or association which is a real estate investment trust determined without regard to the requirements of subsection 7a74 7#e7 ,special rules for determining earnings and profits for purposes of the deduction for dividends paid ,for special rules for determining the earnings and profits of a real estate investment trust for purposes of the deduction for dividends paid1 see section #efb7;e77#a74 4 7b7 ,treatment of gain on sales of real property ,subparagraph 7,a7 of section #efb7;e77#a71 as amended by the preceding provisions of this ,act1 is amended to read as follows3 7,a7 the earnings and profits of such trust for any taxable year 7but not its accumulated earnings7 shall be increased by the amount of gain 7if any7 on the sale or exchange of real property which is taken into account in determining the taxable income of such trust for such taxable year 7and not otherwise taken into account in determining such earnings and profits71 and 4 7c7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 #cfdd4 ,reduction in percentage limitation on assets of ,,reit which may be taxable ,,reit subsidiaries 7a7 ,in general ,section #hef7;c77#d77;,b77ii7 is amended by striking #be percent and inserting #bj percent4 7b7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjaf4 #cfde4 ,treatment of certain services provided by taxable ,,reit subsidiaries 7a7 ,taxable ,,reit subsidiaries treated in same manner as independent contractors for certain purposes 7#a7 ,marketing and development expenses under rental property safe harbor ,clause 7v7 of section #heg7;b77#f77;,c7 is amended by inserting or by a taxable ,,reit subsidiary before the period at the end4 7#b7 ,foreclosure property grace period ,subparagraph 7,c7 of section #hef7;e77#d7 is amended by inserting or through a taxable ,,reit subsidiary after receive any income4 7b7 ,tax on redetermined ,,trs service income 7#a7 ,in general ,subparagraph 7,a7 of section #heg7;b77#g7 is amended by striking and excess interest and inserting excess interest1 and redetermined ,,trs service income4 7#b7 ,redetermined ,,trs service income ,paragraph 7#g7 of section #heg7;b7 is amended by redesignating subparagraphs 7,e7 and 7,f7 as subparagraphs 7,f7 and 7,g71 respectively1 and inserting after subparagraph 7,d7 the following new subparagraph3 7,e7 ,redetermined ,,trs service income 7i7 ,in general ,the term redetermined ,,trs service income means gross income of a taxable ,,reit subsidiary of a real estate investment trust attributable to services provided to1 or on behalf of1 such trust 7less deductions properly allocable thereto7 to the extent the amount of such income 7less such deductions7 would 7but for subparagraph 7,f77 be increased on distribution1 apportionment1 or allocation under section #dhb4 7ii7 ,coordination with redetermined rents ,clause 7i7 shall not apply with respect to gross income attributable to services furnished or rendered to a tenant of the real estate investment trust 7or to deductions properly allocable thereto74 4 7#c7 ,conforming amendments ,subparagraphs 7,b77i7 and 7,c7 of section #heg7;b77#g7 are each amended by striking subparagraph 7,e7 and inserting subparagraph 7,f74 7c7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 #cfdf4 ,study relating to taxable ,,reit subsidiaries ,the ,secretary of the ,treasury 7or the ,secretary's designee7 shall1 biannually-- 7#a7 conduct a study to determine-- 7,a7 how many taxable ,,reit subsidiaries are in existence and the aggregate amount of taxes paid by such subsidiaries1 and 7,b7 the amount by which transactions between a ,,reit and a taxable ,,reit subsidiary reduce taxable income of the taxable ,,reit subsidiary 7whether or not such transactions are conducted at arms length71 and 7#b7 submit a report to the ,committee on ,ways and ,means of the ,house of ,representatives and the ,committee on ,finance of the ,senate describing the results of such study4 #cfdg4 ,c corporation election to become1 or transfer assets to1 a ,,ric or ,,reit 7a7 ,in general ,part ,,iv of subchapter ,o of chapter #a1 as amended by the preceding provisions of this ,act1 is amended by redesignating section #ajfb as section #ajfc and by inserting after section #ajfa the following new section3 #ajfb4 ,recognition of gain or loss upon ,c corporation election to become1 or transfer assets to1 a regulated investment company or a real estate investment trust 7a7 ,in general ,if a ,c corporation elects to become a regulated investment company or a real estate investment trust for a taxable year1 such corporation shall recognize gain or loss as if all its assets were sold by such corporation at their fair market value immediately before the close of the last taxable year before such corporation becomes a regulated investment company or real estate investment trust 7as the case may be74 7b7 ,application to transfers of assets ,in the case of a ,c corporation which transfers to a regulated investment company or a real estate investment trust one or more assets the basis of which is determined 7in whole or in part7 by reference to the basis of such asset or assets in the hands of the ,c corporation1 such corporation shall recognize gain or loss as if such assets were sold by such corporation at their fair market value as of the end of the day before the day of the transfer4 7c7 ,nonapplication to net loss ,subsections 7a7 and 7b7 shall not apply if their application would result in the recognition of a net loss4 ,for purposes of the preceding sentence1 the term net loss means the excess of aggregate losses over aggregate gains 7including items of income7 without regard to character4 7d7 ,basis adjustment ,if any asset is treated as sold under subsection 7a7 or 7b71 the basis of such asset immediately after such deemed sale shall be equal to the fair market value of such asset as determined under such subsection4 7e7 ,c corporation ,for purposes of this section1 the term ,c corporation does not include a regulated investment company or a real estate investment trust4 4 7b7 ,clerical amendment ,the table of sections for part ,,iv of subchapter ,o of chapter #a is amended by redesignating the item relating to section #ajfb as an item relating to section #ajfc and by inserting after the item relating to section #ajfa the following new item3 ,sec4 #ajfb4 ,recognition of gain or loss upon ,c corporation election to become1 or transfer assets to1 a regulated investment company or a real estate investment trust4 4 7c7 ,effective date ,the amendment made by this section shall apply to elections and transfers on or after ,february #bf1 #bjad4 #cfdh4 ,interests in ,r,i,cs and ,r,e,i,ts not excluded from definition of ,united ,states real property interests 7a7 ,in general ,section #hig7;c77#a77;,b7 is amended by striking and at the end of clause 7i71 by striking the period at the end of clause 7ii77,,ii7 and inserting 1 and1 and by adding at the end the following new clause3 7iii7 neither such corporation nor any predecessor of such corporation was a regulated investment company or a real estate investment company at any time during the period described in subparagraph 7,a77ii74 4 7b7 ,effective date ,the amendment made by this section shall apply to dispositions after ,december #ca1 #bjad4 #cfdi4 ,dividends derived from ,r,i,cs and ,r,e,i,ts ineligible for deduction for ,united ,states source portion of dividends from certain foreign corporations 7a7 ,in general ,section #bde7;a7 is amended by adding at the end the following new paragraph3 7#ab7 ,dividends derived from ,r,i,cs and ,r,e,i,ts ineligible for deduction ,regulated investment companies and real estate investment trusts shall not be treated as domestic corporations for purposes of paragraph 7#e77;,b74 4 7b7 ,effective date ,the amendment made by this section shall apply to dividends received from regulated investment companies and real estate investment trusts on or after ,february #bf1 #bjad4 #d ,personal holding companies #cffa4 ,exclusion of dividends from controlled foreign corporations from the definition of personal holding company income for purposes of the personal holding company rules 7a7 ,in general ,paragraph 7#a7 of section #edc7;a7 is amended-- 7#a7 by redesignating subparagraphs 7,c7 and 7,d7 as subparagraphs 7,d7 and 7,e71 respectively1 and 7#b7 by inserting after subparagraph 7,b7 the following3 7,c7 dividends received by a ,united ,states shareholder 7as defined in section #iea7;b77 from a controlled foreign corporation 7as defined in section #ieg7;a771 4 7b7 ,effective date ,the amendments made by this ,act shall apply to taxable years beginning after ,december #ca1 #bjad4 ,h ,taxation of foreign persons #cgja4 ,prevention of avoidance of tax through reinsurance with non-taxed affiliates 7a7 ,in general ,part ,,iii of subchapter ,l of chapter #a is amended by adding at the end the following new section3 #hdi4 ,special rules for reinsurance of non-life contracts with non-taxed affiliates 7a7 ,in general ,the taxable income under section #hca7;a7 or the life insurance company taxable income under section #hja7;b7 7as the case may be7 of an insurance company shall be determined by not taking into account-- 7#a7 any non-taxed reinsurance premium1 7#b7 any additional amount paid by such insurance company with respect to the reinsurance for which such non-taxed reinsurance premium is paid1 to the extent such additional amount is properly allocable to such non-taxed reinsurance premium1 and 7#c7 any return premium1 ceding commission1 reinsurance recovered1 or other amount received by such insurance company with respect to the reinsurance for which such non-taxed reinsurance premium is paid1 to the extent such return premium1 ceding commission1 reinsurance recovered1 or other amount is properly allocable to such non-taxed reinsurance premium4 7b7 ,non-,taxed reinsurance premiums ,for purposes of this section-- 7#a7 ,in general ,the term non-taxed reinsurance premium means any reinsurance premium paid directly or indirectly to an affiliated corporation with respect to reinsurance of risks 7other than excepted risks71 to the extent that the income attributable to the premium is not subject to tax under this subtitle 7either as the income of the affiliated corporation or as amounts included in gross income by a ,united ,states shareholder under section #iea74 7#b7 ,excepted risks ,the term excepted risks means any risk with respect to which reserves described in section #haf7;b77#a7 are established4 7c7 ,affiliated corporations ,for purposes of this section1 a corporation shall be treated as affiliated with an insurance company if both corporations would be members of the same controlled group of corporations 7as defined in section #aefc7;a77 if section #aefc were applied-- 7#a7 by substituting at least #ej percent for at least #hj percent each place it appears in subsection 7a77#a71 and 7#b7 without regard to subsections 7a77#d71 7b77#b77;,c71 7b77#b77;,d71 and 7e77#c77;,c74 7d7 ,election ,to treat reinsurance income as effectively connected 7#a7 ,in general ,a specified affiliated corporation may elect for any taxable year to treat specified reinsurance income as-- 7,a7 income effectively connected with the conduct of a trade or business in the ,united ,states1 and 7,b7 for purposes of any treaty between the ,united ,states and any foreign country1 income attributable to a permanent establishment in the ,united ,states4 7#b7 ,effect of election ,in the case of any specified reinsurance income with respect to which the election under this subsection applies-- 7,a7 ,deduction allowed for reinsurance premiums ,for exemption from subsection 7a71 see definition of non-taxed reinsurance premiums in subsection 7b74 7,b7 ,exception from excise tax ,the tax imposed by section #dcga shall not apply with respect to any income treated as effectively connected with the conduct of a trade or business in the ,united ,states under paragraph 7#a74 7,c7 ,taxation under this subchapter ,such income shall be subject to tax under this subchapter to the same extent and in the same manner as if such income were the income of a domestic insurance company4 7,d7 ,coordination with foreign tax credit provisions ,for purposes of subpart ,a of part ,,iii of subchapter ,n and sections #gh and #ifj-- 7i7 such specified reinsurance income shall be treated as derived from sources without the ,united ,states1 and 7ii7 subsections 7a71 7b71 and 7c7 of section #ijd1 and section #ifj1 shall be applied separately with respect to each item of such income4 ,the ,secretary may issue regulations or other guidance which provide that related items of specified reinsurance income may be aggregated for purposes of applying clause 7ii74 7#c7 ,specified affiliated corporation ,for purposes of this subsection1 the term specified affiliated corporation means any affiliated corporation which is a foreign corporation and which meets such requirements as the ,secretary shall prescribe to ensure that tax on the specified reinsurance income of such corporation is properly determined and paid4 7#d7 ,specified reinsurance income ,for purposes of this paragraph1 the term specified reinsurance income means all income of a specified affiliated corporation which is attributable to reinsurance with respect to which subsection 7a7 would 7but for the election under this subsection7 apply4 7#e7 ,rules related to election ,any election under paragraph 7#a7 shall-- 7,a7 be made at such time and in such form and manner as the ,secretary may provide1 and 7,b7 apply for the taxable year for which made and all subsequent taxable years unless revoked with the consent of the ,secretary4 7e7 ,exception for amounts subject to foreign tax ,an amount shall not be treated as described in paragraph 7#a71 7#b71 or 7#c7 of subsection 7a7 if the taxpayer demonstrates to the satisfaction of the ,secretary that such amount was subject to an effective rate of income tax imposed by a foreign country which is not less than #ajj percent of the maximum rate of tax specified in section #aa4 7f7 ,regulations ,the ,secretary shall prescribe such regulations or other guidance as may be appropriate to carry out1 or to prevent the avoidance of the purposes of1 this section1 including regulations or other guidance which provide for the application of this section to alternative reinsurance transactions1 fronting transactions1 conduit and reciprocal transactions1 and any economically equivalent transactions4 4 7b7 ,clerical amendment ,the table of sections for part ,,iii of subchapter ,l of chapter #a is amended by adding at the end the following new item3 ,sec4 #hdi4 ,special rules for reinsurance of non-life contracts with non-taxed affiliates4 4 7c7 ,effective date ,the amendment made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 #cgjb4 ,taxation of passenger cruise gross income of foreign corporations and nonresident alien individuals 7a7 ,in general ,section #hhb is amended by redesignating subsection 7f7 as subsection 7g7 and by inserting after subsection 7e7 the following new subsection3 7f7 ,treatment of passenger cruise gross income 7#a7 ,in general ,for purposes of this title1 the effectively connected passenger cruise gross income of a foreign corporation shall be treated as gross income which is effectively connected with the conduct of a trade or business in the ,united ,states4 7#b7 ,effectively connected passenger cruise gross income ,for purposes of this subsection1 the term effectively connected passenger cruise gross income means1 with respect to the operation of any ship in a covered voyage1 the ,united ,states territorial waters percentage of the gross income 7determined without regard to section #hhc7;a77#a77 derived from such operation1 including any amount received with respect to the provision of any on- or off-board activities1 services1 or sales1 with respect to passengers incidental to such operation 7or with respect to any agreement with any person with respect to the provision of any such activities1 services1 or sales74 7#c7 ,united ,states territorial waters percentage ,for purposes of this subsection-- 7,a7 ,in general ,the term ,united ,states territorial waters percentage means1 with respect to the operation of any ship in any covered voyage1 the ratio 7expressed as a percentage7 of-- 7i7 the number of days during such voyage such ship was operated in the territorial waters of the ,united ,states1 divided by 7ii7 the total number of days of such voyage4 7,b7 ,calendar day rule ,if a ship-- 7i7 is operated in a covered voyage1 or 7ii7 is operated in the territorial waters of the ,united ,states during a covered voyage1 for any portion of a calendar day1 such ship shall be treated as having operated in a covered voyage1 or as having operated in such territorial waters1 respectively1 for the entirety of such day4 7,c7 ,territorial waters ,the territorial waters of the ,united ,states shall be treated as consisting of those waters which are-- 7i7 within the international boundary line between the ,united ,states and any contiguous foreign country1 or 7ii7 within #ab nautical miles from low tide on the coastline of the ,united ,states4 7#d7 ,covered voyage ,for purposes of this subsection-- 7,a7 ,in general ,the term covered voyage has the meaning given such term by section #ddgb7a74 7,b7 ,anti-abuse rule ,except as otherwise provided by the ,secretary1 if passengers embark a ship in the ,united ,states and more than #aj percent of such passengers disembark in the ,united ,states1 the operation of such ship at all times between such events shall be treated as a covered voyage4 ,nothing in the preceding sentence shall preclude any operation of a ship 7including any operation of a ship before or after such events7 which would otherwise be treated as part of a covered voyage from being so treated4 7#e7 ,treatment of otherwise effectively connected income ,gross income which would1 without regard to this subsection1 be gross income which is effectively connected with the conduct of a trade or business in the ,united ,states-- 7,a7 shall be so treated1 and 7,b7 shall not be taken into account as gross income under paragraph 7#b74 4 7b7 ,application to nonresident alien individuals ,section #hga is amended by redesignating subsection 7n7 as subsection 7o7 and by inserting after subsection 7m7 the following new subsection3 7n7 ,treatment of passenger cruise gross income 7#a7 ,in general ,for purposes of this title1 the effectively connected passenger cruise gross income of a nonresident alien individual shall be treated as gross income which is effectively connected with the conduct of a trade or business in the ,united ,states4 7#b7 ,definitions and special rules ,for purposes of this subsection-- 7,a7 ,definitions ,terms used in this subsection which are also used in section #hhb7;f7 shall have the same meaning as when used in such section1 except that section #hhb7;f77#b7 shall be applied by substituting section #hgb7;b77#a7 for section #hhc7;a77#a74 7,b7 ,treatment of otherwise effectively connected income ,rules similar to the rules of section #hhb7;f77#e7 shall apply for purposes of this subsection4 4 7c7 ,coordination with reciprocal exemptions for shipping income 7#a7 ,in general ,section #hhc7;a77#a7 is amended by striking ,gross income and inserting ,except as provided in section #hhb7;f71 gross income4 7#b7 ,nonresident alien individuals ,section #hgb7;b77#a7 is amended by striking ,gross income and inserting ,except as provided in section #hga7n71 gross income4 7d7 ,coordination with tax on gross transportation income ,section #hhg7;b77#d7 is amended by adding at the end the following new flush text3 ,the preceding sentence shall not apply to any ,united ,states source gross transportation income which is effectively connected passenger cruise gross income 7within the meaning of section #hga7n7 or #hhb7;f774 4 7e7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 #cgjc4 ,restriction on insurance business exception to passive foreign investment company rules 7a7 ,in general ,section #abig7;b77#b77;,b7 is amended to read as follows3 7,b7 derived in the active conduct of an insurance business by a corporation if-- 7i7 such corporation would be subject to tax under subchapter ,l if such corporation were a domestic corporation1 7ii7 more than #ej percent of such corporation's gross receipts for the taxable year consist of premiums1 and 7iii7 the applicable insurance liabilities of such corporation constitute more than #ce percent of its total assets as reported on the corporation's applicable financial statement for the year with which or in which the taxable year ends1 4 7b7 ,applicable insurance liabilities2 applicable financial statement 7#a7 ,in general ,section #abig7;b7 is amended by adding at the end the following new paragraph3 7#c7 ,definitions ,for purposes of this subsection-- 7,a7 ,applicable insurance liabilities ,the term applicable insurance liabilities means1 with respect to any life or property and casualty insurance business-- 7i7 loss and loss adjustment expenses1 7ii7 unearned premiums1 and 7iii7 reserves 7other than deficiency or contingency reserves7 for life and health insurance risks and life and health insurance claims with respect to contracts providing coverage for mortality or morbidity risks 7not to exceed the amount of such reserve that is required to be reported to the home country insurance regulatory body74 7,b7 ,applicable financial statement ,the term applicable financial statement means a statement for financial reporting purposes which-- 7i7 is made on the basis of generally accepted accounting principles1 7ii7 is made on the basis of international financial reporting standards1 but only if there is no statement that meets the requirement of clause 7i71 or 7iii7 except as otherwise provided by the ,secretary in regulations1 is the annual statement which is required to be filed with the home country insurance regulatory body1 but only if there is no statement which meets the requirements of clause 7i7 or 7ii74 4 7#b7 ,conforming amendment ,section #abig7;b7 is amended-- 7,a7 by striking the last sentence in paragraph 7#b7 thereof1 and 7,b7 by adding at the end of paragraph 7#c7 thereof 7as added by paragraph 7#a771 the following new subparagraph3 7,c7 ,related person ,the term related person has the meaning given such term by section #ied7;d77#c7 determined by substituting foreign corporation for controlled foreign corporation each place it appears therein4 4 7c7 ,effective date ,the amendment made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 #cgjd4 ,modification of limitation on earnings stripping 7a7 ,in general ,section #afc7;j77#b77;,b77i77,,ii7 is amended by striking #ej percent and inserting #dj percent4 7b7 ,no new excess limitation carryforwards ,section #afc7;j77#b77;,b77ii7 is amended by striking for any taxable year and inserting for any taxable year beginning before ,january #a1 #bjae4 7c7 ,effective date ,the amendment made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 #cgje4 ,limitation on treaty benefits for certain deductible payments 7a7 ,in general ,section #hid of the ,internal ,revenue ,code of #aihf 7relating to income affected by treaty7 is amended by adding at the end the following new subsection3 7d7 ,limitation on treaty benefits for certain deductible payments 7#a7 ,in general ,in the case of any deductible related-party payment1 any withholding tax imposed under chapter #c 7and any tax imposed under subpart ,a or ,b of this part7 with respect to such payment may not be reduced under any treaty of the ,united ,states unless any such withholding tax would be reduced under a treaty of the ,united ,states if such payment were made directly to the foreign parent corporation4 7#b7 ,deductible related-party payment ,for purposes of this subsection1 the term deductible related-party payment means any payment made1 directly or indirectly1 by any person to any other person if the payment is allowable as a deduction under this chapter and both persons are members of the same foreign controlled group of entities4 7#c7 ,foreign controlled group of entities ,for purposes of this subsection-- 7,a7 ,in general ,the term foreign controlled group of entities means a controlled group of entities the common parent of which is a foreign corporation4 7,b7 ,controlled group of entities ,the term controlled group of entities means a controlled group of corporations as defined in section #aefc7;a77#a71 except that-- 7i7 more than #ej percent shall be substituted for at least #hj percent each place it appears therein1 and 7ii7 the determination shall be made without regard to subsections 7a77#d7 and 7b77#b7 of section #aefc4 ,a partnership or any other entity 7other than a corporation7 shall be treated as a member of a controlled group of entities if such entity is controlled 7within the meaning of section #ied7;d77#c77 by members of such group 7including any entity treated as a member of such group by reason of this sentence74 7#d7 ,foreign parent corporation ,for purposes of this subsection1 the term foreign parent corporation means1 with respect to any deductible related-party payment1 the common parent of the foreign controlled group of entities referred to in paragraph 7#c77;,a74 7#e7 ,regulations ,the ,secretary may prescribe such regulations or other guidance as are necessary or appropriate to carry out the purposes of this subsection1 including regulations or other guidance which provide for-- 7,a7 the treatment of two or more persons as members of a foreign controlled group of entities if such persons would be the common parent of such group if treated as one corporation1 and 7,b7 the treatment of any member of a foreign controlled group of entities as the common parent of such group if such treatment is appropriate taking into account the economic relationships among such entities4 4 7b7 ,effective date ,the amendment made by this section shall apply to payments made after the date of the enactment of this ,act4 ,i ,provisions related to compensation #a ,executive compensation #chja4 ,nonqualified deferred compensation 7a7 ,in general ,subpart ,a of part ,i of subchapter ,d of chapter #a is amended by adding at the end the following new section3 #dji;,b4 ,nonqualified deferred compensation 7a7 ,in general ,any compensation which is deferred under a nonqualified deferred compensation plan shall be includible in gross income when there is no substantial risk of forfeiture of the rights to such compensation4 7b7 ,definitions ,for purposes of this section-- 7#a7 ,substantial risk of forfeiture ,the rights of a person to compensation shall be treated as subject to a substantial risk of forfeiture only if such person's rights to such compensation are conditioned upon the future performance of substantial services by any individual4 7#b7 ,nonqualified deferred compensation plan ,for purposes of this section3 7,a7 ,nonqualified deferred compensation plan ,the term nonqualified deferred compensation plan means any plan that provides for the deferral of compensation1 other than-- 7i7 a qualified employer plan1 7ii7 any bona fide vacation leave1 sick leave1 compensatory time1 disability pay1 or death benefit plan1 and 7iii7 any other plan or arrangement designated by the ,secretary consistent with the purposes of this section4 7,b7 ,equity-based compensation ,the term nonqualified deferred compensation plan shall include any plan that provides a right to compensation based on the appreciation in value of a specified number of equity units of the service recipient or stock options4 7#c7 ,qualified employer plan ,the term qualified employer plan means any plan1 contract1 pension1 account1 or trust described in #djh7p77#b77;,d77ii74 7#d7 ,plan includes arrangements1 etc ,the term plan includes any agreement or arrangement1 including an agreement or arrangement that includes one person4 7#e7 ,exception ,compensation shall not be treated as deferred for purposes of this section if the service provider receives payment of such compensation not later than #f months after the end of the taxable year of the service recipient during which the right to the payment of such compensation is no longer subject to a substantial risk of forfeiture4 7#f7 ,treatment of earnings ,references to deferred compensation shall be treated as including references to income 7whether actual or notional7 attributable to such compensation or such income4 7#g7 ,aggregation rules ,except as provided by the ,secretary1 rules similar to the rules of subsections 7b7 and 7c7 of section #dad shall apply4 7c7 ,no inference on earlier income inclusion or requirement of later inclusion ,nothing in this section shall be construed to prevent the inclusion of amounts in gross income under any other provision of this chapter or any other rule of law earlier than the time provided in this section4 ,any amount included in gross income under this section shall not be required to be included in gross income under any other provision of this chapter or any other rule of law later than the time provided in this section4 7d7 ,regulations ,the ,secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this section1 including regulations disregarding a substantial risk of forfeiture in cases where necessary to carry out the purposes of this section4 4 7b7 ,termination of certain other nonqualified deferred compensation rules 7#a7 ,nonqualified deferred compensation 7,a7 ,in general ,subpart ,a of part ,i of subchapter ,d of chapter #a is amended by striking section #dji;,a 7and by striking the item relating to such section in the table of sections for such subpart74 7,b7 ,conforming amendments 7i7 ,section #bf7;b77#b7 is amended by striking subparagraph 7,v74 7ii7 ,section #cdja7;a7 is amended by striking the flush sentence at the end4 7iii7 ,section #fjda is amended by striking subsection 7g74 7iv7 ,section #fjea7;a71 as amended by the preceding provisions of this ,act1 is amended by striking paragraph 7#ab71 by inserting and at the end of paragraph 7#aa71 and by redesignating paragraph 7#ac7 as paragraph 7#ab74 7#b7 #deg7;b7 plans of tax exempt organizations ,section #deg is amended by adding at the end the following new subsection3 7h7 ,termination of certain plans 7#a7 ,tax-exempt organization plans ,this section shall not apply to amounts deferred which are attributable to services performed after ,december #ca1 #bjad1 under a plan maintained by an employer described in subsection 7e77#a77;,b74 7#b7 ,ineligible deferred compensation plans ,subsection 7f7 shall not apply to amounts deferred which are attributable to services performed after ,december #ca1 #bjad4 4 7#c7 ,nonqualified deferred compensation from certain tax indifferent parties 7,a7 ,in general ,subpart ,b of part ,,ii of subchapter ,e of chapter #a is amended by striking section #deg;,a 7and by striking the item relating to such section in the table of sections for such subpart74 7,b7 ,conforming amendment ,section #bf7;b77#b7 is amended by striking subparagraph 7,x74 7c7 ,clerical amendment ,the table of sections for part ,i of subchapter ,d of chapter #a is amended by adding at the end the following new item3 ,sec4 #dji;,b4 ,nonqualified deferred compensation4 4 7d7 ,effective date 7#a7 ,in general ,except as otherwise provided in this subsection1 the amendments made by this section shall apply to amounts which are attributable to services performed after ,december #ca1 #bjad4 7#b7 ,application to existing deferrals ,in the case of any amount deferred to which the amendments made by this section do no apply solely by reason of the fact that the amount is attributable to services performed before ,january #a1 #bjae1 to the extent such amount is not includible in gross income in a taxable year beginning before #bjbc1 such amounts shall be includible in gross income in the later of-- 7,a7 the last taxable year beginning before #bjbc1 or 7,b7 the taxable year in which there is no substantial risk of forfeiture of the rights to such compensation 7determined in the same manner as determined for purposes of section #dji;,b of the ,internal ,revenue ,code of #aihf1 as added by this section74 7#c7 ,accelerated payments ,no later than #abj days after the date of the enactment of this ,act1 the ,secretary shall issue guidance providing a limited period of time during which a nonqualified deferred compensation arrangement attributable to services performed on or before ,december #ca1 #bjad1 may1 without violating the requirements of section #dji;,a of the ,internal ,revenue ,code of #aihf1 be amended to conform the date of distribution to the date the amounts are required to be included in income4 7#d7 ,certain back-to-back arrangements ,if the taxpayer is also a service recipient and maintains one or more nonqualified deferred compensation arrangements for its service providers under which any amount is attributable to services performed on or before ,december #ca1 #bjad1 the guidance issued under paragraph 7#c7 shall permit such arrangements to be amended to conform the dates of distribution under such arrangement to the date amounts are required to be included in the income of such taxpayer under this subsection4 7#e7 ,accelerated payment not treated as material modification ,any amendment to a nonqualified deferred compensation arrangement made pursuant to paragraph 7#c7 or 7#d7 shall not be treated as a material modification of the arrangement for purposes of section #dji;,a of the ,internal ,revenue ,code of #aihf4 #chjb4 ,modification of limitation on excessive employee remuneration 7a7 ,repeal of performance-,based compensation and commission exceptions for limitation on excessive employee remuneration 7#a7 ,in general ,paragraph 7#d7 of section #afb7m7 is amended by striking subparagraphs 7,b7 and 7,c7 and by redesignating subparagraphs 7,d71 7,e71 7,f71 and 7,g7 as subparagraphs 7,b71 7,c71 7,d71 and 7,e71 respectively4 7#b7 ,conforming amendments 7,a7 ,paragraphs 7#e77;,e7 and 7#f77;,d7 of section #afb7m7 are each amended by striking subparagraphs 7,b71 7,c71 and 7,d7 and inserting subparagraph 7,b74 7,b7 ,paragraphs 7#e77;,g7 and 7#f77;,g7 of section #afb7m7 are each amended by striking 7,f7 and 7,g7 and inserting 7,d7 and 7,e74 7b7 ,modification of definition of covered employees ,paragraph 7#c7 of section #afb7m7 is amended-- 7#a7 in subparagraph 7,a71 by striking as of the close of the taxable year1 such employee is the chief executive officer of the taxpayer or is and inserting such employee is the chief executive officer or the chief financial officer of the taxpayer at any time during the taxable year1 or was1 7#b7 in subparagraph 7,b7-- 7,a7 by striking #d and inserting #c1 and 7,b7 by striking 7other than the chief executive officer7 and inserting 7other than any individual described in subparagraph 7,a771 and 7#c7 by striking or at the end of subparagraph 7,a71 by striking the period at the end of subparagraph 7,b7 and inserting 1 or1 and by adding at the end the following3 7,c7 was a covered employee of the taxpayer 7or any predecessor7 for any preceding taxable year beginning after ,december #ca1 #bjac4 4 7c7 ,special rule for remuneration paid to beneficiaries1 etc ,paragraph 7#d7 of section #afb7m71 as amended by subsection 7a71 is amended by adding at the end the following new subparagraph3 7,f7 ,special rule for remuneration paid to beneficiaries1 etc ,remuneration shall not fail to be applicable employee remuneration merely because it is includible in the income of1 or paid to1 a person other than the covered employee1 including after the death of the covered employee4 4 7d7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 #chjc4 ,excise tax on excess tax-exempt organization executive compensation 7a7 ,in general ,subchapter ,d of chapter #db is amended by adding at the end the following new section3 #difj4 ,tax on excess tax-exempt organization executive compensation 7a7 ,tax imposed ,there is hereby imposed a tax equal to #be percent of the sum of-- 7#a7 so much of the remuneration paid 7other than any excess parachute payment7 by an applicable tax-exempt organization for the taxable year with respect to employment of any covered employee in excess of #a1jjj1jjj1 plus 7#b7 any excess parachute payment paid by such an organization to any covered employee4 7b7 ,liability for tax ,the employer shall be liable for the tax imposed under subsection 7a74 7c7 ,definitions and special rules ,for purposes of this section-- 7#a7 ,applicable tax-exempt organization ,the term applicable tax-exempt organization means any organization that for the taxable year-- 7,a7 is exempt from taxation under section #eja7;a71 7,b7 is a farmers' cooperative organization described in section #eba7;b77#a71 or 7,c7 has income excluded from taxation under section #aae7a74 7#b7 ,covered employee ,for purposes of this section1 the term covered employee means any employee 7including any former employee7 of an applicable tax-exempt organization if the employee-- 7,a7 is one of the #e highest compensated employees of the organization for the taxable year1 or 7,b7 was a covered employee of the organization 7or any predecessor7 for any preceding taxable year beginning after ,december #ca1 #bjac4 7#c7 ,remuneration ,for purposes of this section1 the term remuneration means wages 7as defined in section #cdja7;a771 except that such term shall not include any designated ,roth contribution 7as defined in section #djb;,a7c774 7#d7 ,remuneration from related organizations 7,a7 ,in general ,remuneration of a covered employee by an applicable tax-exempt organization shall include any remuneration paid with respect to employment of such employee by any related person or governmental entity4 7,b7 ,related organizations ,a person or governmental entity shall be treated as related to an applicable tax-exempt organization if such person or governmental entity-- 7i7 controls1 or is controlled by1 the organization1 7ii7 is controlled by one or more persons that control the organization1 7iii7 is a supported organization 7as defined in section #eji7;f77#b77 during the taxable year with respect to the organization1 7iv7 is a supporting organization described in section #eji7;a77#c7 during the taxable year with respect to the organization1 or 7v7 in the case of an organization that is a voluntary employees' beneficiary association described in section #eja7;a77#i71 establishes1 maintains1 or makes contributions to such voluntary employees' beneficiary association4 7,c7 ,liability for tax ,in any case in which remuneration from more than one employer is taken into account under this paragraph in determining the tax imposed by subsection 7a71 each such employer shall be liable for such tax in an amount which bears the same ratio to the total tax determined under subsection 7a7 with respect to such remuneration as-- 7i7 the amount of remuneration paid by such employer with respect to such employee1 bears to 7ii7 the amount of remuneration paid by all such employers to such employee4 7#e7 ,excess parachute payment ,for purposes determining the tax imposed by subsection 7a77#b7-- 7,a7 ,in general ,the term excess parachute payment means an amount equal to the excess of any parachute payment over the portion of the base amount allocated to such payment4 7,b7 ,parachute payment ,the term parachute payment means any payment in the nature of compensation to 7or for the benefit of7 a covered employee if-- 7i7 such payment is contingent on such employee's separation from employment with the employer1 and 7ii7 the aggregate present value of the payments in the nature of compensation to 7or for the benefit of7 such individual which are contingent on such separation equals or exceeds an amount equal to #c times the base amount4 ,such term does not include any payment described in section #bhj;,g7b77#f7 7relating to exemption for payments under qualified plans7 or any payment made under or to an annuity contract described in section #djc7;b7 or a plan described in section #deg7;b74 7,c7 ,base amount ,rules similar to the rules of #bhj;,g7b77#c7 shall apply for purposes of determining the base amount4 7,d7 ,property transfers2 present value ,rules similar to the rules of paragraphs 7#c7 and 7#d7 of section #bhj;,g7d7 shall apply4 7#f7 ,coordination with deduction limitation ,remuneration the deduction for which is not allowed by reason of section #afb7m7 shall not be taken into account for purposes of this section4 4 7b7 ,clerical amendment ,the table of sections for subchapter ,d of chapter #db is amended by adding at the end the following new item3 ,sec4 #difj4 ,tax on excess exempt organization executive compensation4 4 7c7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 #chjd4 ,denial of deduction as research expenditure for stock transferred pursuant to an incentive stock option 7a7 ,in general ,paragraph 7#b7 of section #dba7;a7 is amended by striking under section #afb 7relating to trade or business expenses74 7b7 ,effective date ,the amendment made by this section shall apply to stock transferred on or after ,february #bf1 #bjad4 #b ,worker classification #chaa4 ,determination of worker classification 7a7 ,in general ,chapter #gi1 as amended by the preceding provisions of this ,act1 is amended by adding at the end the following new section3 #ggjg4 ,determination of worker classification 7a7 ,in general ,for purposes of this title 7and notwithstanding any provision of this title not contained in this section to the contrary71 if the requirements of subsections 7b71 7c71 and 7d7 are met with respect to any service performed by a service provider1 then with respect to such service-- 7#a7 the service provider shall not be treated as an employee1 7#b7 the service recipient shall not be treated as an employer1 7#c7 any payor shall not be treated as an employer1 and 7#d7 the compensation paid or received for such service shall not be treated as paid or received with respect to employment4 7b7 ,general service provider requirements 7#a7 ,in general ,the requirements of this subsection are met with respect to any service if the service provider either-- 7,a7 meets the requirements of paragraph 7#b7 with respect to such service1 or 7,b7 in the case a service provider engaged in the trade or business of selling 7or soliciting the sale of7 goods or services1 meets the requirements of paragraph 7#c7 with respect to such service4 7#b7 ,general requirements ,the requirements of this paragraph are met with respect to any service if the service provider1 in connection with performing the service-- 7,a7 incurs significant unreimbursed expenses1 7,b7 agrees to perform the service for a particular amount of time1 to achieve a specific result1 or to complete a specific task1 7,c7 is primarily compensated on a basis not tied to the number of hours worked1 and 7,d7 at least one of the following3 7i7 has a significant investment in assets or training1 7ii7 is not required to perform services exclusively for the service recipient1 or 7iii7 has not performed services for the service recipient as an employee during the #a-year period ending with the date of the commencement of services under the contract described in subsection 7d74 7#c7 ,alternative requirements with respect to sales persons ,in the case of a service provider engaged in the trade or business of selling 7or soliciting the sale of7 goods or services1 the requirements of this paragraph are met with respect to any service provided in the ordinary course of such trade or business if-- 7,a7 the service provider is compensated primarily on a commission basis1 and 7,b7 substantially all the compensation for such service is directly related to sales of goods or services rather than to the number of hours worked4 7c7 ,place of business or own equipment requirement ,the requirement of this subsection is met with respect to any service if the service provider-- 7#a7 has a principal place of business1 7#b7 does not primarily provide the service in the service recipient's place of business1 7#c7 pays a fair market rent for use of the service recipient's place of business1 or 7#d7 provides the service primarily using equipment supplied by the service provider4 7d7 ,written contract requirement ,the requirements of this subsection are met with respect to any service if such service is performed pursuant to a written contract between the service provider and the service recipient 7or payor7 which meets the following requirements3 7#a7 ,the contract includes each of the following3 7,a7 ,the service provider's name1 taxpayer identification number1 and address4 7,b7 ,a statement that the service provider will not be treated as an employee with respect to the services provided pursuant to the contract for purposes of this title4 7,c7 ,a statement that the service recipient 7or the payor7 will withhold upon and report to the ,internal ,revenue ,service the compensation payable pursuant to the contract consistent with the requirements of this title4 7,d7 ,a statement that the service provider is responsible for payment of ,federal1 ,state1 and local taxes1 including self-employment taxes1 on compensation payable pursuant to the contract4 7,e7 ,a statement that the contract is intended to be considered a contract described in this subsection4 7#b7 ,the term of the contract does not exceed #a year4 ,the preceding sentence shall not prevent one or more subsequent written renewals of the contract from satisfying the requirements of this subsection if the term of each such renewal does not exceed #a year and if the information required under paragraph 7#a77;,a7 is updated in connection with each such renewal4 7#c7 ,the contract 7or renewal7 is signed by both the service recipient 7or payor7 and the service provider not later than the date on which the aggregate payments made by the service recipient to the service provider exceeds #fjj for the year covered by the contract 7or renewal74 7e7 ,reporting requirements ,if any service recipient or payor fails to meet the applicable reporting requirements of section #fjda7;a7 or #fjda;,a7a7 for any taxable year with respect to any service provider1 this section shall not apply for purposes of making any determination with respect to the liability of such service recipient or payor for any tax with respect to such service provider for such period4 ,for purposes of the preceding sentence1 such reporting requirements shall be treated as met if the failure to satisfy such requirements is due to reasonable cause and not willful neglect4 7f7 ,exception for services provided by owner ,this section shall not apply with respect to any service provided by a service provider to a service recipient if the service provider owns any interest in the service recipient or any payor with respect to the service provided4 ,the preceding sentence shall not apply in the case of a service recipient the stock of which is regularly traded on an established securities market4 7g7 ,exception for services not received in course of a trade or business ,this section shall not apply with respect to any service unless such service is performed in the ordinary course of a trade or business of the service recipient4 7h7 ,limitation on reclassification by ,secretary ,for purposes of this title-- 7#a7 ,effect of reclassification on recipients and payors ,a determination by the ,secretary that a service recipient or a payor should have treated a service provider as an employee shall be effective with respect to the service recipient or payor no earlier than the notice date if-- 7,a7 the service recipient or the payor entered into a written contract with the service provider which meets the requirements of subsection 7d71 7,b7 the service recipient or the payor satisfied the applicable reporting requirements of section #fjda7;a7 or #fjda;,a7a7 for all relevant taxable years with respect to the service provider1 7,c7 the service recipient or the payor collected and paid over all applicable taxes imposed under subtitle ,c for all relevant taxable years with respect to the service provider1 7,d7 the service recipient or the payor demonstrates a reasonable basis for having determined that the service provider should not be treated as an employee under this section and that such determination was made in good faith4 7#b7 ,effect of reclassification on service providers ,a determination by the ,secretary that a service provider should have been treated as an employee shall be effective with respect to the service provider no earlier than the notice date if-- 7,a7 the service provider entered into a written contract with the service recipient or payor which meets the requirements of subsection 7d71 7,b7 the service provider satisfied the applicable reporting requirements of sections #fjab7;a7 and #fjag for all relevant taxable years with respect to the service recipient or payor1 and 7,c7 the service provider demonstrates a reasonable basis for determining that the service provider is not an employee under this section and that such determination was made in good faith4 7#c7 ,notice date ,for purposes of this subsection1 the term notice date means the #cjth day after the earliest of-- 7,a7 the date on which the first letter of proposed deficiency which allows the service provider1 the service recipient1 or the payor an opportunity for administrative review in the ,internal ,revenue ,service ,office of ,appeals is sent1 7,b7 the date on which a deficiency notice under section #fbab is sent1 or 7,c7 the date on which a notice of determination under section #gdcf7;b77#b7 is sent4 7#d7 ,reasonable cause exception ,the requirements of paragraphs 7#a77;,b7 and 7#b77;,b7 shall be treated as met if the failure to satisfy such requirements is due to reasonable cause and not willful neglect4 7#e7 ,no restriction on administrative or judicial review ,nothing in this subsection shall be construed as limiting any provision of law which provides an opportunity for administrative or judicial review of a determination by the ,secretary4 7i7 ,definitions ,for purposes of this section-- 7#a7 ,service provider 7,a7 ,in general ,the term service provider means any qualified person who performs service for another person4 7,b7 ,qualified person ,the term qualified person means-- 7i7 any natural person1 and 7ii7 any entity if any of the services referred to in subparagraph 7,a7 are performed by one or more natural persons who directly own interests in such entity4 7#b7 ,service recipient ,the term service recipient means the person for whom the service provider performs such service4 7#c7 ,payor ,the term payor means any person who pays the service provider for performing such service4 7j7 ,regulations ,notwithstanding section #ecj7;d7 of the ,revenue ,act of #aigh1 the ,secretary shall issue such regulations as the ,secretary determines are necessary to carry out the purposes of this section4 4 7b7 ,withholding by payor in case of certain persons classified as not employees ,section #cdjb is amended by redesignating subsection 7s7 as subsection 7t7 and inserting after subsection 7r7 the following new subsection3 7s7 ,extension of withholding to payments to certain persons classified as not employees 7#a7 ,in general ,for purposes of this chapter and so much of subtitle ,f as relates to this chapter1 compensation paid pursuant to a contract described in section #ggjg7;d7 shall be treated as if it were a payment of wages by an employer to an employee4 7#b7 ,amount withheld ,except as otherwise provided under subsection 7i71 the amount to be deducted and withheld pursuant to paragraph 7#a7 with respect to compensation paid pursuant to any such contract during any calendar year shall be an amount equal to #e percent of so much of the amount of such compensation as does not exceed #aj1jjj4 4 7c7 ,reporting ,section #fjda;,a is amended by adding at the end the following new subsection3 7g7 ,special rules for certain persons classified as not employees ,in the case of any service recipient required to make a return under subsection 7a7 with respect to compensation to which section #ggjg7;a7 applies-- 7#a7 such return shall include-- 7,a7 the aggregate amount of such compensation paid to each person whose name is required to be included on such return1 7,b7 the aggregate amount deducted and withheld under section #cdjb7s7 with respect to such compensation1 and 7,c7 an indication of whether a copy of the contract described in section #ggjg7;d7 is on file with the service recipient or payor1 and 7#b7 the statement required to be furnished under subsection 7e7 shall include the information described in paragraph 7#a7 with respect to the service provider to whom such statement is furnished4 ,terms used in this subsection which are also used in section #ggjg shall have the same meaning as when used in such section4 4 7d7 ,clerical amendment ,the table of sections for chapter #gi1 as amended by the preceding provisions of this ,act1 is amended by adding at the end the following new item3 ,sec4 #ggjg4 ,determination of worker classification4 4 7e7 ,effective date ,the amendments made by this section shall apply to services performed after ,december #ca1 #bjad 7and to payments made for such services after such date74 ,j ,zones and ,short-,term ,regional ,benefits #chba4 ,repeal of provisions relating to ,empowerment ,zones and ,enterprise ,communities 7a7 ,in general ,chapter #a is amended by striking subchapter ,u 7and by striking the item relating to such subchapter in the table of subchapters for such chapter74 7b7 ,conforming amendments 7#a7 7,a7 ,section #ch7;b7 is amended by striking paragraph 7#i74 7,b7 ,section #bhj;,c7a7 is amended by striking #acif7;a714 7#b7 ,section #agi7;e7 is amended by striking paragraph 7#c7 and by redesignating paragraph 7#d7 as paragraph 7#c74 7#c7 ,section #abjb7;a77#b77;,a7 is amended by inserting 7as in effect before its repeal by the ,tax ,reform ,act of #bjad7 after section #acig;,c7b74 7c7 ,effective date 7#a7 ,in general ,except as otherwise provided in this subsection1 the amendment made by this section shall take effect on the date of the enactment of this ,act4 7#b7 ,rollovers ,so much of subsection 7a7 as relates to the repeal of section #acig;,b of the ,internal ,revenue ,code of #aihf shall apply to sales after the date of the enactment of this ,act4 7#c7 ,savings provision ,the amendments made by this section shall not apply to obligations described in section #acid of the ,internal ,revenue ,code of #aihf 7as in effect before its repeal7 which were issued before ,january #a1 #bjad4 #chbb4 ,repeal of ,,dc ,zone provisions 7a7 ,in general ,chapter #a is amended by striking subchapter ,w 7and by striking the item relating to such subchapter in the table of subchapters for such chapter74 7b7 ,conforming amendments 7#a7 7,a7 ,section #abjb7;a77#b77;,b7 is amended by inserting 7as in effect before its repeal by the ,tax ,reform ,act of #bjad7 after #adjj;,b7b74 7#b7 ,section #be7;e77#a77;,c7 is amended by striking sections #bc1 #be;,d1 and #adjj;,c and inserting section #bc4 7#c7 ,section #ajaf7;a7 is amended by striking paragraph 7#bg74 7c7 ,effective date 7#a7 ,in general ,except as otherwise provided in paragraph 7#b71 the amendments made by this section shall take effect on the date of the enactment of this ,act4 7#b7 ,savings provision ,the amendments made by this section shall not apply to-- 7,a7 in the case of the repeal of section #adjj;,a of the ,internal ,revenue ,code of #aihf1 obligations described in section #acid of such ,code 7as in effect before its repeal7 which were issued before ,january #a1 #bjab1 7,b7 in the case of the repeal of section #adjj;,b of such ,code1 ,,dc ,zone assets 7as defined in such section1 as in effect before its repeal7 which were acquired by the taxpayer before ,january #a1 #bjab1 and 7,c7 in the case of the repeal of section #adjj;,c of such ,code1 principal residences acquired before ,january #a1 #bjab4 #chbc4 ,repeal of provisions relating to renewal communities 7a7 ,in general ,chapter #a is amended by striking subchapter ,x 7and by striking the item relating to such subchapter in the table of subchapters for such chapter74 7b7 ,conforming amendments 7#a7 7,a7 ,section #dfi7;i77#c71 as amended by the preceding provisions of this ,act1 is amended by striking subparagraph 7,c7 and by redesignating subparagraphs 7,d71 7,e71 and 7,f7 as subparagraphs 7,b71 7,c71 and 7,d74 7,b7 ,section #dfi7;i77#c77;,c71 as so redesignated1 is amended to read as follows3 7,c7 ,ordering rule ,if subparagraph 7,b7 applies for a taxable year1 paragraph 7#a7 shall be applied-- 7i7 first to the portion of the passive activity loss to which such subparagraph does not apply1 and 7ii7 then to the portion of such loss to which such subparagraph does apply4 4 7,c7 ,section #dfi7;i77#f77;,b71 as amended by the preceding provisions of this ,act1 is amended-- 7i7 by striking commercial revitalization deduction in the heading1 7ii7 by striking in the case of-- and all that follows through any credit in clause 7i71 7iii7 by striking year1 or in clause 7i7 and inserting year41 and 7iv7 by striking clause 7iii74 7c7 ,effective date 7#a7 ,in general ,except as provided in paragraph 7#b71 the amendments made by this section shall take effect on the date of the enactment of this ,act4 7#b7 ,savings provision ,the amendments made by this section shall not apply to-- 7,a7 in the case of the repeal of section #adjj;,f of the ,internal ,revenue ,code of #aihf1 qualified community assets 7as defined in such section1 as in effect before its repeal7 which were acquired by the taxpayer before ,january #a1 #bjaj1 7,b7 in the case of the repeal section #adjj;,h of such ,code1 wages paid or incurred before ,january #a1 #bjaj1 7,c7 in the case of the repeal of section #adjj;,i of such ,code1 qualified revitalization buildings 7as defined in such section1 as in effect before its repeal7 which were placed in service before ,january #a1 #bjaj1 and 7,d7 in the case of the repeal of section #adjj;,j of such ,code1 property acquired before ,january #a1 #bjaj4 #chbd4 ,repeal of various short-term regional benefits 7a7 ,in general ,chapter #a is amended by striking subchapter ,y 7and by striking the item relating to such subchapter in the table of subchapters for such chapter74 7b7 ,conforming amendments ,section #ch7;b7 is amended by striking paragraphs 7#bg71 7#bh71 7#bi7 and 7#cj74 7c7 ,effective dates 7#a7 ,in general ,except as provided in paragraph 7#b71 the amendments made by this section shall take effect on the date of the enactment of this ,act4 7#b7 ,savings provision ,the amendments made by this section shall not apply to-- 7,a7 in the case of the repeal of section #adjj,l7a7 of the ,internal ,revenue ,code of #aihf1 qualified wages 7as defined in such section1 as in effect before its repeal7 which were paid or incurred before ,january #a1 #bjjd1 7,b7 in the case of the repeal of subsections 7b7 and 7f7 of section #adjj,l of such ,code1 qualified ,new ,york ,liberty ,zone property 7as defined in section #adjj,l7b7 of such ,code1 as in effect before its repeal7 placed in service before ,january #a1 #bjaj1 7,c7 in the case of the repeal of section #adjj,l7c7 of such ,code1 qualified ,new ,york ,liberty ,zone leasehold improvement property 7as defined in such section1 as in effect before its repeal7 placed in service before ,january #a1 #bjjg1 7,d7 in the case of the repeal of section #adjj,l7d7 of such ,code1 qualified ,new ,york ,liberty bonds 7as defined in such section1 as in effect before its repeal7 issued before ,january #a1 #bjad1 7,e7 in the case of the repeal of section #adjj,l7e7 of such ,code1 advanced refundings before ,january #a1 #bjjf1 7,f7 in the case of the repeal of section #adjj,l7g7 of such ,code1 property which is compulsorily or involuntarily converted as a result of the terrorist attacks on ,september #aa1 #bjja1 7,g7 in the case of the repeal of section #adjj,n7a7 of such ,code1 obligations issued before ,january #a1 #bjab1 7,h7 in the case of the repeal of section #adjj,n7b7 of such ,code1 advanced refundings before ,january #a1 #bjaa1 7,i7 in the case of the repeal of section #adjj,n7d7 of such ,code1 property placed in service before ,january #a1 #bjab1 7,j7 in the case of the repeal of section #adjj,n7e7 of such ,code1 property placed in service before ,january #a1 #bjji1 7,k7 in the case of the repeal of subsections 7f7 and 7g7 of section #adjj,n of such ,code1 amounts paid or incurred before ,january #a1 #bjjh1 7,l7 in the case of the repeal of section #adjj,n7h7 of such ,code1 amounts paid or incurred before ,january #a1 #bjab1 7,m7 in the case of the repeal of section #adjj,n7l7 of such ,code1 bonds issued before ,january #a1 #bjjg1 7,n7 in the case of the repeal of section #adjj,q7a7 of such ,code1 distributions before ,january #a1 #bjjg1 7,o7 in the case of the repeal of section #adjj,q7b7 of such ,code1 contributions before ,march #a1 #bjjf1 7,p7 in the case of the repeal of section #adjj,q7c7 of such ,code1 loans made before ,january #a1 #bjjg1 7,q7 in the case of the repeal of section #adjj,r of such ,code1 wages paid or incurred before ,january #a1 #bjjf1 7,r7 in the case of the repeal of section #adjj,s7a7 of such ,code1 contributions paid before ,january #a1 #bjjf1 7,s7 in the case of the repeal of section #adjj,t of such ,code1 financing provided before ,january #a1 #bjaa1 and 7,t7 in the case of the repeal of part ,,iii of subchapter ,y of chapter #a of such ,code1 obligations issued before ,january #a1 #bjaa4 ,,iv ,participation exemption system for the taxation of foreign income ,a ,establishment of exemption system #djja4 ,deduction for dividends received by domestic corporations from certain foreign corporations 7a7 ,in general ,part ,,viii of subchapter ,b of chapter #a is amended by inserting after section #bde the following new section3 #bde;,a4 ,dividends received by domestic corporations from certain foreign corporations 7a7 ,in general ,in the case of any dividend received from a specified #aj-percent owned foreign corporation by a domestic corporation which is a ,united ,states shareholder with respect to such foreign corporation1 there shall be allowed as a deduction an amount equal to #ie percent of the foreign-source portion of such dividend4 7b7 ,specified #aj-,percent owned foreign corporation ,for purposes of this section1 the term specified #aj-percent owned foreign corporation means any foreign corporation if any domestic corporation owns directly1 or indirectly through a chain of ownership described under section #ieh7;a71 #aj percent or more of the voting stock of such foreign corporation4 7c7 ,foreign-,source portion ,for purposes of this section-- 7#a7 ,in general ,the foreign-source portion of any dividend is an amount which bears the same ratio to such dividends as-- 7,a7 the post-#aihf undistributed foreign earnings1 bears to 7,b7 the total post-#aihf undistributed earnings4 7#b7 ,post-#aihf undistributed earnings ,the term post-#aihf undistributed earnings means the amount of the earnings and profits of the specified #aj-percent owned foreign corporation 7computed in accordance with sections #ifd7;a7 and #ihf7 accumulated in taxable years beginning after ,december #ca1 #aihf-- 7,a7 as of the close of the taxable year of the specified #aj-percent owned foreign corporation in which the dividend is distributed1 and 7,b7 without diminution by reason of dividends distributed during such taxable year4 7#c7 ,post-#aihf undistributed foreign earnings ,the term post-#aihf undistributed foreign earnings means the portion of the post-#aihf undistributed earnings which is attributable to neither-- 7,a7 income described in subparagraph 7,a7 of section #bde7;a77#e71 nor 7,b7 dividends described in subparagraph 7,b7 of such section 7determined without regard to section #bde7;a77#ab774 7#d7 ,treatment of distributions from earnings before #aihg 7,a7 ,in general ,in the case of any dividend paid out of earnings and profits of the specified #aj-percent owned foreign corporation 7computed in accordance with sections #ifd7;a7 and #ihf7 accumulated in taxable years beginning before ,january #a1 #aihg-- 7i7 paragraphs 7#a71 7#b71 and 7#c7 shall be applied without regard to the phrase post-#aihf each place it appears1 and 7ii7 paragraph 7#b7 shall be applied without regard to the phrase in taxable years beginning after ,december #ca1 #aihf4 7,b7 ,dividends paid first out of post-#aihf earnings ,dividends shall be treated as paid out of post-#aihf undistributed earnings to the extent thereof4 7d7 ,disallowance of foreign tax credit1 etc 7#a7 ,in general ,no credit shall be allowed under section #ija for any taxes paid or accrued 7or treated as paid or accrued7 with respect to any dividend for which a deduction is allowed under this section4 7#b7 ,denial of deduction ,no deduction shall be allowed under this chapter for any tax for which credit is not allowable under section #ija by reason of paragraph 7#a7 7determined by treating the taxpayer as having elected the benefits of subpart ,a of part ,,iii of subchapter ,n74 7e7 ,regulations ,the ,secretary may prescribe such regulations or other guidance as may be necessary or appropriate to carry out the provisions of this section4 4 7b7 ,application of holding period requirement ,subsection 7c7 of section #bdf is amended-- 7#a7 by striking or #bde in paragraph 7#a7 and inserting #bde1 or #bde;,a1 and 7#b7 by adding at the end the following new paragraph3 7#e7 ,special rules for foreign source portion of dividends received from specified #aj-percent owned foreign corporations 7,a7 #f-month holding period requirement ,for purposes of section #bde;,a-- 7i7 paragraph 7#a77;,a7 shall be applied-- 7,i7 by substituting #ahj days for #de dayseach place it appears1 and 7,,ii7 by substituting #cfa-;day period for #ia-;day period1 and 7ii7 paragraph 7#b7 shall not apply4 7,b7 ,status must be maintained during holding period ,for purposes of section #bde;,a1 the holding period requirement of this subsection shall be treated as met only if-- 7i7 the specified #aj-percent owned corporation referred to in section #bde;,a7a7 is a specified #aj-percent owned corporation at all times during such period1 and 7ii7 the taxpayer is a ,united ,states shareholder with respect to such specified #aj-percent owned corporation at all times during such period4 4 7c7 ,application of rules generally applicable to deductions for dividends received 7#a7 ,treatment of dividends from certain corporations ,paragraph 7#a7 of section #bdf7;a7 is amended by striking and #bde and inserting #bde1 and #bde;,a4 7#b7 ,assets generating tax-exempt portion of dividend not taken into account in allocating and apportioning deductible expenses ,paragraph 7#c7 of section #hfd7;e7 is amended by striking or #bde7;a7 and inserting 1 #bde7;a71 or #bde;,a4 7#c7 ,coordination with section #ajei ,subparagraph 7,b7 of section #ajei7;b77#b7 is amended by striking or #bde and inserting #bde1 or #bde;,a4 7d7 ,coordination with foreign tax credit limitation ,subsection 7b7 of section #ijd1 as amended by the preceding provisions of this ,act1 is amended by redesignating paragraph 7#b7 as paragraph 7#a7 and by adding at the end the following new paragraph3 7#b7 ,treatment of dividends for which deduction is allowed under section #bde;,a ,for purposes of subsection 7a71 in the case of a domestic corporation which is a ,united ,states shareholder with respect to a specified #aj-percent owned foreign corporation1 such domestic corporation's taxable income from sources without the ,united ,states shall be determined without regard to-- 7,a7 the foreign-source portion of any dividend received from such foreign corporation1 and 7,b7 any deductions properly allocable to such portion4 ,any term which is used in section #bde;,a and in this paragraph shall have the same meaning for purposes of this paragraph as when used in such section4 4 7e7 ,conforming amendments 7#a7 ,paragraph 7#d7 of section #bde7;a7 is amended by striking section #ijb7;c77#a7 and inserting section #bde;,a7c77#b74 7#b7 ,subsection 7b7 of section #iea is amended by striking subpart and inserting title4 7#c7 ,subsection 7a7 of section #ieg is amended by striking subpart in the matter preceding paragraph 7#a7 and inserting title4 7#d7 ,the table of sections for part ,,viii of subchapter ,b of chapter #a is amended by inserting after the item relating to section #bde the following new item3 ,sec4 #bde;,a4 ,dividends received by domestic corporations from certain foreign corporations4 4 7f7 ,effective date ,the amendments made by this section shall apply to taxable years of foreign corporations beginning after ,december #ca1 #bjad1 and to taxable years of ,united ,states shareholders in which or with which such taxable years of foreign corporations end4 #djjb4 ,limitation on losses with respect to specified #aj-percent owned foreign corporations 7a7 ,basis in specified #aj-,percent owned foreign corporation reduced by nontaxed portion of dividend for purposes of determining loss 7#a7 ,in general ,section #ifa is amended by adding at the end the following new subsection3 7d7 ,basis in specified #aj-,percent owned foreign corporation reduced by nontaxed portion of dividend for purposes of determining loss ,if a domestic corporation received a dividend from a specified #aj-percent owned foreign corporation 7as defined in section #bde;,a7 in any taxable year1 solely for purposes of determining loss on any disposition in such taxable year or any subsequent taxable year1 the basis of such domestic corporation in the stock of such foreign corporation shall be reduced by the amount of any deduction allowable to such domestic corporation under section #bde;,a with respect to such stock4 4 7#b7 ,effective date ,the amendments made by this subsection shall apply to dividends received in taxable years beginning after ,december #ca1 #bjad4 7b7 ,treatment of foreign branch losses transferred to specified #aj-,percent owned foreign corporations 7#a7 ,in general ,part ,,ii of subchapter ,b of chapter #a1 as amended by the preceding provisions of this ,act1 is amended by adding at the end the following new section3 #ib4 ,certain foreign branch losses transferred to specified #aj-percent owned foreign corporations 7a7 ,in general ,if a domestic corporation transfers substantially all of the assets of a foreign branch 7within the meaning of section #cfg7;a77#c77;,c77 to a specified #aj-percent owned foreign corporation 7as defined in section #bde;,a7 with respect to which it is a ,united ,states shareholder after such transfer1 such domestic corporation shall include in gross income for the taxable year which includes such transfer an amount equal to the transferred loss amount with respect to such transfer4 7b7 ,limitation and carryforward based on foreign-,source dividends received 7#a7 ,in general ,the amount included in the gross income of the taxpayer under subsection 7a7 for any taxable year shall not exceed the amount allowed as a deduction under section #bde;,a for such taxable year 7taking into account dividends received from all specified #aj-percent owned foreign corporations with respect to which the taxpayer is a ,united ,states shareholder74 7#b7 ,amounts not included carried forward ,any amount not included in gross income for any taxable year by reason of paragraph 7#a7 shall1 subject to the application of paragraph 7#a7 to the succeeding taxable year1 be included in gross income for the succeeding taxable year4 7c7 ,transferred loss amount ,for purposes of this section1 the term transferred loss amount means1 with respect to any transfer of substantially all of the assets of a foreign branch1 the excess 7if any7 of-- 7#a7 the sum of losses-- 7,a7 which were incurred by the foreign branch after ,december #ca1 #bjad1 and before the transfer1 and 7,b7 with respect to which a deduction was allowed to the taxpayer1 over 7#b7 the sum of-- 7,a7 any taxable income of such branch for a taxable year after the taxable year in which the loss was incurred and through the close of the taxable year of the transfer1 and 7,b7 any amount which is recognized under section #ijd7;f77#c7 on account of the transfer4 7d7 ,reduction for recognized gains 7#a7 ,in general ,in the case of a transfer not described in section #cfg7;a77#c77;,c71 the transferred loss amount shall be reduced 7but not below zero7 by the amount of gain recognized by the taxpayer on account of the transfer 7other than amounts taken into account under subsection 7c77#b77;,b774 7#b7 ,coordination with recognition under section #cfg ,in the case of a transfer described in section #cfg7;a77#c77;,c71 the transferred loss amount shall not exceed the excess 7if any7 of-- 7,a7 the excess of the amount described in section #cfg7;a77#c77;,c77i7 over the amount described in section #cfg7;a77#c77;,c77ii7 with respect to such transfer1 over 7,b7 the amount of gain recognized under section #cfg7;a77#c77;,c7 with respect to such transfer4 7e7 ,source of income ,amounts included in gross income under this section shall be treated as derived from sources within the ,united ,states4 7f7 ,basis adjustments ,consistent with such regulations or other guidance as the ,secretary may prescribe1 proper adjustments shall be made in the adjusted basis of the taxpayer's stock in the specified #aj-percent owned foreign corporation to which the transfer is made1 and in the transferee's adjusted basis in the property transferred1 to reflect amounts included in gross income under this section4 4 7#b7 ,amounts recognized under section #cfg on transfer of foreign branch with previously deducted losses treated as ,united ,states source ,subparagraph 7,c7 of section #cfg7;a77#c7 is amended by striking outside in the last sentence and inserting within4 7#c7 ,clerical amendment ,the table of subparts for such part1 as amended by the preceding provisions of this ,act1 is amended by adding at the end the following new item3 ,sec4 #ib4 ,certain foreign branch losses transferred to specified #aj-percent owned foreign corporations4 4 7#d7 ,effective date ,the amendments made by this subsection shall apply to transfers after ,december #ca1 #bjad4 #djjc4 ,treatment of deferred foreign income upon transition to participation exemption system of taxation 7a7 ,in general ,section #ife is amended to read as follows3 #ife4 ,treatment of deferred foreign income upon transition to participation exemption system of taxation 7a7 ,treatment of deferred foreign income as subpart ,f income ,in the case of the last taxable year of a deferred foreign income corporation which begins before ,january #a1 #bjae1 the subpart ,f income of such foreign corporation 7as otherwise determined for such taxable year under section #ieb7 shall be increased by the accumulated post-#aihf deferred foreign income of such corporation determined as of the close of such taxable year4 7b7 ,reduction in amounts included in gross income of ,united ,states shareholders of specified foreign corporations with deficits in earnings and profits 7#a7 ,in general ,in the case of a taxpayer which is a ,united ,states shareholder with respect to at least one deferred foreign income corporation and at least one ,e,p deficit foreign corporation1 the amount which would 7but for this subsection7 be taken into account under section #iea7;a77#a7 by reason of subsection 7a7 as such ,united ,states shareholder's pro rata share of the subpart ,f income of each deferred foreign income corporation shall be reduced 7but not below zero7 by the amount of such ,united ,states shareholder's aggregate foreign ,e,p deficit which is allocated under paragraph 7#b7 to such deferred foreign income corporation4 7#b7 ,allocation of aggregate foreign ,e,p deficit ,the aggregate foreign ,e,p deficit of any ,united ,states shareholder shall be allocated among the deferred foreign income corporations of such ,united ,states shareholder in an amount which bears the same proportion to such aggregate as-- 7,a7 such ,united ,states shareholder's pro rata share of the accumulated post-#aihf deferred foreign income of each such deferred foreign income corporation1 bears to 7,b7 the aggregate of such ,united ,states shareholder's pro rata share of the accumulated post-#aihf deferred foreign income of all deferred foreign income corporations of such ,united ,states shareholder4 7#c7 ,definitions related to ,e,p deficits ,for purposes of this subsection-- 7,a7 ,aggregate foreign ,e,p deficit ,the term aggregate foreign ,e,p deficit means1 with respect to any ,united ,states shareholder1 the aggregate of such shareholder's pro rata shares of the specified ,e,p deficits of the ,e,p deficit foreign corporations of such shareholder4 7,b7 ,e,p deficit foreign corporation ,the term ,e,p deficit foreign corporation means1 with respect to any taxpayer1 any specified foreign corporation with respect to which such taxpayer is a ,united ,states shareholder1 if-- 7i7 such specified foreign corporation has a deficit in post-#aihf earnings and profits1 and 7ii7 as of ,february #bf1 #bjad-- 7,i7 such corporation was a specified foreign corporation1 and 7,,ii7 such taxpayer was a ,united ,states shareholder of such corporation4 7,c7 ,specified ,e,p deficit ,the term specified ,e,p deficit means1 with respect to any ,e,p deficit foreign corporation1 the amount of the deficit referred to in subparagraph 7,b74 7c7 ,application of participation exemption to included income 7#a7 ,in general ,in the case of a ,united ,states shareholder of a deferred foreign income corporation1 there shall be allowed as a deduction for the taxable year in which an amount is included in the gross income of such ,united ,states shareholder under section #iea7;a77#a7 by reason of this section an amount equal to the sum of-- 7,a7 #ij percent of the excess 7if any7 of-- 7i7 the amount so included as gross income1 over 7ii7 the amount of such ,united ,states shareholder's aggregate foreign cash position1 plus 7,b7 #ge percent of so much of the amount described in subparagraph 7,a77ii7 as does not exceed the amount described in subparagraph 7,a77i74 7#b7 ,aggregate foreign cash position ,for purposes of this subsection-- 7,a7 ,in general ,the term aggregate foreign cash position means1 with respect to any ,united ,states shareholder1 the greater of-- 7i7 the aggregate of such ,united ,states shareholder's pro rata share of the cash position of each specified foreign corporation of such ,united ,states shareholder determined as of the close of the last taxable year of such specified foreign corporation which begins before ,january #a1 #bjae1 or 7ii7 one half of the sum of-- 7,i7 the aggregate described in clause 7i7 determined as of the close of the last taxable year of each such specified foreign corporation which ends before ,february #bf1 #bjad1 plus 7,,ii7 the aggregate described in clause 7i7 determined as of the close of the taxable year of each such specified foreign corporation which precedes the taxable year referred to in subclause 7,i74 7,b7 ,cash position ,for purposes of this paragraph1 the cash position of any specified foreign corporation is the sum of-- 7i7 cash and foreign currency held by such foreign corporation1 7ii7 the net accounts receivable of such foreign corporation1 plus 7iii7 the fair market value of the following assets held by such corporation3 7,i7 ,actively traded personal property for which there is an established financial market4 7,,ii7 ,commercial paper1 certificates of deposit1 the securities of the ,federal government and of any ,state or foreign government 7,,iii7 ,any obligation with a term of less than one year4 7,,iv7 ,any asset which the ,secretary identifies as being economically equivalent to any asset described in this subparagraph4 7,c7 ,net accounts receivable ,for purposes of this paragraph1 the term net accounts receivable means1 with respect to any specified foreign corporation1 the excess 7if any7 of-- 7i7 such corporation's accounts receivable1 over 7ii7 such corporation's accounts payable 7determined consistent with the rules of section #dfa74 7,d7 ,prevention of double counting ,cash positions of a specified foreign corporation described in clause 7ii7 or 7iii77,,iii7 of subparagraph 7,b7 shall not be taken into account by a ,united ,states shareholder under subparagraph 7,a7 to the extent that such ,united ,states shareholder demonstrates to the satisfaction of the ,secretary that such amount is so taken into account by such ,united ,states shareholder with respect to another specified foreign corporation4 7,e7 ,cash positions of foreign pass-thru entities taken into account ,any foreign entity which would be a specified foreign corporation of a ,united ,states shareholder if such entity were a corporation shall be treated as a specified foreign corporation of such ,united ,states shareholder for purposes of determining such ,united ,states shareholder's aggregate foreign cash position4 7,f7 ,anti-abuse ,if the ,secretary determines that the principal purpose of any transaction was to reduce the aggregate foreign cash position taken into account under this subsection1 such transaction shall be disregarded for purposes of this subsection4 7d7 ,deferred foreign income corporation2 accumulated post-#aihf deferred foreign income ,for purposes of this section-- 7#a7 ,deferred foreign income corporation ,the term deferred foreign income corporation means1 with respect to any ,united ,states shareholder1 any specified foreign corporation of such ,united ,states shareholder which has accumulated post-#aihf deferred foreign income 7as of the close of the taxable year referred to in subsection 7a77 greater than zero4 7#b7 ,accumulated post-#aihf deferred foreign income ,the term accumulated post-#aihf deferred foreign income means the post-#aihf earnings and profits except to the extent such earnings-- 7,a7 are attributable to income of the specified foreign corporation which is effectively connected with the conduct of a trade or business within the ,united ,states and subject to tax under this chapter1 7,b7 if distributed1 would-- 7i7 in the case of a controlled foreign corporation1 be excluded from the gross income of a ,united ,states shareholder under section #iei1 or 7ii7 in the case of any passive foreign investment company 7as defined in section #abig7 other than a controlled foreign corporation1 be treated as a distribution which is not a dividend1 or 7,c7 in the case of any passive foreign investment company 7as so defined71 is properly attributable to an unreversed inclusion of a ,united ,states person under section #abif4 ,to the extent provided in regulations or other guidance prescribed by the ,secretary1 in the case of any controlled foreign corporation which has shareholders which are not ,united ,states shareholders1 accumulated post-#aihf deferred foreign income shall be appropriately reduced by amounts which would be described in subparagraph 7,b77i7 is such shareholders were ,united ,states shareholders4 ,such regulations or other guidance may provide a similar rule for purposes of subparagraph 7,b77ii7 and 7,c74 7#c7 ,post-#aihf earnings and profits ,the term post-#aihf earnings and profits means the earnings and profits of the foreign corporation 7computed in accordance with sections #ifd7;a7 and #ihf7 accumulated in taxable years beginning after ,december #ca1 #aihf1 and determined-- 7,a7 as of the close the taxable year referred to in subsection 7a71 and 7,b7 without diminution by reason of dividends distributed during such taxable year4 7e7 ,specified foreign corporation 7#a7 ,in general ,for purposes of this section1 the term specified foreign corporation means-- 7,a7 any controlled foreign corporation1 and 7,b7 any section #ijb corporation 7as defined in section #iji7;d77#e7 as in effect before the date of the enactment of the ,tax ,reform ,act of #bjad74 7#b7 ,application to section #ijb corporations ,for purposes of section #iea1 a section #ijb corporation 7as so defined7 shall be treated as a controlled foreign corporation solely for purposes of taking into account the subpart ,f income of such corporation under subsection 7a7 7and for purposes of applying subsection 7f774 7f7 ,determinations of pro rata share ,for purposes of this section1 the determination of any ,united ,states shareholder's pro rata share of any amount with respect to any specified foreign corporation shall be determined under rules similar to the rules of section #iea7;a77#b7 by treating such amount in the same manner as subpart ,f income 7and by treating such specified foreign corporation as a controlled foreign corporation74 7g7 ,disallowance of foreign tax credit1 etc 7#a7 ,in general ,no credit shall be allowed under section #ija for the applicable percentage of any taxes paid or accrued 7or treated as paid or accrued7 with respect to any amount for which a deduction is allowed under this section4 7#b7 ,applicable percentage ,for purposes of this subsection1 the term applicable percentage means the amount 7expressed as a percentage7 equal to the sum of-- 7,a7 #j4i multiplied by the ratio of-- 7i7 the excess to which subsection 7c77#a77;,a7 applies1 divided by 7ii7 the sum of such excess plus the amount to which subsection 7c77#a77;,b7 applies1 plus 7,b7 #j4ge multiplied by the ratio of-- 7i7 the amount to which subsection 7c77#a77;,b7 applies1 divided by 7ii7 the sum described in subparagraph 7,a77ii74 7#c7 ,denial of deduction ,no deduction shall be allowed under this chapter for any tax for which credit is not allowable under section #ija by reason of paragraph 7#a7 7determined by treating the taxpayer as having elected the benefits of subpart ,a of part ,,iii of subchapter ,n74 7#d7 ,coordination with section #gh ,section #gh shall not apply to any tax for which credit is not allowable under section #ija by reason of paragraph 7#a74 7h7 ,election ,to pay liability in installments 7#a7 ,in general ,in the case of a ,united ,states shareholder of a deferred foreign income corporation1 such ,united ,states shareholder may elect to pay the net tax liability under this section in #h installments of the following amounts3 7,a7 #h percent of the net tax liability in the case of each of the first #e of such installments1 7,b7 #ae percent of the net tax liability in the case of the #fth such installment1 7,c7 #bj percent of the net tax liability in the case of the #gth such installment1 and 7,d7 #be percent of the net tax liability in the case of the #hth such installment4 7#b7 ,date for payment of installments ,if an election is made under paragraph 7#a71 the first installment shall be paid on the due date 7determined without regard to any extension of time for filing the return7 for the return of tax for the taxable year described in subsection 7b7 and each succeeding installment shall be paid on the due date 7as so determined7 for the return of tax for the taxable year following the taxable year with respect to which the preceding installment was made4 7#c7 ,acceleration of payment ,if there is an addition to tax for failure to pay timely assessed with respect to any installment required under this subsection1 a liquidation or sale of substantially all the assets of the taxpayer 7including in a title #aa or similar case71 a cessation of business by the taxpayer1 or any similar circumstance1 then the unpaid portion of all remaining installments shall be due on the date of such event 7or in the case of a title #aa or similar case1 the day before the petition is filed74 ,the preceding sentence shall not apply to the sale of substantially all the assets of a taxpayer to a buyer if such buyer enters into an agreement with the ,secretary under which such buyer is liable for the remaining installments due under this subsection in the same manner as if such buyer were the taxpayer4 7#d7 ,proration of deficiency to installments ,if an election is made under paragraph 7#a7 to pay the net tax liability under this section in installments and a deficiency has been assessed with respect to such net tax liability1 the deficiency shall be prorated to the installments payable under paragraph 7#a74 ,the part of the deficiency so prorated to any installment the date for payment of which has not arrived shall be collected at the same time as1 and as a part of1 such installment4 ,the part of the deficiency so prorated to any installment the date for payment of which has arrived shall be paid upon notice and demand from the ,secretary4 ,this subsection shall not apply if the deficiency is due to negligence1 to intentional disregard of rules and regulations1 or to fraud with intent to evade tax4 7#e7 ,election ,any election under paragraph 7#a7 shall be made not later than the due date for the return of tax for the taxable year described in subsection 7a7 and shall be made in such manner as the ,secretary may provide4 7#f7 ,net tax liability under this section ,for purposes of this subsection-- 7,a7 ,in general ,the net tax liability under this section with respect to any ,united ,states shareholder is the excess 7if any7 of-- 7i7 such taxpayer's net income tax for the taxable year described in subsection 7a71 over 7ii7 such taxpayer's net income tax for such taxable year determined without regard to this section4 7,b7 ,net income tax ,the term net income tax means the regular tax liability reduced by the credits allowed under subparts ,a1 ,b1 and ,d of part ,,iv of subchapter ,a4 7i7 ,special rules for ,s corporation shareholders 7#a7 ,in general ,in the case of any ,s corporation which is a ,united ,states shareholder of a deferred foreign income corporation1 each shareholder of such ,s corporation may elect to defer payment of such shareholder's net tax liability under this section with respect to such ,s corporation until the shareholder's taxable year which includes the triggering event with respect to such liability4 7#b7 ,triggering event 7,a7 ,in general ,in the case of any shareholder's net tax liability under this section with respect to any ,s corporation1 the triggering event with respect to such liability is whichever of the following occurs first3 7i7 ,such corporation ceases to be an ,s corporation 7determined as of the first day of the first taxable year that such corporation is not an ,s corporation74 7ii7 ,a liquidation or sale of substantially all the assets of such ,s corporation 7including in a title #aa or similar case71 a cessation of business by such ,s corporation1 such ,s corporation ceases to exist1 or any similar circumstance4 7iii7 ,a transfer of any share of stock in such ,s corporation by the taxpayer 7including by reason of death1 or otherwise74 7,b7 ,partial transfers of stock ,in the case of a transfer of less than all of the taxpayer's shares of stock in the ,s corporation1 such transfer shall only be a triggering event with respect to so much of the taxpayer's net tax liability under this section with respect to such ,s corporation as is properly allocable to such stock4 7,c7 ,transfer of liability ,a transfer described in clause 7iii7 shall not be treated as a triggering event if the transferee enters into an agreement with the ,secretary under which such transferee is liable for net tax liability with respect to such stock in the same manner as if such transferee were the taxpayer4 7#c7 ,net tax liability ,a shareholder's net tax liability under this section with respect to any ,s corporation is the net tax liability under this section which would be determined under subsection 7h77#f7 if the only subpart ,f income taken into account by such shareholder by reason of this section were allocations from such ,s corporation4 7#d7 ,election to pay deferred liability in installments ,in the case of a taxpayer which elects to defer payment under paragraph 7#a71 subsection 7h7 shall be applied-- 7,a7 separately with respect to the liability to which such election applies1 7,b7 an election under subsection 7h7 with respect to such liability shall be treated as timely made if made not later than the due date for the return of tax for the taxable year in which the triggering event with respect to such liability occurs1 7,c7 the first installment under subsection 7h7 with respect to such liability shall be paid not later than such due date 7but determined without regard to any extension of time for filing the return71 and 7,d7 if the triggering event with respect to any net tax liability is described in paragraph 7#b77;,a77ii71 an election under subsection 7h7 with respect to such liability may be made only with the consent of the ,secretary4 7#e7 ,joint and several liability of ,s corporation ,if any shareholder of an ,s corporation elects to defer payment under paragraph 7#a71 such ,s corporation shall be jointly and severally liable for such payment and any penalty1 addition to tax1 or additional amount attributable thereto4 7#f7 ,extension of limitation on collection ,notwithstanding any other provision of law1 any limitation on the time period for the collection of a liability deferred under this subsection shall not be treated as beginning before the date of the triggering event with respect to such liability4 7#g7 ,election ,any election under paragraph 7#a7 shall be made not later than the due date for the return of tax for the taxable year described in subsection 7a7 and shall be made in such manner as the ,secretary may provide4 7j7 ,inclusion of deferred foreign income under this section not ,to trigger recapture of overall foreign loss ,for purposes of section #ijd7;f77#a71 in the case of a ,united ,states shareholder of a deferred foreign income corporation1 such ,united ,states shareholder's taxable income from sources without the ,united ,states shall be determined without regard to this section4 7k7 ,regulations ,the ,secretary may prescribe such regulations or other guidance as may be necessary or appropriate to carry out the provisions of this section4 4 7b7 ,dedication of revenues to highway trust fund 7#a7 ,in general ,section #iejc7;f7 is amended by redesignating paragraph 7#e7 as paragraph 7#f7 and by inserting after paragraph 7#d7 the following new paragraph3 7#e7 ,appropriation to trust fund of net tax liabilities received under section #ife 7,a7 ,in general ,out of money in the ,treasury not otherwise appropriated1 there are hereby appropriated to the ,highway ,trust ,fund amounts equivalent to the aggregate net tax liabilities under section #ife 7as defined in such section7 received in the ,treasury4 7,b7 ,monthly transfers based on estimates ,for rule providing for the monthly transfer of amounts appropriated under subparagraph 7,a7 based on estimates of the ,secretary1 see section #ifja4 4 7#b7 ,transfers to ,mass ,transit ,account ,section #iejc7;e77#b7 is amended by striking the mass transit portion and inserting 1 #bj percent of the amounts appropriated to the ,highway ,trust ,fund under subsection 7f77#e71 and the mass transit portion4 7c7 ,clerical amendment ,the table of section for subpart ,f of part ,,iii of subchapter ,n of chapter #a is amended by striking the item relating to section #ife and inserting the following3 ,sec4 #ife4 ,treatment of deferred foreign income upon transition to participation exemption system of taxation4 4 #djjd4 ,look-thru rule for related controlled foreign corporations made permanent 7a7 ,in general ,paragraph 7#f7 of section #ied7;c7 is amended by striking subparagraph 7,c74 7b7 ,effective date ,the amendments made by this section shall apply to taxable years of foreign corporations beginning after ,december #ca1 #bjac1 and to taxable years of ,united ,states shareholders in which or with which such taxable years of foreign corporations end4 ,b ,modifications related to foreign tax credit system #daja4 ,repeal of section #ijb indirect foreign tax credits2 determination of section #ifj credit on current year basis 7a7 ,repeal of section #ijb indirect foreign tax credits ,subpart ,a of part ,,iii of subchapter ,n of chapter #a is amended by striking section #ijb4 7b7 ,determination of section #ifj credit on current year basis ,section #ifj is amended-- 7#a7 by striking subsection 7c71 by redesignating subsection 7b7 as subsection 7c71 by striking all that precedes subsection 7c7 7as so redesignated7 and inserting the following3 #ifj4 ,deemed paid credit for subpart ,f inclusions 7a7 ,in general ,for purposes of this subpart1 if there is included in the gross income of a domestic corporation any item of income under section #iea7;a77#a7 with respect to any controlled foreign corporation with respect to which such domestic corporation is a ,united ,states shareholder1 such domestic corporation shall be deemed to have paid so much of such foreign corporation's foreign income taxes as are properly attributable to the item of income so included4 7b7 ,special rules for distributions from previously taxed earnings and profits ,for purposes of this subpart-- 7#a7 ,in general ,if any portion of a distribution from a controlled foreign corporation to a domestic corporation which is a ,united ,states shareholder with respect to such controlled foreign corporation is excluded from gross income under section #iei7;a71 such domestic corporation shall be deemed to have paid so much of such foreign corporation's foreign income taxes as-- 7,a7 are properly attributable to such portion1 and 7,b7 have not been deemed to have to been paid by such domestic corporation under this section for any prior taxable year4 7#b7 ,tiered controlled foreign corporations ,if section #iei7;b7 applies to any portion of a distribution from a controlled foreign corporation to another controlled foreign corporation1 such controlled foreign corporation shall be deemed to have paid so much of such other controlled foreign corporation's foreign income taxes as-- 7,a7 are properly attributable to such portion1 and 7,b7 have not been deemed to have been paid by a domestic corporation under this section for any prior taxable year4 1 7#b7 and by adding after subsection 7c7 7as so redesignated7 the following new subsections3 7d7 ,foreign income taxes ,the term foreign income taxes means any income1 war profits1 or excess profits taxes paid or accrued to any foreign country or possession of the ,united ,states4 7e7 ,regulations ,the ,secretary shall provide such regulations as may be necessary or appropriate to carry out the provisions of this section4 4 7c7 ,conforming amendments 7#a7 ,section #gh is amended to read as follows3 #gh4 ,gross up for deemed paid foreign tax credit ,if a domestic corporation chooses to have the benefits of subpart ,a of part ,,iii of subchapter ,n 7relating to foreign tax credit7 for any taxable year1 an amount equal to the taxes deemed to be paid by such corporation under section #ifj 7relating to deemed paid credit for subpart ,f inclusions7 for such taxable year shall be treated for purposes of this title 7other than section #ifj7 as an item of income required to be included in the gross income of such domestic corporation under section #iea7;a74 4 7#b7 ,section #bde7;a77#aj7 is amended by striking #ijb14 7#c7 ,sections #ece7;b77#a7 and #ede7;b77#a7 are each amended by striking section #ijb7;a7 or #ifj7;a77#a7 and inserting section #ifj4 7#d7 ,paragraph 7#a7 of section #had7;f7 is amended-- 7,a7 by striking subparagraph 7,b71 and 7,b7 by striking all that precedes ,no income and inserting the following3 7#a7 ,treatment of foreign taxes 4 7#e7 ,subparagraph 7,b7 of section #hfd7;h77#a7 is amended by striking #ijb14 7#f7 ,subsection 7a7 of section #ija is amended by striking sections #ijb and #ifj and inserting section #ifj4 7#g7 ,paragraph 7#b7 of section #ija7;e7 is amended by striking but is not limited to-- and all that follows through that portion and inserting but is not limited to that portion4 7#h7 ,subsection 7f7 of section #ija is amended by striking sections #ijb and #ifj and inserting section #ifj4 7#i7 ,subparagraph 7,a7 of section #ija7;j77#a7 is amended by striking #ijb or4 7#aj7 ,subparagraph 7,b7 of section #ija7;j77#a7 is amended by striking sections #ijb and #ifj and inserting section #ifj4 7#aa7 ,paragraph 7#b7 of section #ija7k7 is amended by striking #ijb14 7#ab7 ,paragraph 7#f7 of section #ija7k7 is amended by striking #ijb or4 7#ac7 ,subparagraph 7,a7 of section #ijd7;h77#aj7 is amended by striking sections #ijb1 #ijg1 and #ifj and inserting sections #ijg and #ifj4 7#ad7 ,section #ijd is amended by striking subsection 7k74 7#ae7 ,paragraph 7#a7 of section #ije7;c7 is amended by striking the last sentence4 7#af7 ,subclause 7,i7 of section #ije7;c77#b77;,b77i7 is amended by striking section #ijb or4 7#ag7 ,subsection 7a7 of section #ijf is amended by striking 7or deemed1 under section #ijb1 paid or accrued during the taxable year74 7#ah7 ,subsection 7b7 of section #ijf is amended by striking paragraphs 7#d7 and 7#e74 7#ai7 ,subparagraph 7,b7 of section #ijg7;b77#b7 is amended by striking #ijb or4 7#bj7 ,paragraph 7#c7 of section #ijg7;c7 is amended-- 7,a7 by striking subparagraph 7,a7 and redesignating subparagraphs 7,b7 and 7,c7 as subparagraphs 7,a7 and 7,b71 respectively1 and 7,b7 by striking section #ifj7;a7 in subparagraph 7,a7 7as so redesignated7 and inserting section #ifj4 7#ba7 ,paragraph 7#e7 of section #ijg7;c7 is amended by striking #ijb or4 7#bb7 ,clause 7i7 of section #ijg7;f77#b77;,b7 is amended by striking #ijb or4 7#bc7 ,subsection 7a7 of section #ijh is amended by striking #ijb or4 7#bd7 ,subsection 7b7 of section #iji is amended-- 7,a7 by striking section #ijb corporation in the matter preceding paragraph 7#a7 and inserting specified #aj-percent owned foreign corporation1 7,b7 by striking #ijb or in paragraph 7#a71 7,c7 by striking by such section #ijb corporation and all that follows in the matter following paragraph 7#b7 and inserting by such specified #aj-percent owned foreign corporation or a domestic corporation which is a ,united ,states shareholder with respect to such specified #aj-percent owned foreign corporation41 and 7,d7 by striking section #ijb corporations in the heading thereof and inserting specified #aj-percent owned foreign corporations4 7#be7 ,subsection 7d7 of section #iji is amended by striking paragraph 7#e74 7#bf7 ,paragraph 7#a7 of section #ieh7;a7 is amended by striking #ifj7;a77#a7 and inserting #ifj4 7#bg7 ,subsection 7d7 of section #iei is amended by striking ,except as provided in section #ifj7;a77#c71 any and inserting ,any4 7#bh7 ,subsection 7e7 of section #iei is amended by striking and section #ifj7;b74 7#bi7 ,subparagraph 7,a7 of section #abia7;g77#b7 is amended by striking any distribution-- and all that follows through but only if and inserting any distribution1 any withholding tax imposed with respect to such distribution1 but only if4 7#cj7 ,section #abic is amended by striking subsection 7f74 7#ca7 ,subparagraph 7,b7 of section #fjch7;c77#a7 is amended by striking sections #ijb 7relating to foreign tax credit for corporate stockholder in foreign corporation7 and #ifj 7relating to special rules for foreign tax credit7 and inserting section #ifj4 7#cb7 ,paragraph 7#d7 of section #fjch7;c7 is amended by striking subparagraph 7,c74 7#cc7 ,the table of sections for subpart ,a of part ,,iii of subchapter ,n of chapter #a is amended by striking the item relating to section #ijb4 7#cd7 ,the table of sections for subpart ,f of part ,,iii of subchapter ,n of chapter #a is amended by striking the item relating to section #ifj and inserting the following3 ,sec4 #ifj4 ,deemed paid credit for subpart ,f inclusions4 4 7d7 ,effective date ,the amendments made by this section shall apply to taxable years of foreign corporations beginning after ,december #ca1 #bjad1 and to taxable years of ,united ,states shareholders in which or with which such taxable years of foreign corporations end4 #dajb4 ,foreign tax credit limitation applied by allocating only directly allocable deductions to foreign source income 7a7 ,in general ,subsection 7b7 of section #ijd1 as amended by the preceding provisions of this ,act1 is amended by adding at the end the following new paragraph3 7#c7 ,deductions allocable to foreign source income only if directly allocable ,for purposes of subsection 7a71 the taxpayer's taxable income from sources without the ,united ,states shall be determined by allocating deductions to such income only if such deductions are directly allocable to such income4 4 7b7 ,effective date ,the amendments made by this section shall apply to taxable years of foreign corporations beginning after ,december #ca1 #bjad1 and to taxable years of ,united ,states shareholders in which or with which such taxable years of foreign corporations end4 #dajc4 ,passive category income expanded to include other mobile income 7a7 ,treatment of foreign base company intangible income and foreign base company sales income as mobile category income ,clause 7i7 of section #ijd7;d77#b77;,a7 is amended by striking and specified passive category income and inserting specified passive category income1 foreign base company sales income 7as defined in section #ied7;d771 and foreign base company intangible income 7as defined in section #ied7;f774 7b7 ,repeal of special rules treating financial services income as general category income ,paragraph 7#b7 of section #ijd7;d7 is amended by striking subparagraphs 7,c7 and 7,d7 and by redesignating subparagraphs 7,e7 through 7,k7 as subparagraphs 7,c7 through 7,i71 respectively4 7c7 ,conforming amendments 7#a7 ,relating to references to passive income 7,a7 ,section #ijd7;d77#a77;,a7 is amended by striking passive category income and inserting mobile category income4 7,b7 ,section #ijd7;d77#b77;,a77i71 as amended by subsection 7a71 is amended-- 7i7 by striking ,passive category income in the heading thereof and inserting ,mobile category income1 7ii7 by striking passive category income and inserting mobile category income1 7iii7 by striking passive income and inserting mobile income1 and 7iv7 by striking specified passive category income and inserting specified mobile category income4 7,c7 ,section #ijd7;d77#b77;,a77ii7 is amended by striking passive category income and inserting mobile category income4 7,d7 ,section #ijd7;d77#b77;,b7 is amended-- 7i7 by striking ,passive income in the heading thereof and inserting ,mobile income1 7ii7 by striking passive income in clauses 7i71 7ii71 and 7iii7 and inserting mobile income1 7iii7 by striking ,specified passive category income in the heading of clause 7iv7 and inserting ,specified mobile category income1 and 7iv7 by striking specified passive category income in clause 7iv7 and inserting specified mobile category income4 7,e7 ,section #ijd7;d77#b77;,d71 as redesignated by subsection 7b71 is amended by striking passive income and inserting mobile income4 7,f7 ,section #ijd7;d77#c77;,a7 is amended by striking passive category income and inserting mobile category income4 7,g7 ,section #ijd7;d77#c77;,b7 is amended by striking passive category income both places it appears and inserting mobile category income4 7,h7 ,section #ijd7;d77#c77;,c7 is amended by striking passive category income both places it appears and inserting mobile category income4 7,i7 ,section #ijd7;d77#c77;,d7 is amended by striking passive category income both places it appears and inserting mobile category income4 7,j7 ,section #ijd7;d77#c77;,e7 is amended-- 7i7 by striking passive category income both places it appears and inserting mobile category income1 and 7ii7 by striking passive income and inserting mobile income4 7,k7 ,section #ijd7;d77#c77;,f7 is amended by striking passive category income both places it appears and inserting mobile category income4 7#b7 ,other conforming amendments 7,a7 ,subparagraph 7,b7 of section #hfd7;f77#e7 is amended by inserting 7as in effect before its repeal7 after section #ijd7;d77#b77;,d77ii74 7,b7 ,subparagraph 7,b7 of section #ied7;c77#b7 is amended by striking section #ijd7;d77#b77;,g7 and inserting section #ijd7;d77#b77;,e74 7d7 ,effective date 7#a7 ,in general ,the amendments made by this section shall apply to taxable years of foreign corporations beginning after ,december #ca1 #bjad1 and to taxable years of ,united ,states shareholders in which or with which such taxable years of foreign corporations end4 7#b7 ,treatment of carryforwards and carrybacks ,for purposes of section #ijd of the ,internal ,revenue ,code of #aihf-- 7,a7 the amendments made by this section shall apply to any taxes carried from any taxable year beginning before ,january #a1 #bjae1 to any taxable year beginning on or after such date1 and 7,b7 the ,secretary of the ,treasury1 or his designee1 may by regulations provide for the allocation of any carryback of taxes with respect to income from a taxable year beginning on or after ,january #a1 #bjae1 to a taxable year beginning before such date for purposes of allocating such income among the separate categories in effect under section #ijd7;d7 for the taxable year to which carried4 #dajd4 ,source of income from sales of inventory determined solely on basis of production activities 7a7 ,in general ,subsection 7b7 of section #hfc is amended by adding at the end the following3 ,gains1 profits1 and income from the sale or exchange of inventory property described in paragraph 7#b7 shall be allocated and apportioned between sources within and without the ,united ,states solely on the basis of the production activities with respect to the property44 7b7 ,effective date ,the amendment made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 ,c ,rules related to passive and mobile income #a ,modification of subpart ,f provisions #dbja4 ,subpart ,f income to only include low-taxed foreign income 7a7 ,in general ,subsection 7a7 of section #ied is amended-- 7#a7 by redesignating paragraphs 7#a71 7#b71 7#c71 and 7#e7 as subparagraphs 7,a7 through 7,d71 respectively1 7#b7 by striking ,for purposes of and inserting the following3 7#a7 ,in general ,for purposes of 1 and 7#c7 by adding at the end the following new paragraph3 7#b7 ,application only to foreign base company income subject to a low foreign effective rate of tax 7,a7 ,in general ,foreign base company income shall only include items of income received by a controlled foreign corporation which are subject to an effective rate of income tax imposed by a foreign country which is less than #ajj percent of the maximum rate of tax specified in section #aa4 7,b7 ,application to foreign base company income subject to reduced domestic rate of tax 7i7 ,foreign base company sales income ,in the case of foreign base company sales income1 subparagraph 7,a7 shall be applied by substituting #ej percent for #ajj percent4 7ii7 ,foreign base company intangible income ,in the case of foreign base company intangible income1 subparagraph 7,a7 shall be applied-- 7,i7 by substituting the applicable percentage of the foreign percentage 7determined under section #bej7;c7 with respect to the controlled foreign corporation7 for #ajj percent1 and 7,,ii7 by treating the foreign base company intangible income as a single item of income4 7iii7 ,applicable percentage ,for purposes of clause 7ii77,i71 the term applicable percentage means1 with respect to any taxable year of a controlled foreign corporation1 the percentage determined in accordance with the following table3 ,in the case of any taxable year beginning in3,the applicable percentage is3 #bjaede percent #bjafdh percent #bjageb percent #bjahef percent #bjai or thereafter#fj percent4 4 7b7 ,insurance income ,subsection 7a7 of section #iec is amended by redesignating paragraph 7#b7 as paragraph 7#c7 and by inserting after paragraph 7#a7 the following new paragraph3 7#b7 ,application only to insurance income subject to a low foreign effective rate of tax ,insurance income shall only include items of income received by a controlled foreign corporation which are subject to an effective rate of income tax imposed by a foreign country which is less than the maximum rate of tax specified in section #aa4 4 7c7 ,conforming amendments 7#a7 ,section #ied7;b77#c77;,b7 is amended by striking paragraphs 7#d7 and 7#e7 and inserting subsection 7a77#b71 section #iec7;a77#b71 and paragraph 7#e7 7#b7 ,section #ied7;b7 is amended by striking paragraph 7#d74 7#c7 ,section #ied7;c77#a7 is amended by striking subsection 7a77#a7 and inserting this section4 7#d7 ,section #ied7;d77#a7 is amended by striking subsection 7a77#b7 and inserting this section4 7#e7 ,section #ied7;e77#a7 is amended by striking subsection 7a77#c7 and inserting this section4 7d7 ,effective date ,the amendments made by this section shall apply to taxable years of foreign corporations beginning after ,december #ca1 #bjad1 and to taxable years of ,united ,states shareholders in which or with which such taxable years of foreign corporations end4 #dbjb4 ,foreign base company sales income 7a7 #ej-,percent exclusion for low-,taxed foreign base company sales income 7#a7 ,in general ,subparagraph 7,b7 of section #ied7;a77#a71 as amended by the preceding provisions of this ,act1 is amended by inserting #ej percent of before the foreign base company sales income4 7#b7 ,preservation of deemed paid foreign tax credit on low-taxed foreign base company income ,section #ifj1 as amended by this ,act1 is amended by redesignating subsection 7c7 as subsection 7d7 and by inserting after subsection 7b7 the following new subsection3 7c7 ,deemed paid credit determined without regard to certain exclusions from subpart ,f income ,solely for purposes of subsection 7a71 section #ied7;a77#a77;,b7 shall be applied by substituting #ajj percent for #ej percent in determining amounts included under section #iea7;a77#a74 4 7b7 ,exception from foreign base company sales income for foreign corporations eligible for benefits under comprehensive income tax treaties ,section #ied7;d7 is amended by adding at the end the following new paragraph3 7#e7 ,exception for foreign corporations eligible for benefits under comprehensive income tax treaties ,no portion of the gross income of a controlled foreign corporation shall be treated as foreign base company sales income if such controlled foreign corporation is eligible as a qualified resident for all of the benefits provided under a comprehensive income tax treaty with the ,united ,states4 4 7c7 ,effective date ,the amendments made by this section shall apply to taxable years of foreign corporations beginning after ,december #ca1 #bjad1 and to taxable years of ,united ,states shareholders in which or with which such taxable years of foreign corporations end4 #dbjc4 ,inflation adjustment of de minimis exception for foreign base company income 7a7 ,in general ,paragraph 7#c7 of section #ied7;b7 is amended by adding at the end the following new subparagraph3 7,d7 ,inflation adjustment ,in the case of any taxable year beginning after #bjae1 the dollar amount in subparagraph 7,a77ii7 shall be increased by an amount equal to-- 7i7 such dollar amount1 multiplied by 7ii7 the cost-of-living adjustment determined under section #a7;c77#b77;,a7 for the calendar year in which the taxable year begins1 determined by substituting calendar year #bjad for calendar year #bjab in clause 7ii7 thereof4 ,any increase determined under the preceding sentence shall be rounded to the nearest multiple of #ej1jjj4 4 7b7 ,effective date ,the amendments made by this section shall apply to taxable years of foreign corporations beginning after ,december #ca1 #bjad1 and to taxable years of ,united ,states shareholders in which or with which such taxable years of foreign corporations end4 #dbjd4 ,active financing exception extended with limitation for low-taxed foreign income 7a7 ,extension of active financing exception 7#a7 ,in general ,paragraph 7#i7 of section #ied7;h7 is amended by striking ,january #a1 #bjad and inserting ,january #a1 #bjai4 7#b7 ,exempt insurance income ,paragraph 7#aj7 of section #iec7;e7 is amended-- 7,a7 by striking ,january #a1 #bjad and inserting ,january #a1 #bjai1 and 7,b7 by striking ,december #ca1 #bjac and inserting ,december #ca1 #bjah4 7b7 ,limitation for low-,taxed foreign income 7#a7 ,in general ,paragraph 7#a7 of section #ied7;h7 is amended to read as follows3 7#a7 ,in general ,for purposes of subsection 7c77#a71 in the case of an eligible controlled foreign corporation1 foreign personal holding company income shall not include-- 7,a7 qualified banking or financing income which is subject to an effective rate of income tax imposed by a foreign country which is at least #ej percent of the maximum rate of tax specified in section #aa1 and 7,b7 #ej percent of any other qualified banking or financing income of such eligible controlled foreign corporation4 4 7#b7 ,insurance business income ,paragraph 7#a7 of section #ied7;i7 is amended to read as follows3 7#a7 ,in general ,for purposes of subsection 7c77#a71 in the case of a qualifying insurance company1 foreign personal holding company income shall not include-- 7,a7 any qualified insurance income which is subject to an effective rate of income tax imposed by a foreign country which is at least #ej percent of the maximum rate of tax specified in section #aa1 and 7,b7 #ej percent of any other qualified insurance income of such qualifying insurance company4 4 7#c7 ,preservation of deemed paid foreign tax credit on high-taxed foreign income ,subsection 7c7 of section #ifj1 as amended by the preceding provisions of this ,act1 is amended by striking ,solely for purposes of subsection 7a7 and all that following and inserting the following3 ,solely for purposes of subsection 7a7-- 7#a7 section #ied7;a77#a77;,b7 shall be applied by substituting #ajj percent for #ej percent1 and 7#b7 the exclusions under subsections 7h77#a77;,b7 and 7i77#a77;,b7 of section #ied shall not apply1 in determining amounts included under section #iea7;a77#a74 4 7c7 ,effective date ,the amendments made by this section shall apply to taxable years of foreign corporations beginning after ,december #ca1 #bjac1 and to taxable years of ,united ,states shareholders in which or with which such taxable years of foreign corporations end4 #dbje4 ,repeal of inclusion based on withdrawal of previously excluded subpart ,f income from qualified investment 7a7 ,in general ,subpart ,f of part ,,iii of subchapter ,n of chapter #a is amended by striking section #iee4 7b7 ,conforming amendments 7#a7 7,a7 ,subparagraph 7,a7 of section #iea7;a77#a71 as amended by this ,act1 is amended to read as follows3 7,a7 his pro rata share 7determined under paragraph 7#b77 of the corporation's subpart ,f income for such year1 and 4 7,b7 ,paragraph 7#c7 of section #hea7;b7 is amended by striking section #iea7;a77#a77;,a77i7 in the flush language at the end and inserting section #iea7;a77#a77;,a74 7,c7 ,clause 7i7 of section #ieb7;c77#a77;,b7 is amended by striking section #iea7;a77#a77;,a77i7 and inserting section #iea7;a77#a77;,a74 7,d7 ,subparagraph 7,c7 of section #iec7;c77#a7 is amended by striking section #iea7;a77#a77;,a77i7 and inserting section #iea7;a77#a77;,a74 7#b7 ,subsection 7a7 of section #iea is amended by striking paragraph 7#c74 7#c7 ,subclause 7,,ii7 of section #iec7;d77#d77;,b77iv7 is amended by striking or amounts referred to in clause 7ii7 or 7iii7 of section #iea7;a77#a77;,a74 7#d7 ,subsection 7b7 of section #ifd is amended by striking 1 #iee14 7#e7 ,section #igj is amended by striking subsection 7b74 7#f7 ,the table of sections for subpart ,f of part ,,iii of subchapter ,n of chapter #a is amended by striking the item relating to section #iee4 7c7 ,effective date ,the amendments made by this section shall apply to taxable years of foreign corporations beginning after ,december #ca1 #bjad1 and to taxable years of ,united ,states shareholders in which or with which such taxable years of foreign corporations end4 #b ,prevention of base erosion #dbaa4 ,foreign intangible income subject to taxation at reduced rate2 intangible income treated as subpart ,f income 7a7 ,foreign base company intangible income treated as subpart ,f income 7#a7 ,treatment as subpart ,f income ,paragraph 7#a7 of section #ied7;a71 as amended by the preceding provisions of this ,act1 is amended by redesignating subparagraph 7,d7 as subparagraph 7,e7 and by inserting after subparagraph 7,c7 the following new subparagraph3 7,d7 the foreign base company intangible income for the taxable year 7determined under subsection 7f7 and reduced as provided in subsection 7b77#e771 and 4 7#b7 ,foreign base company intangible income defined ,section #ied of such ,code is amended by inserting after subsection 7e7 the following new subsection3 7f7 ,foreign base company intangible income ,for purposes of this section-- 7#a7 ,in general ,the term foreign base company intangible income means1 with respect to any corporation for any taxable year1 the excess of-- 7,a7 so much of the adjusted gross income of the corporation as exceeds #aj percent of the corporation's qualified business asset investment1 over 7,b7 the applicable percentage of such corporation's foreign personal holding company income1 foreign base company sales income1 foreign base company services income1 and foreign base company oil related income4 7#b7 ,applicable percentage ,for purposes of paragraph 7#a71 the term applicable percentage means1 with respect to any corporation for any taxable year1 the ratio 7expressed as a percentage7 of-- 7,a7 the excess described in paragraph 7#a77;,a71 divided by 7,b7 the adjusted gross income of the corporation4 7#c7 ,qualified business asset investment 7,a7 ,in general ,the term qualified business asset investment means1 with respect to any corporation for any taxable year1 the aggregate of the corporation's adjusted bases 7determined as of the close of such taxable year and after any adjustments with respect to such taxable year7 in specified tangible property-- 7i7 used in a trade or business of the corporation1 and 7ii7 of a type with respect to which a deduction is allowable under section #afh4 7,b7 ,determination of adjusted basis ,for purposes of subparagraph 7,a71 the adjusted basis in any property shall be determined without regard to any provision of this title 7or any other provision of law7 which is enacted after the date of the enactment of this section4 7,c7 ,regulations ,the ,secretary shall issue such regulations or other guidance as the ,secretary determines appropriate to prevent the avoidance of the purposes of this paragraph1 including regulations or other guidance which provide for the treatment of property if-- 7i7 such property is transferred1 or held1 temporarily1 or 7ii7 the avoidance of the purposes of this paragraph is a factor in the transfer or holding of such property4 7#d7 ,adjusted gross income2 specified tangible property ,for purposes of this subsection-- 7,a7 ,adjusted gross income 7i7 ,in general ,the term adjusted gross income means1 with respect to any corporation1 the gross income of such corporation reduced by such corporation's commodities gross income4 7ii7 ,commodities gross income ,the term commodities gross income means1 with respect to any corporation1 the gross income of such corporation which is derived from commodities which are produced or extracted by such corporation4 7,b7 ,specified tangible property ,the term specified tangible property means any tangible property unless such property is used in the production of commodities gross income4 ,in the case of property which is used in the production of commodities gross income and other gross income1 such property shall be treated as specified tangible property in the same proportion that the adjusted gross income produced with respect to such property bears to the total gross income produced with respect to such property4 7,c7 ,commodity ,the term commodity means any commodity described in section #dge7;e77#b74 4 7#c7 ,application only to foreign base company intangible income subject to a low foreign effective rate of tax ,paragraph 7#b7 of section #ied7;a71 as amended by preceding provisions of this ,act1 is amended by inserting or foreign base company intangible income after foreign base company sales income4 7#d7 ,conforming amendment ,paragraph 7#e7 of section #ied7;b7 is amended by inserting the foreign base company intangible income1 before and the foreign base company oil related income4 7b7 ,deduction for foreign intangible income 7#a7 ,in general ,part ,,viii of subchapter ,b of chapter #a is amended by adding at the end the following new section3 #bej4 ,foreign intangible income 7a7 ,in general ,in the case of a domestic corporation for any taxable year1 there shall be allowed as a deduction an amount equal to the applicable percentage of the lesser of-- 7#a7 the sum of-- 7,a7 the foreign percentage multiplied by the net imputed intangible income of such domestic corporation for such taxable year1 plus 7,b7 in the case of a domestic corporation which is a ,united ,states shareholder with respect to any controlled foreign corporation1 the foreign percentage 7determined with respect to such controlled foreign corporation7 multiplied by any foreign base company intangible income 7as defined in section #ied7;f77 of such controlled foreign corporation which is included in the gross income of such domestic corporation under section #iea for such taxable year1 or 7#b7 taxable income of such domestic corporation 7determined without regard to this section7 for the taxable year4 7b7 ,net imputed intangible income ,for purposes of this subsection1 the term net imputed intangible income means the excess of-- 7#a7 the excess described in section #ied7;f77#a77;,a71 over 7#b7 the deductions properly allocable to the amount described in paragraph 7#a74 7c7 ,foreign percentage ,for purposes of this section-- 7#a7 ,in general ,the term foreign percentage means1 with respect to any corporation for any taxable year1 the ratio 7expressed as a percentage7 of-- 7,a7 the foreign-derived adjusted gross income of such corporation for such taxable year1 over 7,b7 the adjusted gross income of such corporation for such taxable year4 7#b7 ,foreign-derived adjusted gross income 7,a7 ,in general ,the term foreign-derived adjusted gross income means1 with respect to any corporation for any taxable year1 any adjusted gross income of such corporation which is derived in connection with-- 7i7 property which is sold for use1 consumption1 or disposition outside the ,united ,states1 or 7ii7 services provided with respect to persons or property located outside the ,united ,states4 7,b7 ,special rules 7i7 ,ultimate disposition ,property shall not be treated as sold for use1 consumption1 or disposition outside the ,united ,states if the taxpayer knew1 or had reason to know1 that such property would be ultimately sold for use1 consumption1 or disposition in the ,united ,states4 7ii7 ,sales to related parties ,if property is sold to a related party1 such sale shall not be treated as for use1 consumption or disposition outside the ,united ,states unless-- 7,i7 such property is ultimately sold for use1 consumption or disposition outside the ,united ,states1 or 7,,ii7 such property is resold to an unrelated party outside the ,united ,states and no related party knew or had reason to know that such property would be ultimately sold for use1 consumption1 or disposition in the ,united ,states4 7iii7 ,application to services ,rules similar to the rules of clauses 7i7 and 7ii7 shall apply with respect to services described in subparagraph 7,a77ii74 7,c7 ,related party ,for purposes of this paragraph1 the term related party means any member of an affiliated group as defined in section #aejd7;a71 determined-- 7i7 by substituting more than #ej percent for at least #hj percent each place it appears1 and 7ii7 without regard to paragraphs 7#b7 and 7#c7 of section #aejd7;b74 ,any person 7other than a corporation7 shall be treated as a member of such group if such person is controlled by members of such group 7including any entity treated as a member of such group by reason of this sentence7 or controls any such member4 ,for purposes of the preceding sentence1 control shall be determined under the rules of section #ied7;d77#c74 7#c7 ,adjusted gross income ,the term adjusted gross income has the meaning given such term by section #ied7;f77#d74 7d7 ,applicable percentage ,for purposes of this section1 the term applicable percentage means1 with respect to any taxable year of the domestic corporation referred to in subsection 7a71 the percentage determined in accordance with the following table3 ,in the case of any taxable year beginning in3,the applicable percentage is3 #bjaeee percent #bjafeb percent #bjagdh percent #bjahdd percent #bjai or thereafter#dj percent4 7e7 ,regulations ,the ,secretary may prescribe such regulations or other guidance as may be necessary or appropriate to carry out the provisions of this section4 4 7#b7 ,conforming amendments 7,a7 ,clause 7i7 of section #afc7;j77#f77;,a71 as amended by the preceding provisions of this ,act1 is amended by striking and at the end of subclause 7,,ii7 and by adding at the end the following new subclause3 7,,iv7 any deduction allowable under section #bej1 and 4 7,b7 ,subparagraph 7,c7 of section #agj7;b77#b7 is amended by striking and at the end of clause 7iv71 by redesignating clause 7v7 as clause 7vi71 and by inserting after clause 7iv7 the following new clause3 7v7 section #bej1 and 4 7,c7 ,subsection 7d7 of section #agb1 as amended by the preceding provisions of this ,act1 is amended by adding at the end the following new paragraph3 7#g7 ,deduction for foreign intangible income ,the deduction under section #bej shall not be allowed4 4 7,d7 ,paragraph 7#a7 of section #bdf7;b7 is amended by striking and #bdg and inserting #bdg1 and #bej4 7,e7 ,clause 7iii7 of section #dfi7;i77#c77;,d71 as amended by the preceding provisions of this ,act1 is amended by striking and #bbb and inserting #bbb1 and #bej4 7c7 ,effective date 7#a7 ,treatment as subpart ,f income ,the amendments made by subsection 7a7 shall apply to taxable years of foreign corporations beginning after ,december #ca1 #bjad1 and to taxable years of ,united ,states shareholders in which or with which such taxable years of foreign corporations end4 7#b7 ,deduction for foreign intangible income ,the amendments made by subsection 7b7 shall apply to taxable years beginning after ,december #ca1 #bjad4 #dbab4 ,denial of deduction for interest expense of ,united ,states shareholders which are members of worldwide affiliated groups with excess domestic indebtedness 7a7 ,in general ,section #afc is amended by redesignating subsection 7n7 as subsection 7o7 and by inserting after subsection 7m7 the following new subsection3 7n7 ,disallowance of deduction for interest expense of ,united ,states shareholders which are members of worldwide affiliated groups with excess domestic indebtedness 7#a7 ,in general ,in the case of any domestic corporation which is a ,united ,states shareholder 7as defined in section #iea7;b77 with respect to any foreign corporation both of which are members of the same worldwide affiliated group1 the deduction allowed under this chapter for interest paid or accrued by such domestic corporation during the taxable year shall be reduced by the lesser of-- 7,a7 the product of-- 7i7 the net interest expense of such domestic corporation1 multiplied by 7ii7 the debt-to-equity differential percentage of such worldwide affiliated group1 or 7,b7 the excess 7if any7 of-- 7i7 such net interest expense1 over 7ii7 #dj percent of the adjusted taxable income 7as defined in subsection 7j77#f77;,a77 of such domestic corporation4 7#b7 ,carryforward ,any amount disallowed under paragraph 7#a7 for any taxable year shall be treated as interest paid or accrued in the succeeding taxable year 7and shall not be treated as disqualified interest for purposes of applying subsection 7j774 7#c7 ,debt-to-equity differential percentage 7,a7 ,in general ,for purposes of this subsection1 the term debt-to-equity differential percentage means1 with respect to any worldwide affiliated group1 the percentage which the excess domestic indebtedness of such group bears to the total indebtedness of the domestic corporations which are members of such group4 7,b7 ,excess domestic indebtedness ,for purposes of subparagraph 7,a71 the term excess domestic indebtedness means1 with respect to any worldwide affiliated group1 the excess 7if any7 of-- 7i7 the total indebtedness of the domestic corporations which are members of such group1 over 7ii7 #aaj percent of the amount which the total indebtedness of such domestic corporations would be if the ratio of such indebtedness to the total equity of such domestic corporations equaled the ratio which-- 7,i7 the total indebtedness of such group1 bears to 7,,ii7 the total equity of such group4 7,c7 ,total equity ,for purposes of subparagraph 7,b71 the term total equity means1 with respect to one or more corporations1 the excess 7if any7 of-- 7i7 the money and all other assets of such corporations1 over 7ii7 the total indebtedness of such corporations4 7,d7 ,special rules for determining debt and equity ,for purposes of this paragraph-- 7i7 ,application of certain general rules ,rules similar to the rules of clauses 7i71 7ii71 and 7iii7 of subsection 7j77#b77;,c7 shall apply4 7ii7 ,intragroup debt and equity interests disregarded ,the total indebtedness1 and the assets1 of any group of corporations shall be determined by treating all members of such group as one corporation4 7iii7 ,determination of assets of domestic group ,the assets of the domestic corporations which are members of any worldwide affiliated group shall be determined by disregarding any interest held by any such domestic corporation in any foreign corporation which is a member of such group4 7#d7 ,other definitions ,for purposes of this subsection-- 7,a7 ,worldwide affiliated group ,the term worldwide affiliated group has the meaning which would be given such term by section #hfd7;f77#a77;,c7 if section #aejd7;a7 were applied by substituting more than #ej percent for at least #hj percent each place it appears4 7,b7 ,net interest expense ,the term net interest expense has the meaning given such term by subsection 7j77#f77;,b74 7#e7 ,treatment of affiliated group ,for purposes of this subsection1 all members of the same affiliated group 7within the meaning of section #aejd7;a7 applied by substituting more than #ej percent for at least #hj percent each place it appears7 shall be treated as #a taxpayer4 7#f7 ,regulations ,the ,secretary shall prescribe such regulations or other guidance as may be appropriate to carry out the purposes of this subsection1 including regulations or other guidance-- 7,a7 to prevent the avoidance of the purposes of this subsection1 7,b7 providing such adjustments in the case of corporations which are members of an affiliated group as may be appropriate to carry out the purposes of this subsection1 7,c7 providing for the coordination of this subsection with section #hhd1 and 7,d7 providing for the reallocation of shares of partnership indebtedness1 or distributive shares of the partnership's interest income or interest expense4 4 7b7 ,coordination with limitation on related party indebtedness ,paragraph 7#a7 of section #afc7;j7 is amended by adding at the end the following new subparagraph3 7,c7 ,coordination with limitation on excess domestic indebtedness ,the amount disallowed under subparagraph 7,a7 with respect to any corporation for any taxable year shall be reduced by any amount disallowed under subsection 7n77#a7 with respect to such corporation for such taxable year4 4 7c7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 ,v ,tax ,exempt ,entities ,a ,unrelated ,business ,income ,tax #ejja4 ,clarification of unrelated business income tax treatment of entities treated as exempt from taxation under section #eja7;a7 7a7 ,in general ,subparagraph 7,a7 of section #eaa7;a77#b7 is amended by adding at the end the following3 ,for purposes of the preceding sentence1 an organization shall not fail to be treated as exempt from taxation under this subtitle by reason of section #eja7;a7 solely because such organization is also so exempt1 or excludes amounts from gross income1 by reason of any other provision of this title44 7b7 ,clerical amendment ,the heading for subparagraph 7,a7 of section #eaa7;a77#b7 is amended to read as follows3 ,organizations exempt from taxation by reason of section #eja7;a74 7c7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 #ejjb4 ,name and logo royalties treated as unrelated business taxable income 7a7 ,in general ,section #eac is amended by adding at the end the following new subsection3 7k7 ,name and logo royalties ,any sale or licensing by an organization of any name or logo of the organization 7including any trademark or copyright relating to such name or logo7 shall be treated as an unrelated trade or business regularly carried on by such organization4 4 7b7 ,calculation of unrelated business taxable income ,subsection 7b7 of section #eab is amended by adding at the end the following new paragraph3 7#bj7 ,special rule for name and logo royalties ,notwithstanding paragraph 7#a71 7#b71 7#c71 or 7#e71 any income derived from any sale or licensing described in section #eac7k7 shall be included as an item of gross income derived from an unrelated trade or business4 4 7c7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 #ejjc4 ,unrelated business taxable income separately computed for each trade or business activity 7a7 ,in general ,subsection 7a7 of section #eab is amended by adding at the end the following new paragraph3 7#f7 ,special rule for organization with more than #a unrelated trade or business ,in the case of any organization with more than #a unrelated trade or business-- 7,a7 unrelated business taxable income shall be computed separately with respect to each such trade or business and without regard to subsection 7b77#ab71 7,b7 the unrelated business taxable income of such organization shall be the sum of the unrelated business taxable income so computed with respect to each such trade or business1 less a specific deduction under subsection 7b77#ab71 and 7,c7 for purposes of subparagraph 7,b71 unrelated business taxable income with respect to any such trade or business shall not be less than zero1 and 7,d7 the net operating loss deduction shall only be allowed with respect to the trade or business from which the net operating loss arose4 4 7b7 ,effective date 7#a7 ,in general ,except to the extent provided in paragraph 7#b71 the amendment made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 7#b7 ,net operating losses 7,a7 ,certain carryovers ,in the case of any net operating loss arising in a taxable year beginning before ,january #a1 #bjae1 that is carried over to a taxable year beginning on or after such date1 section #eab7;a77#f77;,d7 of the ,internal ,revenue ,code of #aihf1 as added by this ,act1 shall not apply4 7,b7 ,certain carrybacks ,in the case of any net operating loss arising in a taxable year beginning after ,december #ca1 #bjad1 and carried back to any taxable year beginning on or before such date1 in computing unrelated business taxable income of an organization under section #eab7;a7 of such ,code for the taxable year1 the net operating loss deduction shall be allowed only with respect to the trade or business from which the net operating loss arose4 #ejjd4 ,exclusion of research income limited to publicly available research 7a7 ,in general ,paragraph 7#i7 of section #eab7;b7 is amended by striking from research and inserting from such research4 7b7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 #ejje4 ,parity of charitable contribution limitation between trusts and corporations 7a7 ,in general ,paragraph 7#aa7 of section #eab7;b7 is amended by striking the second sentence and inserting the following3 ,the deduction allowed by this paragraph shall not exceed #aj percent of the unrelated business taxable income computed without the benefit of this paragraph4 7b7 ,effective date ,the amendment made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 #ejjf4 ,increased specific deduction 7a7 ,in general ,paragraph 7#ab7 of section #eab7;b7 is amended by striking #a1jjj each place it appears and inserting #aj1jjj4 7b7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 #ejjg4 ,repeal of exclusion of gain or loss from disposition of distressed property 7a7 ,in general ,subsection 7b7 of section #eab is amended by striking paragraph 7#af74 7b7 ,effective date ,the amendment made by this section shall apply to property acquired after ,december #ca1 #bjad4 #ejjh4 ,qualified sponsorship payments 7a7 ,repeal of use or acknowledgment of product lines for qualified sponsorship payments ,subparagraphs 7,a7 and 7,b77ii77,i7 of section #eac7;i77#b7 are each amended by striking 7or product lines74 7b7 ,use or acknowledgment limited in case of certain events ,subparagraph 7,b7 of section #eac7;i77#b7 is amended by adding at the end the following new clause3 7iii7 ,use or acknowledgment limited in case of certain events ,in the case of an event with respect to which an organization receives an aggregate amount of qualified sponsorship payments greater than #be1jjj1 a payment shall not be treated as a qualified sponsorship payment for purposes of paragraph 7#a7 unless the use or acknowledgment of the sponsor's name or logo appears with1 and in substantially the same manner as1 the names of a significant portion of other donors to the organization4 ,for purposes of the preceding sentence1 whether a number of donors is a significant portion shall be determined based on the total number of donors and the total contributed with respect to the event1 but in no event shall fewer than #b other donors be treated as a significant portion of other donors4 4 7c7 ,clerical amendment ,the heading for clause 7ii7 of section #eac7;i77#b77;,b7 is amended to read as follows3 ,periodicals and qualified convention and trade show activities44 7d7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 ,b ,penalties #eaja4 ,increase in information return penalties 7a7 ,failure ,to file return 7#a7 ,organization ,subparagraph 7,a7 of section #ffeb7;c77#a7 is amended-- 7,a7 by striking #bj each place it appears and inserting #dj1 and 7,b7 by striking #ajj and inserting #bjj4 7#b7 ,managers ,clause 7ii7 of section #ffeb7;c77#a77;,b7 is amended by striking #aj and inserting #bj4 7b7 ,failure ,to make returns1 reports1 and applications available for public inspection ,subparagraphs 7,c7 and 7,d7 of section #ffeb7;c77#a7 are each amended by striking #bj and inserting #dj4 7c7 ,failure ,to file returns under section #fjcd or #fjdc ,paragraph 7#b7 of section #ffeb7;c7 is amended-- 7#a7 by striking #aj each place it appears in subparagraphs 7,a7 and 7,b7 and inserting #bj1 and 7#b7 by striking substituting #ajj for #bj1 in subparagraph 7,c77ii7 and inserting substituting #bjj for #dj14 7d7 ,failure ,to file disclosure under section #fjcc7;a77#b7 7#a7 ,organization ,subparagraph 7,a7 of section #ffeb7;c77#c7 is amended by striking #ajj and inserting #bjj4 7#b7 ,managers ,subparagraph 7,b7 of section #ffeb7;c77#c7 is amended by striking #ajj and inserting #bjj4 7e7 ,effective date ,the amendments made by this section shall apply with respect to information returns required to be filed on or after ,january #a1 #bjae4 #eajb4 ,manager-level accuracy-related penalty on underpayment of unrelated business income tax 7a7 ,in general ,section #fffb is amended by adding at the end the following new subsection3 7k7 ,manager-,level penalty for substantial underpayment of unrelated business income tax 7#a7 ,in general ,in the case of any substantial underpayment of income tax which is attributable to the tax imposed by section #eaa on the unrelated business taxable income of an organization for the taxable year1 there is hereby imposed a tax with respect to such organization an amount equal to #e percent of such underpayment to which the underpayment relates4 ,such tax shall be paid by any manager of the organization4 7#b7 ,manager ,for purposes of this subsection1 the term manager means any officer1 director1 trustee1 employee1 or other individual who is under a duty to perform an act in respect of which the underpayment relates4 7#c7 ,joint and several liability ,if more than one person is liable under paragraph 7#a7 with respect to an underpayment1 all such persons shall be jointly and severally liable under such paragraph with respect to such underpayment 7#d7 ,limit ,with respect to any substantial underpayment of income tax for a taxable year1 the maximum amount of the tax added by paragraph 7#a7 shall not exceed #bj1jjj4 4 7b7 ,reportable transactions ,section #fffb;,a is amended by adding at the end the following new subsection3 7f7 ,manager-,level penalty in case of unrelated business income tax 7#a7 ,in general ,in the case of any portion of a reportable transaction understatement of the tax imposed by section #eaa to which this section applies1 there is hereby imposed a tax in an amount equal to #aj percent of such portion of the underpayment to which the reportable transaction understatement occurs4 ,such tax shall be paid by any manager of the organization4 7#b7 ,manager ,for purposes of this subsection1 the term manager means any officer1 director1 trustee1 employee1 or other individual who is under a duty to perform an act in respect of which such understatement occurs4 7#c7 ,joint and several liability ,if more than one person is liable under paragraph 7#a7 with respect to an understatement1 all such persons shall be jointly and severally liable under such paragraph with respect to such understatement4 7#d7 ,limit ,with respect to any understatement of tax to which this section applies1 the maximum amount of the tax added by paragraph 7#a7 shall not exceed #dj1jjj 4 7c7 ,coordination ,section #fffb is amended-- 7#a7 by striking the flush matter at the end of subsection 7b71 and 7#b7 by adding at the end the following new subsection3 7l7 ,coordination with other penalties ,this section shall not apply to any portion of an underpayment on which a penalty is imposed under section #fffc4 ,except as provided in paragraph 7#a7 or 7#b77;,b7 of section #fffb;,a7e71 this section shall not apply to the portion of any underpayment which is attributable to a reportable transaction understatement on which a penalty is imposed under section #fffb;,a4 4 7d7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 ,c ,excise ,taxes #ebja4 ,modification of intermediate sanctions 7a7 ,organization level tax ,subsection 7a7 of section #dieh is amended by adding at the end the following new paragraph3 7#c7 ,on the organization ,in any case in which a tax is imposed by paragraph 7#a71 there is hereby imposed on the organization a tax equal to #aj percent of the excess benefit4 4 7b7 ,minimum standards of organization due diligence ,subsection 7d7 of section #dieh is amended by adding at the end the following new paragraph3 7#c7 ,minimum standards of organization due diligence 7,a7 ,in general ,subsection 7a77#c7 shall not apply to a transaction1 if-- 7i7 the organization establishes that the minimum standards of due diligence described in subparagraph 7,b7 were met with respect to the transaction1 or 7ii7 the organization establishes to the satisfaction of the ,secretary that such other reasonable procedures were used to ensure that no excess benefit was provided4 7,b7 ,minimum standards ,an organization shall be treated as satisfying the minimum standards of due diligence described in this subparagraph with respect to any transaction1 if-- 7i7 the transaction was approved in advance by an authorized body of the organization composed entirely of individuals who did not have a conflict of interest with respect to the transaction1 7ii7 the authorized body obtained and relied upon appropriate data as to comparability prior to approval of the transaction1 and 7iii7 the authorizing body adequately and concurrently documented the basis for approving the transaction4 7,c7 ,no presumption as to reasonableness ,meeting the requirements of clause 7i7 or 7ii7 of subparagraph 7,a7 with respect to a transaction shall not give rise to a presumption of reasonableness for purposes of the taxes imposed by paragraphs 7#a7 or 7#b7 of subsection 7a7 and shall not1 by itself1 support a conclusion that a manager did not act knowingly for purposes of subsection 7a77#b74 4 7c7 ,repeal of exception for manager reliance on professional advice ,section #dieh is amended by adding at the end the following new subsection3 7g7 ,no safe harbor for reliance on professional advice ,an organization manager's reliance on a written opinion of a professional with respect to elements of a transaction within the professional's expertise shall not1 by itself1 preclude the manager from being treated as participating in the transaction knowingly4 4 7d7 ,athletic coaches and investment managers treated as disqualified persons 7#a7 ,athletic coaches 7,a7 ,in general ,paragraph 7#a7 of section #dieh7;f7 is amended by striking and at the end of subparagraph 7,e71 by striking the period at the end of subparagraph 7,f7 and inserting 1 and1 and by adding at the end the following new subparagraph3 7,g7 any person who performs services as an athletic coach for the organization4 4 7,b7 ,family members ,subparagraph 7,b7 of section #dieh7;f77#a7 is amended by inserting or 7,g7 after subparagraph 7,a74 7#b7 ,investment advisors 7,a7 ,in general ,subparagraph 7,f7 of section #dieh7;f77#a7 is amended-- 7i7 by striking which involves a sponsoring organization 7as defined in section #diff7;d77#a7711 and 7ii7 by striking such sponsoring organization 7as so defined7 and inserting the organization4 7,b7 ,investment advisor definition ,subparagraph 7,b7 of section #dieh7;f77#h7 is amended to read as follows3 7,b7 ,investment advisor defined ,for purposes of subparagraph 7,a71 the term investment advisor means-- 7i7 with respect to any organization1 any person who is compensated by such organization and is primarily responsible for managing the investment of1 or providing investment advice with respect to1 assets of such organization1 and 7ii7 with respect to any sponsoring organization 7as defined in section #diff7;d77#a771 any person 7other than an employee of such organization7 compensated by such organization for managing the investment of1 or providing investment advice with respect to1 assets maintained in donor advised funds 7as defined in section #diff7;d77#b77 owned by such organization4 4 7e7 ,application to unions and trade associations ,paragraph 7#a7 of section #dieh7;e7 is amended by inserting 7#e71 7#f71 after 7#d714 7f7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 #ebjb4 ,modification of taxes on self-dealing 7a7 ,organization level tax ,subsection 7a7 of section #dida is amended by adding at the end the following new paragraph3 7#c7 ,on the foundation ,in any case in which a tax is imposed by paragraph 7#a71 there is hereby imposed on the foundation a tax equal to #b4e percent 7#aj percent in the case payment of compensation7 of the amount involved with respect to the act of self-dealing for each year 7or part thereof7 in the taxable period4 4 7b7 ,repeal of exception for manager reliance on advice from counsel ,section #dida is amended by adding at the end the following new subsection3 7f7 ,no safe harbor for reliance on advice of counsel ,a foundation manager's reliance on a written legal opinion by legal counsel that an act is not an act of self-dealing shall not1 by itself1 preclude the manager from being treated as participating in the act knowingly4 4 7c7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 #ebjc4 ,excise tax on failure to distribute within #e years contribution to donor advised fund 7a7 ,in general ,subchapter ,g of chapter #db is amended by adding at the end the following new section3 #difh4 ,failure to distribute contributions within #e years 7a7 ,in general ,in the case of a contribution which is held in a donor advised fund1 there is hereby imposed a tax equal to #bj percent of so much of the portion of such contribution as has not been distributed by the sponsoring organization in an eligible distribution before the beginning of the #fth 7or succeeding7 taxable year beginning after the taxable year during which such contribution was made4 ,the tax imposed by this subsection shall be paid by such sponsoring organization4 7b7 ,treatment of distributions ,for purposes of this section-- 7#a7 ,eligible distribution ,the term eligible distribution means any distribution to an organization described in section #agj7;b77#a77;,a7 7other than an organization described in section #eji7;a77#c7 or any fund or account described in section #diff7;d77#b74 7#b7 ,accounting ,distributions shall be treated as made from contributions 7and any earnings attributable thereto7 on a first-in1 first-out basis4 4 7b7 ,conforming amendment ,the table of sections for subchapter ,g of chapter #db is amended by adding at the end the following new item3 ,sec4 #difh4 ,failure to distribute contributions within #e years4 4 7c7 ,effective date 7#a7 ,in general ,except as provided in paragraph 7#b71 the amendments made by this section shall apply to contributions made after ,december #ca1 #bjad4 7#b7 ,transition rule ,in the case of any contribution-- 7,a7 which was made before ,january #a1 #bjae1 and 7,b7 any portion of which 7including any earnings attributable thereto7 is held in a donor advised fund on such date1 such portion shall be treated as contributed on such date4 #ebjd4 ,simplification of excise tax on private foundation investment income 7a7 ,rate reduction ,subsection 7a7 of section #didj is amended by striking #b percent and inserting #a percent4 7b7 ,repeal of special rules for certain private foundations ,section #didj is amended by striking subsections 7d7 and 7e74 7c7 ,conforming amendment ,section #dide7;d77#d77;,a7 is amended by striking clause 7iii7 and by inserting or at the end of clause 7i74 7d7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 #ebje4 ,repeal of exception for private operating foundation failure to distribute income 7a7 ,in general ,subsection 7a7 of section #didb is amended-- 7#a7 by striking a private foundation-- and all that follows through 7#b7 to the extent and inserting a private foundation to the extent1 and 7#b7 by redesignating subparagraphs 7,a71 7,b71 7,c71 and 7,d7 as paragraphs 7#a71 7#b71 7#c71 and 7#d71 respectively1 and by moving such paragraphs1 as so redesignated1 two ems to the left4 7b7 ,conforming amendments 7#a7 ,section #didb7;j7 is amended by striking paragraphs 7#c71 7#d71 and 7#e74 7#b7 ,section #agj7;b77#a77;,f77i7 is amended by striking 7as defined in section #didb7;j77#c771 7#c7 ,section #agj7;b77#a7 is amended by adding at the end the following new subparagraphs3 7,h7 ,private operating foundation ,for purposes of this paragraph1 the term private operating foundation means any organization-- 7i7 which makes qualifying distributions 7within the meaning of paragraph 7#a7 or 7#b7 of section #didb7;g77 directly for the active conduct of the activities constituting the purpose or function for which it is organized and operated equal to substantially all of the lesser of-- 7,i7 its adjusted net income 7as defined in subsection section #didb7;f771 or 7,,ii7 its minimum investment return1 and 7ii7 7,i7 substantially more than half of the assets of which are devoted directly to such activities or to functionally related businesses1 or to both1 or are stock of a corporation which is controlled by the foundation and substantially all of the assets of which are so devoted1 7,,ii7 which normally makes qualifying distributions 7within the meaning of paragraph 7#a7 or 7#b7 of section #didb7;g77 directly for the active conduct of the activities constituting the purpose or function for which it is organized and operated in an amount not less than two-thirds of its minimum investment return 7as defined in section #didb7;e771 or 7,,iii7 substantially all of the support 7other than gross investment income as defined in section #eji7;e77 of which is normally received from the general public and from #e or more exempt organizations which are not described in section #didf7;a77#a77;,h7 with respect to each other or the recipient foundation2 not more than #be percent of the support 7other than gross investment income7 of which is normally received from any one such exempt organization2 and not more than half of the support of which is normally received from gross investment income4 ,notwithstanding the provisions of clause 7i71 if the qualifying distributions 7within the meaning of paragraph 7#a7 or 7#b7 of section #didb7;g77 of an organization for the taxable year exceed the minimum investment return for the taxable year1 subclause 7,,ii7 of clause 7i7 shall not apply unless substantially all of such qualifying distributions are made directly for the active conduct of the activities constituting the purpose or function for which it is organized and operated4 7,i7 ,functionally related business ,for purposes of subparagraph 7,h71 the term functionally related business means-- 7i7 a trade or business which is not an unrelated trade or business 7as defined in section #eac71 or 7ii7 an activity which is carried on within a larger aggregate of similar activities or within a larger complex of other endeavors which is related 7aside from the need of the organization for income or funds or the use it makes of the profits derived7 to the exempt purposes of the organization4 4 7#d7 ,section #agj7;e77#c77;,a7 is amended by striking as defined in section #didb7;j77#c7 and inserting as defined in subsection 7b77#a77;,h74 7#e7 ,section #aej7;b77#c77;,f71 as redesignated by this ,act1 is amended-- 7,a7 by striking #didb 7relating to the excise tax on a failure to distribute income7 and1 7,b7 by striking section #didb7;j77#d7 and inserting section #agj7;b77#a77;,i74 7#f7 ,section #bjee7;e77#d77;,d7 is amended by striking section #didb7;j77#c7 and inserting section #agj7;b77#a77;,h74 7#g7 ,section #bejc7;g77#b77;,b7 is amended by striking section #didb7;j77#c7 and inserting section #agj7;b77#a77;,h74 7#h7 ,section #didb7;g77#a77;,a7 is amended by striking which is not an operating foundation 7as defined in subsection 7j77#c774 7#i7 ,section #didb7;g77#c77;,a7 is amended by striking which is not an operating foundation4 7#aj7 ,section #didb7;g77#d77;,a7 is amended by striking which is not an operating foundation4 7#aa7 ,section #didc7;d77#c77;,a7 is amended by striking section #didb7;j77#d7 and inserting section #agj7;b77#a77;,i74 7#ab7 ,section #faaj7l77#b77;,a7 is amended by striking section #didb7;j77#c7 and inserting section #agj7;b77#a77;,h74 7#ac7 ,section #gdbh7;a77#a77;,c7 is amended by striking section #didb7;j77#c7 and inserting section #agj7;b77#a77;,h74 7c7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 #ebjf4 ,excise tax based on investment income of private colleges and universities 7a7 ,in general ,chapter #db is amended by adding at the end the following new subchapter3 ,h ,excise tax based on investment income of private colleges and universities ,sec4 #difi4 ,excise tax based on investment income of private colleges and universities4 #difi4 ,excise tax based on investment income of private colleges and universities 7a7 ,tax imposed ,there is hereby imposed on each applicable educational institution for the taxable year a tax equal to #a percent of the net investment income of such institution for the taxable year4 7b7 ,applicable educational institution ,for purposes of this subchapter-- 7#a7 ,in general ,the term applicable educational institution means an eligible educational institution 7as defined in section #be;,a7e77#c77-- 7,a7 which is not described in the first sentence of section #eaa7;a77#b77;,b7 7relating to ,state colleges and universities71 and 7,b7 the aggregate fair market value of the assets of which at the end of the preceding taxable year 7other than those assets which are used 7or held for use7 directly in carrying out the institution's exempt purpose7 is at least #ajj1jjj per student of the institution4 7#b7 ,students ,for purposes of paragraph 7#a77;,b71 the number of students of an institution shall be based on the daily average number of full-time students attending such institution 7with part-time students taken into account on a full-time student equivalent basis74 7c7 ,net investment income ,for purposes of this section1 net investment income shall be determined under rules similar to the rules of section #didj7;c74 4 7b7 ,clerical amendment ,the table of subchapters for chapter #db is amended by adding at the end the following new item3 ,subchapter ,h--,excise tax based on investment income of private colleges and universities 4 7c7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 ,d ,requirements for ,organizations ,exempt ,from ,tax #ecja4 ,repeal of tax-exempt status for professional sports leagues 7a7 ,in general ,paragraph 7#f7 of section #eja7;c7 is amended-- 7#a7 by striking 1 boards of trade1 or professional and all that follows through players7 and inserting 1 or boards of trade1 and 7#b7 by adding at the end the following3 ,this paragraph shall not apply to any professional sports league 7whether or not administering a pension fund for players744 7b7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 #ecjb4 ,repeal of exemption from tax for certain insurance companies and co-op health insurance issuers 7a7 ,in general ,section #eja7;c7 is amended by striking paragraphs 7#ae7 and 7#bi74 7b7 ,conforming amendments 7#a7 ,section #hca7;d71 as amended by the preceding provisions of this ,act1 is amended to read as follows3 7d7 ,cross reference ,for taxation of foreign corporations carrying on an insurance business within the ,united ,states1 see section #hdb4 4 7#b7 ,section #dieh7;e77#a7 is amended by striking 7#d71 or 7#bi7 and inserting or 7#d74 7#c7 ,section #fjcc is amended by striking subsection 7m7 and redesignating subsection 7n7 as subsection 7m74 7c7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjad4 7d7 ,transition rules ,in the case of any organization described in paragraph 7#ae7 or 7#bi7 of section #eja7;c7 of the ,internal ,revenue ,code of #aihf 7as in effect immediately before the enactment of this ,act7-- 7#a7 no adjustment shall be made under section #dha 7or any other provision7 of the ,internal ,revenue ,code of #aihf on account of a change in its method of accounting for its #ast taxable year beginning after ,december #ca1 #bjad1 and 7#b7 for purposes of determining gain or loss1 the adjusted basis of any asset held on the #ast day of such taxable year shall be treated as equal to its fair market value as of such day4 #ecjc4 ,in-,state requirement for workmen's compensation insurance organization 7a7 ,in general ,clause 7ii7 of section #eja7;c77#bg77;,b7 is amended by inserting before the comma at the end the following3 1 and must not offer any other insurance4 7b7 ,effective date ,the amendment made by this section shall apply to insurance policies issued1 and renewals1 after ,december #ca1 #bjad4 #ecjd4 ,repeal of ,type ,,ii and ,type ,,iii supporting organizations 7a7 ,in general ,subparagraph 7,b7 of section #eji7;a77#c7 is amended-- 7#a7 by inserting and at the end of clause 7i71 7#b7 by striking clauses 7ii7 and 7iii71 and 7#c7 by striking is-- and all that follows through operated1 supervised1 or controlled and inserting is operated1 supervised1 or controlled4 7b7 ,conforming amendments 7#a7 ,section #agj7;f77#ah77;,a7 is amended by striking is not-- and all that follows through 1 and and inserting the following3 is not described in paragraph 7#c71 7#d71 or 7#e7 of subsection 7c71 and4 7#b7 7,a7 7i7 ,section #eji7;f7 is amended by striking paragraph 7#a7 and by redesignating paragraphs 7#b7 and 7#c7 as paragraphs 7#a7 and 7#b71 respectively4 7ii7 ,section #didb7;g77#d77;,a77ii77,i7 is amended by striking section #eji7;f77#c7 and inserting section #eji7;f77#b74 7iii7 ,section #dieh7;c77#c77;,c77ii77,,ii7 is amended by striking section #eji7;f77#c7 and inserting section #eji7;f77#b74 7iv7 ,section #diff7;d77#d77;,a77ii77,i7 is amended by striking section #eji7;f77#c7 and inserting section #eji7;f77#b74 7,b7 ,section #eji7;f77#a77;,a71 as so redesignated1 is amended by striking shall not be considered to be-- and all that follows through if such organization and inserting the following3 shall not be considered to be operated1 supervised1 or controlled by any organization described in paragraph 7#a7 or 7#b7 of subsection 7a71 if such organization4 7#c7 ,section #bjee7;e77#e77;,a7 is amended by striking is not-- and all that follows through 1 and and inserting the following3 is not described in paragraph 7#c7 or 7#d7 of subsection 7a71 and4 7#d7 ,section #bebb7;c77#e77;,a7 is amended by striking is not-- and all that follows through 1 and and inserting the following3 is not described in paragraph 7#c7 or 7#d7 of subsection 7a71 and4 7#e7 7,a7 ,section #didb7;g77#d77;,a71 as amended by the preceding provision of this ,act1 is amended-- 7i7 by redesignating subclauses 7,i7 and 7,,ii7 of clause 7ii7 as clauses 7i7 and 7ii71 respectively1 and moving such redesignated clauses #b ems to the left1 7ii7 by striking paid by a private foundation to-- and all that follows through any organization which and inserting the following3 paid by a private foundation to any organization which1 and 7iii7 by striking subparagraph 7,b7 or 7,c7 and inserting subparagraph 7,b74 7,b7 ,section #didb7;g77#d77;,b7 is amended-- 7i7 by striking clause 7ii71 7ii7 by striking section #eji7;a71 or and inserting section #eji7;a741 7iii7 by striking and is-- and all that follows through operated1 supervised1 or controlled by and inserting the following3 and is operated1 supervised1 or controlled by1 and 7iv7 by striking ,type ,i and type ,,ii in the heading thereof4 7,c7 ,section #didb7;g77#d7 is amended by striking subparagraph 7,c74 7,d7 ,section #dide7;d77#d77;,a77ii7 is amended by striking clause 7i7 or 7ii7 of section #didb7;g77#d77;,a7 and inserting section #didb7;g77#d77;,a74 7#f7 ,section #didc is amended by striking subsection 7f74 7#g7 7,a7 ,section #diff7;d77#d77;,a71 as amended by this ,act1 is amended-- 7i7 by redesignating subclauses 7,i7 and 7,,ii7 of clause 7ii7 as clauses 7i7 and 7ii71 respectively1 and moving such redesignated clauses #b ems to the left1 7ii7 by striking with respect to any distribution-- and all that follows through any organization which and inserting the following3 with respect to any distribution1 any organization which1 and 7iii7 by striking subparagraph 7,b7 or 7,c7 and inserting subparagraph 7,b74 7,b7 ,section #diff7;d77#d77;,b7 is amended-- 7i7 by striking clause 7ii71 7ii7 by striking section #eji7;a71 or and inserting section #eji7;a741 7iii7 by striking and is-- and all that follows through operated1 supervised1 or controlled by and inserting the following3 and is operated1 supervised1 or controlled by1 and 7iv7 by striking ,type ,i and type ,,ii in the heading thereof4 7,c7 ,section #diff7;d77#d7 is amended by striking subparagraph 7,c74 7#h7 ,section #fjcc7l7 is amended by inserting and at the end of paragraph 7#a71 by striking paragraph 7#b71 and by redesignating paragraph 7#c7 as paragraph 7#b74 7c7 ,effective date 7#a7 ,in general ,except as provided in paragraph 7#b71 the amendments made by this section shall take effect on the date of the enactment of this ,act4 7#b7 ,delay for current supporting organizations ,in the case of an organization which1 as of the date of the enactment of this ,act1 meets the requirements of subparagraphs 7,a7 and 7,c7 of section #eji7;a77#c7 of the ,internal ,revenue ,code of #aihf and is-- 7,a7 supervised or controlled in connection with one or more organizations described in paragraph 7#a7 or 7#b7 of section #eji7;a7 of such ,code1 or 7,b7 is operated in connection with one or more such organizations1 the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjae4 ,,vi ,tax administration and compliance ,a ,,irs ,investigation-,related ,reforms #fjja4 ,organizations required to notify ,secretary of intent to operate as #eja7;c77#d7 7a7 ,in general ,part ,i of subchapter ,f of chapter #a is amended by adding at the end the following new section3 #ejf4 ,organizations required to notify ,secretary of intent to operate as #eja7;c77#d7 7a7 ,in general ,an organization described in section #eja7;c77#d7 shall1 not later than #fj days after the organization is established1 notify the ,secretary 7in such manner as the ,secretary shall by regulation prescribe7 that it is operating as such4 7b7 ,contents of notice ,the notice required under subsection 7a7 shall include the following information3 7#a7 ,the name1 address1 and taxpayer identification number of the organization4 7#b7 ,the date on which1 and the ,state under the laws of which1 the organization was organized4 7#c7 ,a statement of the purpose of the organization4 7c7 ,acknowledgment of receipt ,not later than #fj days after receipt of such a notice1 the ,secretary shall send to the organization an acknowledgment of such receipt4 7d7 ,extension for reasonable cause ,the ,secretary may1 for reasonable cause1 extend the #fj-;day period described in subsection 7a74 7e7 ,user fee ,the ,secretary shall impose a reasonable user fee for submission of the notice under subsection 7a74 7f7 ,request for determination ,upon request by an organization to be treated as an organization described in section #eja7;c77#d71 the ,secretary may issue a determination with respect to such treatment4 ,such request shall be treated for purposes of section #fajd as an application for exemption from taxation under section #eja7;a74 4 7b7 ,supporting information with first return ,paragraph 7#a7 of section #fjcc7;f7 is amended-- 7#a7 by striking the period at the end and inserting 1 and1 7#b7 by striking include on the return required under subsection 7a7 the information and inserting the following3 include on the return required under subsection 7a7-- 7#a7 the information 1 and 7#c7 by adding at the end the following new paragraph3 7#b7 in the case of the first such return filed by such an organization after submitting a notice to the ,secretary under section #ejf7;a71 such information as the ,secretary shall by regulation require in support of the organization's treatment as an organization described in section #eja7;c77#d74 4 7c7 ,failure ,to file initial notification ,subsection 7c7 of section #ffeb is amended by redesignating paragraphs 7#d7 and 7#e7 as paragraphs 7#e7 and 7#f71 respectively1 and by inserting after paragraph 7#c7 the following new paragraph3 7#d7 ,notices under section #ejf 7,a7 ,penalty on organization ,in the case of a failure to submit a notice required under section #ejf7;a7 7relating to organizations required to notify ,secretary of intent to operate as #eja7;c77#d77 on the date and in the manner prescribed therefor1 there shall be paid by the organization failing to so submit #bj for each day during which such failure continues1 but the total amount imposed under this subparagraph on any organization for failure to submit any one notice shall not exceed #e1jjj4 7,b7 ,managers ,the ,secretary may make written demand on an organization subject to penalty under subparagraph 7,a7 specifying in such demand a reasonable future date by which the notice shall be submitted for purposes of this subparagraph4 ,if such notice is not submitted on or before such date1 there shall be paid by the person failing to so submit #bj for each day after the expiration of the time specified in the written demand during which such failure continues1 but the total amount imposed under this subparagraph on all persons for failure to submit any one notice shall not exceed #e1jjj4 4 7d7 ,clerical amendment ,the table of sections for part ,i of subchapter ,f of chapter #a is amended by adding at the end the following new item3 ,sec4 #ejf4 ,organizations required to notify ,secretary of intent to operate as #eja7;c77#d74 4 7e7 ,effective date 7#a7 ,in general ,the amendments made by this section shall apply to organizations which are described in section #eja7;c77#d7 of the ,internal ,revenue ,code of #aihf and organized after ,december #ca1 #bjad4 7#b7 ,certain existing organizations ,in the case of any other organization described in section #eja7;c77#d7 of such ,code1 the amendments made by this section shall apply to such organization only if1 on or before the date of the enactment of this ,act-- 7,a7 such organization has not applied for a written determination of recognition as an organization described in section #eja7;c77#d7 of such ,code1 and 7,b7 such organization has not filed at least one annual return or notice required under subsection 7a77#a7 or 7i7 7as the case may be7 of section #fjcc of such ,code4 ,in the case of any organization to which the amendments made by this section apply by reason of the preceding sentence1 such organization shall submit the notice required by section #ejf7;a7 of such ,code1 as added by this ,act1 not later than #ahj days after the date of the enactment of this ,act4 #fjjb4 ,declaratory judgments for #eja7;c77#d7 organizations 7a7 ,in general ,paragraph 7#a7 of section #gdbh7;a7 is amended by striking or at the end of subparagraph 7,c7 and by inserting after subparagraph 7,d7 the following new subparagraph3 7,e7 with respect to the initial classification or continuing classification of an organization described in section #eja7;c77#d7 which is exempt from tax under section #eja7;a71 or 4 7b7 ,effective date ,the amendments made by this section shall apply to pleadings filed after the date of the enactment of this ,act4 #fjjc4 ,restriction on donation reporting for certain #eja7;c77#d7 organizations 7a7 ,in general ,subsection 7f7 of section #fjcc1 as amended by this ,act1 is amended-- 7#a7 by redesignating paragraphs 7#a7 and 7#b7 as subparagraphs 7,a7 and 7,b71 respectively1 and by moving such subparagraphs #b ems to the right1 7#b7 by striking in section #eja7;c77#d74--;,every organization and inserting the following3 in section #eja7;c77#d74-- 7#a7 ,in general ,every organization 1 and 7#c7 by adding at the end the following new paragraph3 7#b7 ,restriction on donation reporting ,in the case of any such organization1 information relating to contributions and gifts may only be required to be included on a return required under subsection 7a7 if the contribution or gift is made by an officer or director of the organization 7or an individual having powers or responsibilities similar to those of officers or directors7 or any covered employee 7as defined in section #difj7;c77#b77 of the organization4 4 7b7 ,effective date ,the amendments made by this section shall apply to returns for taxable years beginning after ,december #ca1 #bjac4 #fjjd4 ,mandatory electronic filing for annual returns of exempt organizations 7a7 ,in general ,section #fjcc1 as amended by the preceding provisions of this ,act1 is amended by redesignating subsection 7m7 as subsection 7n7 and by inserting after subsection 7l7 the following new subsection3 7m7 ,mandatory electronic filing ,any organization required to file a return under this section shall file such return in electronic form4 4 7b7 ,inspection of electronically filed annual returns ,subsection 7b7 of section #fajd is amended by adding at the end the following3 ,any annual return required to be filed electronically under section #fjcc7m7 shall be made available by the ,secretary to the public in machine readable format as soon as practicable44 7c7 ,effective date 7#a7 ,in general ,except as provided in paragraph 7#b71 the amendments made by this section shall apply to taxable years beginning after the date of the enactment of this ,act4 7#b7 ,transitional relief 7,a7 ,small organizations 7i7 ,in general ,in the case of any small organizations1 or any other organizations for which the ,secretary determines the application of the amendments made by subsection 7a7 would cause undue burden without a delay1 the ,secretary may delay the application of such amendments1 but not later than taxable years beginning #b years after the date of the enactment of this ,act4 7ii7 ,small organization ,for purposes of clause 7i71 the term small organization means any organization-- 7,i7 the gross receipts of which for the taxable year are less than #bjj1jjj1 and 7,,ii7 the aggregate gross assets of which at the end of the taxable year are less than #ejj1jjj4 7,b7 ,organizations filing form #iij-,t ,in the case of any organization described in section #eaa7;a77#b7 of the ,internal ,revenue ,code of #aihf which is subject to the tax imposed by section #eaa7;a77#a7 of such ,code on its unrelated business taxable income1 or any organization required to file a return under section #fjcc of such ,code and include information under subsection 7e7 thereof1 the ,secretary may delay the application of the amendments made by this section1 but not later than taxable years beginning #b years after the date of the enactment of this ,act4 #fjje4 ,duty to ensure that ,,irs employees are familiar with and act in accord with certain taxpayer rights ,section #ghjc7;a7 is amended by redesignating paragraph 7#c7 as paragraph 7#d7 and by inserting after paragraph 7#b7 the following new paragraph3 7#c7 ,execution of ,duties in ,accord with ,taxpayer ,rights ,in discharging his duties1 the ,commissioner shall ensure that employees of the ,internal ,revenue ,service are familiar with and act in accord with taxpayer rights as afforded by other provisions of this title1 including-- 7,a7 the right to be informed1 7,b7 the right to be assisted1 7,c7 the right to be heard1 7,d7 the right to pay no more than the correct amount of tax1 7,e7 the right of appeal1 7,f7 the right to certainty1 7,g7 the right to privacy1 7,h7 the right to confidentiality1 7,i7 the right to representation1 and 7,j7 the right to a fair and just tax system4 4 #fjjf4 ,termination of employment of ,,irs employees for taking official actions for political purposes ,paragraph 7#aj7 of section #abjc7;b7 of the ,internal ,revenue ,service ,restructuring and ,reform ,act of #aiih is amended to read as follows3 7#aj7 performing1 delaying1 or failing to perform 7or threatening to perform1 delay1 or fail to perform7 any official action 7including any audit7 with respect to a taxpayer for purpose of extracting personal gain or benefit or for a political purpose4 4 #fjjg4 ,release of information regarding the status of certain investigations 7a7 ,in general ,subsection 7e7 of section #fajc is amended by adding at the end the following new paragraph3 7#aa7 ,disclosure of information regarding status of investigation of violation of this section ,in the case of a person who provides to the ,secretary information indicating a violation of section #gbac1 #gbac;,a1 or #gbad with respect to any return or return information of such person1 the ,secretary may disclose to such person 7or such person's designee7-- 7,a7 whether an investigation based on the person's provision of such information has been initiated and whether it is open or closed1 7,b7 whether any such investigation substantiated such a violation by any individual1 and 7,c7 whether any action has been taken with respect to such individual 7including whether a referral has been made for prosecution of such individual74 4 7b7 ,effective date ,the amendment made by this section shall take effect on the date of the enactment of this ,act4 #fjjh4 ,review of ,,irs examination selection procedures 7a7 ,in general ,the ,comptroller ,general of the ,united ,states shall conduct a study of each ,internal ,revenue ,service operating division to assess the process used for determining how enforcement cases are selected and processed4 ,such study shall include a review of the following3 7#a7 ,the standards each such operating division has established for enforcement case selection 7including any automated or discretionary selection processes7 and case work1 and whether such standards meet the objectives of impartiality1 objectivity1 compliance1 and minimizing taxpayer burden4 7#b7 ,the extent to which any cases are initiated by referrals or complaints from inside or outside of the operating division 7including from outside of the ,internal ,revenue ,service74 7#c7 ,the ,internal ,revenue ,service controls 7including management reviews and regular updates7 for assuring that its standards for enforcement cases 7and handling of referrals and complaints7 in each operating division are sufficient for achieving the objectives described in paragraph 7#a74 7#d7 ,the ,internal ,revenue ,service controls 7including training1 monitoring1 and quality assessments7 for assuring that its standards are adhered to by all division personnel and the effectiveness of such controls4 7#e7 ,whether the existing standards and controls provide reasonable assurance that each division's enforcement processes meet the ,internal ,revenue ,service objectives of impartiality1 objectivity1 compliance1 and minimizing taxpayer burden4 7b7 ,initial report ,not later than #a year after the date of the enactment of this section1 the ,comptroller ,general shall submit to the ,committee on ,ways and ,means of the ,house of ,representatives1 the ,committee on ,finance of the ,senate1 and the ,secretary of the ,treasury a report on the results of such study4 ,such report shall include such recommendations as the ,comptroller ,general may deem advisable4 7c7 ,follow-,up on recommendations ,not later than #ahj days after a report is submitted with respect to an operating division under subsection 7b71 the ,comptroller ,general shall conduct a follow-up study1 and submit to the ,committee on ,ways and ,means of the ,house of ,representatives1 the ,committee on ,finance of the ,senate1 and the ,secretary of the ,treasury a report1 on whether any recommendations to improve case selection and case work processes have been implemented and are working as intended4 7d7 ,continuing case management studies and reports 7#a7 ,in general ,after a report is submitted under subsection 7b71 the ,comptroller ,general shall conduct follow-up studies and reports in the same manner as provided in subsections 7a7 and 7b7 with respect to each operating division of the ,internal ,revenue ,service and shall include in such study and report a review of whether any previous recommendations to improve case selection and case work processes have been implemented and are working as intended4 7#b7 ,frequency ,each such report with respect to an operating division shall be submitted not later than #d years after the date the most recent report was submitted with respect to such operating division under subsection 7b7 or this subsection4 ,the ,comptroller ,general shall submit no fewer than #a such report each year4 #fjji4 ,,irs employees prohibited from using personal email accounts for official business ,no officer or employee of the ,internal ,revenue ,service may use a personal email account to conduct any official business of the ,government4 #fjaj4 ,moratorium on ,,irs conferences ,the ,internal ,revenue ,service shall not hold any conference until the ,treasury ,inspector ,general for ,tax ,administration submits a report to ,congress-- 7#a7 certifying that the ,internal ,revenue ,service has implemented all of the recommendations set out in such ,inspector ,general's report titled ,review of the ,august #bjaj ,small ,business_/,self-,employed ,division's ,conference in ,anaheim1 ,california1 and 7#b7 describing such implementation4 #fjaa4 ,applicable standard for determinations of whether an organization is operated exclusively for the promotion of social welfare 7a7 ,in general ,the standard and definitions as in effect on ,january #a1 #bjaj1 which are used to determine whether an organization is operated exclusively for the promotion of social welfare for purposes of section #eja7;c77#d7 of the ,internal ,revenue ,code of #aihf shall apply for purposes of determining the status of organizations under section #eja7;c77#d7 of the ,internal ,revenue ,code of #aihf after the date of the enactment of this ,act4 7b7 ,prohibition on modification of standard ,the ,secretary of the ,treasury may not 7nor may any delegate of such ,secretary7 issue1 revise1 or finalize any regulation 7including the proposed regulations published at #gh ,fed4 ,reg4 #gaece 7,november #bi1 #bjac771 revenue ruling1 or other guidance not limited to a particular taxpayer relating to the standard and definitions specified in subsection 7a74 7c7 ,application to organizations ,except as provided in subsection 7d71 this section shall apply with respect to any organization claiming tax exempt status under section #eja7;c77#d7 of the ,internal ,revenue ,code of #aihf which was created on1 before1 or after the date of the enactment of this ,act4 7d7 ,sunset ,this section shall not apply after the one-year period beginning on the date of the enactment of this ,act4 ,b ,taxpayer ,protection and ,service ,reforms #faja4 ,extension of ,,irs authority to require truncated ,social ,security numbers on ,form ,w-#b 7a7 ,in general ,paragraph 7#b7 of section #fjea7;a7 is amended by striking his social security number and inserting an identifying number for the employee4 7b7 ,effective date ,the amendment made by this section shall take effect on the date of the enactment of this ,act4 #fajb4 ,free electronic filing 7a7 ,in general ,the ,secretary of the ,treasury shall1 in cooperation with the private sector technology industry1 maintain a program that provides free individual income tax preparation and electronic filing services to low-income taxpayers and elderly taxpayers4 7b7 ,requirements of program ,the ,secretary shall by regulation or other guidance prescribe with respect to the program-- 7#a7 the qualifications1 selection process1 and contract term for businesses participating in the program1 7#b7 a process for periodic review of businesses participating in the program1 7#c7 procedures for terminating business participation in the program for failure to comply with any program requirements1 and 7#d7 such other procedures as the ,secretary determines are necessary or appropriate to carry out the purposes of the program4 7c7 ,free ,file program ,the ,internal ,revenue ,service ,free ,file program1 as set forth in the notice published in the ,federal ,register on ,november #d1 #bjjb 7#fg ,fed4 ,reg4 #fgbdg71 shall be treated as meeting the requirements of subsection 7a74 #fajc4 ,pre-populated returns prohibited ,except to the extent provided in section #fjad1 #fjbj1 or #fbja7;d7 of the ,internal ,revenue ,code of #aihf1 the ,secretary of the ,treasury shall not provide to any person a proposed final return or statement for use by such person to satisfy a filing or reporting requirement under such ,code4 #fajd4 ,form #ajdj,,sr for seniors 7a7 ,in general ,the ,secretary of the ,treasury 7or the ,secretary's delegate7 shall make available a form1 to be known as ,form #ajdj,,sr1 for use by individuals to file the return of tax imposed by chapter #a of the ,internal ,revenue ,code of #aihf4 ,such form shall be as similar as practicable to ,form #ajdj;,,ez1 except that-- 7#a7 the form shall be available to individuals who have attained age #fe as of the close of the taxable year1 7#b7 the form may be used even if income for the taxable year includes-- 7,a7 social security benefits 7as defined in section #hf7;d7 of the ,internal ,revenue ,code of #aihf71 7,b7 distributions from qualified retirement plans 7as defined in section #digd7;c7 of such ,code71 annuities or other such deferred payment arrangements1 7,c7 interest and dividends1 or 7,d7 capital gains and losses taken into account in determining the deduction for adjusted net capital gain under section #afi of such ,code1 and 7#c7 the form shall be available without regard to the amount of any item of taxable income or the total amount of taxable income for the taxable year4 7b7 ,effective date ,the form required by subsection 7a7 shall be made available for taxable years beginning after ,december #ca1 #bjad4 #faje4 ,increased refund and credit threshold for ,joint ,committee on ,taxation review of ,c corporation return 7a7 ,in general ,subsections 7a7 and 7b7 of section #fdje are each amended by inserting 7#e1jjj1jjj in the case of a ,c corporation7 after #b1jjj1jjj4 7b7 ,effective date ,the amendment made by this section shall take effect on the date of the enactment of this ,act1 except that such amendment shall not apply with respect to any refund or credit with respect to a report that has been made before such date under section #fdje of the ,internal ,revenue ,code of #aihf4 ,c ,tax return due date simplification #fbja4 ,due dates for returns of partnerships1 ,s corporations1 and ,c corporations 7a7 ,partnerships and ,s corporations 7#a7 ,in general ,so much of subsection 7b7 of #fjgb as precedes the second sentence thereof is amended to read as follows3 7b7 ,returns of partnerships and ,s corporations ,returns of partnerships under section #fjca and returns of ,s corporations under sections #fjab and #fjcg made on the basis of the calendar year shall be filed on or before the #aeth day of ,march following the close of the calendar year1 and such returns made on the basis of a fiscal year shall be filed on or before the #aeth day of the third month following the close of the fiscal year4 4 7#b7 ,conforming amendment ,section #fjgb7;a7 is amended by striking #fjag1 or #fjca and inserting or #fjag4 7b7 ,conforming amendments relating to ,c corporation due date of #aeth day of fourth month following taxable year 7#a7 ,section #agj7;a77#c77;,b71 as redesignated by the preceding provisions of this ,act1 is amended by striking third month and inserting fourth month4 7#b7 ,section #efc is amended by striking third month each place it appears and inserting fourth month4 7#c7 ,section #aced7;d77#a77;,b77i7 is amended by striking #c;d month and inserting #dth month4 7#d7 ,subsection 7a7 and 7c7 of section #fafg are each amended by striking third month and inserting fourth month4 7#e7 ,section #fdbe7;a77#a7 is amended by striking third month and inserting fourth month4 7#f7 ,subsections 7b77#b77;,a71 7g77#c71 and 7h77#a7 of section #ffee are each amended by striking #crd month and inserting #dth month4 7c7 ,effective dates 7#a7 ,in general ,except as provided in paragraph 7#b71 the amendments made by this section shall apply to returns for taxable years beginning after ,december #ca1 #bjad4 7#b7 ,special rule for c corporations with fiscal years ending on ,june #cj ,in the case of any ,c corporation with a fiscal year ending on ,june #cj1 the amendments made by this section shall not apply to any taxable year beginning in #bjbb4 #fbjb4 ,modification of due dates by regulation ,in the case of returns for taxable years beginning after ,december #ca1 #bjad1 the ,secretary of the ,treasury1 or the ,secretary's designee1 shall modify appropriate regulations to provide as follows3 7#a7 ,the maximum extension for the returns of partnerships filing ,form #ajfe shall be a #f-month period ending on ,september #ae for calendar year taxpayers4 7#b7 ,the maximum extension for the returns of trusts filing ,form #ajda shall be a #e-month period ending on ,september #cj for calendar year taxpayers4 7#c7 ,the maximum extension for the returns of employee benefit plans filing ,form #eejj shall be an automatic #c-month period ending on ,november #ae for calendar year plans4 7#d7 ,the maximum extension for the returns of organizations exempt from income tax filing ,form #iij shall be an automatic #f-month period ending on ,november #ae for calendar year filers4 7#e7 ,the due date of ,form #cebj-;,a 7relating to the ,annual ,information ,return of ,foreign ,trust with a ,united ,states ,owner7 for calendar year filers shall be ,april #ae with a maximum extension for a #f-month period ending on ,october #ae4 7#f7 ,the due date of ,form ,,td ,f #ij-bb4a 7relating to ,report of ,foreign ,bank and ,financial ,accounts7 shall be ,april #ae with a maximum extension for a #f-month period ending on ,october #ae and with provision for an extension under rules similar to the rules in ,treas4 ,reg4 section #a4fjha-e4 ,for any taxpayer required to file such ,form for the first time1 any penalty for failure to timely request for1 or file1 an extension1 may be waived by the ,secretary4 #fbjc4 ,corporations permitted statutory automatic #f-month extension of income tax returns 7a7 ,in general ,section #fjha7;b7 is amended by striking #c months and inserting #f months4 7b7 ,effective date ,the amendments made by this section shall apply to returns for taxable years beginning after ,december #ca1 #bjad4 ,d ,compliance ,reforms #fcja4 ,penalty for failure to file 7a7 ,in general ,section #ffea7;a7 is amended by striking #ace in the flush material at the end and inserting #djj4 7b7 ,effective date ,the amendments made by this section shall apply to returns the due date for the filing of which 7including extension7 is after ,december #ca1 #bjad4 #fcjb4 ,penalty for failure to file correct information returns and provide payee statements 7a7 ,in general ,section #fgba7;a77#a7 is amended-- 7#a7 by striking #ajj and inserting #bej1 and 7#b7 by striking #a1ejj1jjj and inserting #c1jjj1jjj4 7b7 ,reduction where correction in specified period 7#a7 ,correction within #cj days ,section #fgba7;b77#a7 is amended-- 7,a7 by striking #cj and inserting #ej1 7,b7 by striking #ajj and inserting #bej1 and 7,c7 by striking #bej1jjj and inserting #ejj1jjj4 7#b7 ,failures corrected on or before ,august #a ,section #fgba7;b77#b7 is amended-- 7,a7 by striking #fj and inserting #ajj1 7,b7 by striking #ajj 7prior to amendment by subparagraph 7,a77 and inserting #bej1 and 7,c7 by striking #ejj1jjj and inserting #a1ejj1jjj4 7c7 ,lower limitation for persons with gross receipts of not more than #e1jjj1jjj ,section #fgba7;d77#a7 is amended-- 7#a7 in subparagraph 7,a7-- 7,a7 by striking #ejj1jjj and inserting #a1jjj1jjj1 and 7,b7 by striking #a1ejj1jjj and inserting #c1jjj1jjj1 7#b7 in subparagraph 7,b7-- 7,a7 by striking #ge1jjj and inserting #age1jjj1 and 7,b7 by striking #bej1jjj and inserting #ejj1jjj1 and 7#c7 in subparagraph 7,c7-- 7,a7 by striking #bjj1jjj and inserting #ejj1jjj1 and 7,b7 by striking #ejj1jjj 7prior to amendment by subparagraph 7,a77 and inserting #a1ejj1jjj4 7d7 ,penalty in case of intentional disregard ,section #fgba7;e7 is amended-- 7#a7 by striking #bej in paragraph 7#b7 and inserting #ejj1 and 7#b7 by striking #a1ejj1jjj in paragraph 7#c77;,a7 and inserting #c1jjj1jjj4 7e7 ,failure ,to furnish correct payee statements 7#a7 ,in general ,section #fgbb7;a77#a7 is amended-- 7,a7 by striking #ajj and inserting #bej1 and 7,b7 by striking #a1ejj1jjj and inserting #c1jjj1jjj4 7#b7 ,reduction where correction in specified period 7,a7 ,correction within #cj days ,section #fgbb7;b77#a7 is amended-- 7i7 by striking #cj and inserting #ej1 7ii7 by striking #ajj and inserting #bej1 and 7iii7 by striking #bej1jjj and inserting #ejj1jjj4 7,b7 ,failures corrected on or before ,august #a ,section #fgbb7;b77#b7 is amended-- 7i7 by striking #fj and inserting #ajj1 7ii7 by striking #ajj 7prior to amendment by clause 7i77 and inserting #bej1 and 7iii7 by striking #ejj1jjj and inserting #a1ejj1jjj4 7#c7 ,lower limitation for persons with gross receipts of not more than #e1jjj1jjj ,section #fgbb7;d77#a7 is amended-- 7,a7 in subparagraph 7,a7-- 7i7 by striking #ejj1jjj and inserting #a1jjj1jjj1 and 7ii7 by striking #a1ejj1jjj and inserting #c1jjj1jjj1 7,b7 in subparagraph 7,b7-- 7i7 by striking #ge1jjj and inserting #age1jjj1 and 7ii7 by striking #bej1jjj and inserting #ejj1jjj1 and 7,c7 in subparagraph 7,c7-- 7i7 by striking #bjj1jjj and inserting #ejj1jjj1 and 7ii7 by striking #ejj1jjj 7prior to amendment by subparagraph 7,a77 and inserting #a1ejj1jjj4 7#d7 ,penalty in case of intentional disregard ,section #fgbb7;e7 is amended-- 7,a7 by striking #bej in paragraph 7#b7 and inserting #ejj1 and 7,b7 by striking #a1ejj1jjj in paragraph 7#c77;,a7 and inserting #c1jjj1jjj4 7f7 ,effective date ,the amendments made by this section shall apply with respect to returns and statements required to be filed after ,december #ca1 #bjad4 #fcjc4 ,clarification of #f-year statute of limitations in case of overstatement of basis 7a7 ,in general ,subparagraph 7,b7 of section #feja7;e77#a7 is amended-- 7#a7 by striking and at the end of clause 7i71 by redesignating clause 7ii7 as clause 7iii71 and by inserting after clause 7i7 the following new clause3 7ii7 ,an understatement of gross income by reason of an overstatement of unrecovered cost or other basis is an omission from gross income2 and 1 and 7#b7 by inserting 7other than in the case of an overstatement of unrecovered cost or other basis7 in clause 7iii7 7as so redesignated7 after ,in determining the amount omitted from gross income4 7b7 ,effective date ,the amendments made by this section shall apply to-- 7#a7 returns filed after the date of the enactment of this ,act1 and 7#b7 returns filed on or before such date if the period specified in section #feja of the ,internal ,revenue ,code of #aihf 7determined without regard to such amendments7 for assessment of the taxes with respect to which such return relates has not expired as of such date4 #fcjd4 ,reform of rules related to qualified tax collection contracts 7a7 ,requirement ,to collect certain inactive tax receivables under qualified tax collection contracts ,section #fcjf is amended by redesignating subsections 7c7 through 7f7 as subsections 7d7 through 7g71 respectively1 and by inserting after subsection 7b7 the following new subsection3 7c7 ,collection of inactive tax receivables 7#a7 ,in general ,notwithstanding any other provision of law1 the ,secretary shall enter into one or more qualified tax collection contracts for the collection of all outstanding inactive tax receivables4 7#b7 ,inactive tax receivables ,for purposes of this section-- 7,a7 ,in general ,the term inactive tax receivable means any tax receivable if-- 7i7 at any time after assessment1 the ,internal ,revenue ,service removes such receivable from the active inventory for lack of resources or inability to locate the taxpayer1 7ii7 more than #a_/c of the period of the applicable statute of limitation has lapsed and no employee of the ,internal ,revenue ,service has been assigned such receivable for collection1 or 7iii7 in the case of a receivable which has been assigned for collection1 more than #cfe days have passed without interaction with the taxpayer or a third party for purposes of furthering the collection of such receivable4 7,b7 ,tax receivable ,the term tax receivable means any outstanding assessment which the ,internal ,revenue ,service includes in potentially collectible inventory4 4 7b7 ,certain tax receivables not eligible for collection under qualified tax collection contracts ,section #fcjf1 as amended by subsection 7a71 is amended by redesignating subsections 7d7 through 7g7 as subsections 7e7 through 7h71 respectively1 and by inserting after subsection 7c7 the following new subsection3 7d7 ,certain tax receivables not eligible for collection under qualified tax collections contracts ,a tax receivable shall not be eligible for collection pursuant to a qualified tax collection contract if such receivable-- 7#a7 is subject to a pending or active offer-in-compromise or installment agreement1 7#b7 is classified as an innocent spouse case1 7#c7 involves a taxpayer identified by the ,secretary as being-- 7,a7 deceased1 7,b7 under the age of #ah1 7,c7 in a designated combat zone1 or 7,d7 a victim of identity theft1 7#d7 is currently under examination1 litigation1 criminal investigation1 or levy1 or 7#e7 is currently subject to a proper exercise of a right of appeal under this title4 4 7c7 ,contracting priority ,section #fcjf1 as amended by the preceding provisions of this section1 is amended by redesignating subsection 7h7 as subsection 7i7 and by inserting after subsection 7g7 the following new subsection3 7h7 ,contracting priority ,in contracting for the services of any person under this section1 the ,secretary shall give priority to private collection contractors and debt collection centers on the schedule required under section #cgaa7;g7 of title #ca1 ,united ,states ,code1 to the extent such private collection contractors and debt collection centers are appropriate to carry out the purposes of this section4 4 7d7 ,disclosure of return information ,section #fajc7k7 is amended by adding at the end the following new paragraph3 7#aa7 ,qualified tax collection contractors ,persons providing services pursuant to a qualified tax collection contract under section #fcjf may1 if speaking to a person who has identified himself or herself as having the name of the taxpayer to which a tax receivable 7within the meaning of such section7 relates1 identify themselves as contractors of the ,internal ,revenue ,service and disclose the business name of the contractor1 and the nature1 subject1 and reason for the contact4 ,disclosures under this paragraph shall be made only in such situations and under such conditions as have been approved by the ,secretary4 4 7e7 ,taxpayers affected by federally declared disasters ,section #fcjf1 as amended by the preceding provisions of this section1 is amended by redesignating subsection 7i7 as subsection 7j7 and by inserting after subsection 7h7 the following new subsection3 7i7 ,taxpayers in ,presidentially declared disaster areas ,the ,secretary may prescribe procedures under which a taxpayer determined to be affected by a federally declared disaster 7as defined by section #afe7;i77#e77 may request-- 7#a7 relief from immediate collection measures by contractors under this section1 and 7#b7 a return of the inactive tax receivable to the ,internal ,revenue ,service for collection4 4 7f7 ,report to ,congress 7#a7 ,in general ,section #fcjf1 as amended by the preceding provisions of this section1 is amended by redesignating subsection 7j7 as subsection 7k7 and by inserting after subsection 7i7 the following new subsection3 7j7 ,report to ,congress ,not later than #ij days after each fiscal year ending on ,september #cj1 the ,secretary shall submit to the ,committee on ,ways and ,means of the ,house of ,representatives and the ,committee on ,finance of the ,senate a report with respect to qualified tax collection contracts under this section which shall include-- 7#a7 annually 7with respect to each such fiscal year beginning with the first such fiscal year ending after the date of the enactment of this subsection7-- 7,a7 the total number and amount of tax receivables provided to each contractor for collection under this section1 7,b7 the total amounts collected 7and amounts of installment agreements entered into under subsection 7b77#a77;,b77 with respect to each contractor and the collection costs incurred 7directly and indirectly7 by the ,internal ,revenue ,service with respect to such amounts1 7,c7 the impact of such contracts on the total number and amount of unpaid assessments1 and on the number and amount of assessments collected by ,internal ,revenue ,service personnel after initial contact by a contractor1 7,d7 the amount of fees retained by the ,secretary under subsection 7e7 and a description of the use of such funds1 and 7,e7 a disclosure safeguard report in a form similar to that required under section #fajc7p77#e71 and 7#b7 biannually 7beginning with the second report submitted under this subsection7-- 7,a7 an independent evaluation of contractor performance2 and 7,b7 a measurement plan that includes a comparison of the best practices used by the private collectors to the collection techniques used by the ,internal ,revenue ,service and mechanisms to identify and capture information on successful collection techniques used by the contractors that could be adopted by the ,internal ,revenue ,service4 4 7#b7 ,repeal of existing reporting requirements with respect to qualified tax collection contracts ,section #hha of the ,american ,jobs ,creation ,act of #bjjd is amended by striking subsection 7e74 7g7 ,effective dates 7#a7 ,in general ,the amendments made by subsections 7a7 and 7b7 shall apply to tax receivables identified by the ,secretary after the date of the enactment of this ,act4 7#b7 ,contracting priority ,the amendments made by subsection 7c7 shall apply to contracts and agreements entered into after the date of the enactment of this ,act4 7#c7 ,disclosures ,the amendments made by subsection 7d7 shall apply to disclosures made after the date of the enactment of this ,act4 7#d7 ,procedures2 ,report to ,congress ,the amendments made by subsections 7e7 and 7f7 shall take effect on the date of the enactment of this ,act4 #fcje4 #ajj percent continuous levy on payments to ,medicare providers and suppliers 7a7 ,in general ,paragraph 7#c7 of section #fcca7;h7 is amended by striking the period at the end and inserting 1 or to a ,medicare provider or supplier under title ,,xviii of the ,social ,security ,act44 7b7 ,effective date ,the amendment made by this section shall apply to levies issued after the date of the enactment of this ,act4 #fcjf4 ,treatment of refundable credits for purposes of certain penalties 7a7 ,application of underpayment penalties ,section #fffd7;a7 is amended by adding at the end the following3 ,a rule similar to the rule of section #fbaa7;b77#d7 shall apply for purposes of this subsection44 7b7 ,penalty for erroneous claim of credit made applicable to earned income credit ,section #ffgf7;a7 is amended by striking 7other than a claim for a refund or credit relating to the earned income credit under section #cb74 7c7 ,effective dates 7#a7 ,underpayment penalties ,the amendment made by subsection 7a7 shall apply to-- 7,a7 returns filed after ,february #bf1 #bjad1 and 7,b7 returns filed on or before such date if the period specified in section #feja of the ,internal ,revenue ,code of #aihf for assessment of the taxes with respect to which such return relates has not expired as of such date4 7#b7 ,penalty for erroneous claim of credit ,the amendment made by subsection 7b7 shall apply to claims filed after ,february #bf1 #bjad4 ,,vii ,excise taxes #gjja4 ,repeal of medical device excise tax 7a7 ,in general ,chapter #cb is amended by striking subchapter ,e4 7b7 ,conforming amendments 7#a7 ,subsection 7a7 of section #dbba is amended by striking the last sentence4 7#b7 ,paragraph 7#b7 of section #fdaf7;b7 is amended by striking the last sentence4 7c7 ,clerical amendment ,the table of subchapters for chapter #cb is amended by striking the item relating to subchapter ,e4 7d7 ,effective date ,the amendments made by this section shall apply to sales after the date of the enactment of this ,act4 #gjjb4 ,modifications relating to oil spill liability trust fund 7a7 ,extension of ,oil ,spill ,liability ,trust ,fund financing rate ,paragraph 7#b7 of section #dfaa7;f7 is amended by striking ,december #ca1 #bjag and inserting ,december #ca1 #bjbc4 7b7 ,application with respect to bitumen and bituminous mixtures and shale oil ,paragraph 7#a7 of section #dfab7;a7 is amended to read as follows3 7#a7 ,crude oil ,the term crude oil includes crude oil condensates1 natural gasoline1 any bitumen or bituminous mixture1 any oil derived from a bitumen or bituminous mixture1 shale oil1 and any oil derived from kerogen-bearing sources4 4 7c7 ,conforming amendment ,paragraph 7#b7 of section #dfab7;a7 is amended by striking from a well located4 7d7 ,effective date ,the amendments made by this section shall apply to oil and petroleum products received or entered during calendar quarters beginning more than #fj days after the date of the enactment of this ,act4 #gjjc4 ,modification relating to inland waterways trust fund financing rate 7a7 ,in general ,section #djdb7;b77#b77;,a7 is amended to read as follows3 7,a7 ,the ,inland ,waterways ,trust ,fund financing rate is #bf cents per gallon4 4 7b7 ,effective date ,the amendment made by this section shall apply to fuel used after ,december #ca1 #bjad4 #gjjd4 ,excise tax on systemically important financial institutions 7a7 ,in general ,chapter #cf is amended by adding at the end the following new subchapter3 ,e ,tax on systemically important financial institutions ,sec4 #ddia4 ,tax on systemically important financial institutions4 #ddia4 ,tax on systemically important financial institutions 7a7 ,in general ,there is hereby imposed a tax on the excess total consolidated assets of any systemically important financial institution on the close of each calendar quarter4 7b7 ,amount of tax ,the rate of tax imposed by subsection 7a7 is #j4jce percent of such excess total consolidated assets4 7c7 ,by whom paid ,the tax imposed by subsection 7a7 shall be paid by the systemically important financial institution4 7d7 ,due date ,the tax imposed by subsection 7a7 for a calendar quarter shall be due on the first day of the third month beginning after the close of such quarter4 7e7 ,systemically important financial institution ,for purposes of this section1 the term systemically important financial institution means any person subject to section #afe of the ,dodd-,frank ,wall ,street ,reform and ,consumer ,protection ,act4 7f7 ,excess total consolidated assets ,for purposes of this section1 the term excess total consolidated assets means the excess of-- 7#a7 total consolidated assets 7within the meaning of section #afe of the ,dodd-,frank ,wall ,street ,reform and ,consumer ,protection ,act71 over 7#b7 #ejj1jjj1jjj1jjj4 7g7 ,adjustment of dollar amount 7#a7 ,in general ,in the case of any calendar year beginning after #bjae1 there shall be substituted for the dollar amount in subsection 7f77#b7 a dollar amount which bears the same ratio to such amount 7determined without regard to this subsection7 as-- 7,a7 the ,,gdp for the preceding calendar year1 bears to 7,b7 the ,,gdp for #bjad4 ,any dollar amount determined under this paragraph for substitution in subsection 7f77#b7 which is not a multiple of #a1jjj1jjj1jjj shall be rounded to the nearest multiple of #a1jjj1jjj1jjj4 7#b7 ,,gdp ,for purposes of this subsection1 the ,,gdp for any calendar year means the latest estimate of the gross domestic product published by the ,department of ,commerce for the preceding calendar year4 7h7 ,treatment of certain references ,any reference in this section to any provision of the ,dodd-,frank ,wall ,street ,reform and ,consumer ,protection ,act shall be treated as a reference to such provision as in effect on the date of the enactment of this section4 4 7b7 ,clerical amendment ,the table of subchapters for chapter #cf is amended by adding at the end the following new item3 ,subchapter ,e4 ,tax on systemically important financial institutions4 4 7c7 ,effective date ,the amendments made by this section shall apply to calendar quarters beginning after ,december #ca1 #bjad4 #gjje4 ,clarification of orphan drug exception to annual fee on branded prescription pharmaceutical manufacturers and importers 7a7 ,in general ,paragraph 7#c7 of section #ijjh7;e7 of the ,patient ,protection and ,affordable ,care ,act 7,public ,law #aaa-adh7 is amended to read as follows3 7#c7 ,exclusion of orphan drug sales 7,a7 ,in general ,the term branded prescription drug sales shall not include sales of any drug or biological product-- 7i7 with respect to which a credit was allowed for any taxable year under section #de;,c of the ,internal ,revenue ,code of #aihf 7as in effect before its repeal by the ,tax ,reform ,act of #bjad72 or 7ii7 which is approved or licensed by the ,food and ,drug ,administration for marketing solely for one or more rare diseases or conditions4 7,b7 ,limitation ,subparagraph 7,a7 shall not apply with respect to any drug or biological product after the date on which the drug or biological product is approved or licensed by the ,food and ,drug ,administration for marketing for any indication other than the treatment of a rare disease or condition4 7,c7 ,rare disease or condition 7i7 ,in general ,for purposes of this paragraph1 the term rare disease or condition means any disease or condition which-- 7,i7 affects less than #bjj1jjj persons in the ,united ,states1 or 7,,ii7 affects more than #bjj1jjj persons in the ,united ,states but for which there is no reasonable expectation that the cost of developing and making available in the ,united ,states a drug or biological product for such disease or condition will be recovered from sales in the ,united ,states of such drug or biological product4 7ii7 ,time of determination ,determinations under the preceding sentence with respect to any drug or biological product shall be made on the basis of the facts and circumstances as of-- 7,i7 in the case a drug or biological product that has been designated under section #ebf of the ,federal ,food1 ,drug1 and ,cosmetic ,act for a particular indication1 the date of such designation1 and 7,,ii7 in any other case1 the date such drug or biological product is approved or licensed by the ,food and ,drug ,administration for marketing for the treatment of the disease or condition referred to in clause 7i74 4 7b7 ,effective date ,the amendment made by this section shall apply to fees imposed under section #ijjh7;a77#a7 of the ,patient ,protection and ,affordable ,care ,act with annual payment dates after #bjac4 ,,viii ,deadwood and technical provisions ,a ,repeal of ,deadwood #hjja4 ,repeal of ,puerto ,rico economic activity credit ,subpart ,b of part ,,iv of subchapter ,a of chapter #a is amended by striking section #cj;,a 7and by striking the item relating to such section in the table of sections of such subpart74 #hjjb4 ,repeal of making work pay credit 7a7 ,in general ,subpart ,c of part ,,iv of subchapter ,a of chapter #a is amended by striking section #cf;,a 7and by striking the item relating to such section in the table of sections of such subpart74 7b7 ,conforming amendments 7#a7 ,section #fbaa7;b77#d77;,a7 is amended by striking #cf;,a14 7#b7 ,section #fbac7;g77#b7 is amended by striking subparagraph 7,n74 #hjjc4 ,general business credit ,subsection 7d7 of section #ch is amended by striking paragraph 7#c74 #hjjd4 ,environmental tax 7a7 ,in general ,subchapter ,a of chapter #a is amended by striking part ,,vii 7and the table of parts for such chapter is amended by striking the item relating to part ,,vii74 7b7 ,conforming amendments 7#a7 ,section #bf7;b77#b7 is amended by striking subparagraph 7,b74 7#b7 ,section #afd7;a7 is amended by striking paragraph 7#e74 7#c7 ,section #bge7;a7 is amended by striking the last sentence4 7#d7 ,section #hhb7;a77#a7 is amended by striking #ei;,a14 7#e7 ,section #fdbe7;c77#a77;,a71 as amended by the preceding provisions of this ,act1 is amended to read as follows3 7,a7 the tax imposed by section #aa or #abja7;a71 or subchapter ,l of chapter #a1 whichever is applicable1 over 4 7#f7 ,section #ffee7;g77#a77;,a71 as amended by the preceding provisions of this ,act1 is amended by adding plus at the end of clause 7i7 and by striking clause 7ii74 #hjje4 ,annuities2 certain proceeds of endowment and life insurance contracts ,section #gb is amended-- 7#a7 in subsection 7c77#d7 by striking 2 except that if such date was before ,january #a1 #aied1 then the annuity starting date is ,january #a1 #aied1 and 7#b7 in subsection 7g77#c7 by striking ,january #a1 #aied1 or and 1 whichever is later4 #hjjf4 ,unemployment compensation ,section #he is amended by striking subsection 7c74 #hjjg4 ,flexible spending arrangements ,section #ajf7;c77#a7 is amended by striking ,effective on and after ,january #a1 #aiig1 gross and inserting ,gross4 #hjjh4 ,certain combat zone compensation of members of the armed forces ,subsection 7c7 of section #aab is amended-- 7#a7 by striking 7after ,june #bd1 #aiej7 in paragraph 7#b71 and 7#b7 striking such zone2 and all that follows in paragraph 7#c7 and inserting such zone44 #hjji4 ,qualified group legal services plans 7a7 ,in general ,part ,,iii of subchapter ,b of chapter #a is amended by striking section #abj 7and by striking the item relating to such section in the table of sections for such part74 7b7 ,tax-,exemption of group legal services plans ,section #eja7;c7 is amended by striking paragraph 7#bj74 7c7 ,conforming amendments 7#a7 ,section #dad7n77#c77;,c7 is amended by striking #abj14 7#b7 ,section #dad7t77#b7 is amended by striking #abj14 7#c7 ,section #caba7;a7 is amended by striking paragraph 7#ag74 7#d7 ,section #cbca7;e7 is amended by striking paragraph 7#g74 7#e7 ,section #ccjf7;b7 is amended by striking paragraph 7#ab74 7#f7 ,section #fjci;,d7d77#a7 is amended by striking #abj14 7#g7 ,section #bji7;a77#ad7 of the ,social ,security ,act is amended-- 7,a7 by striking subparagraph 7,b71 and 7,b7 by striking 7#ad77;,a7 and inserting 7#ad74 #hjaj4 ,certain reduced uniformed services retirement pay ,section #abb7;b77#a7 is amended by striking after ,december #ca1 #aife14 #hjaa4 ,great plains conservation program ,section #abf7;a7 is amended by striking paragraph 7#f7 and by redesignating paragraphs 7#g717h71 7#i71 and 7#aj7 as paragraphs 7#f71 7#g71 7#h71 and 7#i71 respectively4 #hjab4 ,state legislators' travel expenses away from home ,paragraph 7#d7 of section #afb7;h7 is amended by striking ,for taxable years beginning after ,december #ca1 #aihj1 this and inserting ,this4 #hjac4 ,treble damage payments under the antitrust law ,section #afb7;g7 is amended by striking the last sentence4 #hjad4 ,phase-in of limitation on investment interest ,section #afc7;d7 is amended by striking paragraph 7#f74 #hjae4 ,charitable1 etc41 contributions and gifts ,section #agj is amended by striking subsection 7k74 #hjaf4 ,amortizable bond premium 7a7 ,in general ,subparagraph 7,b7 of section #aga7;b77#a7 is amended to read as follows3 7,b7 7i7 with reference to the amount payable on maturity 7or if it results in a smaller amortizable bond premium attributable to the period before the call date1 with reference to the amount payable on the earlier call date71 in the case of a bond described in subsection 7a77#a71 and 7ii7 with reference to the amount payable on maturity or on an earlier call date1 in the case of a bond described in subsection 7a77#b74 4 7b7 ,conforming amendments ,paragraphs 7#b77;,b7 and 7#c77;,b7 of section #aga7;b7 are each amended by striking paragraph 7#a77;,b77ii7 and inserting paragraph 7#a77;,b77i74 #hjag4 ,repeal of deduction for clean-fuel vehicles and certain refueling property 7a7 ,in general ,part ,,vi of subchapter ,b of chapter #a is amended by striking section #agi;,a 7and by striking the item relating to such section in the table of sections for such part74 7b7 ,conforming amendment 7#a7 ,section #fb7;a7 is amended by striking paragraph 7#ad74 7#b7 ,section #bhj;,f7a77#a7 is amended by striking subparagraph 7,c74 7#c7 ,section #cab7k77#c71 as amended by this ,act1 is amended by striking 1 #agi;,a each place it appears4 7#d7 ,section #ajaf7;a7 is amended by striking paragraph 7#bd74 7c7 ,effective date ,the amendments made by this section shall apply to property placed in service after ,december #ca1 #bjje4 #hjah4 ,repeal of deduction for capital costs incurred in complying with environmental protection agency sulfur regulations 7a7 ,in general ,part ,,vi of subchapter ,b of chapter #a is amended by striking section #agi;,b 7and by striking the item relating to such section in the table of sections for such part74 7b7 ,conforming amendments 7#a7 ,section #cab7k77#c71 as amended by this ,act1 is amended by striking 1 #agi;,b each place it appears4 7#b7 ,section #ajaf7;a7 is amended by striking paragraph 7#cj74 7c7 ,effective date ,the amendments made by this section shall apply to amounts paid or incurred after ,december #ca1 #bjji4 #hjai4 ,activities not engaged in for profit ,section #ahc7;e77#a7 is amended by striking the last sentence4 #hjbj4 ,dividends received on certain preferred stock2 and dividends paid on certain preferred stock of public utilities 7a7 ,in general ,sections #bdd and #bdg are hereby repealed1 and the table of sections for part ,,viii of subchapter ,b of chapter #a is amended by striking the items relating to sections #bdd and #bdg4 7b7 ,conforming amendments 7#a7 ,paragraph 7#e7 of section #agb7;d7 is amended to read as follows3 7#e7 ,computation of deduction for dividends received ,the deductions allowed by section #bdc 7relating to dividends received by corporations7 and #bde 7relating to dividends received from certain foreign corporations7 shall be computed without regard to section #bdf7;b7 7relating to limitation on aggregate amount of deductions74 4 7#b7 ,paragraph 7#a7 of section #bdc7;c7 is amended to read as follows3 7#a7 ,in general ,in the case of any dividend received from a #bj-percent owned corporation1 subsection 7a77#a7 shall be applied by substituting #hj percent for #gj percent 4''4 7#c7 ,section #bdc7;d7 is amended by striking paragraph 7#d74 7#d7 ,section #bdf is amended-- 7,a7 by striking 1 #bdd1 in subsection 7a77#a71 7,b7 in subsection 7b77#a7-- 7i7 by striking sections #bdc7;a77#a71 #bdd7;a71 the first place it appears and inserting section #bdc7;a77#a71 7ii7 by striking #bdd7;a71 the second place it appears1 and 7iii7 by striking subsection 7a7 or 7b7 of section #bde1 and #bdg1 and inserting and subsection 7a7 or 7b7 of section #bde11 and 7,c7 by striking 1 #bdd1 in subsection 7c77#a74 7#e7 ,section #bdf;,a is amended by striking 1 #bdd1 both places it appears in subsections 7a7 and 7e74 7#f7 ,sections #bfc7;g77#b77;,b77iii71 #bgg7;a71 #cja7;e77#b71 #dfi7;e77#d71 #eab7;a77#c77;,a71 #hje7;a77#d77;,a71 7,c71 and 7,d71 #hje7;b77#d7 7as redesignated by this ,act71 #hcb7;b77#e77;,b77ii71 7,d77i71 and 7,d77ii77,i71 #hcc7;b77#c77;,e71 and #ajei7;b77#b77;,b7 are each amended by striking 1 #bdd1 each place it appears4 7#g7 ,section #hje7;a77#d77;,b7 is amended by striking 1 #bdd7;a71 each place it appears4 7#h7 ,section #haj7;c77#b77;,b7 is amended by striking #bdd 7relating to dividends on certain preferred stock of public utilities714 7#i7 ,section #abdd7;c77#b77;,c7 is amended by striking #bdd14 #hjba4 ,acquisitions made to evade or avoid income tax ,paragraphs 7#a7 and 7#b7 of section #bfi7;a7 are each amended by striking or acquired on or after ,october #h1 #aidj14 #hjbb4 ,distributions of property ,paragraph 7#c7 of section #cja7;c7 is amended to read as follows3 7#c7 ,amounts in excess of basis ,that portion of the distribution which is not a dividend1 to the extent that it exceeds the adjusted basis of the stock1 shall be treated as gain from the sale or exchange of property4 4 #hjbc4 ,effect on earnings and profits ,subsection 7d7 of section #cab is amended by striking paragraph 7#b7 and redesignating paragraph 7#c7 as paragraph 7#b74 #hjbd4 ,basis to corporations ,section #cfb7;a7 is amended by striking on or after ,june #bb1 #aied14 #hjbe4 ,tax credit employee stock ownership plans ,section #dji is amended by striking subsection 7q74 #hjbf4 ,employee stock purchase plans ,section #dbc7;a7 is amended by striking after ,december #ca1 #aifc4 #hjbg4 ,transition rules 7a7 ,paragraph 7#e7 of section #dcj7;c7 is amended by striking subparagraph 7,b7 and by striking 7,a7 ,in general4--4 7b7 ,paragraph 7#b7 of section #dcj7;h7 is amended by striking subparagraph 7,g74 7c7 ,paragraph 7#c7 of section #dcf7;j7 is amended by striking subparagraphs 7,b7 and 7,c7 and by striking 7,a7 ,in general4-- 7d7 ,section #dcf is amended by striking subsection 7m74 #hjbh4 ,limitation on deductions for certain farming 7a7 ,in general ,section #dfd is amended by striking any farming syndicate 7as defined in subsection 7c77 both places it appears in subsections 7a7 and 7b7 and inserting any taxpayer to whom subsection 7d7 applies4 7b7 ,farming syndicate 7#a7 ,subsection 7c7 of section #dfd is hereby moved to the end of section #dfa and redesignated as subsection 7j74 7#b7 ,such subsection 7j7 is amended-- 7,a7 by striking ,for purposes of this section in paragraph 7#a7 and inserting ,for purposes of subsection 7i77#d71 and 7,b7 by adding at the end the following new paragraphs3 7#c7 ,farming ,for purposes of this subsection1 the term farming has the meaning given to such term by section #dfd7;e74 7#d7 ,limited entrepreneur ,for purposes of this subsection1 the term limited entrepreneur means a person who-- 7,a7 has an interest in an enterprise other than as a limited partner1 and 7,b7 does not actively participate in the management of such enterprise4 4 7,c7 ,paragraph 7#d7 of section #dfa7;i7 is amended by striking section #dfd7;c7 and inserting subsection 7j74 7c7 ,section #dfd is amended-- 7#a7 by striking subsections 7e7 and 7g7 and redesignating subsections 7d7 and 7f7 as subsections 7c7 and 7d71 respectively1 and 7#b7 by inserting after subsection 7d7 the following new subsection3 7e7 ,farming ,for purposes of this section1 the term farming means the cultivation of land or the raising or harvesting of any agricultural or horticultural commodity including the raising1 shearing1 feeding1 caring for1 training1 and management of animals4 ,for purposes of the preceding sentence1 trees 7other than trees bearing fruit or nuts7 shall not be treated as an agricultural or horticultural commodity4 4 7d7 ,subsection 7d7 of section #dfd of such ,code1 as redesignated by subsection 7c71 is amended-- 7#a7 by striking paragraph 7#a7 and redesignating paragraphs 7#b71 7#c71 and 7#d7 as paragraphs 7#a71 7#b71 and 7#c71 respectively1 and 7#b7 by striking ,,subsections 7a7 ,,and 7b7 ,,to ,,apply ,,to in the subsection heading4 7e7 ,subparagraph 7,a7 of section #eh7;a77#b7 is amended by striking section #dfd7;c7 and inserting section #dfa7;j74 #hjbi4 ,deductions limited to amount at risk ,paragraph 7#c7 of section #dfe7;c7 is amended by striking ,in the case of taxable years beginning after ,december #ca1 #aigh1 this and inserting ,this4 #hjcj4 ,passive activity losses and credits limited ,section #dfi is amended by striking subsection 7m74 #hjca4 ,adjustments required by changes in method of accounting ,section #dha7;b77#c7 is amended by striking subparagraph 7,c74 #hjcb4 ,exemption from tax on corporations1 certain trusts1 etc ,section #eja is amended by striking subsection 7s74 #hjcc4 ,requirements for exemption 7a7 ,section #ejc7;a77#a7 is amended to read as follows3 7#a7 ,general rule ,an organization described in paragraph 7#ag7 or 7#ah7 of section #eja7;c7 or described in section #dja7;a7 and referred to in section #dige7;g77#b7 or 7#c7 shall not be exempt from taxation under section #eja7;a7 if it has engaged in a prohibited transaction4 4 7b7 ,paragraph 7#b7 of section #ejc7;a7 is amended by striking described in section #eja7;c77#ag7 or 7#ah7 or paragraph 7a77#a77;,b7 and inserting described in paragraph 7#a74 7c7 ,subsection 7c7 of section #ejc is amended by striking described in section #eja7;c77#ag7 or 7#ah7 or subsection 7a77#a77;,b7 and inserting described in subsection 7a77#a74 #hjcd4 ,repeal of special treatment for religious broadcasting company 7a7 ,in general ,subsection 7b7 of section #eab is amended by striking paragraph 7#ae74 7b7 ,effective date ,the amendment made by this section shall apply to taxable years beginning after the date of the enactment of this ,act4 #hjce4 ,repeal of exclusion of gain or loss from disposition of brownfield property 7a7 ,in general ,subsection 7b7 of section #eab is amended by striking paragraph 7#ai74 7b7 ,effective date ,the amendment made by this section shall apply to property acquired after ,december #ca1 #bjji4 #hjcf4 ,accumulated taxable income ,paragraph 7#a7 of section #ece7;b7 and paragraph 7#a7 of section #ede7;b7 are each amended by striking section #eca and all that follows and inserting section #eca or the personal holding company tax imposed by section #eda44 #hjcg4 ,certain provisions related to depletion 7a7 ,section #fad7;b77#c7 7before being redesignated by title ,,iii7 is amended by striking subparagraph 7,c74 7b7 ,section #fad7;b77#d7 7before being redesignated by title ,,iii7 is amended by striking whichever of the following taxable years is the later3 ,the first taxable year beginning after ,december #ca1 #aifc1 or4 7c7 ,section #fad7;b7 7before being redesignated by title ,,iii7 is amended by striking paragraph 7#e74 #hjch4 ,amounts received by surviving annuitant under joint and survivor annuity contract ,subparagraph 7,a7 of section #fia7;d77#a7 is amended by striking after ,december #ca1 #aiec1 and4 #hjci4 ,income taxes of members of armed forces on death ,section #fib7;a77#a7 is amended by striking after ,june #bd1 #aiej4 #hjdj4 ,special rules for computing reserves ,paragraph 7#g7 of section #hjg7;e7 is amended by striking subparagraph 7,b7 and redesignating subparagraph 7,c7 as subparagraph 7,b74 #hjda4 ,insurance company taxable income 7a7 ,section #hcb7;e7 is amended by striking of taxable years beginning after ,december #ca1 #aiff14 7b7 ,section #hcb7;e77#f7 is amended by striking ,in the case of any taxable year beginning after ,december #ca1 #aigj1 the and inserting ,the4 #hjdb4 ,capitalization of certain policy acquisition expenses ,section #hdh 7as amended by title ,,ii7 is amended by striking subsection 7i74 #hjdc4 ,repeal of provision on expatriation to avoid tax 7a7 ,in general ,subpart ,a of part ,,ii of subchapter ,n of chapter #a is amended by striking section #hgg 7and by striking the item relating to such section in the table of sections for such subpart74 7b7 ,conforming amendments 7#a7 ,section #b7;d7 is amended by striking or #hgg4 7#b7 ,section #aba is amended by striking subsection 7e74 7#c7 ,section #hfe7;j77#c7 is amended by inserting as in effect before its repeal after section #hgg4 7#d7 ,paragraph 7#b7 of section #hga7o7 7as amended by this ,act7 is amended to read as follows3 7#b7 ,for taxation of covered expatriates1 see section #hgg;,a4 4 7#e7 7,a7 ,section #hgg;,a7g77#a77;,a7 is amended to read as follows3 7,a7 ,in general ,the term covered expatriate means any expatriate if-- 7i7 the average annual net income tax of such individual for the period of #e taxable years ending before the date of the loss of ,united ,states citizenship is greater than #abd1jjj1 7ii7 the net worth of the individual as of such date is #b1jjj1jjj or more1 or 7iii7 such individual fails to certify under penalty of perjury that he has met the requirements of this title for the #e preceding taxable years or fails to submit such evidence of such compliance as the ,secretary may require4 4 7,b7 ,section #hgg;,a7g77#a77;,b7 is amended by striking shall not be treated as meeting the requirements of subparagraph 7,a7 or 7,b7 of section #hgg7;a77#b7 and inserting shall not be treated as described in clause 7i7 or 7ii7 of subparagraph 7,a74 7,c7 ,section #hgg;,a7g77#a7 is amended by redesignating subparagraph 7,c7 as subparagraph 7,d7 and inserting after subparagraph 7,b7 the following new subparagraph3 7,c7 ,net income tax ,for purposes of subparagraph 7,a71 the term net income tax means the regular tax liability reduced by the credits allowed under subparts ,a1 ,b1 and ,d of part ,,iv of subchapter ,a4 4 7,d7 ,section #hgg;,a7g77#a71 as amended by subparagraph 7,c71 is amended by adding at the end the following new subparagraph3 7,e7 ,inflation adjustment ,in the case of the loss of ,united ,states citizenship in any calendar year after #bjjg1 the dollar amount in subparagraph 7,a77i7 shall be increased by an amount equal to-- 7i7 such dollar amount1 multiplied by 7ii7 the cost-of-living adjustment determined under section #a7;c77#b77;,a7 for the calendar year in which such loss of ,united ,states citizenship occurs determined by substituting calendar year #bjjc for calendar year #bjab in clause 7ii7 thereof4 ,any increase determined under the preceding sentence shall be rounded to the nearest multiple of #a1jjj4 4 7,e7 ,section #hgg;,a7g77#e7 is amended to read as follows3 7#e7 ,long-term resident ,the term long-term resident means any individual 7other than a citizen of the ,united ,states7 who is a lawful permanent resident of the ,united ,states in at least #h taxable years during the period of #ae taxable years ending with the taxable year during which the event described in subparagraph 7,a7 or 7,b7 of paragraph 7#b7 occurs4 ,for purposes of the preceding sentence1 an individual shall not be treated as a lawful permanent resident for any taxable year if such individual is treated as a resident of a foreign country for the taxable year under the provisions of a tax treaty between the ,united ,states and the foreign country and does not waive the benefits of such treaty applicable to residents of the foreign country4 4 7#f7 ,section #hid7;b7 is amended by striking the last sentence4 7#g7 ,section #bajg is amended by striking subsection 7e74 7#h7 ,section #beja7;a7 is amended by striking paragraphs 7#c7 and 7#e7 and by redesignating paragraph 7#d7 as paragraph 7#c74 7#i7 ,section #cdje7;e77#ac77;,b7 is amended by striking that such person is not-- and all that follows and inserting that such person is not a ,united ,states citizen or a resident alien of the ,united ,states44 7#aj7 ,section #fjci;,g7a7 is amended by striking section #hgg7;b7 or #hgg;,a and inserting section #hgg;,a4 7#aa7 ,section #fjci;,g7d7 is amended by striking section #hgg7;a7 or #hgg;,a and inserting section #hgg;,a4 7#ab7 ,section #ggja7;b7 is amended by striking paragraph 7#aj7 and by redesignating paragraph 7#aa7 as paragraph 7#aj74 7c7 ,effective date ,the amendments made by this subsection shall apply to individuals whose expatriation date 7as defined in section #hgg;,a7g77#c7 of the ,internal ,revenue ,code of #aihf7 is on or after ,june #ag1 #bjjh4 #hjdd4 ,repeal of certain transition rules on income from sources without ,united ,states 7a7 ,limitation on credit ,paragraph 7#b7 of section #ijd7;d7 is amended by striking subparagraph 7,j74 7b7 ,foreign earned income ,clause 7i7 of section #iaa7;b77#b77;,d7 is amended to read as follows3 7i7 ,in general ,the exclusion amount for any calendar year is #hj1jjj4 4 #hjde4 ,repeal of ,puerto ,rico and possession tax credit 7a7 ,in general ,subpart ,d of part ,,iii of subchapter ,n of chapter #a is amended by striking section #icf 7and by striking the item relating to such section in the table of sections of such subpart74 7b7 ,conforming amendments 7#a7 7,a7 ,section #bg is amended to read as follows3 #bg4 ,taxes of foreign countries and possessions of the ,united ,states ,the amount of taxes imposed by foreign countries and possessions of the ,united ,states shall be allowed as a credit against the tax imposed by this chapter to the extent provided in section #ija4 4 7,b7 ,the item relating to section #bg in the table of sections for subpart ,b of part ,,iv of subchapter ,a of chapter #a is amended to read as follows3 ,sec4 #bg4 ,taxes of foreign countries and possessions of the ,united ,states4 4 7#b7 ,section #bdc7;b77#a77;,b7 is amended to read as follows3 7,b7 if such dividend is distributed out of the earnings and profits of a taxable year of the distributing corporation which ends after ,december #ca1 #aifc1 and on each day of which the distributing corporation and the corporation receiving the dividend were members of such affiliated group4 4 7#c7 ,section #bdf is amended by striking subsection 7e74 7#d7 ,section #cch7;h77#f77;,b77i7 is amended by striking 1 a ,,disc1 or a corporation to which an election under section #icf applies and inserting or a ,,disc4 7#e7 ,section #hfa7;a77#b7 is amended-- 7,a7 by striking subparagraph 7,a7 and by redesignating subparagraphs 7,b71 7,c71 and 7,d7 as subparagraphs 7,a71 7,b71 and 7,c71 respectively1 and 7,b7 by striking subparagraph 7,b7 each place it appears and inserting subparagraph 7,a74 7#f7 ,section #hfd7;d77#e7 is amended to read as follows3 7#e7 ,certain provisions not to apply ,the following provisions shall not apply to any amount treated as interest under paragraph 7#a7 or 7#f73 7,a7 ,section #ijd7;d77#b77;,b77iii77,i7 7relating to exceptions for export financing interest74 7,b7 ,subparagraph 7,a7 of section #ied7;b77#c7 7relating to exception where foreign base company income is less than #e percent or #a1jjj1jjj74 7,c7 ,subparagraph 7,b7 of section #ied7;c77#b7 7relating to certain export financing74 7,d7 ,clause 7i7 of section #ied7;c77#c77;,a7 7relating to certain income received from related persons74 4 7#g7 ,section #hfe7;j77#c7 is amended by striking 1 #icc1 and #icf and inserting and #icc4 7#h7 ,section #ija7;g77#b7 is amended by inserting 7as in effect before its repeal7 after #icf4 7#i7 ,section #ijd7;b7 is amended by striking paragraph 7#d74 7#aj7 ,section #abjb7;e77#d7 is amended by striking subparagraph 7,b7 and by redesignating subparagraphs 7,c7 and 7,d7 as subparagraphs 7,b7 and 7,c71 respectively4 7#aa7 ,section #acfa7;b77#b7 is amended by adding or at the end of subparagraph 7,b71 by striking subparagraph 7,c71 and by redesignating subparagraph 7,d7 as subparagraph 7,c74 7#ab7 ,section #aejd7;b7 is amended by striking paragraph 7#d74 7#ac7 ,section #fjia7;b77#b77;,b7 is amended by striking clause 7ii7 and by redesignating clauses 7iii7 and 7iv7 as clauses 7ii7 and 7iii71 respectively4 7#ad7 ,section #ffed7;d77#b77;,d7 is amended-- 7,a7 by striking #icf7;h7 or in clause 7i71 and 7,b7 by striking 8and section #icf0 in the heading4 7#ae7 ,section #ffee7;e77#d7 is amended-- 7,a7 by striking #icf7;h7 or in subparagraph 7,a71 and 7,b7 by striking 8and section #icf0 in the heading4 7#af7 7,a7 ,section #cfg7;d7 is amended by adding at the end the following new paragraph3 7#d7 ,intangible property ,for purposes of this subsection1 the term intangible property means any-- 7,a7 patent1 invention1 formula1 process1 design1 pattern1 or know-how1 7,b7 copyright1 literary1 musical1 or artistic composition1 7,c7 trademark1 trade name1 or brand name1 7,d7 franchise1 license1 or contract1 7,e7 method1 program1 system1 procedure1 campaign1 survey1 study1 forecast1 estimate1 customer list1 or technical data1 or 7,f7 any similar item1 which has substantial value independent of the services of any individual4 4 7,b7 ,section #cfg7;a77#c77;,b77iv7 is amended by striking section #icf7;h77#c77;,b7 and inserting subsection 7d77#d74 7,c7 ,sections #dhb and #abih7;e77#b77;,a7 are each amended by striking section #icf7;h77#d77;,b7 and inserting section #cfg7;d77#d74 #hjdf4 ,basis of property acquired from decedent ,section #ajad is amended-- 7#a7 by striking either and by striking or section #haa7;j7 of the ,internal ,revenue ,code of #aici where the decedent died after ,october #ba1 #aidb in subsection 7a77#b71 and 7#b7 by striking paragraphs 7#g7 and 7#h7 of subsection 7b74 #hjdg4 ,property on which lessee has made improvements ,section #ajai is amended by striking the last sentence4 #hjdh4 ,involuntary conversion ,section #ajcc is amended by striking subsection 7j7 and by redesignating subsection 7k7 as subsection 7j74 #hjdi4 ,property acquired during affiliation ,section #ajea is hereby repealed1 and the table of sections for part ,,iv of subchapter ,o of chapter #a is amended by striking the item relating to section #ajea4 #hjej4 ,repeal of special holding period rules for certain commodity futures transactions ,section #abbb is amended by striking the last sentence4 #hjea4 ,holding period of property 7a7 ,paragraph 7#a7 of section #abbc is amended by striking 1 in the case of such exchanges after ,march #a1 #aied14 7b7 ,paragraph 7#d7 of section #abbc is amended by striking 7or under so much of section #ajeb7;c7 as refers to section #aac7;a77#bc7 of the ,internal ,revenue ,code of #aici74 7c7 ,paragraph 7#f7 of section #abbc is repealed4 7d7 ,paragraph 7#h7 of section #abbc is repealed4 #hjeb4 ,property used in the trade or business and involuntary conversions ,subparagraph 7,a7 of section #abca7;c77#b7 is amended by striking beginning after ,december #ca1 #aiha4 #hjec4 ,sale of patents ,subsection 7a7 of section #abdi is amended by striking after ,december #ca1 #aifb14 #hjed4 ,gain from disposition of farmland 7a7 ,paragraph 7#a7 of section #abeb7;a71 as amended by the preceding provisions of this ,act1 is amended-- 7#a7 by striking beginning after ,december #ca1 #aifi in the matter preceding subparagraph 7,a71 and 7#b7 by amending subparagraph 7,a7 to read as follows3 7,a7 the applicable percentage of the aggregate deductions allowed under section #age 7as in effect before its repeal by the ,tax ,reform ,act of #bjad7 with respect to the farmland1 or 4 7b7 ,paragraph 7#b7 of section #abeb7;a7 is amended by striking sections #age and all that follows and inserting section #age 7as in effect before its repeal by the ,tax ,reform ,act of #bjad744 #hjee4 ,transition rules related to the treatment of amounts received on retirement or sale or exchange of debt instruments 7a7 ,section #abga is amended by striking subsection 7c74 7b7 ,section #abga7;a77#b77;,b7 is amended by striking 7and paragraph 7#b7 of subsection 7c774 #hjef4 ,certain rules with respect to debt instruments issued before ,july #b1 #aihb 7a7 ,section #abgb is amended by striking subsection 7b74 7b7 ,section #afc7;j77#b77;,c77ii7 is amended by striking or 7b77#d74 7c7 ,section #abga7;a77#b77;,a77ii7 is amended by striking subsection 7a77#g7 or 7b77#d7 of section #abgb and inserting section #abgb7;a77#g74 7d7 ,section #abga7;b77#a7 is amended to read as follows3 7#a7 ,in general ,this section shall not apply to any obligation issued by a natural person before ,june #i1 #aiig4 4 7e7 ,section #abgi7;a77#d77;,a77ii71 as amended by the preceding provisions of this ,act1 is amended by striking or 7b77#d74 7f7 ,the amendments made by this section shall apply to debt instruments issued after ,july #a1 #aihb4 #hjeg4 ,certain rules with respect to stripped bonds purchased before ,july #b1 #aihb 7a7 ,section #abhf is amended by striking subsection 7c74 7b7 ,section #abhf7;e77#e7 is amended by striking the last sentence4 7c7 ,subsections 7a7 and 7b7 of section #abhf are each amended by striking after ,july #a1 #aihb14 7d7 ,the amendments made by this section shall apply to bonds and coupons purchased after ,july #a1 #aihb4 #hjeh4 ,amount and method of adjustment ,section #acad is amended by striking subsection 7d7 and by redesignating subsection 7e7 as subsection 7d74 #hjei4 ,old-age1 survivors1 and disability insurance ,subsection 7a7 of section #adja is amended by striking the following percent and all that follows and inserting #ab4d percent of the amount of the self-employment income for such taxable year44 #hjfj4 ,hospital insurance ,paragraph 7#a7 of section #adja7;b7 is amended by striking the following percentand all that follows and inserting #b4i percent of the amount of the self-employment income for such taxable year44 #hjfa4 ,ministers1 members of religious orders1 and christian science practitioners ,paragraph 7#c7 of section #adjb7;e7 is amended by striking whichever of the following dates is later3 7,a7 and by striking 2 or 7,b7 and all that follows and inserting a period4 #hjfb4 ,affiliated group defined ,subparagraph 7,a7 of section #aejd7;a77#c7 is amended by striking for a taxable year which includes any period after ,december #ca1 #aihd in clause 7i7 and by striking in a taxable year beginning after ,december #ca1 #aihd in clause 7ii74 #hjfc4 ,credit for state death taxes 7a7 ,part ,,ii of subchapter ,a of chapter #aa is amended by striking section #bjaa 7and by striking the item relating to such section in the table of sections for such subpart74 7b7 ,subchapter ,a of chapter #ac is amended by striking section #bfjd 7and by striking the item relating to such section in the table of sections for such subpart74 #hjfd4 ,family-owned business interest ,part ,,iv of subchapter ,a of chapter #aa is amended by striking section #bjeg 7and by striking the item relating to such section in the table of sections for such part74 #hjfe4 ,property within the united states ,subsection 7c7 of section #bajd is amended by striking ,with respect to estates of decedents dying after ,december #ca1 #aifi1 deposits and inserting ,deposits4 #hjff4 ,repeal of deadwood provisions relating to employment taxes 7a7 ,tax on employees ,subsection 7a7 of section #caja is amended by striking the following percentages and all that follows and inserting #f4b percent of the wages 7as defined in section #caba7;a77 received by him with respect to employment 7as defined in section #caba7;b7744 7b7 ,tax on employers 7#a7 ,subsection 7a7 of section #caaa is amended by striking the following percentages and all that follows and inserting #f4b percent of the wages 7as defined in section #caba7;a77 paid by him with respect to employment 7as defined in section #caba7;b774 7#b7 ,subsection 7b7 of section #caaa is amended by striking the following percentages and all that follows and inserting #a4de percent of the wages 7as defined in section #caba7;a77 paid by him with respect to employment 7as defined in section #caba7;b774 7#c7 ,section #caaa is amended by striking subsection 7d7 and redesignating subsection 7e7 as subsection 7d74 7c7 ,tier #b tax on employees ,subsection 7b7 of section #cbja is amended to read as follows3 7b7 ,tier #b tax ,in addition to other taxes1 there is hereby imposed on the income of each employee a tax equal to the percentage determined under section #cbda for any calendar year of the compensation received during such calendar year by such employee for services rendered by such employee4 4 7d7 ,rate of ,tier #b tax on employee representatives ,subsection 7b7 of section #cbaa is amended to read as follows3 7b7 ,tier #b tax ,in addition to other taxes1 there is hereby imposed on the income of each employee representative a tax equal to the percentage determined under section #cbda for any calendar year of the compensation received during such calendar year by such employee representative for services rendered by such employee representative4 4 7e7 ,tier #b tax on employers 7#a7 ,subsection 7b7 of section #cbba is amended to read as follows3 7b7 ,tier #b tax ,in addition to other taxes1 there is hereby imposed on the income of each employer a tax equal to the percentage determined under section #cbda for any calendar year of the compensation paid during such calendar year by such employer for services rendered for such employer4 4 7#b7 ,section #cbba is amended by striking subsection 7d7 and redesignating subsection 7e7 as subsection 7d74 7f7 ,employee under ,railroad ,retirement ,system ,subsection 7b7 of section #cbca is amended by is amended by striking 2 except and all that follows and inserting a period4 7g7 ,definition of wages 7#a7 ,section #caba7;b7 is amended by striking paragraph 7#ag74 7#b7 ,section #baj7;a7 of the ,social ,security ,act is amended by striking paragraph 7#ag74 7h7 ,credits against unemployment tax 7#a7 ,paragraph 7#d7 of section #ccjb7;f7 is amended-- 7,a7 by striking subsection-- and all that follows through 7,a7 in general--,the and inserting subsection1 the1 7,b7 by striking subparagraph 7,b71 7,c7 by redesignating clauses 7i7 and7ii7 as subparagraphs 7,a7 and 7,b71 respectively1 and 7,d7 by moving the text of such subparagraphs 7as so redesignated7 #b ems to the left4 7#b7 ,paragraph 7#e7 of section #ccjb7;f7 is amended by striking subparagraph 7,d7 and by redesignating subparagraph 7,e7 as subparagraph 7,d74 7i7 ,domestic service employment taxes ,section #ceaj7;b7 is amended by striking paragraph 7#d74 #hjfg4 ,luxury passenger automobiles 7a7 ,in general ,chapter #ca is amended by striking subchapter ,a 7and by striking the item relating to such subchapter in the table of sections for such chapter74 7b7 ,conforming amendments 7#a7 ,section #dbic is amended by striking subchapter ,a of chapter #ca14 7#b7 ,section #dbba is amended-- 7,a7 in subsections 7a7 and 7d77#a71 by striking subchapter ,a or and inserting subchapter1 7,b7 in subsection 7a71 by striking ,in the case of taxes imposed by subchapter ,a of chapter #ca1 paragraphs 7#a71 7#c71 7#d71 and 7#e7 shall not apply41 and 7,c7 in subsection 7c71 by striking #djja7;c71 #djja7;d74 7#c7 ,section #dbbb is amended by striking #djja7;c71 #djja7;d714 #hjfh4 ,transportation by air ,section #dbfa7;e7 is amended-- 7#a7 in paragraph 7#a7 by striking subparagraph 7,c71 and 7#b7 by striking paragraph 7#e74 #hjfi4 ,taxes on failure to distribute income 7a7 ,paragraph 7#b7 of section #didb7;f7 is amended by striking the semicolon at the end of subparagraph 7,b7 and inserting 1 and1 by striking 2 and at the end of subparagraph 7,c7 and inserting a period1 and by striking subparagraph 7,d74 7b7 ,subsection 7g7 of section #didb 7as amended by this ,act7 is amended-- 7#a7 by striking ,for all taxable years beginning on or after ,january #a1 #aige1 subject in paragraph 7#b77;,a7 and inserting ,subject1 and 7#b7 by striking paragraph 7#d74 7c7 ,section #didb7;i77#b7 is amended by striking beginning after ,december #ca1 #aifi1 and4 #hjgj4 ,taxes on taxable expenditures ,section #dide7;f7 is amended by striking 7excluding therefrom any preceding taxable year which begins before ,january #a1 #aigj74 #hjga4 ,definitions and special rules ,section #dfhb is amended by striking subsection 7h74 #hjgb4 ,returns ,subsection 7a7 of section #fjci;,d is amended by striking beginning after ,december #ca1 #aihd14 #hjgc4 ,information returns ,subsection 7c7 of section #fjfj is amended by striking year and all that follows and inserting year44 #hjgd4 ,abatements ,section #fdjd7;f7 is amended by striking paragraph 7#c74 #hjge4 ,failure by corporation to pay estimated income tax ,clause 7i7 of section #ffee7;g77#d77;,a7 is amended by striking 7or the corresponding provisions of prior law74 #hjgf4 ,repeal of #bjjh recovery rebates 7a7 ,in general ,subchapter ,b of chapter #fe is amended by striking section #fdbh 7and by striking the item relating to such section in the table of sections for such subchapter74 7b7 ,conforming amendments 7#a7 ,section #fbaa7;b77#d77;,a7 is amended by striking #fdbh14 7#b7 ,section #fbac7;g77#b77,l7 is amended by striking #cb1 or #fdbh and inserting or #cb4 7#c7 ,paragraph 7#b7 of section #acbd7;b7 of title #ca1 ,united ,states ,code1 is amended by striking or #fdbh4 #hjgg4 ,repeal of advance payment of portion of increased child credit for #bjjc ,subchapter ,b of chapter #fe is amended by striking section #fdbi 7and by striking the item relating to such section in the table of sections for such subchapter74 #hjgh4 ,repeal of provisions related to ,,cobra premium assistance 7a7 ,in general ,subchapter ,b of chapter #fe is amended by striking section #fdcb 7and by striking the item relating to such section in the table of sections for such subchapter74 7b7 ,notification requirement ,part ,i of subchapter ,b of chapter #fh is amended by striking section #fgbj;,c 7and by striking the item relating to such section in the table of sections for such part74 7c7 ,exclusion from gross income ,part ,,iii of subchapter ,b of chapter #a is amended by striking section #aci;,c 7and by striking the item relating to such section in the table of sections for such part74 #hjgi4 ,retirement ,section #gddg7;i77#c77;,b77ii7 is amended by striking at #d percent per annum to ,december #ca1 #aidg1 and at #c percent per annum thereafter1 and inserting at #c percent per annum4 #hjhj4 ,annuities to surviving spouses and dependent children of judges 7a7 ,paragraph 7#b7 of section #gddh7;a7 is amended by striking or under section #aajf of the ,internal ,revenue ,code of #aici and by striking or pursuant to section #aajf7;d7 of the ,internal ,revenue ,code of #aici4 7b7 ,subsection 7g7 of section #gddh is amended by striking or other than pursuant to section #aajf of the ,internal ,revenue ,code of #aici4 7c7 ,subsections 7g71 7j77#a71 and 7j77#b7 of section #gddh are each amended by striking at #d percent per annum to ,december #ca1 #aidg1 and at #c percent per annum thereafter and inserting at #c percent per annum4 #hjha4 ,merchant marine capital construction funds ,paragraph 7#d7 of section #geah7;g7 is amended by striking any nonqualified withdrawal and all that follows through shall be determined and inserting any nonqualified withdrawal shall be determined4 #hjhb4 ,valuation tables 7a7 ,subsection 7c7 of section #gebj is amended by striking paragraph 7#b7 and by redesignating paragraph 7#c7 as paragraph 7#b74 7b7 ,paragraph 7#b7 of section #gebj7;c7 of such ,code1 as so redesignated1 is amended-- 7#a7 by striking ,not later than ,december #ca1 #aihi1 the and inserting ,the1 and 7#b7 by striking thereafter in the last sentence thereof4 #hjhc4 ,definition of employee ,section #ggja7;a77#bj7 is amended by striking chapter #ba and all that follows and inserting chapter #ba44 #hjhd4 ,effective date 7a7 ,general ,rule ,except as otherwise provided in subsection 7b7 of this section and the preceding sections of this subtitle1 the amendments made by this subtitle shall take effect on the date of enactment of this ,act4 7b7 ,savings provision ,if-- 7#a7 any provision amended or repealed by the amendments made by this subtitle applied to-- 7,a7 any transaction occurring before the date of the enactment of this ,act1 7,b7 any property acquired before such date of enactment1 or 7,c7 any item of income1 loss1 deduction1 or credit taken into account before such date of enactment1 and 7#b7 the treatment of such transaction1 property1 or item under such provision would 7without regard to the amendments or repeals made by this subtitle7 affect the liability for tax for periods ending after such date of enactment1 nothing in the amendments or repeals made by this subtitle shall be construed to affect the treatment of such transaction1 property1 or item for purposes of determining liability for tax for periods ending after such date of enactment4 ,b ,conforming ,amendments ,related to ,multiple ,sections #haja4 ,conforming amendments related to multiple sections 7a7 ,general business credit ,section #ch7;b71 as amended by the preceding provisions of this ,act1 is amended-- 7#a7 by redesignating paragraphs 7#d71 7#e71 7#g71 7#h71 7#ac71 7#bj71 and 7#cc7 as paragraphs 7#c71 7#d71 7#e71 7#f71 7#g71 7#h71 and 7#i71 respectively1 7#b7 by adding plus at the end of paragraph 7#h7 7as so redesignated71 and 7#c7 by striking the comma at the end of paragraph 7#i7 7as so redesignated7 and inserting a period4 7b7 ,adjustments to basis ,section #ajaf7;a71 as amended by the preceding provisions of this ,act1 is amended-- 7#a7 by striking the last two sentences of paragraph 7#b71 7#b7 in paragraph 7#d7 by striking 7not including and all that follows through #aiba71 7#c7 by striking paragraph 7#ab71 7#d7 by redesignating paragraphs 7#aa71 7#ad71 7#af71 7#ag71 7#ah71 7#ba71 7#bc71 7#bf71 7#ch71 and 7#ci7 as paragraphs 7#i71 7#aj71 7#aa71 7#ab71 7#ac71 7#ad71 7#ae71 7#af71 7#ag71 and 7#ah71 respectively1 and 7#e7 by adding and at the end of paragraph 7#ag7 7as so redesignated74 7c7 ,holding period of property ,section #abbc1 as amended by the preceding provisions of this ,act1 is amended by redesignating paragraphs 7#i71 7#aj71 7#aa71 7#ab71 and 7#ae7 as paragraphs 7#f71 7#g71 7#h71 7#i7 and 7#aj71 respectively4 7d7 ,corporate preference items 7#a7 ,in general ,subchapter ,b of chapter #a1 as amended by this ,act1 is amended by striking part ,,xi 7and by striking the item relating to such part from the table of parts for such subchapter74 7#b7 ,preservation of special rule for treatment of intangible drilling costs ,section #bfc7;c7 is amended-- 7,a7 by striking all that precedes and except as provided in subsection 7i7 and inserting the following3 7c7 ,intangible drilling and development costs in the case of oil and gas wells and geothermal wells 7#a7 ,in general ,notwithstanding subsection 7a71 1 and 7,b7 by adding at the end the following new paragraph3 7#b7 ,reduction for integrated oil companies 7,a7 ,in general ,in the case of a corporation which is an integrated oil company1 the amount allowable as a deduction for any taxable year 7determined without regard to this paragraph7 under paragraph 7#a7 shall be reduced by #cj percent4 7,b7 ,amortization of disallowed amounts ,the amount not allowable as a deduction under paragraph 7#a7 for any taxable year by reason of subparagraph 7,a7 shall be allowable as a deduction ratably over the #fj-month period beginning with the month in which the costs are paid or incurred4 7,c7 ,dispositions ,for purposes of section #abed1 any deduction under subparagraph 7,b7 shall be treated as a deduction allowable under paragraph 7#a74 7,d7 ,integrated oil company ,for purposes of this paragraph1 the term integrated oil company means1 with respect to any taxable year1 any producer of crude oil to whom subsection 7c7 of section #fac;,a does not apply by reason of paragraph 7#b7 or 7#d7 of section #fac;,a7d7 7as such provisions were in effect before their repeal by the ,tax ,reform ,act of #bjad74 7,e7 ,coordination with cost depletion ,the portion of the adjusted basis of any property which is attributable to amounts to which subparagraph 7,a7 applied shall not be taken into account for purposes of determining depletion under section #faa4 4 7#c7 ,preservation of limitation on certain interest on indebtedness of financial institutions 7,a7 ,in general ,section #afc is amended by redesignating subsection 7n7 as subsection 7o7 and by inserting after subsection 7m7 the following new subsection3 7n7 ,limitation on certain interest on indebtedness of financial institutions 7#a7 ,in general ,for purposes of this subtitle1 in the case of a corporation1 the amount allowable as a deduction under this chapter 7determined without regard to this subsection7 with respect to the amount described in paragraph 7#b7 shall be reduced by #bj percent4 7#b7 ,interest on debt to carry tax-exempt obligations acquired after ,december #ca1 #aihb1 and before ,august #h1 #aihf 7,a7 ,in general ,in the case of a financial institution which is a bank 7as defined in section #ehe7;a77#b771 the amount described in this paragraph is the amount of interest on indebtedness incurred or continued to purchase or carry obligations acquired after ,december #ca1 #aihb1 and before ,august #h1 #aihf1 the interest on which is exempt from taxes for the taxable year1 to the extent that a deduction would 7but for this paragraph or section #bfe7;b77 be allowable with respect to such interest for such taxable year4 7,b7 ,determination of interest allocable to indebtedness on tax-exempt obligations ,unless the taxpayer 7under regulations prescribed by the ,secretary7 establishes otherwise1 the amount determined under subparagraph 7,a7 shall be an amount which bears the same ratio to the aggregate amount allowable 7determined without regard to this section and section #bfe7;b77 to the taxpayer as a deduction for interest for the taxable year as-- 7i7 the taxpayer's average adjusted basis 7within the meaning of section #ajaf7 of obligations described in subparagraph 7,a71 bears to 7ii7 such average adjusted basis for all assets of the taxpayer4 7,c7 ,interest ,for purposes of this paragraph1 the term interest includes amounts 7whether or not designated as interest7 paid in respect of deposits1 investment certificates1 or withdrawable or repurchasable shares4 7,d7 ,application of subparagraph to certain obligations issued after ,august #g1 #aihf ,for application of this subparagraph to certain obligations issued after ,august #g1 #aihf1 see section #bfe7;b77#c7 7as in effect before the enactment of the ,tax ,reform ,act of #bjad74 ,that portion of any obligation not taken into account under paragraph 7#b77;,a7 of section #bfe7;b7 7as so in effect7 by reason of paragraph 7#g7 of such section shall be treated for purposes of this section as having been acquired on ,august #g1 #aihf4 4 7,b7 ,conforming amendments 7i7 ,section #abgg7;c7 is amended by striking section #bia7;e77#a77;,b77ii7 and inserting section #afc7n77#b77;,b74 7ii7 ,section #acfc7;b77#c71 as amended by the preceding provisions of this ,act1 is amended by striking section #bia and inserting section #afc7n74 7#d7 ,effective date ,except as otherwise provided in this ,act with respect to amendments made to section #bia of the ,internal ,revenue ,code of #aihf1 the amendments made this subsection shall apply to taxable years beginning after ,december #ca1 #bjad4