,,ii #aacth ,,congress #ast ,session ,s4 #bfh ,,in ,,the ,,senate ,,of ,,the ,,united ,,states ,february #aa1 #bjac ,mr4 ,levin 7for himself and ,mr4 ,whitehouse7 introduced the following bill2 which was read twice and referred to the ,committee on ,finance ,a ,,bill ,to reduce the deficit and protect important programs by ending tax loopholes4 #a4 ,short title2 etc 7a7 ,short title ,this ,act may be cited as the ,cut ,unjustified ,tax ,loopholes ,act or ,,cut ,loopholes ,act4 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--,ending offshore tax abuses ,subtitle ,a--,deterring the use of tax havens for tax evasion ,sec4 #aja4 ,authorizing special measures against foreign jurisdictions1 financial institutions1 and others that significantly impede ,united ,states tax enforcement4 ,sec4 #ajb4 ,strengthening the ,foreign ,account ,tax ,compliance ,act 7,,fatca74 ,sec4 #ajc4 ,treatment of foreign corporations managed and controlled in the ,united ,states as domestic corporations4 ,sec4 #ajd4 ,reporting ,united ,states beneficial owners of foreign owned financial accounts4 ,sec4 #aje4 ,swap payments made from the ,united ,states to persons offshore4 ,subtitle ,b--,other measures ,to combat tax haven and tax shelter abuses ,sec4 #aaa4 ,country-by-country reporting4 ,sec4 #aab4 ,penalty for failing to disclose offshore holdings4 ,sec4 #aac4 ,deadline for anti-money laundering rule for investment advisers4 ,sec4 #aad4 ,anti-money laundering requirements for formation agents4 ,sec4 #aae4 ,strengthening ,john ,doe summons proceedings4 ,sec4 #aaf4 ,improving enforcement of foreign financial account reporting4 ,subtitle ,c--,ending offshore tax avoidance ,sec4 #aba4 ,allocation of expenses and taxes on basis of repatriation of foreign income4 ,sec4 #abb4 ,excess income from transfers of intangibles to low-taxed affiliates treated as subpart ,f income4 ,sec4 #abc4 ,limitations on income shifting through intangible property transfers4 ,sec4 #abd4 ,limitation on earnings stripping by expatriated entities4 ,sec4 #abe4 ,repeal of check-the-box rules for certain foreign entities and ,,cfc look-thru rules4 ,sec4 #abf4 ,prohibition on offshore loan abuse4 ,,title ,,ii--,strengthening tax enforcement ,subtitle ,a--,combating tax shelter promotion ,sec4 #bja4 ,penalty for promoting abusive tax shelters4 ,sec4 #bjb4 ,penalty for aiding and abetting the understatement of tax liability4 ,sec4 #bjc4 ,prohibited fee arrangement4 ,sec4 #bjd4 ,preventing tax shelter activities by financial institutions4 ,sec4 #bje4 ,information sharing for enforcement purposes4 ,sec4 #bjf4 ,disclosure of information to ,congress4 ,sec4 #bjg4 ,tax opinion standards for tax practitioners4 ,subtitle ,b--,simplify tax lien procedure ,sec4 #baa4 ,short title4 ,sec4 #bab4 ,findings and purpose4 ,sec4 #bac4 ,national tax lien filing system4 ,,title ,,iii--,ending excessive corporate tax deductions for stock options ,sec4 #cja4 ,consistent treatment of stock options by corporations4 ,sec4 #cjb4 ,application of executive pay deduction limit4 ,,title ,,iv--,closing the derivatives blended rate loophole ,sec4 #dja4 ,short title4 ,sec4 #djb4 ,modifications to treatment of section #abef contracts4 ,sec4 #djc4 ,modifications to treatment of dealers in securities and commodities4 ,,title ,v--,ending the tar sands oil spill loophole ,sec4 #eja4 ,short title4 ,sec4 #ejb4 ,requirements for contribution to the ,oil ,spill ,liability ,trust ,fund4 ,sec4 #ejc4 ,extension of ,oil ,spill ,liability ,trust ,fund financing rate4 ,sec4 #ejd4 ,technical amendment4 ,,title ,,vi--,ending the carried interest loophole ,sec4 #fja4 ,short title2 etc4 ,sec4 #fjb4 ,partnership interests transferred in connection with performance of services4 ,sec4 #fjc4 ,special rules for partners providing investment management services to partnerships4 ,i ,ending offshore tax abuses ,a ,deterring the use of tax havens for tax evasion #aja4 ,authorizing special measures against foreign jurisdictions1 financial institutions1 and others that significantly impede ,united ,states tax enforcement ,section #ecah;,a of title #ca1 ,united ,states ,code1 is amended-- 7#a7 by striking the section heading and inserting the following3 #ecah;,a4 ,special measures for jurisdictions1 financial institutions1 or international transactions that are of primary money laundering concern or significantly impede ,united ,states tax enforcement 2 7#b7 in subsection 7a71 by striking the subsection heading and inserting the following3 7a7 ,special measures ,to counter money laundering and efforts to significantly impede ,united ,states tax enforcement 2 7#c7 in subsection 7c7-- 7,a7 by striking the subsection heading and inserting the following3 7c7 ,consultations and information ,to be considered in finding jurisdictions1 institutions1 types of accounts1 or transactions ,to be of primary money laundering concern or ,to be significantly impeding ,united ,states tax enforcement 2 and 7,b7 by inserting at the end of paragraph 7#b7 thereof the following new subparagraph3 7,c7 ,other considerations ,the fact that a jurisdiction or financial institution is cooperating with the ,united ,states on implementing the requirements specified in chapter #d of the ,internal ,revenue ,code of #aihf may be favorably considered in evaluating whether such jurisdiction or financial institution is significantly impeding ,united ,states tax enforcement4 2 7#d7 in subsection 7a77#a71 by inserting or is significantly impeding ,united ,states tax enforcement after primary money laundering concern2 7#e7 in subsection 7a77#d7-- 7,a7 in subparagraph 7,a7-- 7i7 by inserting in matters involving money laundering1 before shall consult2 and 7ii7 by striking and at the end2 7,b7 by redesignating subparagraph 7,b7 as subparagraph 7,c72 and 7,c7 by inserting after subparagraph 7,a7 the following3 7,b7 in matters involving ,united ,states tax enforcement1 shall consult with the ,commissioner of the ,internal ,revenue1 the ,secretary of ,state1 the ,attorney ,general of the ,united ,states1 and in the sole discretion of the ,secretary1 such other agencies and interested parties as the ,secretary may find to be appropriate2 and 2 7#f7 in each of paragraphs 7#a77;,a71 7#b71 7#c71 and 7#d7 of subsection 7b71 by inserting or to be significantly impeding ,united ,states tax enforcement after primary money laundering concern each place that term appears2 7#g7 in subsection 7b71 by striking paragraph 7#e7 and inserting the following3 7#e7 ,prohibitions or conditions on opening or maintaining certain correspondent or payable-through accounts or authorizing certain payment cards ,if the ,secretary finds a jurisdiction outside of the ,united ,states1 #a or more financial institutions operating outside of the ,united ,states1 or #a or more classes of transactions within or involving a jurisdiction outside of the ,united ,states to be of primary money laundering concern or to be significantly impeding ,united ,states tax enforcement1 the ,secretary1 in consultation with the ,secretary of ,state1 the ,attorney ,general of the ,united ,states1 and the ,chairman of the ,board of ,governors of the ,federal ,reserve ,system1 may prohibit1 or impose conditions upon-- 7,a7 the opening or maintaining in the ,united ,states of a correspondent account or payable-through account2 or 7,b7 the authorization1 approval1 or use in the ,united ,states of a credit card1 charge card1 debit card1 or similar credit or debit financial instrument by any domestic financial institution1 financial agency1 or credit card company or association1 for or on behalf of a foreign banking institution1 if such correspondent account1 payable-through account1 credit card1 charge card1 debit card1 or similar credit or debit financial instrument1 involves any such jurisdiction or institution1 or if any such transaction may be conducted through such correspondent account1 payable-through account1 credit card1 charge card1 debit card1 or similar credit or debit financial instrument4 2 and 7#h7 in subsection 7c77#a71 by inserting or is significantly impeding ,united ,states tax enforcement after primary money laundering concern2 7#i7 in subsection 7c77#b77;,a7-- 7,a7 in clause 7ii71 by striking bank secrecy or special regulatory advantages and inserting bank1 tax1 corporate1 trust1 or financial secrecy or regulatory advantages2 7,b7 in clause 7iii71 by striking supervisory and counter-money and inserting supervisory1 international tax enforcement1 and counter-money2 7,c7 in clause 7v71 by striking banking or secrecy and inserting banking1 tax1 or secrecy2 and 7,d7 in clause 7vi71 by inserting 1 tax treaty1 or tax information exchange agreement after treaty2 7#aj7 in subsection 7c77#b77;,b7-- 7,a7 in clause 7i71 by inserting or tax evasion after money laundering2 and 7,b7 in clause 7iii71 by inserting 1 tax evasion1 after money laundering2 and 7#aa7 in subsection 7d71 by inserting involving money laundering1 and shall notify1 in writing1 the ,committee on ,finance of the ,senate and the ,committee on ,ways and ,means of the ,house of ,representatives of any such action involving ,united ,states tax enforcement after such action4 #ajb4 ,strengthening the ,foreign ,account ,tax ,compliance ,act 7,,fatca7 7a7 ,reporting activities with respect to passive foreign investment companies ,section #abih7;f7 is amended by inserting 1 or who directly or indirectly forms1 transfers assets to1 is a beneficiary of1 has a beneficial interest in1 or receives money or property or the use thereof from1 after shareholder of4 7b7 ,withholdable payments to foreign financial institutions ,section #adga7;d7 is amended-- 7#a7 by inserting or transaction after any depository in paragraph 7#b77;,a71 and 7#b7 by striking or any interest and all that follows in paragraph 7#e77;,c7 and inserting derivatives1 or any interest 7including a futures or forward contract1 swap1 or option7 in such securities1 partnership interests1 commodities1 or derivatives44 7c7 ,withholdable payments to other foreign financial institutions ,section #adgb is amended-- 7#a7 by inserting as a result of any customer identification1 anti-money laundering1 anti-corruption1 or similar obligation to identify account holders1 after reason to know1 in subsection 7b77#b71 and 7#b7 by inserting as posing a low risk of tax evasion after this subsection in subsection 7c77#a77;,g74 7d7 ,definitions ,clauses 7i7 and 7ii7 of section #adgc7b77;,a7 are each amended by inserting or as a beneficial owner after indirectly4 7e7 ,special rules ,section #adgd7;c7 is amended-- 7#a7 by inserting 1 except that information provided under sections #adga7;c7 or #adgb7;b7 may be disclosed to any ,federal law enforcement agency1 upon request or upon the initiation of the ,secretary1 to investigate or address a possible violation of ,united ,states law after shall apply in paragraph 7#a71 and 7#b7 by inserting 1 or has had an agreement terminated under such section1 after section #adga7;b7 in paragraph 7#b74 7f7 ,information with respect to foreign financial assets ,section #fjch;,d7a7 is amended by inserting ownership or beneficial ownership after holds any4 7g7 ,establishing presumptions for entities and transactions involving non-,,fatca institutions 7#a7 ,presumptions for tax purposes 7,a7 ,in general ,chapter #gf is amended by inserting after section #gdia the following new subchapter3 ,f ,presumptions for certain legal proceedings ,sec4 #gdib4 ,presumptions pertaining to entities and transactions involving non-,,fatca institutions4 #gdib4 ,presumptions pertaining to entities and transactions involving non-,,fatca institutions 7a7 ,control ,for purposes of any ,united ,states civil judicial or administrative proceeding to determine or collect tax1 there shall be a rebuttable presumption that a ,united ,states person 7other than an entity with shares regularly traded on an established securities market7 who1 directly or indirectly1 formed1 transferred assets to1 was a beneficiary of1 had a beneficial interest in1 or received money or property or the use thereof from an entity1 including a trust1 corporation1 limited liability company1 partnership1 or foundation 7other than an entity with shares regularly traded on an established securities market71 that holds an account1 or in any other manner has assets1 in a non-,,fatca institution1 exercised control over such entity4 ,the presumption of control created by this subsection shall not be applied to prevent the ,secretary from determining or arguing the absence of control4 7b7 ,transfers of income ,for purposes of any ,united ,states civil judicial or administrative proceeding to determine or collect tax1 there shall be a rebuttable presumption that any amount or thing of value received by a ,united ,states person 7other than an entity with shares regularly traded on an established securities market7 directly or indirectly from an account or from an entity 7other than an entity with shares regularly traded on an established securities market7 that holds an account1 or in any other manner has assets1 in a non-,,fatca institution1 constitutes income of such person taxable in the year of receipt2 and any amount or thing of value paid or transferred by or on behalf of a ,united ,states person 7other than an entity with shares regularly traded on an established securities market7 directly or indirectly to an account1 or entity 7other than an entity with shares regularly traded on an established securities market7 that holds an account1 or in any other manner has assets1 in a non-,,fatca institution1 represents previously unreported income of such person taxable in the year of the transfer4 7c7 ,rebutting the presumptions ,the presumptions established in this section may be rebutted only by clear and convincing evidence1 including detailed documentary1 testimonial1 and transactional evidence1 establishing that-- 7#a7 in subsection 7a71 such taxpayer exercised no control1 directly or indirectly1 over account or entity at the time in question1 and 7#b7 in subsection 7b71 such amounts or things of value did not represent income related to such ,united ,states person4 ,any court having jurisdiction of a civil proceeding in which control of such an offshore account or offshore entity or the income character of such receipts or amounts transferred is an issue shall prohibit the introduction by the taxpayer of any foreign based document that is not authenticated in open court by a person with knowledge of such document1 or any other evidence supplied by a person outside the jurisdiction of a ,united ,states court1 unless such person appears before the court4 4 7,b7 ,the table of subchapters for chapter #gf is amended by inserting after the item relating to subchapter ,e the following new item3 ,subchapter ,f--,presumptions for certain legal proceedings 4 7#b7 ,definition of non-fatca institution ,section #ggja7;a7 is amended by adding at the end the following new paragraph3 7#ea7 ,non-fatca institution ,the term non-,,fatca institution means any financial institution that does not meet the reporting requirements of section #adga7;b74 4 7#c7 ,presumptions for securities law purposes ,section #ba of the ,securities ,exchange ,act of #aicd 7#ae ,u4,s4,c4 #ghu7 is amended by adding at the end the following new subsection3 7j7 ,presumptions pertaining to control and beneficial ownership 7#a7 ,control ,for purposes of any civil judicial or administrative proceeding under this title1 there shall be a rebuttable presumption that a ,united ,states person 7other than an entity with shares regularly traded on an established securities market7 who1 directly or indirectly1 formed1 transferred assets to1 was a beneficiary of1 had a beneficial interest in1 or received money or property or the use thereof from an entity1 including a trust1 corporation1 limited liability company1 partnership1 or foundation 7other than an entity with shares regularly traded on an established securities market71 that holds an account1 or in any other manner has assets1 in a non-,,fatca institution 7as defined in section #ggja7;a77#ea7 of the ,internal ,revenue ,code of #aihf71 exercised control over such entity4 ,the presumption of control created by this paragraph shall not be applied to prevent the ,commission from determining or arguing the absence of control4 7#b7 ,beneficial ownership ,for purposes of any civil judicial or administrative proceeding under this title1 there shall be a rebuttable presumption that securities that are nominally owned by an entity1 including a trust1 corporation1 limited liability company1 partnership1 or foundation 7other than an entity with shares regularly traded on an established securities market71 and that are held in a non-,,fatca institution 7as so defined71 are beneficially owned by any ,united ,states person 7other than an entity with shares regularly traded on an established securities market7 who directly or indirectly exercised control over such entity4 ,the presumption of beneficial ownership created by this paragraph shall not be applied to prevent the ,commission from determining or arguing the absence of beneficial ownership4 4 7#d7 ,presumption for reporting purposes relating to foreign financial accounts ,section #ecad of title #ca1 ,united ,states ,code1 is amended by adding at the end the following new subsection3 7d7 ,rebuttable presumption ,for purposes of this section1 there shall be a rebuttable presumption that any account with a non-,,fatca institution 7as defined in section #ggja7;a77#ea7 of the ,internal ,revenue ,code of #aihf7 contains funds in an amount that is at least sufficient to require a report prescribed by regulations under this section4 4 7#e7 ,regulatory authority ,not later than #ahj days after the date of enactment of this ,act1 the ,secretary of the ,treasury and the ,chairman of the ,securities and ,exchange ,commission shall each adopt regulations or other guidance necessary to implement the amendments made by this subsection4 ,the ,secretary and the ,chairman may1 by regulation or guidance1 provide that the presumption of control shall not extend to particular classes of transactions1 such as corporate reorganizations or transactions below a specified dollar threshold1 if either determines that applying such amendments to such transactions is not necessary to carry out the purposes of such amendments4 7h7 ,effective date ,the amendments made by this section shall take effect on the date which is #ahj days after the date of enactment of this ,act1 whether or not regulations are issued under subsection 7g77#e74 #ajc4 ,treatment of foreign corporations managed and controlled in the ,united ,states as domestic corporations 7a7 ,in general ,section #ggja is amended by redesignating subsection 7p7 as subsection 7q7 and by inserting after subsection 7o7 the following new subsection3 7p7 ,certain corporations managed and controlled in the ,united ,states treated as domestic for income tax 7#a7 ,in general ,notwithstanding subsection 7a77#d71 in the case of a corporation described in paragraph 7#b7 if-- 7,a7 the corporation would not otherwise be treated as a domestic corporation for purposes of this title1 but 7,b7 the management and control of the corporation occurs1 directly or indirectly1 primarily within the ,united ,states1 then1 solely for purposes of chapter #a 7and any other provision of this title relating to chapter #a71 the corporation shall be treated as a domestic corporation4 7#b7 ,corporation described 7,a7 ,in general ,a corporation is described in this paragraph if-- 7i7 the stock of such corporation is regularly traded on an established securities market1 or 7ii7 the aggregate gross assets of such corporation 7or any predecessor thereof71 including assets under management for investors1 whether held directly or indirectly1 at any time during the taxable year or any preceding taxable year is #ej1jjj1jjj or more4 7,b7 ,general exception ,a corporation shall not be treated as described in this paragraph if-- 7i7 such corporation was treated as a corporation described in this paragraph in a preceding taxable year1 7ii7 such corporation-- 7,i7 is not regularly traded on an established securities market1 and 7,,ii7 has1 and is reasonably expected to continue to have1 aggregate gross assets 7including assets under management for investors1 whether held directly or indirectly7 of less than #ej1jjj1jjj1 and 7iii7 the ,secretary grants a waiver to such corporation under this subparagraph4 7,c7 ,exception from gross assets test ,subparagraph 7,a77ii7 shall not apply to a corporation which is a controlled foreign corporation 7as defined in section #ieg7 and which is a member of an affiliated group 7as defined section #aejd1 but determined without regard to section #aejd7;b77#c77 the common parent of which-- 7i7 is a domestic corporation 7determined without regard to this subsection71 and 7ii7 has substantial assets 7other than cash and cash equivalents and other than stock of foreign subsidiaries7 held for use in the active conduct of a trade or business in the ,united ,states4 7#c7 ,management and control 7,a7 ,in general ,the ,secretary shall prescribe regulations for purposes of determining cases in which the management and control of a corporation is to be treated as occurring primarily within the ,united ,states4 7,b7 ,executive officers and senior management ,such regulations shall provide that-- 7i7 the management and control of a corporation shall be treated as occurring primarily within the ,united ,states if substantially all of the executive officers and senior management of the corporation who exercise day-to-day responsibility for making decisions involving strategic1 financial1 and operational policies of the corporation are located primarily within the ,united ,states1 and 7ii7 individuals who are not executive officers and senior management of the corporation 7including individuals who are officers or employees of other corporations in the same chain of corporations as the corporation7 shall be treated as executive officers and senior management if such individuals exercise the day-to-day responsibilities of the corporation described in clause 7i74 7,c7 ,corporations primarily holding investment assets ,such regulations shall also provide that the management and control of a corporation shall be treated as occurring primarily within the ,united ,states if-- 7i7 the assets of such corporation 7directly or indirectly7 consist primarily of assets being managed on behalf of investors1 and 7ii7 decisions about how to invest the assets are made in the ,united ,states4 4 7b7 ,effective date ,the amendments made by this section shall apply to taxable years beginning on or after the date which is #b years after the date of the enactment of this ,act1 whether or not regulations are issued under section #ggja7p77#c7 of the ,internal ,revenue ,code of #aihf1 as added by this section4 #ajd4 ,reporting ,united ,states beneficial owners of foreign owned financial accounts 7a7 ,in general ,subpart ,b of part ,,iii of subchapter ,a of chapter #fa is amended by inserting after section #fjde;,b the following new sections3 #fjde;,c4 ,returns regarding ,united ,states beneficial owners of financial accounts located in the ,united ,states and held in the name of a foreign entity 7a7 ,requirement of return ,if-- 7#a7 any withholding agent under sections #adda and #addb has the control1 receipt1 custody1 disposal1 or payment of any amount constituting gross income from sources within the ,united ,states of any foreign entity1 including a trust1 corporation1 limited liability company1 partnership1 or foundation 7other than an entity with shares regularly traded on an established securities market71 and 7#b7 such withholding agent determines for purposes of titles #ad1 #ah1 or #ca of the ,united ,states ,code that a ,united ,states person has any beneficial interest in the foreign entity or in the account in such entity's name 7hereafter in this section referred to as ,united ,states beneficial owner71 then the withholding agent shall make a return according to the forms or regulations prescribed by the ,secretary4 7b7 ,required information ,for purposes of subsection 7a7 the information required to be included on the return shall include-- 7#a7 the name1 address1 and1 if known1 the taxpayer identification number of the ,united ,states beneficial owner1 7#b7 the known facts pertaining to the relationship of such ,united ,states beneficial owner to the foreign entity and the account1 7#c7 the gross amount of income from sources within the ,united ,states 7including gross proceeds from brokerage transactions71 and 7#d7 such other information as the ,secretary may by forms or regulations provide4 7c7 ,statements ,to ,be furnished to beneficial owners with respect to whom information is required ,to ,be reported ,a withholding agent required to make a return under subsection 7a7 shall furnish to each ,united ,states beneficial owner whose name is required to be set forth in such return a statement showing-- 7#a7 the name1 address1 and telephone 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 ,united ,states beneficial owner4 ,the written statement required under the preceding sentence shall be furnished to the ,united ,states beneficial owner on or before ,january #ca of the year following the calendar year for which the return under subsection 7a7 was required to be made4 ,in the event the person filing such return does not have a current address for the ,united ,states beneficial owner1 such written statement may be mailed to the address of the foreign entity4 #fjde;,d4 ,returns by financial institutions regarding establishment of accounts in non-,,fatca institutions 7a7 ,requirement of return ,any financial institution directly or indirectly opening a bank1 brokerage1 or other financial account for or on behalf of an offshore entity1 including a trust1 corporation1 limited liability company1 partnership1 or foundation 7other than an entity with shares regularly traded on an established securities market71 in a non-,,fatca institution 7as defined in section #ggja7;a77#ea77 at the direction of1 on behalf of1 or for the benefit of a ,united ,states person shall make a return according to the forms or regulations prescribed by the ,secretary4 7b7 ,required information ,for purposes of subsection 7a7 the information required to be included on the return shall include-- 7#a7 the name1 address1 and taxpayer identification number of such ,united ,states person1 7#b7 the name and address of the financial institution at which a financial account is opened1 the type of account1 the account number1 the name under which the account was opened1 and the amount of the initial deposit1 7#c7 if the account is held in the name of an entity1 the name and address of such entity1 the type of entity1 and the name and address of any company formation agent or other professional employed to form or acquire the entity1 and 7#d7 such other information as the ,secretary may by forms or regulations provide4 7c7 ,statements ,to be furnished to ,united ,states persons with respect to whom information is required ,to be reported ,a financial institution required to make a return under subsection 7a7 shall furnish to each ,united ,states person whose name is required to be set forth in such return a statement showing-- 7#a7 the name1 address1 and telephone 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 ,united ,states person4 ,the written statement required under the preceding sentence shall be furnished to such ,united ,states person on or before ,january #ca of the year following the calendar year for which the return under subsection 7a7 was required to be made4 7d7 ,exemption ,the ,secretary may by regulations exempt any class of ,united ,states persons or any class of accounts or entities from the requirements of this section if the ,secretary determines that applying this section to such persons1 accounts1 or entities is not necessary to carry out the purposes of this section4 4 7b7 ,penalties 7#a7 ,returns ,section #fgbd7;d77#a77;,b7 is amended by striking or at the end of clause 7xxiv71 by striking and at the end of clause 7xxv71 and by adding after clause 7xxv7 the following new clauses3 7xxvi7 section #fjde;,c7a7 7relating to returns regarding ,united ,states beneficial owners of financial accounts located in the ,united ,states and held in the name of a foreign entity71 or 7xxvii7 section #fjde;,d7a7 7relating to returns by financial institutions regarding establishment of accounts at non-,,fatca institutions71 and 4 7#b7 ,payee statements ,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,,hh71 and by inserting after subparagraph 7,,hh7 the following new subparagraphs3 7,,ii7 section #fjde;,c7c7 7relating to returns regarding ,united ,states beneficial owners of financial accounts located in the ,united ,states and held in the name of a foreign entity71 7,,jj7 section #fjde;,d7c7 7relating to returns by financial institutions regarding establishment of accounts at non-,,fatca institutions74 4 7c7 ,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 #fjde;,b the following new items3 ,sec4 #fjde;,c4 ,returns regarding ,united ,states beneficial owners of financial accounts located in the ,united ,states and held in the name of a foreign entity4 ,sec4 #fjde;,d4 ,returns by financial institutions regarding establishment of accounts at non-,,fatca institutions4 4 7d7 ,additional penalties 7#a7 ,additional penalties on banks ,section #ebci7;b77#a7 of the ,revised ,statutes of the ,united ,states 7#ab ,u4,s4,c4 #ic7;b77#a77 is amended by inserting or any of the provisions of section #fjde;,d of the ,internal ,revenue ,code of #aihf1 after any regulation issued pursuant to14 7#b7 ,additional penalties on securities firms ,section #ba7;d77#c77;,a7 of the ,securities ,exchange ,act of #aicd 7#ae ,u4,s4,c4 #ghu7d77#c77;,a77 is amended by inserting any of the provisions of section #fjde;,d of the ,internal ,revenue ,code of #aihf1 after the rules or regulations thereunder14 7e7 ,regulatory authority and effective date 7#a7 ,regulatory ,authority ,not later than #ahj days after the date of the enactment of this ,act1 the ,secretary of the ,treasury shall adopt regulations1 forms1 or other guidance necessary to implement this section4 7#b7 ,effective ,date ,section #fjde;,c of the ,internal ,revenue ,code of #aihf 7as added by this section7 and the amendment made by subsection 7d77#a7 shall take effect with respect to amounts paid into foreign owned accounts located in the ,united ,states after ,december #ca of the year of the date of the enactment of this ,act4 ,section #fjde;,d of such ,code 7as so added7 and the amendment made by subsection 7d77#b7 shall take effect with respect to accounts opened after ,december #ca of the year of the date of the enactment of this ,act4 #aje4 ,swap payments made from the ,united ,states to persons offshore 7a7 ,tax on swap payments received by foreign persons ,section #hga7;a77#a7 is amended-- 7#a7 by inserting swap payments 7as identified in section #abef7;b77#b77;,b771 after annuities1 in subparagraph 7,a71 and 7#b7 by adding at the end the following new sentence3 ,in the case of swap payments1 the source of a swap payment is determined by reference to the location of the payor44 7b7 ,tax on swap payments received by foreign corporations ,section #hha7;a7 is amended-- 7#a7 by inserting swap payments 7as identified in section #abef7;b77#b77;,b771 after annuities1 in paragraph 7#a71 and 7#b7 by adding at the end the following new sentence3 ,in the case of swap payments1 the source of a swap payment is determined by reference to the location of the payor44 ,b ,other measures ,to combat tax haven and tax shelter abuses #aaa4 ,country-by-country reporting 7a7 ,country-by-,country reporting ,section #ac of the ,securities ,exchange ,act of #aicd 7#ae ,u4,s4,c4 #ghm7 is amended by adding at the end the following new subsection3 7s7 ,disclosure of financial performance on a country-by-,country basis 7#a7 ,definitions ,in this subsection-- 7,a7 the term issuer group means the issuer1 each subsidiary of the issuer1 and each entity under the control of the issuer2 and 7,b7 the term country of operation means each country in which a member of the issuer group is incorporated1 organized1 maintains employees1 or conducts significant business activities4 7#b7 ,rules required ,the ,commission shall issue rules that require each issuer to include in an annual report filed by the issuer with the ,commission information on a country-by-country basis during the covered period1 consisting of-- 7,a7 a list of each country of operation and the name of each entity of the issuer group domiciled in each country of operation2 7,b7 the number of employees physically working in each country of operation2 7,c7 the total pre-tax gross revenues of each member of the issuer group in each country of operation2 7,d7 the total amount of payments made to governments by each member of the issuer group in each country of operation1 without exception1 including1 and set forth according to-- 7i7 total ,federal1 regional1 local1 and other tax assessed against each member of the issuer group with respect to each country of operation during the covered period2 and 7ii7 after any tax deductions1 tax credits1 tax forgiveness1 or other tax benefits or waivers1 the total amount of tax paid from the treasury of each member of the issuer group to the government of each country of operation during the covered period2 and 7,e7 such other financial information as the ,commission may determine is necessary or appropriate in the public interest or for the protection of investors4 4 7b7 ,rulemaking 7#a7 ,deadlines ,the ,securities and ,exchange ,commission 7in this section referred to as the ,commission7 shall-- 7,a7 not later than #bgj days after the date of enactment of this ,act1 issue a proposed rule to carry out this section and the amendment made by this section2 and 7,b7 not later than #a year after the date of enactment of this ,act1 issue a final rule to carry out this section and the amendment made by this section4 7#b7 ,data format ,the information required to be provided by this section shall be provided by the issuer in a format prescribed by the ,commission1 and shall be made available to the public online1 in such format as the ,commission shall prescribe4 7#c7 ,effective date ,subsection 7s7 of section #ac of the ,securities ,exchange ,act of #aicd1 as added by this section1 shall become effective #a year after the date on which the ,commission issues a final rule under this section4 #aab4 ,penalty for failing to disclose offshore holdings 7a7 ,securities ,exchange ,act of #aicd ,section #ba7;d77#c77;,b7 of the ,securities ,exchange ,act of #aicd 7#ae ,u4,s4,c4 #ghu7d77#c77;,b77 is amended by adding at the end the following3 7iv7 ,fourth tier ,notwithstanding clauses 7i71 7ii71 and 7iii71 for each violation1 the amount of the penalty shall not exceed #a1jjj1jjj for any natural person or #aj1jjj1jjj for any other person1 if-- 7,i7 such person directly or indirectly controlled any foreign entity1 including any trust1 corporation1 limited liability company1 partnership1 or foundation through which an issuer purchased1 sold1 or held equity or debt instruments2 7,,ii7 such person knowingly or recklessly failed to disclose any such holding1 purchase1 or sale by the issuer2 and 7,,iii7 the holding1 purchase1 or sale would have been otherwise subject to disclosure by the issuer or such person under this title4 4 7b7 ,securities ,act of #aicc ,section #bj7;d77#b7 of the ,securities ,act of #aicc 7#ae ,u4,s4,c4 #ggt7d77#b77 is amended by adding at the end the following3 7,d7 ,fourth tier ,notwithstanding subparagraphs 7,a71 7,b71 and 7,c71 for each violation1 the amount of the penalty shall not exceed #a1jjj1jjj for any natural person or #aj1jjj1jjj for any other person1 if-- 7i7 such person directly or indirectly controlled any foreign entity1 including any trust1 corporation1 limited liability company1 partnership1 or foundation through which an issuer purchased1 sold1 or held equity or debt instruments2 7ii7 such person knowingly or recklessly failed to disclose any such holding1 purchase1 or sale by the issuer2 and 7iii7 the holding1 purchase1 or sale would have been otherwise subject to disclosure by the issuer or such person under this title4 4 7c7 ,investment ,advisers ,act of #aidj ,section #bjc7;i77#b7 of the ,investment ,advisers ,act of #aidj 7#ae ,u4,s4,c4 #hj;b-#c7;i77#b77 is amended by adding at the end the following3 7,d7 ,fourth tier ,notwithstanding subparagraphs 7,a71 7,b71 and 7,c71 for each violation1 the amount of the penalty shall not exceed #a1jjj1jjj for any natural person or #aj1jjj1jjj for any other person1 if-- 7i7 such person directly or indirectly controlled any foreign entity1 including any trust1 corporation1 limited liability company1 partnership1 or foundation through which an issuer purchased1 sold1 or held equity or debt instruments2 7ii7 such person knowingly or recklessly failed to disclose any such holding1 purchase1 or sale by the issuer2 and 7iii7 the holding1 purchase1 or sale would have been otherwise subject to disclosure by the issuer or such person under this title4 4 #aac4 ,deadline for anti-money laundering rule for investment advisers 7a7 ,anti-,money laundering obligations for investment advisers ,section #ecab7;a77#b7 of title #ca1 ,united ,states ,code1 is amended-- 7#a7 in subparagraph 7,y71 by striking or at the end2 7#b7 by redesigning subparagraph 7,z7 as subparagraph 7,,bb72 and 7#c7 by inserting after subparagraph 7,y7 the following3 7,z7 an investment adviser2 4 7b7 ,rules required ,the ,secretary of the ,treasury shall-- 7#a7 in consultation with the ,chairman of the ,securities and ,exchange ,commission and the ,chairman of the ,commodity ,futures ,trading ,commission1 not later than #bgj days after the date of enactment of this ,act1 publish a proposed rule in the ,federal ,register to carry out the amendments made by this section2 and 7#b7 not later than #ahj days after the date of enactment of this ,act1 publish a final rule in the ,federal ,register on the matter described in paragraph 7#a74 7c7 ,contents ,the final rule published under this section shall require1 at a minimum1 each investment adviser 7as defined in section #bjb7;a77#aa7 of the ,investment ,advisers ,act of #aidj 7#ae ,u4,s4,c4 #hj;b-#b7;a77#aa777 registered with the ,securities and ,exchange ,commission pursuant to section #bjc of that ,act 7#ae ,u4,s4,c4 #hj;b-#c7-- 7#a7 to submit suspicious activity reports and establish an anti-money laundering program under subsections 7g7 and 7h71 respectively1 of section #ecah of title #ca1 ,united ,states ,code2 and 7#b7 to comply with-- 7,a7 the customer identification program requirements under section #ecah7l7 of title #ca1 ,united ,states ,code2 and 7,b7 the due diligence requirements under section #ecah7;i7 of title #ca1 ,united ,states ,code4 #aad4 ,anti-money laundering requirements for formation agents 7a7 ,anti-,money laundering obligations for formation agents ,section #ecab7;a77#b7 of title #ca1 ,united ,states ,code1 as amended by section #aac of this ,act1 is amended by inserting after subparagraph 7,z7 the following3 7,,aa7 any person engaged in the business of forming new corporations1 limited liability companies1 partnerships1 trusts1 or other legal entities2 or 4 7b7 ,deadline for anti-,money laundering rule for formation agents 7#a7 ,proposed rule ,the ,secretary of the ,treasury1 in consultation with the ,attorney ,general of the ,united ,states1 the ,secretary of ,homeland ,security1 and the ,commissioner of ,internal ,revenue1 shall-- 7,a7 not later than #abj days after the date of enactment of this ,act1 publish a proposed rule in the ,federal ,register requiring persons described in section #ecab7;a77#b77;,,aa7 of title #ca1 ,united ,states ,code1 as added by this section1 to establish anti-money laundering programs under section #ecah7;h7 of that title2 and 7,b7 not later than #bgj days after the date of enactment of this ,act1 publish a final rule in the ,federal ,register on the matter described in subparagraph 7,a74 7#b7 ,exclusions ,the rule promulgated under this subsection shall exclude from the category of persons engaged in the business of forming new corporations or other entities-- 7,a7 any government agency2 and 7,b7 any attorney or law firm that uses a paid formation agent operating within the ,united ,states to form such corporations or other entities4 #aae4 ,strengthening ,john ,doe summons proceedings 7a7 ,in general ,subsection 7f7 of section #gfji is amended to read as follows3 7f7 ,additional requirement in the case of a ,john ,doe summons 7#a7 ,general ,rule ,any summons described in subsection 7c77#a7 which does not identify the person with respect to whose liability the summons is issued may be served only after a court proceeding in which the ,secretary establishes that-- 7,a7 the summons relates to the investigation of a particular person or ascertainable group or class of persons1 7,b7 there is a reasonable basis for believing that such person or group or class of persons may fail or may have failed to comply with any provision of any internal revenue law1 and 7,c7 the information sought to be obtained from the examination of the records or testimony 7and the identity of the person or persons with respect to whose liability the summons is issued7 is not readily available from other sources4 7#b7 ,exception ,paragraph 7#a7 shall not apply to any summons which specifies that it is limited to information regarding a ,united ,states correspondent account 7as defined in section #ecah;,a7e77#a77;,b7 of title #ca1 ,united ,states ,code7 or a ,united ,states payable-through account 7as defined in section #ecah;,a7e77#a77;,c7 of such title7 of a financial institution that is held at a non-,,fatca institution 7as defined in section #ggja7;a77#ea774 7#c7 ,presumption in cases involving non-fatca institutions ,for purposes of this section1 in any case in which the particular person or ascertainable group or class of persons have financial accounts in or transactions related to a non-,,fatca institution 7as defined in section #ggja7;a77#ea771 there shall be a presumption that there is a reasonable basis for believing that such person or group or class of persons may fail or may have failed to comply with provisions of internal revenue law4 7#d7 ,project ,john ,doe summonses 7,a7 ,in general ,notwithstanding the requirements of paragraph 7#a71 the ,secretary may issue a summons described in paragraph 7#a7 if the summons-- 7i7 relates to a project which is approved under subparagraph 7,b71 7ii7 is issued to a person who is a member of the group or class established under subparagraph 7,b77i71 and 7iii7 is issued within #c years of the date on which such project was approved under subparagraph 7,b74 7,b7 ,approval of projects ,a project may only be approved under this subparagraph after a court proceeding in which the ,secretary establishes that-- 7i7 any summons issues with respect to the project will be issued to a member of an ascertainable group or class of persons1 and 7ii7 any summons issued with respect to such project will meet the requirements of paragraph 7#a74 7,c7 ,extension ,upon application of the ,secretary1 the court may extend the time for issuing such summonses under subparagraph 7,a77i7 for additional #c-year periods1 but only if the court continues to exercise oversight of such project under subparagraph 7,d74 7,d7 ,ongoing court oversight ,during any period in which the ,secretary is authorized to issue summonses in relation to a project approved under subparagraph 7,b7 7including during any extension under subparagraph 7,c771 the ,secretary shall report annually to the court on the use of such authority1 provide copies of all summonses with such report1 and comply with the court's direction with respect to the issuance of any ,john ,doe summons under such project4 4 7b7 ,jurisdiction of court 7#a7 ,in general ,paragraph 7#a7 of section #gfji7;h7 is amended by inserting after the first sentence the following new sentence3 ,any ,united ,states district court in which a member of the group or class to which a summons may be issued resides or is found shall have jurisdiction to hear and determine the approval of a project under subsection 7f77#b77;,b744 7#b7 ,conforming amendment ,the first sentence of section #gfji7;h77#a7 is amended by striking 7f7 and inserting 7f77#a74 7c7 ,effective date ,the amendments made by this section shall apply to summonses issued after the date of the enactment of this ,act4 #aaf4 ,improving enforcement of foreign financial account reporting 7a7 ,clarifying the connection of foreign financial account reporting to tax administration ,paragraph 7#d7 of section #fajc7;b7 is amended by adding at the end the following new sentence3 ,for purposes of subparagraph 7,a77i71 section #ecad of title #ca1 ,united ,states ,code1 and sections #ecba and #ecbb of such title 7as such sections pertain to such section #ecad71 shall be considered related statutes4 4 7b7 ,simplifying the calculation of foreign financial account reporting penalties ,section #ecba7;a77#e77;,d77ii7 of title #ca1 ,united ,states ,code1 is amended by striking the balance in the account at the time of the violation and inserting the highest balance in the account during the reporting period to which the violation relates4 7c7 ,clarifying the use of suspicious activity reports under the ,bank ,secrecy ,act for civil tax law enforcement ,section #ecai of title #ca1 ,united ,states ,code1 is amended by inserting the civil and criminal enforcement divisions of the ,internal ,revenue ,service1 after including4 ,c ,ending offshore tax avoidance #aba4 ,allocation of expenses and taxes on basis of repatriation of foreign income 7a7 ,in general ,part ,,iii of subchapter ,n of chapter #a is amended by inserting after subpart ,g the following new subpart3 ,h ,special ,rules for ,allocation of ,foreign-,related ,deductions and ,foreign ,tax ,credits ,sec4 #ige4 ,deductions allocated to deferred foreign income may not offset ,united ,states source income4 ,sec4 #igf4 ,amount of foreign taxes computed on overall basis4 ,sec4 #igg4 ,application of subpart4 #ige4 ,deductions allocated to deferred foreign income may not offset ,united ,states source income 7a7 ,current year deductions ,for purposes of this chapter1 foreign-related deductions for any taxable year-- 7#a7 shall be taken into account for such taxable year only to the extent that such deductions are allocable to currently-taxed foreign income1 and 7#b7 to the extent not so allowed1 shall be taken into account in subsequent taxable years as provided in subsection 7b74 ,foreign-related deductions shall be allocated to currently taxed foreign income in the same proportion which currently taxed foreign income bears to the sum of currently taxed foreign income and deferred foreign income4 7b7 ,deductions related to repatriated deferred foreign income 7#a7 ,in general ,if there is repatriated foreign income for a taxable year1 the portion of the previously deferred deductions allocated to the repatriated foreign income shall be taken into account for the taxable year as a deduction allocated to income from sources outside the ,united ,states4 ,any such amount shall not be included in foreign-related deductions for purposes of applying subsection 7a7 to such taxable year4 7#b7 ,portion of previously deferred deductions ,for purposes of paragraph 7#a71 the portion of the previously deferred deductions allocated to repatriated foreign income is-- 7,a7 the amount which bears the same proportion to such deductions1 as 7,b7 the repatriated income bears to the previously deferred foreign income4 7c7 ,definitions and special rule ,for purposes of this section-- 7#a7 ,foreign-related deductions ,the term foreign-related deductions means the total amount of deductions and expenses which would be allocated or apportioned to gross income from sources without the ,united ,states for the taxable year if both the currently-taxed foreign income and deferred foreign income were taken into account4 7#b7 ,currently-taxed foreign income ,the term currently-taxed foreign income means the amount of gross income from sources without the ,united ,states for the taxable year 7determined without regard to repatriated foreign income for such year74 7#c7 ,deferred foreign income ,the term deferred foreign income means the excess of-- 7,a7 the amount that would be includible in gross income under subpart ,f of this part for the taxable year if-- 7i7 all controlled foreign corporations were treated as one controlled foreign corporation1 and 7ii7 all earnings and profits of all controlled foreign corporations were subpart ,f income 7as defined in section #ieb71 over 7,b7 the sum of-- 7i7 all dividends received during the taxable year from controlled foreign corporations1 plus 7ii7 amounts includible in gross income under section #iea7;a74 7#d7 ,previously deferred foreign income ,the term previously deferred foreign income means the aggregate amount of deferred foreign income for all prior taxable years to which this part applies1 determined as of the beginning of the taxable year1 reduced by the repatriated foreign income for all such prior taxable years4 7#e7 ,repatriated foreign income ,the term repatriated foreign income means the amount included in gross income on account of distributions out of previously deferred foreign income4 7#f7 ,previously deferred deductions ,the term previously deferred deductions means the aggregate amount of foreign-related deductions not taken into account under subsection 7a7 for all prior taxable years 7determined as of the beginning of the taxable year71 reduced by any amounts taken into account under subsection 7b7 for such prior taxable years4 7#g7 ,treatment of certain foreign taxes 7,a7 ,paid by controlled foreign corporation ,section #gh shall not apply for purposes of determining currently-taxed foreign income and deferred foreign income4 7,b7 ,paid by taxpayer ,for purposes of determining currently-taxed foreign income1 gross income from sources without the ,united ,states shall be reduced by the aggregate amount of taxes described in the applicable paragraph of section #ija7;b7 which are paid by the taxpayer 7without regard to sections #ijb and #ifj7 during the taxable year4 7#h7 ,coordination with section #igf ,in determining currently-taxed foreign income and deferred foreign income1 the amount of deemed foreign tax credits shall be determined with regard to section #igf4 #igf4 ,amount of foreign taxes computed on overall basis 7a7 ,current year allowance ,for purposes of this chapter1 the amount taken into account as foreign income taxes for any taxable year shall be an amount which bears the same ratio to the total foreign income taxes for that taxable year as-- 7#a7 the currently-taxed foreign income for such taxable year1 bears to 7#b7 the sum of the currently-taxed foreign income and deferred foreign income for such year4 ,the portion of the total foreign income taxes for any taxable year not taken into account under the preceding sentence for a taxable year shall only be taken into account as provided in subsection 7b7 7and shall not be taken into account for purposes of applying sections #ijb and #ifj74 7b7 ,allowance related to repatriated deferred foreign income 7#a7 ,in general ,if there is repatriated foreign income for any taxable year1 the portion of the previously deferred foreign income taxes paid or accrued during such taxable year shall be taken into account for the taxable year as foreign taxes paid or accrued4 ,any such taxes so taken into account shall not be included in foreign income taxes for purposes of applying subsection 7a7 to such taxable year4 7#b7 ,portion of previously deferred foreign income taxes ,for purposes of paragraph 7#a71 the portion of the previously deferred foreign income taxes allocated to repatriated deferred foreign income is-- 7,a7 the amount which bears the same proportion to such taxes1 as 7,b7 the repatriated deferred income bears to the previously deferred foreign income4 7c7 ,definitions and special rule ,for purposes of this section-- 7#a7 ,previously deferred foreign income taxes ,the term previously deferred foreign income taxes means the aggregate amount of total foreign income taxes not taken into account under subsection 7a7 for all prior taxable years 7determined as of the beginning of the taxable year71 reduced by any amounts taken into account under subsection 7b7 for such prior taxable years4 7#b7 ,total foreign income taxes ,the term total foreign income taxes means the sum of foreign income taxes paid or accrued during the taxable year 7determined without regard to section #ijd7;c77 plus the increase in foreign income taxes that would be paid or accrued during the taxable year under sections #ijb and #ifj if-- 7,a7 all controlled foreign corporations were treated as one controlled foreign corporation1 and 7,b7 all earnings and profits of all controlled foreign corporations were subpart ,f income 7as defined in section #ieb74 7#c7 ,foreign income taxes ,the term foreign income taxes means any income1 war profits1 or excess profits taxes paid by the taxpayer to any foreign country or possession of the ,united ,states4 7#d7 ,currently-taxed foreign income and deferred foreign income ,the terms currently-taxed foreign income and deferred foreign income have the meanings given such terms by section #ige7;c774 #igg4 ,application of subpart ,this subpart-- 7#a7 shall be applied before subpart ,a1 and 7#b7 shall be applied separately with respect to the categories of income specified in section #ijd7;d77#a74 4 7b7 ,clerical amendment ,the table of subparts for part ,,iii of subpart ,n of chapter #a is amended by inserting after the item relating to subpart ,g the following new item3 ,subpart ,h4 ,special ,rules for ,allocation of ,foreign-,related ,deductions and ,foreign ,tax ,credits4 4 7c7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after the date of the enactment of this ,act4 #abb4 ,excess income from transfers of intangibles to low-taxed affiliates treated as subpart ,f income 7a7 ,in general ,subsection 7a7 of section #ied is amended by inserting after paragraph 7#c7 the following new paragraph3 7#d7 the foreign base company excess intangible income for the taxable year 7determined under subsection 7f7 and reduced as provided in subsection 7b77#e771 and 4 7b7 ,foreign base company excess intangible income ,section #ied is amended by inserting after subsection 7e7 the following new subsection3 7f7 ,foreign base company excess intangible income ,for purposes of subsection 7a77#d7 and this subsection3 7#a7 ,foreign base company excess intangible income defined 7,a7 ,in general ,the term foreign base company excess intangible income means1 with respect to any covered intangible1 the excess of-- 7i7 the sum of-- 7,i7 gross income from the sale1 lease1 license1 or other disposition of property in which such covered intangible is used directly or indirectly1 and 7,,ii7 gross income from the provision of services related to such covered intangible or in connection with property in which such covered intangible is used directly or indirectly1 over 7ii7 #aej percent of the costs properly allocated and apportioned to the gross income taken into account under clause 7i7 other than expenses for interest and taxes and any expenses which are not directly allocable to such gross income4 7,b7 ,same country income not taken into account ,if-- 7i7 the sale1 lease1 license1 or other disposition of the property referred to in subparagraph 7,a77i77,i7 is for use1 consumption1 or disposition in the country under the laws of which the controlled foreign corporation is created or organized1 or 7ii7 the services referred to in subparagraph 7,a77i77,,ii7 are performed in such country1 the gross income from such sale1 lease1 license1 or other disposition1 or provision of services1 shall not be taken into account under subparagraph 7,a77i74 7#b7 ,exception based on effective foreign income tax rate 7,a7 ,in general ,foreign base company excess intangible income shall not include the applicable percentage of any item of income received by a controlled foreign corporation if the taxpayer establishes to the satisfaction of the ,secretary that such income was subject to an effective rate of income tax imposed by a foreign country in excess of #e percent4 7,b7 ,applicable percentage ,for purposes of subparagraph 7,a71 the term applicable percentage means the ratio 7expressed as a percentage71 not greater than #ajj percent1 of-- 7i7 the number of percentage points by which the effective rate of income tax referred to in subparagraph 7,a7 exceeds #e percentage points1 over 7ii7 #aj percentage points4 7,c7 ,treatment of losses in determining effective rate of foreign income tax ,for purposes of determining the effective rate of income tax imposed by any foreign country-- 7i7 such effective rate shall be determined without regard to any losses carried to the relevant taxable year1 and 7ii7 to the extent the income with respect to such intangible reduces losses in the relevant taxable year1 such effective rate shall be treated as being the effective rate which would have been imposed on such income without regard to such losses4 7#c7 ,covered intangible ,the term covered intangible means1 with respect to any controlled foreign corporation1 any intangible property 7as defined in section #icf7;h77#c77;,b77-- 7,a7 which is sold1 leased1 licensed1 or otherwise transferred 7directly or indirectly7 to such controlled foreign corporation from a related person1 or 7,b7 with respect to which such controlled foreign corporation and one or more related persons has 7directly or indirectly7 entered into any shared risk or development agreement 7including any cost sharing agreement74 7#d7 ,related person ,the term related person has the meaning given such term in subsection 7d77#c74 4 7c7 ,separate basket for foreign tax credit ,subsection 7d7 of section #ijd is amended by redesignating paragraph 7#g7 as paragraph 7#h7 and by inserting after paragraph 7#f7 the following new paragraph3 7#f7 ,separate application to foreign base company excess intangible income 7,a7 ,in general ,subsections 7a71 7b71 and 7c7 of this section and sections #ijb1 #ijg1 and #ifj shall be applied separately with respect to each item of income which is taken into account under section #ied7;a77#d7 as foreign base company excess intangible income4 7,b7 ,regulations ,the ,secretary may issue such regulations or other guidance as is necessary or appropriate to carry out the purposes of this subsection1 including regulations or other guidance which provides that related items of income may be aggregated for purposes of this paragraph4 4 7d7 ,conforming amendments 7#a7 ,paragraph 7#d7 of section #ied7;b7 is amended by inserting foreign base company excess intangible income described in subsection 7a77#d7 or before foreign base company oil-related income in the last sentence thereof4 7#b7 ,subsection 7b7 of section #ied is amended by adding at the end the following new paragraph3 7#g7 ,foreign base company excess intangible income not treated as another kind of base company income ,income of a corporation which is foreign base company excess intangible income shall not be considered foreign base company income of such corporation under paragraph 7#b71 7#c71 or 7#e7 of subsection 7a74 4 7e7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after the date of the enactment of this ,act4 #abc4 ,limitations on income shifting through intangible property transfers 7a7 ,clarification of definition of intangible asset ,clause 7vi7 of section #icf7;h77#c77;,b7 is amended by inserting 7including any section #aig intangible described in subparagraph 7,a71 7,b71 or 7,c77i7 of subsection 7d77#a7 of such section7 after item4 7b7 ,clarification of allowable valuation methods 7#a7 ,foreign corporations ,paragraph 7#b7 of section #cfg7;d7 is amended by adding at the end the following new subparagraph3 7,d7 ,regulatory authority ,for purposes of the last sentence of subparagraph 7,a71 the ,secretary may require-- 7i7 the valuation of transfers of intangible property on an aggregate basis1 or 7ii7 the valuation of such a transfer on the basis of the realistic alternatives to such a transfer1 in any case in which the ,secretary determines that such basis is the most reliable means of valuation of such transfers4 4 7#b7 ,allocation among taxpayers ,section #dhb is amended by adding at the end the following3 ,for purposes of the preceding sentence1 the ,secretary may require the valuation of transfers of intangible property on an aggregate basis or the valuation of such a transfer on the basis of the realistic alternatives to such a transfer1 in any case in which the ,secretary determines that such basis is the most reliable means of valuation of such transfers44 7c7 ,effective date 7#a7 ,in general ,the amendments made by this section shall apply to transfers in taxable years beginning after the date of the enactment of this ,act4 7#b7 ,no inference ,nothing in the amendment made by subsection 7a7 shall be construed to create any inference with respect to the application of section #icf7;h77#c7 of the ,internal ,revenue ,code of #aihf1 or the authority of the ,secretary of the ,treasury to provide regulations for such application1 on or before the date of the enactment of such amendment4 #abd4 ,limitation on earnings stripping by expatriated entities 7a7 ,in general ,subsection 7j7 of section #afc is amended-- 7#a7 by redesignating paragraph 7#i7 as paragraph 7#aj71 and 7#b7 by inserting after paragraph 7#h7 the following new paragraph3 7#i7 ,special rules for expatriated entities 7,a7 ,in general ,in the case of a corporation to which this subsection applies which is an expatriated entity1 this subsection shall apply to such corporation with the following modifications3 7i7 ,paragraph 7#b77;,a7 shall be applied without regard to clause 7ii7 thereof4 7ii7 ,paragraph 7#a77;,b7 shall be applied-- 7,i7 without regard to the parenthetical1 and 7,,ii7 by substituting in the #ast succeeding taxable year and in the #bnd through #ajth succeeding taxable years to the extent not previously taken into account under this subparagraph for in the succeeding taxable year4 7iii7 ,paragraph 7#b77;,b7 shall be applied-- 7,i7 without regard to clauses 7ii7 and 7iii71 and 7,,ii7 by substituting #be percent of the adjusted taxable income of the corporation for such taxable year for the matter of clause 7i77,,ii7 thereof4 7,b7 ,expatriated entity ,for purposes of this paragraph-- 7i7 ,in general ,with respect to a corporation and a taxable year1 the term expatriated entity has the meaning given such term by section #ghgd7;a77#b71 determined as if such section and the regulations under such section as in effect on the first day of such taxable year applied to all taxable years of the corporation beginning after ,july #aj1 #aihi4 7ii7 ,exception for surrogates treated as a domestic corporation ,the term expatriated entity does not include a surrogate foreign corporation which is treated as a domestic corporation by reason of section #ghgd7;b74 4 7b7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after the date of the enactment of this ,act4 #abe4 ,repeal of check-the-box rules for certain foreign entities and ,,cfc look-thru rules 7a7 ,check-the-,box rules ,paragraph 7#c7 of section #ggja7;a7 is amended-- 7#a7 by striking and1 and 7#b7 by inserting after insurance companies the following3 1 and any foreign business entity that-- 7,a7 has a single owner that does not have limited liability1 or 7,b7 has one or more members all of which have limited liability 4 7b7 ,look-,thru rule ,subparagraph 7,c7 of section #ied7;c77#f7 is amended to read as follows3 7,c7 ,termination ,subparagraph 7,a7 shall not apply to dividends1 interest1 rents1 and royalties received or accrued after the date of the enactment of the ,,cut ,loopholes ,act4 4 #abf4 ,prohibition on offshore loan abuse 7a7 ,in general ,subpart ,f of part ,,iii of subchapter ,n of chapter #a is amended by adding at the end the following new section3 #iff4 ,income inclusion for loans to ,united ,states shareholders from controlled foreign corporations 7a7 ,in general ,in the case of a ,united ,states shareholder1 there shall be included in income for the taxable year an amount equal to the disqualified ,,cfc loan amount4 7b7 ,disqualified ,,cfc loan amount 7#a7 ,in general ,for purposes of this section1 the disqualified ,,cfc loan amount for any taxable year is an amount equal to the lesser of-- 7,a7 the aggregate amount of obligations of the ,united ,states shareholder which originated in such taxable year and are held 7directly or indirectly7 by controlled foreign corporations1 or 7,b7 the foreign group earnings amount4 7#b7 ,exception ,in determining the amount of obligations under subparagraph 7,a71 there shall be excluded any obligation described in section #ief7;c77#b77;,c74 7#c7 ,carryforward of certain amounts ,if1 for any taxable year1 the amount under subparagraph 7,a7 exceeds the amount under subparagraph 7,b71 such excess shall be taken into account as an obligation to which subparagraph 7,a7 applies for the succeeding taxable year4 7#d7 ,foreign group earnings amount ,for purposes of this section1 the term foreign group earnings amount means the aggregate earnings and profits of all controlled foreign corporations in the worldwide affiliated group 7as defined in section #hfd7;f77#a77;,c77 of the ,united ,states shareholder1 determined-- 7,a7 as of the last day of the taxable year of the ,united ,states shareholder1 and 7,b7 without regard to any distributions made during such taxable year4 7c7 ,denial of interest deduction ,no deduction shall be allowed for interest paid or accrued with respect to obligations taken into account under subsection 7b74 7d7 ,treatment of income source ,any amount included in income under subsection 7a7 shall be treated as income from sources within the ,united ,states4 4 7b7 ,coordination with section #ief ,paragraph 7#b7 of section #ief7;c7 is amended by striking and at the end of subparagraph 7,k71 by striking the period at the end of subparagraph 7,l77ii7 and inserting 2 and1 and by inserting after subparagraph 7,l7 the following new subparagraph3 7,m7 any obligation which is taken into account in determining the disqualified ,,cfc loan amount under section #iff4 4 7c7 ,clerical amendment ,the table of sections for subpart ,f of part ,,iii of subchapter ,n of chapter #a is amended by adding at the end the following new item3 ,sec4 #iff4 ,income inclusion for loans to certain ,united ,states shareholders from controlled foreign corporations4 4 7d7 ,effective date ,the amendments made by this section shall apply to obligations originated after the date of the enactment of this ,act4 ,,ii ,strengthening tax enforcement ,a ,combating tax shelter promotion #bja4 ,penalty for promoting abusive tax shelters 7a7 ,penalty for promoting abusive tax shelters ,section #fgjj is amended-- 7#a7 by redesignating subsections 7b7 and 7c7 as subsections 7d7 and 7e71 respectively1 7#b7 by striking a penalty and all that follows through the period in the first sentence of subsection 7a7 and inserting a penalty determined under subsection 7b71 and 7#c7 by inserting after subsection 7a7 the following new subsections3 7b7 ,amount of penalty2 calculation of penalty2 liability for penalty 7#a7 ,amount of penalty ,the amount of the penalty imposed by subsection 7a7 shall not exceed #aej percent of the gross income derived 7or to be derived7 from such activity by the person or persons subject to such penalty4 7#b7 ,calculation of penalty ,the penalty amount determined under paragraph 7#a7 shall be calculated with respect to each instance of an activity described in subsection 7a71 each instance in which income was derived by the person or persons subject to such penalty1 and each person who participated in such an activity4 7#c7 ,liability for penalty ,if more than #a person is liable under subsection 7a7 with respect to such activity1 all such persons shall be jointly and severally liable for the penalty under such subsection4 7c7 ,penalty not deductible ,the payment of any penalty imposed under this section or the payment of any amount to settle or avoid the imposition of such penalty shall not be considered an ordinary and necessary expense in carrying on a trade or business for purposes of this title and shall not be deductible by the person who is subject to such penalty or who makes such payment4 4 7b7 ,conforming amendment ,section #fgjj7;a7 is amended by striking the last sentence4 7c7 ,effective date ,the amendments made by this section shall apply to activities after the date of the enactment of this ,act4 #bjb4 ,penalty for aiding and abetting the understatement of tax liability 7a7 ,in general ,section #fgja7;a7 is amended-- 7#a7 by inserting the tax liability or after respect to1 in paragraph 7#a71 7#b7 by inserting aid1 assistance1 procurement1 or advice with respect to such before portion both places it appears in paragraphs 7#b7 and 7#c71 and 7#c7 by inserting instance of aid1 assistance1 procurement1 or advice or each such before document in the matter following paragraph 7#c74 7b7 ,amount of penalty ,subsection 7b7 of section #fgja is amended to read as follows3 7b7 ,amount of penalty2 calculation of penalty2 liability for penalty 7#a7 ,amount of penalty ,the amount of the penalty imposed by subsection 7a7 shall not exceed #aej percent of the gross income derived 7or to be derived7 from such aid1 assistance1 procurement1 or advice provided by the person or persons subject to such penalty4 7#b7 ,calculation of penalty ,the penalty amount determined under paragraph 7#a7 shall be calculated with respect to each instance of aid1 assistance1 procurement1 or advice described in subsection 7a71 each instance in which income was derived by the person or persons subject to such penalty1 and each person who made such an understatement of the liability for tax4 7#c7 ,liability for penalty ,if more than #a person is liable under subsection 7a7 with respect to providing such aid1 assistance1 procurement1 or advice1 all such persons shall be jointly and severally liable for the penalty under such subsection4 4 7c7 ,penalty not deductible ,section #fgja is amended by adding at the end the following new subsection3 7g7 ,penalty not deductible ,the payment of any penalty imposed under this section or the payment of any amount to settle or avoid the imposition of such penalty shall not be considered an ordinary and necessary expense in carrying on a trade or business for purposes of this title and shall not be deductible by the person who is subject to such penalty or who makes such payment4 4 7d7 ,effective date ,the amendments made by this section shall apply to activities after the date of the enactment of this ,act4 #bjc4 ,prohibited fee arrangement 7a7 ,in general ,section #fgja1 as amended by this ,act1 is amended-- 7#a7 by redesignating subsections 7f7 and 7g7 as subsections 7g7 and 7h71 respectively1 7#b7 by striking subsection 7a74 in paragraphs 7#b7 and 7#c7 of subsection 7g7 7as redesignated by paragraph 7#a77 and inserting subsection 7a7 or 7f741 and 7#c7 by inserting after subsection 7e7 the following new subsection3 7f7 ,prohibited fee arrangement 7#a7 ,in general ,any person who makes an agreement for1 charges1 or collects a fee which is for services provided in connection with the internal revenue laws1 and the amount of which is calculated according to1 or is dependent upon1 a projected or actual amount of-- 7,a7 tax savings or benefits1 or 7,b7 losses which can be used to offset other taxable income1 shall pay a penalty with respect to each such fee activity in the amount determined under subsection 7b74 7#b7 ,rules ,the ,secretary may issue rules to carry out the purposes of this subsection and may provide exceptions for fee arrangements that are in the public interest4 4 7b7 ,effective date ,the amendments made by this section shall apply to fee agreements1 charges1 and collections made after the date of the enactment of this ,act4 #bjd4 ,preventing tax shelter activities by financial institutions 7a7 ,examinations 7#a7 ,development of examination techniques ,each of the ,federal banking agencies and the ,commission shall1 in consultation with the ,internal ,revenue ,service1 develop examination techniques to detect potential violations of section #fgjj or #fgja of the ,internal ,revenue ,code of #aihf1 by depository institutions1 brokers1 dealers1 and investment advisers1 as appropriate4 7#b7 ,implementation ,each of the ,federal banking agencies and the ,commission shall implement the examination techniques developed under paragraph 7#a7 with respect to each of the depository institutions1 brokers1 dealers1 or investment advisers subject to their enforcement authority4 ,such examination shall1 to the extent possible1 be combined with any examination by such agency otherwise required or authorized by ,federal law4 7b7 ,report to internal revenue service ,in any case in which an examination conducted under this section with respect to a financial institution or other entity reveals a potential violation1 such agency shall promptly notify the ,internal ,revenue ,service of such potential violation for investigation and enforcement by the ,internal ,revenue ,service1 in accordance with applicable provisions of law4 7c7 ,report to congress ,the ,federal banking agencies and the ,commission shall submit a joint written report to ,congress in #bjad on their progress in preventing violations of sections #fgjj and #fgja of the ,internal ,revenue ,code of #aihf1 by depository institutions1 brokers1 dealers1 and investment advisers1 as appropriate4 7d7 ,definitions ,for purposes of this section-- 7#a7 the terms broker1 dealer1 and investment adviser have the same meanings as in section #c of the ,securities ,exchange ,act of #aicd 7#ae ,u4,s4,c4 #gh;c72 7#b7 the term ,commission means the ,securities and ,exchange ,commission2 7#c7 the term depository institution has the same meaning as in section #c7;c7 of the ,federal ,deposit ,insurance ,act 7#ab ,u4,s4,c4 #ahac7;c772 7#d7 the term ,federal banking agencies has the same meaning as in section #c7q7 of the ,federal ,deposit ,insurance ,act 7#ab ,u4,s4,c4 #ahac7q772 and 7#e7 the term ,secretary means the ,secretary of the ,treasury4 #bje4 ,information sharing for enforcement purposes 7a7 ,promotion of prohibited tax shelters or tax avoidance schemes ,section #fajc7;h7 is amended by adding at the end the following new paragraph3 7#g7 ,disclosure of returns and return information related to promotion of prohibited tax shelters or tax avoidance schemes 7,a7 ,written request ,upon receipt by the ,secretary of a written request which meets the requirements of subparagraph 7,b7 from the head of the ,united ,states ,securities and ,exchange ,commission1 an appropriate ,federal banking agency as defined under section #ahac7q7 of title #ab1 ,united ,states ,code1 or the ,public ,company ,accounting ,oversight ,board1 a return or return information shall be disclosed to such requestor's officers and employees who are personally and directly engaged in an investigation1 examination1 or proceeding by such requestor to evaluate1 determine1 penalize1 or deter conduct by a financial institution1 issuer1 or public accounting firm1 or associated person1 in connection with a potential or actual violation of section #fgjj 7promotion of abusive tax shelters71 #fgja 7aiding and abetting understatement of tax liability71 or activities related to promoting or facilitating inappropriate tax avoidance or tax evasion4 ,such disclosure shall be solely for use by such officers and employees in such investigation1 examination1 or proceeding4 ,in the discretion of the ,secretary1 such disclosure may take the form of the participation of ,internal ,revenue ,service employees in a joint investigation1 examination1 or proceeding with the ,securities and ,exchange ,commission1 ,federal banking agency1 or ,public ,company ,accounting ,oversight ,board4 7,b7 ,requirements ,a request meets the requirements of this subparagraph if it sets forth-- 7i7 the nature of the investigation1 examination1 or proceeding1 7ii7 the statutory authority under which such investigation1 examination1 or proceeding is being conducted1 7iii7 the name or names of the financial institution1 issuer1 or public accounting firm to which such return information relates1 7iv7 the taxable period or periods to which such return information relates1 and 7v7 the specific reason or reasons why such disclosure is1 or may be1 relevant to such investigation1 examination or proceeding4 7,c7 ,financial institution ,for the purposes of this paragraph1 the term financial institution means a depository institution1 foreign bank1 insured institution1 industrial loan company1 broker1 dealer1 investment company1 investment advisor1 or other entity subject to regulation or oversight by the ,united ,states ,securities and ,exchange ,commission or an appropriate ,federal banking agency4 4 7b7 ,financial and accounting fraud investigations ,section #fajc7;i7 is amended by adding at the end the following new paragraph3 7#i7 ,disclosure of returns and return information for use in financial and accounting fraud investigations 7,a7 ,written request ,upon receipt by the ,secretary of a written request which meets the requirements of subparagraph 7,b7 from the head of the ,united ,states ,securities and ,exchange ,commission or the ,public ,company ,accounting ,oversight ,board1 a return or return information shall be disclosed to such requestor's officers and employees who are personally and directly engaged in an investigation1 examination1 or proceeding by such requester to evaluate the accuracy of a financial statement or report1 or to determine whether to require a restatement1 penalize1 or deter conduct by an issuer1 investment company1 or public accounting firm1 or associated person1 in connection with a potential or actual violation of auditing standards or prohibitions against false or misleading statements or omissions in financial statements or reports4 ,such disclosure shall be solely for use by such officers and employees in such investigation1 examination1 or proceeding4 7,b7 ,requirements ,a request meets the requirements of this subparagraph if it sets forth-- 7i7 the nature of the investigation1 examination1 or proceeding1 7ii7 the statutory authority under which such investigation1 examination1 or proceeding is being conducted1 7iii7 the name or names of the issuer1 investment company1 or public accounting firm to which such return information relates1 7iv7 the taxable period or periods to which such return information relates1 and 7v7 the specific reason or reasons why such disclosure is1 or may be1 relevant to such investigation1 examination or proceeding4 4 7c7 ,effective date ,the amendments made by this section shall apply to disclosures and to information and document requests made after the date of the enactment of this ,act4 #bjf4 ,disclosure of information to ,congress 7a7 ,disclosure by tax return preparer 7#a7 ,in general ,subparagraph 7,b7 of section #gbaf7;b77#a7 is amended to read as follows3 7,b7 pursuant to any #a of the following documents1 if clearly identified3 7i7 ,the order of any ,federal1 ,state1 or local court of record4 7ii7 ,a subpoena issued by a ,federal or ,state grand jury4 7iii7 ,an administrative order1 summons1 or subpoena which is issued in the performance of its duties by-- 7,i7 any ,federal agency1 including ,congress or any committee or subcommittee thereof1 or 7,,ii7 any ,state agency1 body1 or commission charged under the laws of the ,state or a political subdivision of the ,state with the licensing1 registration1 or regulation of tax return preparers4 4 7#b7 ,effective date ,the amendment made by this subsection shall apply to disclosures made after the date of the enactment of this ,act pursuant to any document in effect on or after such date4 7b7 ,disclosure by ,secretary ,paragraph 7#b7 of section #fajd7;a7 is amended to read as follows3 7#b7 ,inspection by ,congress 7,a7 ,in general ,upon receipt of a written request from a committee or subcommittee of ,congress1 copies of documents related to a determination by the ,secretary to grant1 deny1 revoke1 or restore an organization's exemption from taxation under section #eja shall be provided to such committee or subcommittee1 including any application1 notice of status1 or supporting information provided by such organization to the ,internal ,revenue ,service2 any letter1 analysis1 or other document produced by or for the ,internal ,revenue ,service evaluating1 determining1 explaining1 or relating to the tax exempt status of such organization 7other than returns1 unless such returns are available to the public under this section or section #fajc or #faaj72 and any communication between the ,internal ,revenue ,service and any other party relating to the tax exempt status of such organization4 7,b7 ,additional information ,section #fajc7;f7 shall apply with respect to-- 7i7 the application for exemption of any organization described in subsection 7c7 or 7d7 of section #eja which is exempt from taxation under section #eja7;a7 for any taxable year and any application referred to in subparagraph 7,b7 of subsection 7a77#a7 of this section1 and 7ii7 any other papers which are in the possession of the ,secretary and which relate to such application1 as if such papers constituted returns4 4 7c7 ,effective date ,the amendments made by this section shall apply to disclosures and to information and document requests made after the date of the enactment of this ,act4 #bjg4 ,tax opinion standards for tax practitioners ,section #ccj7;d7 of title #ca1 ,united ,states ,code1 is amended to read as follows3 7d7 ,the ,secretary of the ,treasury shall impose standards applicable to the rendering of written advice with respect to any listed transaction or any entity1 plan1 arrangement1 or other transaction which has a potential for tax avoidance or evasion4 ,such standards shall address1 but not be limited to1 the following issues3 7#a7 ,independence of the practitioner issuing such written advice from persons promoting1 marketing1 or recommending the subject of the advice4 7#b7 ,collaboration among practitioners1 or between a practitioner and other party1 which could result in such collaborating parties having a joint financial interest in the subject of the advice4 7#c7 ,avoidance of conflicts of interest which would impair auditor independence4 7#d7 ,for written advice issued by a firm1 standards for reviewing the advice and ensuring the consensus support of the firm for positions taken4 7#e7 ,reliance on reasonable factual representations by the taxpayer and other parties4 7#f7 ,appropriateness of the fees charged by the practitioner for the written advice4 7#g7 ,preventing practitioners and firms from aiding or abetting the understatement of tax liability by clients4 7#h7 ,banning the promotion of potentially abusive or illegal tax shelters4 4 ,b ,simplify tax lien procedure #baa4 ,short title ,this subtitle may be cited as the ,tax ,lien ,simplification ,act4 #bab4 ,findings and purpose 7a7 ,findings ,congress makes the following findings3 7#a7 ,the present decentralized system for filing ,federal tax liens in local property offices1 which was established before the advent of modern computers1 the ,internet1 and e-government programs1 is inefficient1 burdensome1 and expensive4 7#b7 ,current technology permits the creation of a centralized ,federal tax lien filing system which can provide for enhanced public notice of and access to accurate tax lien information in a manner that is more efficient1 more timely1 and less burdensome than the existing tax lien filing system2 which would expedite the release of liens2 and which would be less expensive for both taxpayers and users4 7b7 ,purpose ,the purpose of this subtitle is to simplify and modernize the process for filing notices of ,federal tax liens1 to improve public access to tax lien information1 and to save taxpayer dollars by establishing a nationwide1 ,internet accessible1 and fully searchable filing system for ,federal tax liens which would replace the current system of local tax lien filings4 #bac4 ,national tax lien filing system 7a7 ,filing of notice of lien ,subsection 7f7 of section #fcbc is amended to read as follows3 7f7 ,filing of notice2 form 7#a7 ,filing of notice ,the notice referred to in subsection 7a7 shall be filed in the ,federal tax lien registry operated under subsection 7k74 ,the filing of a notice of lien1 or a certificate of release1 discharge1 subordination1 or nonattachment of lien1 or a notice of withdrawal of a notice of lien1 in the ,federal tax lien registry shall be effective for purposes of determining lien priority regardless of the nature or location of the property interest to which the lien attaches4 7#b7 ,form ,the form and content of the notice referred to in subsection 7a7 shall be prescribed by the ,secretary4 ,such notice shall be valid notwithstanding any other provision of law regarding the form or content of a notice of lien4 7#c7 ,other national filing systems ,once the ,federal tax lien registry is operational under subsection 7k71 the filing of a notice of lien shall be governed by this title and shall not be subject to any other ,federal law establishing a place or places for the filing of liens or encumbrances under a national filing system4 4 7b7 ,refiling of notice ,paragraph 7#b7 of section #fcbc7;g7 is amended to read as follows3 7#b7 ,refiling ,a notice of lien may be refiled in the ,federal tax lien registry operated under subsection 7k74 4 7c7 ,release of tax liens or discharge of property 7#a7 ,in general ,section #fcbe7;a7 is amended by inserting 1 and shall cause the certificate of release to be filed in the ,federal tax lien registry operated under section #fcbc7k71 after internal revenue tax4 7#b7 ,release of tax liens expedited from #cj to #bj days ,section #fcbe7;a7 is amended by striking not later than #cj days and inserting not later than #bj days4 7#c7 ,discharge of property from lien ,section #fcbe7;b7 is amended-- 7,a7 by inserting 1 and shall cause the certificate of discharge to be filed in the ,federal tax lien registry operated under section #fcbc7k71 after under this chapter in paragraph 7#a71 7,b7 by inserting 1 and shall cause the certificate of discharge to be filed in such ,federal tax lien registry1 after property subject to the lien in paragraph 7#b71 7,c7 by inserting 1 and shall cause the certificate of discharge to be filed in such ,federal tax lien registry1 after property subject to the lien in paragraph 7#c71 and 7,d7 by inserting 1 and shall cause the certificate of discharge of property to be filed in such ,federal tax lien registry1 after certificate of discharge of such property in paragraph 7#d74 7#d7 ,discharge of property from estate or gift tax lien ,section #fcbe7;c7 is amended by inserting 1 and shall cause the certificate of discharge to be filed in the ,federal tax lien registry operated under section #fcbc7k71 after imposed by section #fcbd4 7#e7 ,subordination of lien ,section #fcbe7;d7 is amended by inserting 1 and shall cause the certificate of subordination to be filed in the ,federal tax lien registry operated under section #fcbc7k71 after subject to such lien4 7#f7 ,nonattachment of lien ,section #fcbe7;e7 is amended by inserting 1 and shall cause the certificate of nonattachment to be filed in the ,federal tax lien registry operated under section #fcbc7k71 after property of such person4 7#g7 ,effect of certificate ,paragraphs 7#a7 and 7#b77;,b7 of section #fcbe7;f7 are each amended by striking in the same office as the notice of lien to which it relates is filed 7if such notice of lien has been filed7 and inserting in the ,federal tax lien registry operated under section #fcbc7k74 7#h7 ,release following administrative appeal ,section #fcbf7;b7 is amended-- 7,a7 by striking and shall include and insert 1 shall include1 and 7,b7 by inserting 1 and shall cause the certificate of release to be filed in the ,federal tax lien registry operated under section #fcbc7k71 after erroneous4 7#i7 ,withdrawal of notice ,section #fcbc7;j77#a7 is amended by striking at the same office as the withdrawn notice and inserting in the ,federal tax lien registry operated under section #fcbc7k74 7#aj7 ,conforming amendments ,section #fcbe is amended by striking subsection 7g7 and by redesignating subsection 7h7 as subsection 7g74 7d7 ,federal tax lien registry ,section #fcbc is amended by adding at the end the following new subsection3 7k7 ,federal tax lien registry 7#a7 ,in general ,the ,federal tax lien registry operated under this subsection shall be established and maintained by the ,secretary and shall be accessible to and searchable by the public through the ,internet at no cost to access or search4 ,the registry shall identify the taxpayer to whom the ,federal tax lien applies and reflect the date and time the notice of lien was filed1 and shall be made searchable by1 at a minimum1 taxpayer name1 the ,state of the taxpayer's address as shown on the notice of lien1 the type of tax1 and the tax period4 ,the registry shall also provide for the filing of certificates of release1 discharge1 subordination1 and nonattachment of ,federal tax liens1 as authorized in sections #fcbe and #fcbf1 and may provide for publishing such other documents or information with respect to ,federal tax liens as the ,secretary may by regulation provide under paragraph 7#b77;,c74 7#b7 ,administrative action 7,a7 ,in general ,the ,secretary shall issue regulations or other guidance providing for the maintenance1 reliability1 accessibility1 and use of the ,federal tax lien registry established under paragraph 7#a74 ,such regulations or guidance shall address1 among other matters1 issues related to periods during which the registry may be unavailable for use due to routine maintenance or other activities4 7,b7 ,fees ,the ,secretary may charge a taxpayer's account with a reasonable filing fee for each notice of lien and each related certificate1 notice1 or other filing recorded in the ,federal tax lien registry with respect to such taxpayer1 in an amount determined by the ,secretary to be sufficient to defray the costs of operating the registry4 ,the ,secretary may also charge a reasonable fee to any person who requests and receives under section #fcbc7;d77#a7 information or a certified copy of a filing in the ,federal tax lien registry to defray the costs of providing such information or copies4 7,c7 ,filing of other items on registry ,the ,secretary may1 by regulation1 provide for the filing of items on the registry other than ,federal tax liens1 including criminal fine judgments under section #cfac of title #ah1 ,united ,states ,code1 and civil judgments under section #cbja of such title1 if the ,secretary determines that it would be useful and appropriate to do so4 4 7e7 ,certified copies of information from registry ,section #fcbc1 as amended by subsection 7d71 is amended by adding at the end the following new subsection3 7l7 ,certified copies of information from ,federal registry ,the ,secretary shall make available in a certificate that can be admitted into evidence in the courts of the ,united ,states without extrinsic evidence of its authenticity the following information to any person that submits a request in a form specified by the ,secretary3 7#a7 ,whether there is on file in the ,federal tax lien registry operated under subsection 7k7 at a date and time specified by the ,secretary1 but not a date earlier than #c days before the creation of the certificate1 any notice of a lien that-- 7,a7 designates a particular taxpayer1 7,b7 has not been fully satisfied1 become legally unenforceable1 or been released or withdrawn1 and 7,c7 if the request so states1 has been fully satisfied1 become legally unenforceable1 or been released or withdrawn1 and a record of which is maintained on the registry at the time of filing of the request1 7#b7 the date and time of filing of and the information provided in each notice of lien1 and 7#c7 if the request so states1 the date and time of filing of and the information provided in each certificate of release1 discharge1 subordination1 or non-attachment and each notice of withdrawal recorded in the registry with respect to each notice of lien4 4 7f7 ,effective date2 implementation of registry 7#a7 ,effective date ,the amendments made by this section shall take effect on the date determined by the ,secretary of the ,treasury under paragraph 7#b77;,e7 and1 except as provided in paragraph 7#b77;,f71 shall apply to notices of liens filed after such date4 7#b7 ,implementation of ,federal tax lien registry 7,a7 ,pilot project ,prior to the implementation of the ,federal tax lien registry under section #fcbc7k77#a7 of the ,internal ,revenue ,code of #aihf 7as added by this section71 the ,secretary of the ,treasury1 or the ,secretary's delegate1 shall conduct and shall complete by not later than #b years after the date of the enactment of this ,act #a or more pilot projects to test the accessibility1 reliability1 and effectiveness of the electronic systems designed to operate the registry4 7,b7 ,,gao review ,within #c months after the completion of such a pilot project1 the ,government ,accountability ,office shall provide a written evaluation of the project results and provide such evaluation to the ,secretary of the ,treasury1 the ,commissioner of ,internal ,revenue1 and appropriate committees in ,congress4 ,the ,secretary and ,commissioner shall cooperate with1 and provide information requested by1 the ,government ,accountability ,office to enable the evaluation to be completed by the date specified4 7,c7 ,nationwide test ,upon the completion of #a or more such pilot projects and after making a determination that the electronic systems designed to operate the ,federal tax lien registry are sufficiently accessible1 reliable1 and effective1 the ,secretary of the ,treasury1 or the ,secretary's delegate1 shall conduct a nationwide test of the ,federal tax lien registry to evaluate its capabilities and functionality4 7,d7 ,data protection ,prior to the implementation of such registry1 the ,secretary of the ,treasury1 or the ,secretary's delegate1 shall take appropriate steps to-- 7i7 secure and prevent tampering with the data recorded in the registry1 7ii7 review the information currently provided in public lien filings and determine whether any such information should be excluded or protected from public viewing in such registry1 and 7iii7 develop a system1 after consultation with the ,states1 industry1 and other interested parties1 and after consideration of search criteria developed for other public filing systems including ,article #i of the ,uniform ,commercial ,code1 that will enable users of the registry1 when examining tax lien information for a taxpayer with a common name1 to identify through reasonable efforts the specific person to whom such tax lien relates4 7,e7 ,declaration of registry effective date ,upon the successful completion of a nationwide test of the ,federal tax lien registry system1 the ,secretary of the ,treasury shall determine and announce publicly a date upon which the registry shall take effect and become operational4 7,f7 ,orderly transition ,in order to permit an orderly transition to the ,federal tax lien registry1 the ,secretary of the ,treasury may by regulation prescribe for the continued filing of notices of ,federal tax liens in the offices of the ,states1 counties1 and other governmental subdivisions after the determination of an effective date under subparagraph 7,e7 under the provisions of section #fcbc7;f7 as in effect before such effective date1 for an appropriate period not to exceed #b years after such effective date4 ,,iii ,ending excessive corporate tax deductions for stock options #cja4 ,consistent treatment of stock options by corporations 7a7 ,consistent treatment for wage deduction 7#a7 ,in general ,section #hc7;h7 is amended-- 7,a7 by striking ,in the case of and inserting3 7#a7 ,in general ,in the case of 1 and 7,b7 by adding at the end the following new paragraph3 7#b7 ,stock options ,in the case of property transferred to a person in connection with a stock option1 any deduction related to such stock option shall be allowed only under section #afb7q7 and paragraph 7#a7 shall not apply4 4 7#b7 ,treatment of compensation paid with stock options ,section #afb is amended by redesignating subsection 7q7 as subsection 7r7 and by inserting after subsection 7p7 the following new subsection3 7q7 ,treatment of compensation paid with stock options 7#a7 ,in general ,in the case of compensation for personal services that is paid with stock options1 the deduction under subsection 7a77#a7 shall not exceed the amount the taxpayer has treated as compensation cost with respect to such stock options for the purpose of ascertaining income1 profit1 or loss in a report or statement to shareholders1 partners1 or other proprietors 7or to beneficiaries71 and shall be taken into account in the same period that such compensation cost is recognized for such purpose4 7#b7 ,special rules for controlled groups ,the ,secretary may prescribe rules for the application of paragraph 7#a7 in cases where the stock option is granted by-- 7,a7 a parent or subsidiary corporation 7within the meaning of section #dbd7 of the taxpayer1 or 7,b7 another corporation4 4 7b7 ,consistent treatment for research tax credit ,section #da7;b77#b77;,d7 is amended by inserting at the end the following new clause3 7iv7 ,special rule for stock options ,the amount which may be treated as wages for any taxable year in connection with the issuance of a stock option shall not exceed the amount allowed for such taxable year as a compensation deduction under section #afb7q7 with respect to such stock option4 4 7c7 ,application of amendments ,the amendments made by this section shall apply to stock options exercised after the date of the enactment of this ,act1 except that-- 7#a7 such amendments shall not apply to stock options that were granted before such date and that vested in taxable periods beginning on or before ,june #ae1 #bjje1 7#b7 for stock options that were granted before such date of enactment and vested during taxable periods beginning after ,june #ae1 #bjje1 and ending before such date of enactment1 a deduction under section #afb7q7 of the ,internal ,revenue ,code of #aihf 7as added by subsection 7a77#b77 shall be allowed in the first taxable period of the taxpayer that ends after such date of enactment1 7#c7 for public entities reporting as small business issuers and for non-public entities required to file public reports of financial condition1 paragraphs 7#a7 and 7#b7 shall be applied by substituting ,december #ae1 #bjje for ,june #ae1 #bjje1 and 7#d7 no deduction shall be allowed under section #hc7;h7 or section #afb7q7 of such ,code with respect to any stock option the vesting date of which is changed to accelerate the time at which the option may be exercised in order to avoid the applicability of such amendments4 #cjb4 ,application of executive pay deduction limit 7a7 ,in general ,subparagraph 7,d7 of section #afb7m77#d7 is amended to read as follows3 7,d7 ,stock option compensation ,the term applicable employee remuneration shall include any compensation deducted under subsection 7q71 and such compensation shall not qualify as performance-based compensation under subparagraph 7,c74 4 7b7 ,effective date ,the amendment made by this section shall apply to stock options exercised or granted after the date of the enactment of this ,act4 ,,iv ,closing the derivatives blended rate loophole #dja4 ,short title ,this title may be cited as the ,closing the ,derivatives ,blended ,rate ,loophole ,act4 #djb4 ,modifications to treatment of section #abef contracts 7a7 ,elimination of blended capital gain or loss treatment in favor of short-,term capital gain or loss 7#a7 ,in general ,paragraph 7#c7 of section #abef7;a7 is amended to read as follows3 7#c7 any gain or loss with respect to a section #abef contract shall be treated as short-term capital gain or loss1 and 4 7#b7 ,conforming amendments ,subsection 7f7 of section #abef is amended by striking paragraphs 7#b71 7#c71 and 7#d7 and by redesignating paragraph 7#e7 as paragraph 7#b74 7b7 ,conforming amendments 7#a7 ,clause 7iv7 of section #ihh7;c77#a77;,e7 is amended to read as follows3 7iv7 ,treatment of certain currency contracts ,except as provided in regulations1 in the case of a qualified fund1 any bank forward contract1 any foreign currency futures contract traded on a foreign exchange1 or to the extent provided in regulations any similar instrument1 which is not otherwise a section #abef contract shall be treated as a section #abef contract for purposes of section #abef4 4 7#b7 ,subparagraph 7,a7 of section #abab7;c77#a7 is amended by striking preceding taxable year and all that follows and inserting preceding taxable year1 the amount so allowed shall be treated as short-term capital loss from section #abef contracts44 7#c7 ,subparagraph 7,a7 of section #abab7;c77#f7 is amended by striking preceding taxable year and all that follows and inserting preceding taxable year1 the amount allowed as a carryback shall be treated as short-term gain for the loss year44 7#d7 ,subparagraph 7,b7 of section #abab7;c77#f7 is amended by striking or long-term4 7#e7 ,subsection 7f7 of section #abef is amended by striking paragraphs 7#c7 and 7#d7 and by redesignating paragraph 7#e7 as paragraph 7#c74 7c7 ,effective dates 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 ,conforming amendments ,the amendments made by paragraphs 7#b71 7#c71 and 7#d7 of subsection 7b7 shall apply to losses for taxable years beginning after the date of the enactment of this ,act4 #djc4 ,modifications to treatment of dealers in securities and commodities 7a7 ,modification of definition of security ,paragraph 7#b7 of section #dge7;c7 is amended by striking the second sentence4 7b7 ,required mark to market for dealers in commodities ,subsection 7e7 of section #dge is amended-- 7#a7 by striking ,in the case of a dealer in commodities who elects the application of this subsection1 this section shall apply to commodities held by such dealer in paragraph 7#a7 and inserting ,this section shall apply to commodities held by a dealer in commodities1 and 7#b7 by striking paragraph 7#c74 7c7 ,commodities derivatives dealers ,clause 7i7 of section #abba7;b77#a77;,b7 is amended by striking a note1 bond1 or other evidence of indebtedness1 or a section #abef contract 7as defined in section #abef7;b77 and inserting or a note1 bond1 or other evidence of indebtedness74 7d7 ,technical amendment ,paragraph 7#a7 of section #adjb7;i7 is amended by striking subsection 7a77#c77;,a7 and inserting subsection 7a77#c74 7e7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after the date of the enactment of this ,act4 ,v ,ending the tar sands oil spill loophole #eja4 ,short title ,this title may be cited as the ,closing the ,oil ,spill ,cleanup ,loophole ,act4 #ejb4 ,requirements for contribution to the ,oil ,spill ,liability ,trust ,fund 7a7 ,in general ,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 shale oil1 any bitumen or bituminous mixture1 any oil derived from a bitumen or bituminous mixture1 and any oil derived from kerogen-bearing sources4 4 7b7 ,regulatory authority ,to address other types of crude oil and petroleum products ,subsection 7a7 of section #dfab is amended by adding at the end the following new paragraph3 7#aj7 ,regulatory authority to address other types of crude oil and petroleum products ,under such regulations as the ,secretary may prescribe1 after consultation with the ,administrator of the ,environmental ,protection ,agency1 the ,secretary may include as crude oil or as a petroleum product subject to tax under section #dfaa1 any fuel feedstock or finished fuel product customarily transported by pipeline1 vessel1 railcar1 or tanker truck if the ,secretary determines that-- 7,a7 the classification of such fuel feedstock or finished fuel product is consistent with the definition of oil under the ,oil ,pollution ,act of #aiij1 and 7,b7 such fuel feedstock or finished fuel product is produced in sufficient commercial quantities as to pose a significant risk of hazard in the event of a discharge4 4 7c7 ,removing restrictions relating to oil wells and extraction methods ,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 ,act1 regardless of whether the ,secretary of the ,treasury has promulgated regulations implementing such amendments4 #ejc4 ,extension of ,oil ,spill ,liability ,trust ,fund financing rate ,section #dfaa is amended by striking subsection 7f74 #ejd4 ,technical amendment ,subclause 7,i7 of section #dfab7;e77#b77;,b77ii7 is amended by striking tranferred and inserting transferred4 ,,vi ,ending the carried interest loophole #fja4 ,short title2 etc ,this title may be cited as the ,carried ,interest ,fairness ,act of #bjab4 #fjb4 ,partnership interests transferred in connection with performance of services 7a7 ,modification to election ,to include partnership interest in gross income in year of transfer ,subsection 7c7 of section #hc is amended by redesignating paragraph 7#d7 as paragraph 7#e7 and by inserting after paragraph 7#c7 the following new paragraph3 7#d7 ,partnership interests ,except as provided by the ,secretary-- 7,a7 ,in general ,in the case of any transfer of an interest in a partnership in connection with the provision of services to 7or for the benefit of7 such partnership-- 7i7 the fair market value of such interest shall be treated for purposes of this section as being equal to the amount of the distribution which the partner would receive if the partnership sold 7at the time of the transfer7 all of its assets at fair market value and distributed the proceeds of such sale 7reduced by the liabilities of the partnership7 to its partners in liquidation of the partnership1 and 7ii7 the person receiving such interest shall be treated as having made the election under subsection 7b77#a7 unless such person makes an election under this paragraph to have such subsection not apply4 7,b7 ,election ,the election under subparagraph 7,a77ii7 shall be made under rules similar to the rules of subsection 7b77#b74 4 7b7 ,effective date ,the amendments made by this section shall apply to interests in partnerships transferred after the date of the enactment of this ,act4 #fjc4 ,special rules for partners providing investment management services to partnerships 7a7 ,in general ,part ,i of subchapter ,k of chapter #a is amended by adding at the end the following new section3 #gaj4 ,special rules for partners providing investment management services to partnerships 7a7 ,treatment of distributive share of partnership items ,for purposes of this title1 in the case of an investment services partnership interest-- 7#a7 ,in general ,notwithstanding section #gjb7;b7-- 7,a7 an amount equal to the net capital gain with respect to such interest for any partnership taxable year shall be treated as ordinary income1 and 7,b7 subject to the limitation of paragraph 7#b71 an amount equal to the net capital loss with respect to such interest for any partnership taxable year shall be treated as an ordinary loss4 7#b7 ,recharacterization of losses limited to recharacterized gains ,the amount treated as ordinary loss under paragraph 7#a77;,b7 for any taxable year shall not exceed the excess 7if any7 of-- 7,a7 the aggregate amount treated as ordinary income under paragraph 7#a77;,a7 with respect to the investment services partnership interest for all preceding partnership taxable years to which this section applies1 over 7,b7 the aggregate amount treated as ordinary loss under paragraph 7#a77;,b7 with respect to such interest for all preceding partnership taxable years to which this section applies4 7#c7 ,allocation to items of gain and loss 7,a7 ,net capital gain ,the amount treated as ordinary income under paragraph 7#a77;,a7 shall be allocated ratably among the items of long-term capital gain taken into account in determining such net capital gain4 7,b7 ,net capital loss ,the amount treated as ordinary loss under paragraph 7#a77;,b7 shall be allocated ratably among the items of long-term capital loss and short-term capital loss taken into account in determining such net capital loss4 7#d7 ,terms relating to capital gains and losses ,for purposes of this section-- 7,a7 ,in general ,net capital gain1 long-term capital gain1 and long-term capital loss1 with respect to any investment services partnership interest for any taxable year1 shall be determined under section #abbb1 except that such section shall be applied-- 7i7 without regard to the recharacterization of any item as ordinary income or ordinary loss under this section1 7ii7 by only taking into account items of gain and loss taken into account by the holder of such interest under section #gjb with respect to such interest for such taxable year1 and 7iii7 by treating property which is taken into account in determining gains and losses to which section #abca applies as capital assets held for more than #a year4 7,b7 ,net capital loss ,the term net capital loss means the excess of the losses from sales or exchanges of capital assets over the gains from such sales or exchanges4 ,rules similar to the rules of clauses 7i7 through 7iii7 of subparagraph 7,a7 shall apply for purposes of the preceding sentence4 7#e7 ,special rules for dividends 7,a7 ,individuals ,any dividend allocated to any investment services partnership interest shall not be treated as qualified dividend income for purposes of section #a7;h74 7,b7 ,corporations ,no deduction shall be allowed under section #bdc or #bde with respect to any dividend allocated to any investment services partnership interest4 7#f7 ,special rule for qualified small business stock ,section #abjb shall not apply to any gain from the sale or exchange of qualified small business stock 7as defined in section #abjb7;c77 allocated with respect to any investment services partnership interest4 7b7 ,dispositions of partnership interests 7#a7 ,gain 7,a7 ,in general ,any gain on the disposition of an investment services partnership interest shall be-- 7i7 treated as ordinary income1 and 7ii7 recognized notwithstanding any other provision of this subtitle4 7,b7 ,gift and transfers at death ,in the case of a disposition of an investment services partnership interest by gift or by reason of death of the taxpayer-- 7i7 subparagraph 7,a7 shall not apply1 7ii7 such interest shall be treated as an investment services partnership interest in the hands of the person acquiring such interest1 and 7iii7 any amount that would have been treated as ordinary income under this subsection had the decedent sold such interest immediately before death shall be treated as an item of income in respect of a decedent under section #fia4 7#b7 ,loss ,any loss on the disposition of an investment services partnership interest shall be treated as an ordinary loss to the extent of the excess 7if any7 of-- 7,a7 the aggregate amount treated as ordinary income under subsection 7a7 with respect to such interest for all partnership taxable years to which this section applies1 over 7,b7 the aggregate amount treated as ordinary loss under subsection 7a7 with respect to such interest for all partnership taxable years to which this section applies4 7#c7 ,election with respect to certain exchanges ,paragraph 7#a77;,a77ii7 shall not apply to the contribution of an investment services partnership interest to a partnership in exchange for an interest in such partnership if-- 7,a7 the taxpayer makes an irrevocable election to treat the partnership interest received in the exchange as an investment services partnership interest1 and 7,b7 the taxpayer agrees to comply with such reporting and recordkeeping requirements as the ,secretary may prescribe4 7#d7 ,distributions of partnership property 7,a7 ,in general ,in the case of any distribution of property by a partnership with respect to any investment services partnership interest held by a partner1 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,c774 7,b7 ,treatment of gain as ordinary income ,any gain recognized by such partner under subparagraph 7,a7 shall be treated as ordinary income to the same extent and in the same manner as the increase in such partner's distributive share of the taxable income of the partnership would be treated under subsection 7a7 if1 immediately prior to the distribution1 the partnership had sold the distributed property at fair market value and all of the gain from such disposition were allocated to such partner4 ,for purposes of applying subsection 7a77#b71 any gain treated as ordinary income under this subparagraph shall be treated as an amount treated as ordinary income under subsection 7a77#a77;,a74 7,c7 ,adjustment of basis ,in the case a distribution to which subparagraph 7,a7 applies1 the basis of the distributed property in the hands of the distributee partner shall be the fair market value of such property4 7,d7 ,special rules with respect to mergers1 divisions1 and technical terminations ,in the case of a taxpayer which satisfies requirements similar to the requirements of subparagraphs 7,a7 and 7,b7 of paragraph 7#c71 this paragraph and paragraph 7#a77;,a77ii7 shall not apply to the distribution of a partnership interest if such distribution is in connection with a contribution 7or deemed contribution7 of any property of the partnership to which section #gba applies pursuant to a transaction described in paragraph 7#a77;,b7 or 7#b7 of section #gjh7;b74 7c7 ,investment services partnership interest ,for purposes of this section-- 7#a7 ,in general ,the term investment services partnership interest means any interest in an investment partnership acquired or held by any person in connection with the conduct of a trade or business described in paragraph 7#b7 by such person 7or any person related to such person74 ,an interest in an investment partnership held by any person-- 7,a7 shall not be treated as an investment services partnership interest for any period before the first date on which it is so held in connection with such a trade or business1 7,b7 shall not cease to be an investment services partnership interest merely because such person holds such interest other than in connection with such a trade or business1 and 7,c7 shall be treated as an investment services partnership interest if acquired from a related person in whose hands such interest was an investment services partnership interest4 7#b7 ,businesses to which this section applies ,a trade or business is described in this paragraph if such trade or business primarily involves the performance of any of the following services with respect to assets held 7directly or indirectly7 by the investment partnership referred to in paragraph 7#a73 7,a7 ,advising as to the advisability of investing in1 purchasing1 or selling any specified asset4 7,b7 ,managing1 acquiring1 or disposing of any specified asset4 7,c7 ,arranging financing with respect to acquiring specified assets4 7,d7 ,any activity in support of any service described in subparagraphs 7,a7 through 7,c74 7#c7 ,investment partnership 7,a7 ,in general ,the term investment partnership means any partnership if1 at the end of any calendar quarter ending after the date of enactment of this section-- 7i7 substantially all of the assets of the partnership are specified assets 7determined without regard to any section #aig intangible within the meaning of section #aig7;d771 and 7ii7 more than half of the capital of the partnership is attributable to qualified capital interests which 7in the hands of the owners of such interests7 constitute property not held in connection with a trade or business4 7,b7 ,special rules for determining if property not held in connection with trade or business ,except as otherwise provided by the ,secretary1 for purposes of determining whether any interest in a partnership constitutes property not held in connection with a trade or business under subparagraph 7,a77ii7-- 7i7 any election under subsection 7e7 or 7f7 of section #dge shall be disregarded1 and 7ii7 paragraph 7#e77;,b7 shall not apply4 7,c7 ,antiabuse rules ,the ,secretary may issue regulations or other guidance which prevent the avoidance of the purposes of subparagraph 7,a71 including regulations or other guidance which treat convertible and contingent debt 7and other debt having the attributes of equity7 as a capital interest in the partnership4 7,d7 ,controlled groups of entities 7i7 ,in general ,in the case of a controlled group of entities1 if an interest in the partnership received in exchange for a contribution to the capital of the partnership by any member of such controlled group would 7in the hands of such member7 constitute property held in connection with a trade or business1 then any interest in such partnership held by any member of such group shall be treated for purposes of subparagraph 7,a7 as constituting 7in the hands of such member7 property held in connection with a trade or business4 7ii7 ,controlled group of entities ,for purposes of clause 7i71 the term controlled group of entities means a controlled group of corporations as defined in section #aefc7;a77#a71 applied 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,e7 ,special rule for corporations ,for purposes of this paragraph1 in the case of a corporation1 the determination of whether property is held in connection with a trade or business shall be determined as if the taxpayer were an individual4 7#d7 ,specified asset ,the term specified asset means securities 7as defined in section #dge7;c77#b7 without regard to the last sentence thereof71 real estate held for rental or investment1 interests in partnerships1 commodities 7as defined in section #dge7;e77#b771 cash or cash equivalents1 or options or derivative contracts with respect to any of the foregoing4 7#e7 ,related persons 7,a7 ,in general ,a person shall be treated as related to another person if the relationship between such persons is described in section #bfg7;b7 or #gjg7;b74 7,b7 ,attribution of partner services ,any service described in paragraph 7#b7 which is provided by a partner of a partnership shall be treated as also provided by such partnership4 7d7 ,exception for certain capital interests 7#a7 ,in general ,in the case of any portion of an investment services partnership interest which is a qualified capital interest1 all items of gain and loss 7and any dividends7 which are allocated to such qualified capital interest shall not be taken into account under subsection 7a7 if-- 7,a7 allocations of items are made by the partnership to such qualified capital interest in the same manner as such allocations are made to other qualified capital interests held by partners who do not provide any services described in subsection 7c77#b7 and who are not related to the partner holding the qualified capital interest1 and 7,b7 the allocations made to such other interests are significant compared to the allocations made to such qualified capital interest4 7#b7 ,authority to provide exceptions to allocation requirements ,to the extent provided by the ,secretary in regulations or other guidance-- 7,a7 ,allocations to portion of qualified capital interest ,paragraph 7#a7 may be applied separately with respect to a portion of a qualified capital interest4 7,b7 ,no or insignificant allocations to nonservice providers ,in any case in which the requirements of paragraph 7#a77;,b7 are not satisfied1 items of gain and loss 7and any dividends7 shall not be taken into account under subsection 7a7 to the extent that such items are properly allocable under such regulations or other guidance to qualified capital interests4 7,c7 ,allocations to service providers' qualified capital interests which are less than other allocations ,allocations shall not be treated as failing to meet the requirement of paragraph 7#a77;,a7 merely because the allocations to the qualified capital interest represent a lower return than the allocations made to the other qualified capital interests referred to in such paragraph4 7#c7 ,special rule for changes in services and capital contributions ,in the case of an interest in a partnership which was not an investment services partnership interest and which1 by reason of a change in the services with respect to assets held 7directly or indirectly7 by the partnership or by reason of a change in the capital contributions to such partnership1 becomes an investment services partnership interest1 the qualified capital interest of the holder of such partnership interest immediately after such change shall not1 for purposes of this subsection1 be less than the fair market value of such interest 7determined immediately before such change74 7#d7 ,special rule for tiered partnerships ,except as otherwise provided by the ,secretary1 in the case of tiered partnerships1 all items which are allocated in a manner which meets the requirements of paragraph 7#a7 to qualified capital interests in a lower-tier partnership shall retain such character to the extent allocated on the basis of qualified capital interests in any upper-tier partnership4 7#e7 ,exception for no-self-charged carry and management fee provisions ,except as otherwise provided by the ,secretary1 an interest shall not fail to be treated as satisfying the requirement of paragraph 7#a77;,a7 merely because the allocations made by the partnership to such interest do not reflect the cost of services described in subsection 7c77#b7 which are provided 7directly or indirectly7 to the partnership by the holder of such interest 7or a related person74 7#f7 ,special rule for dispositions ,in the case of any investment services partnership interest any portion of which is a qualified capital interest1 subsection 7b7 shall not apply to so much of any gain or loss as bears the same proportion to the entire amount of such gain or loss as-- 7,a7 the distributive share of gain or loss that would have been allocated to the qualified capital interest 7consistent with the requirements of paragraph 7#a77 if the partnership had sold all of its assets at fair market value immediately before the disposition1 bears to 7,b7 the distributive share of gain or loss that would have been so allocated to the investment services partnership interest of which such qualified capital interest is a part4 7#g7 ,qualified capital interest ,for purposes of this section-- 7,a7 ,in general ,the term qualified capital interest means so much of a partner's interest in the capital of the partnership as is attributable to-- 7i7 the fair market value of any money or other property contributed to the partnership in exchange for such interest 7determined without regard to section #geb7;a771 7ii7 any amounts which have been included in gross income under section #hc with respect to the transfer of such interest1 and 7iii7 the excess 7if any7 of-- 7,i7 any items of income and gain taken into account under section #gjb with respect to such interest1 over 7,,ii7 any items of deduction and loss so taken into account4 7,b7 ,adjustment to qualified capital interest 7i7 ,distributions and losses ,the qualified capital interest shall be reduced by distributions from the partnership with respect to such interest and by the excess 7if any7 of the amount described in subparagraph 7,a77iii77,,ii7 over the amount described in subparagraph 7,a77iii77,i74 7ii7 ,special rule for contributions of property ,in the case of any contribution of property described in subparagraph 7,a77i7 with respect to which the fair market value of such property is not equal to the adjusted basis of such property immediately before such contribution1 proper adjustments shall be made to the qualified capital interest to take into account such difference consistent with such regulations or other guidance as the ,secretary may provide4 7,c7 ,technical terminations1 etc41 disregarded ,no increase or decrease in the qualified capital interest of any partner shall result from a termination1 merger1 consolidation1 or division described in section #gjh1 or any similar transaction4 7#h7 ,treatment of certain loans 7,a7 ,proceeds of partnership loans not treated as qualified capital interest of service providing partners ,for purposes of this subsection1 an investment services partnership interest shall not be treated as a qualified capital interest to the extent that such interest is acquired in connection with the proceeds of any loan or other advance made or guaranteed1 directly or indirectly1 by any other partner or the partnership 7or any person related to any such other partner or the partnership74 ,the preceding sentence shall not apply to the extent the loan or other advance is repaid before the date of the enactment of this section unless such repayment is made with the proceeds of a loan or other advance described in the preceding sentence4 7,b7 ,reduction in allocations to qualified capital interests for loans from nonservice-providing partners to the partnership ,for purposes of this subsection1 any loan or other advance to the partnership made or guaranteed1 directly or indirectly1 by a partner not providing services described in subsection 7c77#b7 to the partnership 7or any person related to such partner7 shall be taken into account in determining the qualified capital interests of the partners in the partnership4 7e7 ,other income and gain in connection with investment management services 7#a7 ,in general ,if-- 7,a7 a person performs 7directly or indirectly7 investment management services for any investment entity1 7,b7 such person holds 7directly or indirectly7 a disqualified interest with respect to such entity1 and 7,c7 the value of such interest 7or payments thereunder7 is substantially related to the amount of income or gain 7whether or not realized7 from the assets with respect to which the investment management services are performed1 any income or gain with respect to such interest shall be treated as ordinary income4 ,rules similar to the rules of subsections 7a77#e7 and 7d7 shall apply for purposes of this subsection4 7#b7 ,definitions ,for purposes of this subsection-- 7,a7 ,disqualified interest 7i7 ,in general ,the term disqualified interest means1 with respect to any investment entity-- 7,i7 any interest in such entity other than indebtedness1 7,,ii7 convertible or contingent debt of such entity1 7,,iii7 any option or other right to acquire property described in subclause 7,i7 or 7,,ii71 and 7,,iv7 any derivative instrument entered into 7directly or indirectly7 with such entity or any investor in such entity4 7ii7 ,exceptions ,such term shall not include-- 7,i7 a partnership interest1 7,,ii7 except as provided by the ,secretary1 any interest in a taxable corporation1 and 7,,iii7 except as provided by the ,secretary1 stock in an ,s corporation4 7,b7 ,taxable corporation ,the term taxable corporation means-- 7i7 a domestic ,c corporation1 or 7ii7 a foreign corporation substantially all of the income of which is-- 7,i7 effectively connected with the conduct of a trade or business in the ,united ,states1 or 7,,ii7 subject to a comprehensive foreign income tax 7as defined in section #deg;,a7d77#b774 7,c7 ,investment management services ,the term investment management services means a substantial quantity of any of the services described in subsection 7c77#b74 7,d7 ,investment entity ,the term investment entity means any entity which1 if it were a partnership1 would be an investment partnership4 7f7 ,regulations ,the ,secretary shall prescribe such regulations or other guidance as is necessary or appropriate to carry out the purposes of this section1 including regulations or other guidance to-- 7#a7 provide modifications to the application of this section 7including treating related persons as not related to one another7 to the extent such modification is consistent with the purposes of this section1 7#b7 prevent the avoidance of the purposes of this section1 and 7#c7 coordinate this section with the other provisions of this title4 7g7 ,cross-,reference ,for #dj percent penalty on certain underpayments due to the avoidance of this section1 see section #fffb4 4 7b7 ,application of section #gea to indirect dispositions of investment services partnership interests 7#a7 ,in general ,subsection 7a7 of section #gea is amended by striking or at the end of paragraph 7#a71 by inserting or at the end of paragraph 7#b71 and by inserting after paragraph 7#b7 the following new paragraph3 7#c7 investment services partnership interests held by the partnership1 4 7#b7 ,certain distributions treated as sales or exchanges ,subparagraph 7,a7 of section #gea7;b77#a7 is amended by striking or at the end of clause 7i71 by inserting or at the end of clause 7ii71 and by inserting after clause 7ii7 the following new clause3 7iii7 investment services partnership interests held by the partnership1 4 7#c7 ,application of special rules in the case of tiered partnerships ,subsection 7f7 of section #gea is amended-- 7,a7 by striking or at the end of paragraph 7#a71 by inserting or at the end of paragraph 7#b71 and by inserting after paragraph 7#b7 the following new paragraph3 7#c7 an investment services partnership interest held by the partnership1 1 and 7,b7 by striking partner4 and inserting partner 7other than a partnership in which it holds an investment services partnership interest744 7#d7 ,investment services partnership interests2 qualified capital interests ,section #gea is amended by adding at the end the following new subsection3 7g7 ,investment services partnership interests ,for purposes of this section-- 7#a7 ,in general ,the term investment services partnership interest has the meaning given such term by section #gaj7;c74 7#b7 ,adjustments for qualified capital interests ,the amount to which subsection 7a7 applies by reason of paragraph 7#c7 thereof shall not include so much of such amount as is attributable to any portion of the investment services partnership interest which is a qualified capital interest 7determined under rules similar to the rules of section #gaj7;d774 7#c7 ,exception for publicly traded partnerships ,in the case of an exchange of an interest in a publicly traded partnership 7as defined in section #ggjd7 to which subsection 7a7 applies-- 7,a7 this section shall be applied without regard to subsections 7a77#c71 7b77#a77;,a77iii71 and 7f77#c71 and 7,b7 such partnership shall be treated as owning its proportionate share of the property of any other partnership in which it is a partner4 7#d7 ,recognition of gains ,any gain with respect to which subsection 7a7 applies by reason of paragraph 7#c7 thereof shall be recognized notwithstanding any other provision of this title4 7#e7 ,coordination with inventory items ,an investment services partnership interest held by the partnership shall not be treated as an inventory item of the partnership4 7#f7 ,prevention of double counting ,under regulations or other guidance prescribed by the ,secretary1 subsection 7a77#c7 shall not apply with respect to any amount to which section #gaj applies4 7#g7 ,valuation methods ,the ,secretary shall prescribe regulations or other guidance which provide the acceptable methods for valuing investment services partnership interests for purposes of this section4 4 7c7 ,treatment for purposes of section #ggjd ,subsection 7d7 of section #ggjd is amended by adding at the end the following new paragraph3 7#f7 ,income from certain carried interests not qualified 7,a7 ,in general ,specified carried interest income shall not be treated as qualifying income4 7,b7 ,specified carried interest income ,for purposes of this paragraph-- 7i7 ,in general ,the term specified carried interest income means-- 7,i7 any item of income or gain allocated to an investment services partnership interest 7as defined in section #gaj7;c77 held by the partnership1 7,,ii7 any gain on the disposition of an investment services partnership interest 7as so defined7 or a partnership interest to which 7in the hands of the partnership7 section #gea applies1 and 7,,iii7 any income or gain taken into account by the partnership under subsection 7b77#d7 or 7e7 of section #gaj4 7ii7 ,exception for qualified capital interests ,a rule similar to the rule of section #gaj7;d7 shall apply for purposes of clause 7i74 7,c7 ,coordination with other provisions ,subparagraph 7,a7 shall not apply to any item described in paragraph 7#a77;,e7 7or so much of paragraph 7#a77;,f7 as relates to paragraph 7#a77;,e774 7,d7 ,special rules for certain partnerships 7i7 ,certain partnerships owned by real estate investment trusts ,subparagraph 7,a7 shall not apply in the case of a partnership which meets each of the following requirements3 7,i7 ,such partnership is treated as publicly traded under this section solely by reason of interests in such partnership being convertible into interests in a real estate investment trust which is publicly traded4 7,,ii7 ,fifty percent or more of the capital and profits interests of such partnership are owned1 directly or indirectly1 at all times during the taxable year by such real estate investment trust 7determined with the application of section #bfg7;c774 7,,iii7 ,such partnership meets the requirements of paragraphs 7#b71 7#c71 and 7#d7 of section #hef7;c74 7ii7 ,certain partnerships owning other publicly traded partnerships ,subparagraph 7,a7 shall not apply in the case of a partnership which meets each of the following requirements3 7,i7 ,substantially all of the assets of such partnership consist of interests in one or more publicly traded partnerships 7determined without regard to subsection 7b77#b774 7,,ii7 ,substantially all of the income of such partnership is ordinary income or section #abca gain 7as defined in section #abca7;a77#c774 7,e7 ,transitional rule ,subparagraph 7,a7 shall not apply to any taxable year of the partnership beginning before the date which is #aj years after the date of the enactment of this paragraph4 4 7d7 ,imposition of penalty on underpayments 7#a7 ,in general ,subsection 7b7 of section #fffb is amended by inserting after paragraph 7#g7 the following new paragraph3 7#h7 ,the application of section #gaj7;e7 or the regulations or other guidance prescribed under section #gaj7;f7 to prevent the avoidance of the purposes of section #gaj4 4 7#b7 ,amount of penalty 7,a7 ,in general ,section #fffb is amended by adding at the end the following new subsection3 7k7 ,increase in penalty in case of property transferred for investment management services ,in the case of any portion of an underpayment to which this section applies by reason of subsection 7b77#h71 subsection 7a7 shall be applied with respect to such portion by substituting #dj percent for #bj percent4 4 7,b7 ,conforming amendment ,subparagraph 7,b7 of section #fffb;,a7e77#b7 is amended by striking or 7i7 and inserting 1 7i71 or 7k74 7#c7 ,special rules for application of reasonable cause exception ,subsection 7c7 of section #fffd is amended-- 7,a7 by redesignating paragraphs 7#c7 and 7#d7 as paragraphs 7#d7 and 7#e71 respectively2 7,b7 by striking paragraph 7#c7 in paragraph 7#e77;,a71 as so redesignated1 and inserting paragraph 7#d72 and 7,c7 by inserting after paragraph 7#b7 the following new paragraph3 7#c7 ,special rule for underpayments attributable to investment management services 7,a7 ,in general ,paragraph 7#a7 shall not apply to any portion of an underpayment to which section #fffb applies by reason of subsection 7b77#h7 unless-- 7i7 the relevant facts affecting the tax treatment of the item are adequately disclosed1 7ii7 there is or was substantial authority for such treatment1 and 7iii7 the taxpayer reasonably believed that such treatment was more likely than not the proper treatment4 7,b7 ,rules relating to reasonable belief ,rules similar to the rules of subsection 7d77#c7 shall apply for purposes of subparagraph 7,a77iii74 4 7e7 ,income and loss from investment services partnership interests taken into account in determining net earnings from self-,employment 7#a7 ,internal ,revenue ,code 7,a7 ,in general ,section #adjb7;a7 is amended by striking and at the end of paragraph 7#af71 by striking the period at the end of paragraph 7#ag7 and inserting 2 and1 and by inserting after paragraph 7#ag7 the following new paragraph3 7#ah7 notwithstanding the preceding provisions of this subsection1 in the case of any individual engaged in the trade or business of providing services described in section #gaj7;c77#b7 with respect to any entity1 investment services partnership income or loss 7as defined in subsection 7m77 of such individual with respect to such entity shall be taken into account in determining the net earnings from self-employment of such individual4 4 7,b7 ,investment services partnership income or loss ,section #adjb is amended by adding at the end the following new subsection3 7m7 ,investment services partnership income or loss ,for purposes of subsection 7a7-- 7#a7 ,in general ,the term investment services partnership income or loss means1 with respect to any investment services partnership interest 7as defined in section #gaj7;c77 or disqualified interest 7as defined in section #gaj7;e771 the net of-- 7,a7 the amounts treated as ordinary income or ordinary loss under subsections 7b7 and 7e7 of section #gaj with respect to such interest1 7,b7 all items of income1 gain1 loss1 and deduction allocated to such interest1 and 7,c7 the amounts treated as realized from the sale or exchange of property other than a capital asset under section #gea with respect to such interest4 7#b7 ,exception for qualified capital interests ,a rule similar to the rule of section #gaj7;d7 shall apply for purposes of applying paragraph 7#a77;,b74 4 7#b7 ,social ,security ,act ,section #baa7;a7 of the ,social ,security ,act is amended by striking and at the end of paragraph 7#ae71 by striking the period at the end of paragraph 7#af7 and inserting 2 and1 and by inserting after paragraph 7#af7 the following new paragraph3 7#ag7 ,notwithstanding the preceding provisions of this subsection1 in the case of any individual engaged in the trade or business of providing services described in section #gaj7;c77#b7 of the ,internal ,revenue ,code of #aihf with respect to any entity1 investment services partnership income or loss 7as defined in section #adjb7m7 of such ,code7 shall be taken into account in determining the net earnings from self-employment of such individual4 4 7f7 ,conforming amendments 7#a7 ,subsection 7d7 of section #gca is amended by inserting section #gaj7;b77#d7 7relating to distributions of partnership property71 after to the extent otherwise provided by4 7#b7 ,section #gda is amended by inserting or section #gaj 7relating to special rules for partners providing investment management services to partnerships7 before the period at the end4 7#c7 ,the table of sections for part ,i of subchapter ,k of chapter #a is amended by adding at the end the following new item3 ,sec4 #gaj4 ,special rules for partners providing investment management services to partnerships4 4 7g7 ,effective date 7#a7 ,in general ,except as otherwise provided in this subsection1 the amendments made by this section shall apply to taxable years ending after the date of the enactment of this ,act4 7#b7 ,partnership taxable years which include effective date ,in applying section #gaj7;a7 of the ,internal ,revenue ,code of #aihf 7as added by this section7 in the case of any partnership taxable year which includes the date of the enactment of this ,act1 the amount of the net capital gain referred to in such section shall be treated as being the lesser of the net capital gain for the entire partnership taxable year or the net capital gain determined by only taking into account items attributable to the portion of the partnership taxable year which is after such date4 7#c7 ,dispositions of partnership interests 7,a7 ,in general ,section #gaj7;b7 of such ,code 7as added by this section7 shall apply to dispositions and distributions after the date of the enactment of this ,act4 7,b7 ,indirect dispositions ,the amendments made by subsection 7b7 shall apply to transactions after the date of the enactment of this ,act4 7#d7 ,other income and gain in connection with investment management services ,section #gaj7;e7 of such ,code 7as added by this section7 shall take effect on the date of the enactment of this ,act4