,,ii #aacth ,,congress #ast ,session ,s4 #bgg ,,in ,,the ,,senate ,,of ,,the ,,united ,,states ,february #aa1 #bjac ,mr4 ,whitehouse 7for himself1 ,mr4 ,harkin1 ,mr4 ,sanders1 and ,mr4 ,levin7 introduced the following bill2 which was read twice and referred to the ,committee on ,finance ,a ,,bill ,to replace the ,budget ,control ,act sequester by eliminating tax loopholes1 and for other purposes4 #a4 ,short title2 table of contents 7a7 ,short title ,this ,act may be cited as the ,job ,preservation and ,economic ,certainty ,act of #bjac4 7b7 ,table of contents ,the table of contents of this ,act is as follows3 ,sec4 #a4 ,short title2 table of contents4 ,,title ,i--,elimination of sequestration ,sec4 #aja4 ,discretionary spending limits4 ,,title ,,ii--,elimination of ,tax ,loopholes for ,high-,income ,taxpayers ,sec4 #bja4 ,minimum tax for high-income earners4 ,sec4 #bjb4 ,requiring high-income professionals to pay their payroll taxes4 ,sec4 #bjc4 ,elimination of private jet giveaway4 ,sec4 #bjd4 ,limitation on itemized deductions to #bh-percent rate bracket4 ,,title ,,iii--,elimination of tax loopholes for offshoring manufacturers ,sec4 #cja4 ,ending tax breaks for offshoring manufacturers4 ,,title ,,iv--,elimination of tax loopholes for oil and gas companies ,sec4 #dja4 ,modifications of foreign tax credit rules applicable to major integrated oil companies which are dual capacity taxpayers4 ,sec4 #djb4 ,limitation on section #aii deduction attributable to oil1 natural gas1 or primary products thereof4 ,sec4 #djc4 ,limitation on deduction for intangible drilling and development costs4 ,sec4 #djd4 ,limitation on percentage depletion allowance for oil and gas wells4 ,sec4 #dje4 ,limitation on deduction for tertiary injectants4 ,sec4 #djf4 ,repeal of outer ,continental ,shelf deep water and deep gas royalty relief4 ,,title ,v--,ending ,international ,tax ,abuses ,sec4 #eja4 ,allocation of expenses and taxes on basis of repatriation of foreign income4 ,sec4 #ejb4 ,excess income from transfers of intangibles to low-taxed affiliates treated as subpart ,f income4 ,sec4 #ejc4 ,limitations on income shifting through intangible property transfers4 ,sec4 #ejd4 ,limitation on earnings stripping by expatriated entities4 ,sec4 #eje4 ,modifications of foreign tax credit rules applicable to dual capacity taxpayers4 ,sec4 #ejf4 ,separate basket treatment taxes paid on foreign oil and gas income4 ,,title ,,vi--,financial crisis responsibility fee ,sec4 #fja4 ,definitions and special rules4 ,sec4 #fjb4 ,financial crisis responsibility fee4 ,sec4 #fjc4 ,other provisions4 ,,title ,,vii--,tax on trading transactions ,sec4 #gja4 ,transaction tax4 ,,title ,,viii--,modification of accounting rules ,sec4 #hja4 ,repeal of last-in1 first-out method of inventory4 ,sec4 #hjb4 ,repeal of lower of cost or market method of inventory4 ,,title ,,ix--,fair treatment of options ,sec4 #ija4 ,consistent treatment of stock options by corporations4 ,sec4 #ijb4 ,application of executive pay deduction limit4 ,i ,elimination of sequestration #aja4 ,discretionary spending limits 7a7 ,in general ,part ,c of title ,,ii of the ,balanced ,budget and ,emergency ,deficit ,control ,act of #aihe 7#b ,u4,s4,c4 #ijj et seq47 is amended-- 7#a7 by striking section #bea7;c7 7#b ,u4,s4,c4 #ija7;c77 and inserting the following3 7c7 ,discretionary spending limit ,as used in this part1 the term discretionary spending limit means-- 7#a7 with respect to fiscal year #bjab-- 7,a7 for the security category1 #fhd1jjj1jjj1jjj in new budget authority2 and 7,b7 for the nonsecurity category1 #cei1jjj1jjj1jjj in new budget authority2 7#b7 with respect to fiscal year #bjac-- 7,a7 for the security category1 #fhf1jjj1jjj1jjj in new budget authority2 and 7,b7 for the nonsecurity category1 #cfa1jjj1jjj1jjj in new budget authority2 7#c7 with respect to fiscal year #bjad1 for the discretionary category1 #a1jff1jjj1jjj1jjj in new budget authority2 7#d7 with respect to fiscal year #bjae1 for the discretionary category1 #a1jhf1jjj1jjj1jjj in new budget authority2 7#e7 with respect to fiscal year #bjaf1 for the discretionary category1 #a1ajg1jjj1jjj1jjj in new budget authority2 7#f7 with respect to fiscal year #bjag1 for the discretionary category1 #a1aca1jjj1jjj1jjj in new budget authority2 7#g7 with respect to fiscal year #bjah1 for the discretionary category1 #a1aef1jjj1jjj1jjj in new budget authority2 7#h7 with respect to fiscal year #bjai1 for the discretionary category1 #a1ahb1jjj1jjj1jjj in new budget authority2 7#i7 with respect to fiscal year #bjbj1 for the discretionary category1 #a1bjh1jjj1jjj1jjj in new budget authority2 and 7#aj7 with respect to fiscal year #bjba1 for the discretionary category1 #a1bcd1jjj1jjj1jjj in new budget authority2 as adjusted in strict conformance with subsection 7b74 2 7#b7 by striking section #bea;,a 7#b ,u4,s4,c4 #ija;a72 and 7#c7 in the table of contents set forth in section #bej7;a71 by striking the item relating to section #bea;,a4 7b7 ,technical and conforming amendment ,section #ija7;e7 of the ,american ,taxpayer ,relief ,act of #bjab 7,public ,law #aab-bdj7 is repealed4 ,,ii ,elimination of ,tax ,loopholes for ,high-,income ,taxpayers #bja4 ,minimum tax for high-income earners 7a7 ,in general ,subchapter ,a of chapter #a is amended by adding at the end the following new part3 ,,viii ,fair share tax on high-income taxpayers ,sec4 #ei;,b4 ,fair share tax4 #ei;,b4 ,fair share tax 7a7 ,general rule 7#a7 ,phase-in of tax ,in the case of any high-income taxpayer1 there is hereby imposed for a taxable year 7in addition to any other tax imposed by this subtitle7 a tax equal to the product of-- 7,a7 the amount determined under paragraph 7#b71 and 7,b7 a fraction 7not to exceed #a7-- 7i7 the numerator of which is the excess of-- 7,i7 the taxpayer's adjusted gross income1 over 7,,ii7 the dollar amount in effect under subsection 7c77#a71 and 7ii7 the denominator of which is the dollar amount in effect under subsection 7c77#a74 7#b7 ,amount of tax ,the amount of tax determined under this paragraph is an amount equal to the excess 7if any7 of-- 7,a7 the tentative fair share tax for the taxable year1 over 7,b7 the excess of-- 7i7 the sum of-- 7,i7 the regular tax liability 7as defined in section #bf7;b77 for the taxable year1 determined without regard to any tax liability determined under this section1 7,,ii7 the tax imposed by section #ee for the taxable year1 plus 7,,iii7 the payroll tax for the taxable year1 over 7ii7 the credits allowable under part ,,iv of subchapter ,a 7other than sections #bg7;a71 #ca1 and #cd74 7b7 ,tentative fair share tax ,for purposes of this section-- 7#a7 ,in general ,the tentative fair share tax for the taxable year is #cj percent of the excess of-- 7,a7 the adjusted gross income of the taxpayer1 over 7,b7 the modified charitable contribution deduction for the taxable year4 7#b7 ,modified charitable contribution deduction ,for purposes of paragraph 7#a7-- 7,a7 ,in general ,the modified charitable contribution deduction for any taxable year is an amount equal to the amount which bears the same ratio to the deduction allowable under section #agj 7section #fdb7;c7 in the case of a trust or estate7 for such taxable year as-- 7i7 the amount of itemized deductions allowable under the regular tax 7as defined in section #ee7 for such taxable year1 determined after the application of section #fh1 bears to 7ii7 such amount1 determined before the application of section #fh4 7,b7 ,taxpayer must itemize ,in the case of any individual who does not elect to itemize deductions for the taxable year1 the modified charitable contribution deduction shall be zero4 7c7 ,high-,income taxpayer ,for purposes of this section-- 7#a7 ,in general ,the term high-income taxpayer means1 with respect to any taxable year1 any taxpayer 7other than a corporation7 with an adjusted gross income for such taxable year in excess of #a1jjj1jjj 7#ej percent of such amount in the case of a married individual who files a separate return74 7#b7 ,inflation adjustment 7,a7 ,in general ,in the case of a taxable year beginning after #bjac1 the #a1jjj1jjj amount under paragraph 7#a7 shall be increased by an amount equal to-- 7i7 such dollar amount1 multiplied by 7ii7 the cost-of-living adjustment determined under section #a7;f77#c7 for the calendar year in which the taxable year begins1 determined by substituting calendar year #bjab for calendar year #aiib in subparagraph 7,b7 thereof4 7,b7 ,rounding ,if any amount as adjusted under subparagraph 7,a7 is not a multiple of #aj1jjj1 such amount shall be rounded to the next lowest multiple of #aj1jjj4 7d7 ,payroll tax ,for purposes of this section1 the payroll tax for any taxable year is an amount equal to the excess of-- 7#a7 the taxes imposed on the taxpayer under sections #adja1 #adaa1 #caja1 #cbja1 and #cbaa7;a7 7to the extent such tax is attributable to the rate of tax in effect under section #caja7 with respect to such taxable year or wages or compensation received during such taxable year1 over 7#b7 the deduction allowable under section #afd7;f7 for such taxable year4 7e7 ,special rule for estates and trusts ,for purposes of this section1 in the case of an estate or trust1 adjusted gross income shall be computed in the manner described in section #fg7;e74 7f7 ,not treated as tax imposed by this chapter for certain purposes ,the tax imposed under this section shall not be treated as tax imposed by this chapter for purposes of determining the amount of any credit under this chapter 7other than the credit allowed under section #bg7;a77 or for purposes of section #ee4 4 7b7 ,clerical amendment ,the table of parts for subchapter ,a of chapter #a is amended by adding at the end the following new item3 ,part ,,viii--,fair share tax on high-,income taxpayers 4 7c7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjab4 #bjb4 ,requiring high-income professionals to pay their payroll taxes 7a7 ,in general ,section #adjb of the ,internal ,revenue ,code of #aihf is amended by adding at the end the following new subsection3 7m7 ,special rules for professional service businesses 7#a7 ,shareholders providing services to specified ,s corporations 7,a7 ,in general ,in the case of an applicable shareholder who provides substantial services with respect to a professional service business referred to in subparagraph 7,c7 of a specified ,s corporation-- 7i7 such shareholder shall be treated as engaged in the trade or business of such professional service business with respect to items of income or loss described in section #acff which are attributable to such business1 and 7ii7 such shareholder's net earnings from self-employment shall include such shareholder's pro rata share of such items of income or loss1 except that in computing such pro rata share of such items the exceptions provided in subsection 7a7 shall apply4 7,b7 ,treatment of family members ,except as otherwise provided by the ,secretary1 the applicable shareholder's pro rata share of items referred to in subparagraph 7,a7 shall be increased by the pro rata share of such items of each member of such applicable shareholder's family 7within the meaning of section #cah7;a77#a77 who does not provide substantial services with respect to such professional service business4 7,c7 ,specified ,s corporation ,for purposes of this subsection1 the term specified ,s corporation means-- 7i7 any ,s corporation which is a partner in a partnership which is engaged in a professional service business if substantially all of the activities of such ,s corporation are performed in connection with such partnership1 and 7ii7 any other ,s corporation which is engaged in a professional service business if #ge percent or more of the gross income of such business is attributable to service of #c or fewer shareholders of such corporation4 7,d7 ,applicable shareholder ,for purposes of this paragraph1 the term applicable shareholder means any shareholder whose modified adjusted gross income for the taxable year exceeds-- 7i7 in the case of a shareholder making a joint return under section #fjac or a surviving spouse 7as defined in section #b7;a771 #bej1jjj1 7ii7 in the case of a married shareholder 7as defined in section #ggjc7 filing a separate return1 half of the dollar amount determined under clause 7i71 and 7iii7 in any other case1 #bjj1jjj4 7#b7 ,partners 7,a7 ,in general ,in the case of any partnership which is engaged in a professional service business1 subsection 7a77#ac7 shall not apply to any applicable partner who provides substantial services with respect to such professional service business4 7,b7 ,applicable partner ,for purposes of this paragraph1 the term applicable partner means any partner whose modified adjusted gross income for the taxable year exceeds-- 7i7 in the case of a partner making a joint return under section #fjac or a surviving spouse 7as defined in section #b7;a771 #bej1jjj1 7ii7 in the case of a married partner 7as defined in section #ggjc7 filing a separate return1 half of the dollar amount determined under clause 7i71 and 7iii7 in any other case1 #bjj1jjj4 7#c7 ,professional service business ,for purposes of this subsection1 the term professional service business means any trade or business 7or portion thereof7 providing services in the fields of health1 law1 lobbying1 engineering1 architecture1 accounting1 actuarial science1 performing arts1 consulting1 athletics1 investment advice or management1 or brokerage services4 7#d7 ,modified adjusted gross income ,for purposes of this subsection1 the term modified adjusted gross income means adjusted gross income-- 7,a7 determined without regard to any deduction allowed under section #afd7;f71 and 7,b7 increased by the amount excluded from gross income under section #iaa7;a77#a74 7#e7 ,regulations ,the ,secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this subsection1 including regulations which prevent the avoidance of the purposes of this subsection through tiered entities or otherwise4 7#f7 ,cross reference ,for employment tax treatment of wages paid to shareholders of ,s corporations1 see subtitle ,c4 4 7b7 ,conforming amendment ,section #baa of the ,social ,security ,act is amended by adding at the end the following new subsection3 7l7 ,special rules for professional service businesses 7#a7 ,shareholders providing services to specified ,s corporations 7,a7 ,in general ,in the case of an applicable shareholder who provides substantial services with respect to a professional service business referred to in subparagraph 7,c7 of a specified ,s corporation-- 7i7 such shareholder shall be treated as engaged in the trade or business of such professional service business with respect to items of income or loss described in section #acff of the ,internal ,revenue ,code of #aihf which are attributable to such business1 and 7ii7 such shareholder's net earnings from self-employment shall include such shareholder's pro rata share of such items of income or loss1 except that in computing such pro rata share of such items the exceptions provided in subsection 7a7 shall apply4 7,b7 ,treatment of family members ,except as otherwise provided by the ,secretary of the ,treasury1 the applicable shareholder's pro rata share of items referred to in subparagraph 7,a7 shall be increased by the pro rata share of such items of each member of such applicable shareholder's family 7within the meaning of section #cah7;a77#a7 of the ,internal ,revenue ,code of #aihf7 who does not provide substantial services with respect to such professional service business4 7,c7 ,specified ,s corporation ,for purposes of this subsection1 the term specified ,s corporation means-- 7i7 any ,s corporation 7as defined in section #acfa7;a7 of the ,internal ,revenue ,code of #aihf7 which is a partner in a partnership which is engaged in a professional service business if substantially all of the activities of such ,s corporation are performed in connection with such partnership1 and 7ii7 any other ,s corporation 7as so defined7 which is engaged in a professional service business if #ge percent or more of the gross income of such business is attributable to service of #c or fewer shareholders of such corporation4 7,d7 ,applicable shareholder ,for purposes of this paragraph1 the term applicable shareholder means any shareholder whose modified adjusted gross income for the taxable year exceeds-- 7i7 in the case of a shareholder making a joint return under section #fjac of the ,internal ,revenue ,code of #aihf or a surviving spouse 7as defined in section #b7;a7 of such ,code71 #bej1jjj1 7ii7 in the case of a married shareholder 7as defined in section #ggjc of such ,code7 filing a separate return1 half of the dollar amount determined under clause 7i71 and 7iii7 in any other case1 #bjj1jjj4 7#b7 ,partners 7,a7 ,in general ,in the case of any partnership which is engaged in a professional service business1 subsection 7a77#ab7 shall not apply to any applicable partner who provides substantial services with respect to such professional service business4 7,b7 ,applicable partner ,for purposes of this paragraph1 the term applicable partner means any partner whose modified adjusted gross income for the taxable year exceeds-- 7i7 in the case of a partner making a joint return under section #fjac of the ,internal ,revenue ,code of #aihf or a surviving spouse 7as defined in section #b7;a7 of such ,code71 #bej1jjj1 7ii7 in the case of a married partner 7as defined in section #ggjc of such ,code7 filing a separate return1 half of the dollar amount determined under clause 7i71 and 7iii7 in any other case1 #bjj1jjj4 7#c7 ,professional service business ,for purposes of this subsection1 the term professional service business means any trade or business 7or portion thereof7 providing services in the fields of health1 law1 lobbying1 engineering1 architecture1 accounting1 actuarial science1 performing arts1 consulting1 athletics1 investment advice or management1 or brokerage services4 7#d7 ,modified adjusted gross income ,for purposes of this subsection1 the term modified adjusted gross income means adjusted gross income as determined under section #fb of the ,internal ,revenue ,code of #aihf-- 7,a7 determined without regard to any deduction allowed under section #afd7;f7 of such ,code1 and 7,b7 increased by the amount excluded from gross income under section #iaa7;a77#a7 of such ,code4 4 7c7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjab4 #bjc4 ,elimination of private jet giveaway 7a7 ,in general ,subparagraph 7,c7 of section #afh7;e77#c7 of the ,internal ,revenue ,code of #aihf is amended by striking and at the end of clause 7iv71 by redesignating clause 7v7 as clause 7vi71 and by inserting after clause 7iv7 the following new clause3 7v7 any general aviation aircraft1 and 4 7b7 ,class ,life ,paragraph 7#c7 of section #afh7;g7 of the ,internal ,revenue ,code of #aihf is amended by inserting after subparagraph 7,e7 the following new subparagraph3 7,f7 ,general aviation aircraft ,in the case of any general aviation aircraft1 the recovery period used for purposes of paragraph 7#b7 shall be #ab years4 4 7c7 ,general aviation aircraft ,subsection 7i7 of section #afh of the ,internal ,revenue ,code of #aihf is amended by inserting after paragraph 7#ai7 the following new paragraph3 7#bj7 ,general aviation aircraft ,the term general aviation aircraft means any airplane or helicopter 7including airframes and engines7 not used in commercial or contract carrying of passengers or freight1 but which primarily engages in the carrying of passengers4 4 7d7 ,effective date ,this section shall be effective for property placed in service after ,december #ca1 #bjab4 #bjd4 ,limitation on itemized deductions to #bh-percent rate bracket 7a7 ,in general ,the ,internal ,revenue ,code of #aihf is amended by inserting after section #fh the following new section3 #fh;,a4 ,benefit of itemized deductions limited to #bh-percent rate bracket 7a7 ,in general ,in the case of an individual whose adjusted gross income exceeds #bjj1jjj 7#bej1jjj in the case of a joint return71 the amount of the itemized deductions otherwise allowable for the taxable year shall be reduced by an amount necessary to increase the amount of regular tax liability of the taxpayer to an amount that would be imposed if such deductions reduced the regular tax liability by not more than the amount such deductions would reduce the tax imposed by section #a on taxable income within the #bh-percent bracket amount4 7b7 ,regular tax liability ,for purposes of this section1 the term regular tax liability has the meaning given such term by section #bf7;b74 7c7 ,coordination with section #fh ,this section shall apply after the application of section #fh4 4 7b7 ,alternative minimum tax 7#a7 ,in general ,subsection 7b7 of section #ee is amended by adding at the end the following new paragraph3 7#e7 ,coordination with section #fh;,a ,in the case of an individual1 for purposes of paragraph 7#b71 alternative minimum taxable income shall be determined by reducing the amount of any itemized deductions otherwise allowed in determining alternative minimum taxable income by an amount which bears the same ratio to the amount by which the itemized deductions of the taxpayer were reduced for the taxable year under section #fh;,a as-- 7,a7 the amount of itemized deductions otherwise allowed in determining the alternative minimum taxable income for the taxable year1 bears to 7,b7 the aggregate amount of itemized deductions of the taxpayer for the taxable year 7determined without regard to section #fh;,a74 4 7#b7 ,conforming amendment ,paragraph 7#a7 of section #ef7;b7 is amended by adding at the end the following new subparagraph3 7,g7 ,section #fh;,a not applicable ,section #fh;,a shall not apply4 4 7c7 ,clerical amendment ,the table of sections for part ,i of subchapter ,b of chapter #a is amended by adding at the end the following new item3 ,sec4 #fh;,a4 ,benefit of itemized deductions limited to #bh-percent rate bracket4 4 7d7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjab4 ,,iii ,elimination of tax loopholes for offshoring manufacturers #cja4 ,ending tax breaks for offshoring manufacturers 7a7 ,general ,rule ,subsection 7a7 of section #ied of the ,internal ,revenue ,code of #aihf is amended by striking the period at the end of paragraph 7#e7 and inserting 1 and1 by redesignating paragraph 7#e7 as paragraph 7#d71 and by adding at the end the following new paragraph3 7#e7 imported property income for the taxable year 7determined under subsection 7j7 and reduced as provided in subsection 7b77#e774 4 7b7 ,definition of ,imported ,property ,income ,section #ied of the ,internal ,revenue ,code of #aihf is amended by adding at the end the following new subsection3 7j7 ,imported ,property ,income 7#a7 ,in general ,for purposes of subsection 7a77#e71 the term imported property income means income 7whether in the form of profits1 commissions1 fees1 or otherwise7 derived in connection with-- 7,a7 manufacturing1 producing1 growing1 or extracting imported property2 7,b7 the sale1 exchange1 or other disposition of imported property2 or 7,c7 the lease1 rental1 or licensing of imported property4 ,such term shall not include any foreign oil and gas extraction income 7within the meaning of section #ijg7;c77 or any foreign oil related income 7within the meaning of section #ijg7;c774 7#b7 ,imported property ,for purposes of this subsection-- 7,a7 ,in general ,except as otherwise provided in this paragraph1 the term imported property means property which is imported into the ,united ,states by the controlled foreign corporation or a related person4 7,b7 ,imported property includes certain property imported by unrelated persons ,the term imported property includes any property imported into the ,united ,states by an unrelated person if1 when such property was sold to the unrelated person by the controlled foreign corporation 7or a related person71 it was reasonable to expect that-- 7i7 such property would be imported into the ,united ,states2 or 7ii7 such property would be used as a component in other property which would be imported into the ,united ,states4 7,c7 ,exception for property subsequently exported ,the term imported property does not include any property which is imported into the ,united ,states and which-- 7i7 before substantial use in the ,united ,states1 is sold1 leased1 or rented by the controlled foreign corporation or a related person for direct use1 consumption1 or disposition outside the ,united ,states2 or 7ii7 is used by the controlled foreign corporation or a related person as a component in other property which is so sold1 leased1 or rented4 7,d7 ,exception for certain agricultural commodities ,the term imported property does not include any agricultural commodity which is not grown in the ,united ,states in commercially marketable quantities4 7#c7 ,definitions and special rules 7,a7 ,import ,for purposes of this subsection1 the term import means entering1 or withdrawal from warehouse1 for consumption or use4 ,such term includes any grant of the right to use intangible property 7as defined in section #icf7;h77#c77;,b77 in the ,united ,states4 7,b7 ,united states ,for purposes of this subsection1 the term ,united ,states includes the ,commonwealth of ,puerto ,rico1 the ,virgin ,islands of the ,united ,states1 ,guam1 ,american ,samoa1 and the ,commonwealth of the ,northern ,mariana ,islands4 7,c7 ,unrelated person ,for purposes of this subsection1 the term unrelated person means any person who is not a related person with respect to the controlled foreign corporation4 7,d7 ,coordination with foreign base company sales income ,for purposes of this section1 the term foreign base company sales income shall not include any imported property income4 4 7c7 ,separate ,application of ,limitations on ,foreign ,tax ,credit for ,imported ,property ,income 7#a7 ,in general ,paragraph 7#a7 of section #ijd7;d7 of the ,internal ,revenue ,code of #aihf is amended by striking and at the end of subparagraph 7,a71 by redesignating subparagraph 7,b7 as subparagraph 7,c71 and by inserting after subparagraph 7,a7 the following new subparagraph3 7,b7 imported property income1 and 4 7#b7 ,imported property income defined ,paragraph 7#b7 of section #ijd7;d7 of such ,code is amended by redesignating subparagraphs 7,i71 7,j71 and 7,k7 as subparagraphs 7,j71 7,k71 and 7,l71 respectively1 and by inserting after subparagraph 7,h7 the following new subparagraph3 7,i7 ,imported property income ,the term imported property income means any income received or accrued by any person which is of a kind which would be imported property income 7as defined in section #ied7;j774 4 7#c7 ,conforming amendment ,clause 7ii7 of section #ijd7;d77#b77;,a7 of such ,code is amended by inserting or imported property income after passive category income4 7d7 ,technical ,amendments 7#a7 ,clause 7iii7 of section #ieb7;c77#a77;,b7 of the ,internal ,revenue ,code of #aihf is amended-- 7,a7 by redesignating subclauses 7,,ii71 7,,iii71 7,,iv71 and 7,v7 as subclauses 7,,iii71 7,,iv71 7,v71 and 7,,vi71 and 7,b7 by inserting after subclause 7,i7 the following new subclause3 7,,ii7 imported property income1 4 7#b7 ,the last sentence of paragraph 7#d7 of section #ied7;b7 of such ,code is amended by striking subsection 7a77#e7 and inserting subsection 7a77#d74 7#c7 ,paragraph 7#e7 of section #ied7;b7 of such ,code is amended by striking and the foreign base company oil related income and inserting the foreign base company oil related income1 and the imported property income4 7e7 ,effective ,date ,the amendments made by this section shall apply to taxable years of foreign corporations beginning after the date of the enactment of this ,act1 and to taxable years of ,united ,states shareholders within which or with which such taxable years of such foreign corporations end4 ,,iv ,elimination of tax loopholes for oil and gas companies #dja4 ,modifications of foreign tax credit rules applicable to major integrated oil companies which are dual capacity taxpayers 7a7 ,in general ,section #ija of the ,internal ,revenue ,code of #aihf is amended by redesignating subsection 7n7 as subsection 7o7 and by inserting after subsection 7m7 the following new subsection3 7n7 ,special rules relating to major integrated oil companies which are dual capacity taxpayers 7#a7 ,general rule ,notwithstanding any other provision of this chapter1 any amount paid or accrued by a dual capacity taxpayer which is a major integrated oil company 7as defined in section #afg7;h77#e77;,b77 to a foreign country or possession of the ,united ,states for any period shall not be considered a tax-- 7,a7 if1 for such period1 the foreign country or possession does not impose a generally applicable income tax1 or 7,b7 to the extent such amount exceeds the amount 7determined in accordance with regulations7 which-- 7i7 is paid by such dual capacity taxpayer pursuant to the generally applicable income tax imposed by the country or possession1 or 7ii7 would be paid if the generally applicable income tax imposed by the country or possession were applicable to such dual capacity taxpayer4 ,nothing in this paragraph shall be construed to imply the proper treatment of any such amount not in excess of the amount determined under subparagraph 7,b74 7#b7 ,dual capacity taxpayer ,for purposes of this subsection1 the term dual capacity taxpayer means1 with respect to any foreign country or possession of the ,united ,states1 a person who-- 7,a7 is subject to a levy of such country or possession1 and 7,b7 receives 7or will receive7 directly or indirectly a specific economic benefit 7as determined in accordance with regulations7 from such country or possession4 7#c7 ,generally applicable income tax ,for purposes of this subsection-- 7,a7 ,in general ,the term generally applicable income tax means an income tax 7or a series of income taxes7 which is generally imposed under the laws of a foreign country or possession on income derived from the conduct of a trade or business within such country or possession4 7,b7 ,exceptions ,such term shall not include a tax unless it has substantial application1 by its terms and in practice1 to-- 7i7 persons who are not dual capacity taxpayers1 and 7ii7 persons who are citizens or residents of the foreign country or possession4 4 7b7 ,effective ,date 7#a7 ,in general ,the amendments made by this section shall apply to taxes paid or accrued in taxable years beginning after the date of the enactment of this ,act4 7#b7 ,contrary treaty obligations upheld ,the amendments made by this section shall not apply to the extent contrary to any treaty obligation of the ,united ,states4 #djb4 ,limitation on section #aii deduction attributable to oil1 natural gas1 or primary products thereof 7a7 ,denial of deduction ,paragraph 7#d7 of section #aii7;c7 of the ,internal ,revenue ,code of #aihf is amended by adding at the end the following new subparagraph3 7,e7 ,special rule for certain oil and gas income ,in the case of any taxpayer who is a major integrated oil company 7as defined in section #afg7;h77#e77;,b77 for the taxable year1 the term domestic production gross receipts shall not include gross receipts from the production1 transportation1 or distribution of oil1 natural gas1 or any primary product 7within the meaning of subsection 7d77#i77 thereof4 4 7b7 ,effective date ,the amendment made by this section shall apply to taxable years beginning after ,december #ca1 #bjab4 #djc4 ,limitation on deduction for intangible drilling and development costs 7a7 ,in general ,section #bfc7;c7 of the ,internal ,revenue ,code of #aihf is amended by adding at the end the following new sentence3 ,this subsection shall not apply to amounts paid or incurred by a taxpayer in any taxable year in which such taxpayer is a major integrated oil company 7as defined in section #afg7;h77#e77;,b7744 7b7 ,effective date ,the amendment made by this section shall apply to amounts paid or incurred in taxable years beginning after ,december #ca1 #bjab4 #djd4 ,limitation on percentage depletion allowance for oil and gas wells 7a7 ,in general ,section #fac;,a of the ,internal ,revenue ,code of #aihf is amended by adding at the end the following new subsection3 7f7 ,application with respect to major integrated oil companies ,in the case of any taxable year in which the taxpayer is a major integrated oil company 7as defined in section #afg7;h77#e77;,b771 the allowance for percentage depletion shall be zero4 4 7b7 ,effective date ,the amendment made by this section shall apply to taxable years beginning after ,december #ca1 #bjab4 #dje4 ,limitation on deduction for tertiary injectants 7a7 ,in general ,section #aic of the ,internal ,revenue ,code of #aihf is amended by adding at the end the following new subsection3 7d7 ,application with respect to major integrated oil companies ,this section shall not apply to amounts paid or incurred by a taxpayer in any taxable year in which such taxpayer is a major integrated oil company 7as defined in section #afg7;h77#e77;,b774 4 7b7 ,effective date ,the amendment made by this section shall apply to amounts paid or incurred in taxable years beginning after ,december #ca1 #bjab4 #djf4 ,repeal of outer ,continental ,shelf deep water and deep gas royalty relief 7a7 ,in general ,sections #cdd and #cde of the ,energy ,policy ,act of #bjje 7#db ,u4,s4,c4 #aeijd1 #aeije7 are repealed4 7b7 ,administration ,the ,secretary of the ,interior shall not be required to provide for royalty relief in the lease sale terms beginning with the first lease sale held on or after the date of enactment of this ,act for which a final notice of sale has not been published4 ,v ,ending ,international ,tax ,abuses #eja4 ,allocation of expenses and taxes on basis of repatriation of foreign income 7a7 ,in general ,part ,,iii of subchapter ,n of chapter #a of the ,internal ,revenue ,code of #aihf 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;c74 #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 of such ,code 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 #ejb4 ,excess income from transfers of intangibles to low-taxed affiliates treated as subpart ,f income 7a7 ,in general ,subsection 7a7 of section #ied of the ,internal ,revenue ,code of #aihf 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 of such ,code 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 of such ,code 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 of such ,code 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 of such ,code 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 #ejc4 ,limitations on income shifting through intangible property transfers 7a7 ,clarification of definition of intangible asset ,clause 7vi7 of section #icf7;h77#c77;,b7 of the ,internal ,revenue ,code of #aihf 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 of the ,internal ,revenue ,code of #aihf 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 of such ,code 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 #ejd4 ,limitation on earnings stripping by expatriated entities 7a7 ,in general ,subsection 7j7 of section #afc of the ,internal ,revenue ,code of #aihf 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 #eje4 ,modifications of foreign tax credit rules applicable to dual capacity taxpayers 7a7 ,in general ,section #ija of the ,internal ,revenue ,code of #aihf is amended by redesignating subsection 7n7 as subsection 7o7 and by inserting after subsection 7m7 the following new subsection3 7n7 ,special ,rules ,relating to ,dual ,capacity ,taxpayers 7#a7 ,general rule ,notwithstanding any other provision of this chapter1 any amount paid or accrued by a dual capacity taxpayer or any member of the worldwide affiliated group of which such dual capacity taxpayer is also a member to any foreign country or to any possession of the ,united ,states for any period shall not be considered a tax to the extent such amount exceeds the amount 7determined in accordance with regulations7 which would have been required to be paid if the taxpayer were not a dual capacity taxpayer4 7#b7 ,dual capacity taxpayer ,for purposes of this subsection1 the term #8dual capacity taxpayer' means1 with respect to any foreign country or possession of the ,united ,states1 a person who-- 7,a7 is subject to a levy of such country or possession1 and 7,b7 receives 7or will receive7 directly or indirectly a specific economic benefit 7as determined in accordance with regulations7 from such country or possession4 7#c7 ,regulations ,the ,secretary may issue such regulations or other guidance as is necessary or appropriate to carry out the purposes of this subsection4 4 7b7 ,contrary ,treaty ,obligations ,upheld ,the amendments made by this section shall not apply to the extent contrary to any treaty obligation of the ,united ,states4 7c7 ,effective ,date ,the amendments made by this section shall apply to amounts that1 if such amounts were an amount of tax paid or accrued1 would be considered paid or accrued in taxable years beginning after ,december #ca1 #bjab4 #ejf4 ,separate basket treatment taxes paid on foreign oil and gas income 7a7 ,separate ,basket for ,foreign ,tax ,credit ,paragraph 7#a7 of section #ijd7;d7 of the ,internal ,revenue ,code of #aihf is amended by striking and at the end of subparagraph 7,a71 by striking the period at the end of subparagraph 7,b7 and inserting 1 and1 and by adding at the end the following3 7,c7 combined foreign oil and gas income 7as defined in section #ijg7;b77#a774 4 7b7 ,coordination ,section #ijd7;d77#b7 of such ,code is amended by redesignating subparagraphs 7,j7 and 7,k7 as subparagraphs 7,k7 and 7,l7 and by inserting after subparagraph 7,i7 the following3 7,j7 ,coordination with combined foreign oil and gas income ,for purposes of this section1 passive category income and general category income shall not include combined foreign oil and gas income 7as defined in section #ijg7;b77#a774 4 7c7 ,conforming amendments 7#a7 ,section #ijg7;a7 of such ,code is hereby repealed4 7#b7 ,section #ijg7;c77#d7 of such ,code is hereby repealed4 7#c7 ,section #ijg7;f7 of such ,code is hereby repealed4 7d7 ,effective dates 7#a7 ,in general ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjab4 7#b7 ,transitional rules 7,a7 ,carryovers ,any unused foreign oil and gas taxes which under section #ijg7;f7 of such ,code 7as in effect before the amendment made by subsection 7c77#c77 would have been allowable as a carryover to the taxpayer's first taxable year beginning after ,december #ca1 #bjab 7without regard to the limitation of paragraph 7#b7 of such section #ijg7;f7 for first taxable year7 shall be allowed as carryovers under section #ijd7;c7 of such ,code in the same manner as if such taxes were unused taxes under such section #ijd7;c7 with respect to foreign oil and gas extraction income4 7,b7 ,losses ,the amendment made by subsection 7c77#b7 shall not apply to foreign oil and gas extraction losses arising in taxable years beginning on or before the date of the enactment of this ,act4 ,,vi ,financial crisis responsibility fee #fja4 ,definitions and special rules 7a7 ,definitions ,in this title1 the following definitions shall apply3 7#a7 ,appropriate ,federal agency ,the term appropriate ,federal agency means-- 7,a7 for a covered firm that is a bank holding company1 a savings and loan holding company1 any company controlled by a bank holding company or savings and loan institution 7other than a depository institution71 a state member bank1 a branch or agency of a foreign bank1 a foreign bank that does not operate an insured branch1 an agency or commercial lending company other than a ,federal agency or any company that controls a registered broker or dealer but does not also control an insured depository institution1 the ,board of ,governors of the ,federal ,reserve ,system2 7,b7 for a covered firm that is a national banking association1 a ,federal branch or agency of a foreign bank1 or a federal savings association1 the ,office of the ,comptroller of the ,currency2 7,c7 for a covered firm that is a state nonmember insured bank1 a foreign bank that has an insured branch1 a state savings association1 or a company that controls an insured depository institution and is not regulated as a bank holding company or a savings and loan association holding company1 the ,federal ,deposit ,insurance ,corporation2 and 7,d7 for a covered firm that is a covered broker or dealer1 the ,securities and ,exchange ,commission4 7#b7 ,bank holding company ,the term bank holding company has the same meaning as in section #c7w77#b7 of the ,federal ,deposit ,insurance ,act 7#ab ,u4,s4,c4 #ahac7w77#b774 7#c7 ,covered broker or dealer ,the term covered broker or dealer means a broker or dealer designated by the ,board of ,governors of the ,federal ,reserve ,system or the ,federal ,reserve ,bank of ,new ,york as a primary dealer in government debt instruments4 7#d7 ,covered firm ,the term covered firm means any corporation or other entity that is organized under the laws of the ,united ,states or any state or territory thereof if-- 7,a7 as of ,january #ad1 #bjab1 such corporation or other entity was1 or is at any time during a the beginning of the fiscal year for which this section is applicable1 an insured depository institution1 a bank holding company1 a savings and loan holding company1 a company that directly or indirectly controls an insured depository institution1 a covered broker or dealer1 or a company that directly or indirectly controls a covered broker or dealer2 and 7,b7 has #ej1jjj1jjj1jjj or more in total consolidated balance sheet assets that are associated with activities that are permissible for a bank holding company or a financial holding company under sections #c and #d of the ,bank ,holding ,company ,act of #aief 7#ab ,u4,s4,c4 #ahdb and #ahdc7 at the beginning of the fiscal year4 7#e7 ,fee ,the term fee means the ,financial ,crisis ,responsibility ,fee authorized under section #ejb4 7#f7 ,financial holding company ,the term financial holding company has the same meaning as in section #b7p7 of the ,bank ,holding ,company ,act of #aief1 7#ab ,u4,s4,c4 #ahda7b77q774 7#g7 ,fiscal year ,the term fiscal year means the ,government's fiscal year beginning on ,october #a4 7#h7 ,foreign banking organization ,the term foreign banking organization means-- 7,a7 a foreign bank1 as defined in section #a7;b77#g7 of the ,international ,banking ,act of #aigh 7#ab ,u4,s4,c4 #caja7g771 that-- 7i7 operates a branch1 agency1 or commercial lending company subsidiary in the ,united ,states2 7ii7 controls a bank in the ,united ,states2 or 7iii7 controls an ,edge corporation acquired after ,march #e1 #aihg2 and 7,b7 any company that directly or indirectly controls the foreign bank4 7#i7 ,secretary ,the term ,secretary means the ,secretary of the ,treasury4 7#aj7 ,top-tier covered firm ,the term top-tier covered firm means a covered firm that controls one or more other covered firms but is not itself directly or indirectly controlled by another covered firm4 7#aa7 ,additional definitions ,for purposes of this chapter1 the terms insured depository institution and savings and loan holding company shall have the same meanings as in section #c of the ,federal ,deposit ,insurance ,act 7#ab ,u4,s4,c4 #ahac74 7b7 ,special rules 7#a7 ,determination of control ,for purposes of this ,act1 a person shall be considered to control another person if the first such person directly or indirectly owns 7or otherwise has the power to vote7 #be percent or more of any class of voting securities of the second such person4 7#b7 ,treatment of certain affiliated companies ,for purposes of determining the applicability of this ,act and the amount of the ,fee payable under section #ejb1 the total consolidated balance sheet assets of any two or more corporations or other entities that are organized under the laws of the ,united ,states or any state or territory thereof that each meet any of the criteria described in subsection 7a77#d77;,a7 and that are under common control1 directly or indirectly1 by the same person but that are not under common control1 directly or indirectly1 by any top-tier covered firm shall be consolidated together4 ,if1 following such consolidation1 the amount and other characteristics of the combined balance sheet assets of such firms satisfy the criteria specified in subsection 7a77#d77;,b71 each such firm shall be deemed a covered firm and the resulting amount of fee shall be appropriately apportioned by the ,secretary4 #fjb4 ,financial crisis responsibility fee 7a7 ,amount ,to be collected ,in order to recover the costs to the ,federal ,government of assistance provided through the ,troubled ,asset ,relief ,program and other ,federal programs and activities1 the ,secretary1 during the #aj-year period beginning in fiscal year #bjad and continuing through the end of fiscal year #bjbc1 shall assess a risk-based ,financial ,crisis ,responsibility ,fee that shall collect a total of #cj1jjj1jjj1jjj1 net of any estimated corporate income tax deductions attributable to the ,fee1 during that period4 7b7 ,assessment and schedule 7#a7 ,in general ,to collect the fee authorized by this section1 the ,secretary shall establish1 by regulation1 an assessment schedule by fiscal year1 including assessment base and rates1 that-- 7,a7 is designed1 in the ,secretary's judgment1 to result in the collection of a total of #cj1jjj1jjj1jjj1 net of the estimated corporate income tax deduction1 by the end of fiscal year #bjbc2 and 7,b7 shall apply to-- 7i7 a top-tiered covered firm1 with respect to the group consisting of such top-tier covered firm and each other covered firm controlled by such top-tier covered firm2 and 7ii7 a covered firm1 if such covered firm is not controlled by a top-tier covered firm4 7#b7 ,phase in ,to promote the full recovery of the economy and financial sector1 the ,secretary shall phase-in the assessment rate over the #aj-year period1 in a manner determined by the ,secretary4 7c7 ,annual adjustment ,for each fiscal year1 starting with fiscal year #bjae1 the ,secretary-- 7#a7 shall apply the fee to-- 7,a7 a top-tiered covered firm1 with respect to the group consisting of such top-tier covered firm and each other covered firm controlled by such top-tier covered firm2 and 7,b7 a covered firm1 if such covered firm is not controlled by a top-tier covered firm2 and 7#b7 shall adjust the rates under this subsection in a manner that is designed1 in the judgment of the ,secretary1 to result in the collection of a total of #cj1jjj1jjj1jjj1 net of the estimated corporate income tax deduction1 by the end of fiscal year #bjbc4 7d7 ,extension of the financial crisis responsibility fee 7#a7 ,in general ,if the estimated cost of the ,troubled ,asset ,relief ,program1 as projected in the ,fiscal ,year #bjbd ,budget of the ,u4,s4 ,government1 exceeds the total fee collections received as of the end of ,fiscal ,year #bjbc1 the ,secretary shall extend the operation of the ,fee beyond the end of fiscal year #bjbc in order to collect such excess amount4 7#b7 ,assessment schedule under extension ,in order to collect1 by the end of fiscal year #bjbh1 the excess amount determined under paragraph 7d71 the ,secretary shall establish1 by regulation1 an assessment schedule1 including assessment base and rates1 that-- 7,a7 is designed1 in the judgment of the ,secretary1 to result in the collection of such excess amount by the end of fiscal year #bjbh2 and 7,b7 shall apply to-- 7i7 a top-tiered covered firm1 with respect to the group consisting of such top-tier covered firm and each other covered firm controlled by such top-tier covered firm2 and 7ii7 a covered firm1 if such covered firm is not controlled by a top-tier covered firm4 7#c7 ,annual adjustment ,for each fiscal year1 starting with fiscal year #bjbd1 the ,secretary-- 7,a7 shall apply the fee required by this section to-- 7i7 a top-tiered covered firm1 with respect to the group consisting of such top-tier covered firm and each other covered firm controlled by such top-tier covered firm2 and 7ii7 a covered firm1 if such covered firm is not controlled by a top-tier covered firm2 and 7,b7 shall adjust the rates under this subsection in a manner that is designed1 in the judgment of the ,secretary1 to result in the collection of such excess amount as may be determined under this section by the end of fiscal year #bjbh4 7e7 ,deposit of collections ,all amounts collected pursuant to the fee1 during fiscal year #bjad and each fiscal year thereafter 7including during the extension period1 if applicable7-- 7#a7 shall be deposited and credited as general revenue of the ,treasury for the purposes of deficit reduction2 and 7#b7 shall not be available for obligation4 #fjc4 ,other provisions 7a7 ,assistance with assessment and collection ,the appropriate ,federal agencies shall respond promptly to any request for information or assistance from the ,secretary with regard to the determination or collection of any ,fee to be determined or imposed under this ,act4 7b7 ,severability2 rule of construction ,it is the intent of ,congress that the provisions of this ,act be severable1 and be construed to avoid the constitutional invalidity of any provision of the ,act or any application of any provision of the ,act to any person or circumstance4 ,if a provision of this ,act is held invalid1 all valid provisions shall remain in effect4 ,if a provision of this ,act is held invalid in one or more of its applications to any person or circumstance1 the ,act shall remain in effect in all its valid applications4 ,in any challenge to the constitutionality of any provision of this ,act1 a reviewing court shall construe such provision as necessary to avoid any constitutional invalidity4 ,,vii ,tax on trading transactions #gja4 ,transaction tax 7a7 ,in general ,chapter #cf of the ,internal ,revenue ,code of #aihf is amended by inserting after subchapter ,b the following new subchapter3 ,c ,tax on ,trading ,transactions ,sec4 #ddge4 ,tax on trading transactions4 #ddge4 ,tax on trading transactions 7a7 ,imposition of tax ,there is hereby imposed a tax on each covered transaction with respect to any security4 7b7 ,rate of tax ,the tax imposed under subsection 7a7 with respect to any covered transaction shall be #j4jc percent of the specified base amount with respect to such covered transaction4 7c7 ,specified base amount ,for purposes of this section1 the term specified base amount means-- 7#a7 except as provided in paragraph 7#b71 the fair market value of the security 7determined as of the time of the covered transaction71 and 7#b7 in the case of any payment described in subsection 7h71 the amount of such payment4 7d7 ,covered transaction ,for purposes of this section1 the term covered transaction means-- 7#a7 except as provided in paragraph 7#b71 any purchase if-- 7,a7 such purchase occurs or is cleared on a facility located in the ,united ,states1 or 7,b7 the purchaser or seller is a ,united ,states person1 and 7#b7 any transaction with respect to a security described in subparagraph 7,d71 7,e71 or 7,f7 of subsection 7e77#a71 if-- 7,a7 such security is traded or cleared on a facility located in the ,united ,states1 or 7,b7 any party with rights under such security is a ,united ,states person4 7e7 ,security and other definitions ,for purposes of this section-- 7#a7 ,in general ,the term security means-- 7,a7 any share of stock in a corporation1 7,b7 any partnership or beneficial ownership interest in a partnership or trust1 7,c7 any note1 bond1 debenture1 or other evidence of indebtedness1 7,d7 any evidence of an interest in1 or a derivative financial instrument with respect to1 any security or securities described in subparagraph 7,a71 7,b71 or 7,c71 7,e7 any derivative financial instrument with respect to any currency or commodity1 and 7,f7 any notional principal contract4 7#b7 ,derivative financial instrument ,the term derivative financial instrument includes any option1 forward contract1 futures contract1 or any similar financial instrument4 7#c7 ,notional principal contract ,except as otherwise provided by the ,secretary1 the term notional principal contract means any financial instrument which requires two or more payments at specified intervals calculated by reference to a specified index upon one or more notional principal amounts4 ,an amount shall not fail to be treated as a payment described in the preceding sentence merely because such amount is fixed on one date and paid or otherwise taken into account on a different date4 7#d7 ,specified index ,the term specified index means any #a or more of any combination of-- 7,a7 a fixed rate1 price1 or amount1 or 7,b7 a variable rate1 price1 or amount1 7,c7 any index based on any objectively determinable information 7including the occurrence or nonoccurrence of any event7 which is not within the control of any of the parties to the instrument and is not unique to any of the parties' circumstances1 and 7,d7 any other index as the ,secretary may prescribe4 7#e7 ,treatment of exchanges 7,a7 ,in general ,an exchange shall be treated as the sale of the property transferred and a purchase of the property received by each party to the exchange4 7,b7 ,certain deemed exchanges ,in the case of a distribution treated as an exchange for stock under section #cjb or #cca1 the corporation making such distribution shall be treated as having purchased such stock for purposes of this section4 7f7 ,exceptions 7#a7 ,exception for initial issues ,no tax shall be imposed under subsection 7a7 on any covered transaction with respect to the initial issuance of any security described in subparagraph 7,a71 7,b71 or 7,c7 of subsection 7e77#a74 7#b7 ,exception for certain traded short-term indebtedness ,a note1 bond1 debenture1 or other evidence of indebtedness which-- 7,a7 is traded on a trading facility located in the ,united ,states1 and 7,b7 has a fixed maturity of not more than #ajj days1 shall not be treated as described in subsection 7e77#a77;,c74 7#c7 ,exception for securities lending arrangements ,no tax shall be imposed under subsection 7a7 on any covered transaction with respect to which gain or loss is not recognized by reason of section #ajeh4 7g7 ,by whom paid 7#a7 ,in general ,the tax imposed by this section shall be paid by-- 7,a7 in the case of a transaction which occurs or is cleared on a facility located in the ,united ,states1 such facility1 and 7,b7 in the case of a purchase not described in subparagraph 7,a7 which is executed by a broker 7as defined in section #fjde7;c77#a77 which is a ,united ,states person1 such broker4 7#b7 ,special rules for direct1 etc41 transactions ,in the case of any transaction to which paragraph 7#a7 does not apply1 the tax imposed by this section shall be paid by-- 7,a7 in the case of a transaction described in subsection 7d77#a7-- 7i7 the purchaser if the purchaser is a ,united ,states person1 and 7ii7 the seller if the purchaser is not a ,united ,states person1 and 7,b7 in the case of a transaction described in subsection 7d77#b7-- 7i7 the payor if the payor is a ,united ,states person1 and 7ii7 the payee if the payor is not a ,united ,states person4 7h7 ,certain payments treated as separate transactions ,except as otherwise provided by the ,secretary1 any payment with respect to a security described in subparagraph 7,d71 7,e71 or 7,f7 of subsection 7e77#a7 shall be treated as a separate transaction for purposes of this section1 including-- 7#a7 any net initial payment1 net final or terminating payment1 or net periodical payment with respect to a notional principal contract 7or similar financial instrument71 7#b7 any payment with respect to any forward contract 7or similar financial instrument71 and 7#c7 any premium paid with respect to any option 7or similar financial instrument74 7i7 ,application to transactions by controlled foreign corporations 7#a7 ,in general ,for purposes of this section1 a controlled foreign corporation shall be treated as a ,united ,states person4 7#b7 ,special rules for payment of tax on direct1 etc41 transactions ,in the case of any transaction which is a covered transaction solely by reason of paragraph 7#a7 and which is not described in subsection 7g77#a7-- 7,a7 ,payment by ,united ,states shareholders ,any tax which would 7but for this paragraph7 be payable under subsection 7g77#b7 by the controlled foreign corporation shall1 in lieu thereof1 be paid by the ,united ,states shareholders of such controlled foreign corporation as provided in subparagraph 7,b74 7,b7 ,pro rata shares ,each such ,united ,states shareholder shall pay the same proportion of such tax as-- 7i7 the stock which such ,united ,states shareholder owns 7within the meaning of section #ieh7;a77 in such controlled foreign corporation1 bears to 7ii7 the stock so owned by all ,united ,states shareholders in such controlled foreign corporation4 7,c7 ,definitions ,for purposes of this subsection1 the terms ,united ,states shareholder and controlled foreign corporation have the meanings given such terms in sections #iea7;b7 and #ieg7;a71 respectively4 7j7 ,administration ,the ,secretary shall carry out this section in consultation with the ,securities and ,exchange ,commission and the ,commodity ,futures ,trading ,commission4 7k7 ,guidance2 regulations ,the ,secretary shall-- 7#a7 provide guidance regarding such information reporting concerning covered transactions as the ,secretary deems appropriate1 and 7#b7 prescribe such regulations as are necessary or appropriate to prevent avoidance of the purposes of this section1 including the use of non-,united ,states persons in such transactions4 4 7b7 ,credit with respect to certain tax-,favored accounts ,to offset transaction tax 7#a7 ,in general ,subpart ,c of part ,,iv of subchapter ,a of chapter #a of such ,code is amended by inserting after section #cf;,b the following new section3 #cf;,c4 ,offset for transaction tax with respect to certain tax-favored accounts 7a7 ,in general ,there shall be allowed as a credit against the tax imposed by this subtitle for the taxable year an amount equal to #j4jc percent of the qualified tax-favored account contributions of the taxpayer for the taxable year4 7b7 ,qualified tax-,favored account contributions ,for purposes of this section1 the term qualified tax-favored account contributions means1 with respect to any taxable year1 the sum of-- 7#a7 with respect to qualified retirement plans 7as defined in section #digd7;c77 of the taxpayer1 the amount contributed to such plans for such taxable year to the extent that such contributions are allowable as a deduction or are excludable from gross income 7or1 in the case of a ,roth ,,ira 7as defined in section #djh;,a7b771 the amount contributed71 7#b7 with respect to ,archer ,m,s,as of the taxpayer1 the amount allowed as a deduction under section #bbj for such taxable year1 7#c7 with respect to health savings accounts of the taxpayer1 the amount allowed as a deduction under section #bbc for such taxable year1 plus 7#d7 with respect to qualified tuition programs 7as defined in section #ebi7 and ,coverdell education savings accounts 7as defined in section #ecj7 with respect to which the taxpayer is the designated beneficiary 7or1 in the case of a designated beneficiary with respect to whom another taxpayer is allowed a deduction under section #aea1 such other taxpayer in lieu of such designated beneficiary71 the amount contributed for such taxable year4 4 7#b7 ,conforming amendments 7,a7 ,section #acbd7;b77#b7 of title #ca1 ,united ,states ,code1 is amended by inserting 1 #cf;,c after #cf;,b4 7,b7 ,the table of sections for subpart ,c of part ,,iv of subchapter ,a of chapter #a of the ,internal ,revenue ,code of #aihf is amended by inserting before the item relating to section #cg the following new item3 ,sec4 #cf;,c4 ,offset for transaction tax on contributions to certain tax-favored accounts4 4 7c7 ,information reporting with respect to controlled foreign corporations ,subparagraph 7,b7 of section #fjch7;a77#a7 is amended by inserting and transactions which are covered transactions for purposes of section #ddge by reason of the application of section #ddge7;i77#a7 to such corporation before the semicolon at the end4 7d7 ,clerical amendment ,the table of subchapters for chapter #cf of the ,internal ,revenue ,code of #aihf is amended by inserting after the item relating to subchapter ,b the following new item3 ,subchapter ,c4 ,tax on trading transactions4 4 7e7 ,effective date ,the amendments made by this section shall apply to transactions after ,december #ca1 #bjac4 ,,viii ,modification of accounting rules #hja4 ,repeal of last-in1 first-out method of inventory 7a7 ,in general ,subpart ,d of part ,,ii of subchapter ,e of chapter #a is amended by striking sections #dgb 7relating to last-in1 first-out inventories71 #dgc 7relating to qualified liquidations of ,,lifo inventories71 and #dgd 7relating to simplified dollar-value ,,lifo method for certain small businesses74 7b7 ,conforming amendments 7#a7 7,a7 ,section #cab7n7 is amended by striking paragraph 7#d7 and by redesignating paragraphs 7#e7 through 7#h7 as paragraphs 7#d7 through 7#g71 respectively4 7,b7 ,section #cab7n77#g71 as redesignated by subparagraph 7,a71 is amended-- 7i7 by striking paragraphs 7#d7 and 7#f7 in subparagraph 7,a7 and inserting paragraph 7#e71 and 7ii7 by striking paragraph 7#e7 in subparagraph 7,b7 and inserting paragraph 7#d74 7,c7 ,section #ef7;g77#d77;,d7 is amended by striking clause 7iii7 and by redesignating clause 7iv7 as clause 7iii74 7#b7 ,section #acfc is amended by striking subsection 7d74 7c7 ,effective date 7#a7 ,in general ,the amendments made by this section shall apply to taxable years beginning after the date of the enactment of this ,act4 7#b7 ,change in method of accounting ,in the case of any taxpayer required by the amendments made by this section to change its method of accounting for its first taxable year beginning after the date of the enactment of this ,act-- 7,a7 such change shall be treated as initiated by the taxpayer1 7,b7 such change shall be treated as made with the consent of the ,secretary of the ,treasury1 and 7,c7 if the net amount of the adjustments required to be taken into account by the taxpayer under section #dha of the ,internal ,revenue ,code of #aihf is positive1 such amount shall be taken into account over a period of #h years beginning with such first taxable year4 #hjb4 ,repeal of lower of cost or market method of inventory 7a7 ,in general ,section #dga is amended by redesignating subsection 7c7 as subsection 7d7 and by inserting after subsection 7b7 the following new subsection3 7c7 ,inventories taken into account at cost ,a method of determining inventories shall not be treated as clearly reflecting income unless such method provides that inventories shall be taken into account at cost4 4 7b7 ,effective date 7#a7 ,in general ,the amendments made by this section shall apply to taxable years beginning after the date of the enactment of this ,act4 7#b7 ,change in method of accounting ,in the case of any taxpayer required by the amendments made by this section to change its method of accounting for its first taxable year beginning after the date of the enactment of this ,act-- 7,a7 such change shall be treated as initiated by the taxpayer1 7,b7 such change shall be treated as made with the consent of the ,secretary of the ,treasury1 and 7,c7 if the net amount of the adjustments required to be taken into account by the taxpayer under section #dha of the ,internal ,revenue ,code of #aihf is positive1 such amount shall be taken into account over a period of #h years beginning with such first taxable year4 ,,ix ,fair treatment of options #ija4 ,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 #ijb4 ,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