113 S268 IS: Cut Unjustified Tax Loopholes Act
U.S. Senate
2013-02-11
text/xml
EN
Pursuant to Title 17 Section 105 of the United States Code, this file is not subject to copyright protection and is in the public domain.
1.
(a)This Act may be cited
as the Cut Unjustified Tax Loopholes
Act
or CUT
Loopholes Act
.
(b)Except as otherwise
expressly provided, whenever in this Act an amendment or repeal is expressed in
terms of an amendment to, or repeal of, a section or other provision, the
reference shall be considered to be made to a section or other provision of the
Internal Revenue Code of 1986.
(c)The table of contents of this Act is as follows:
Sec. 1. Short title;
etc.
TITLE I—Ending offshore tax abuses
Subtitle A—Deterring the use of tax havens for tax
evasion
Sec. 101. Authorizing special measures
against foreign jurisdictions, financial institutions, and others that
significantly impede United States tax enforcement.
Sec. 102. Strengthening the Foreign Account Tax Compliance Act
(FATCA).
Sec. 103. Treatment of foreign corporations managed and
controlled in the United States as domestic corporations.
Sec. 104. Reporting United States beneficial owners of foreign
owned financial accounts.
Sec. 105. Swap payments made from the United States to persons
offshore.
Subtitle B—Other measures To combat tax haven and tax shelter
abuses
Sec. 111. Country-by-country
reporting.
Sec. 112. Penalty for failing to disclose
offshore holdings.
Sec. 113. Deadline for anti-money
laundering rule for investment advisers.
Sec. 114. Anti-money laundering
requirements for formation agents.
Sec. 115. Strengthening John Doe summons
proceedings.
Sec. 116. Improving enforcement of foreign financial account
reporting.
Subtitle C—Ending offshore tax avoidance
Sec. 121. Allocation of expenses and taxes on basis of
repatriation of foreign income.
Sec. 122. Excess income from transfers of intangibles to
low-taxed affiliates treated as subpart F income.
Sec. 123. Limitations on income shifting through intangible
property transfers.
Sec. 124. Limitation on earnings stripping by expatriated
entities.
Sec. 125. Repeal of check-the-box rules for certain foreign
entities and CFC look-thru rules.
Sec. 126. Prohibition on offshore loan abuse.
TITLE II—Strengthening tax enforcement
Subtitle A—Combating tax shelter promotion
Sec. 201. Penalty for promoting abusive tax
shelters.
Sec. 202. Penalty for aiding and abetting the understatement of
tax liability.
Sec. 203. Prohibited fee arrangement.
Sec. 204. Preventing tax shelter activities by financial
institutions.
Sec. 205. Information sharing for enforcement
purposes.
Sec. 206. Disclosure of information to Congress.
Sec. 207. Tax opinion standards for tax
practitioners.
Subtitle B—Simplify tax lien procedure
Sec. 211. Short title.
Sec. 212. Findings and purpose.
Sec. 213. National tax lien filing system.
TITLE III—Ending excessive corporate tax deductions for stock
options
Sec. 301. Consistent treatment of stock options by
corporations.
Sec. 302. Application of executive pay deduction
limit.
TITLE IV—Closing the derivatives blended rate
loophole
Sec. 401. Short title.
Sec. 402. Modifications to treatment of section 1256
contracts.
Sec. 403. Modifications to treatment of dealers in securities
and commodities.
TITLE V—Ending the tar sands oil spill loophole
Sec. 501. Short title.
Sec. 502. Requirements for contribution to the Oil Spill
Liability Trust Fund.
Sec. 503. Extension of Oil Spill Liability Trust Fund financing
rate.
Sec. 504. Technical amendment.
TITLE VI—Ending the carried interest loophole
Sec. 601. Short title; etc.
Sec. 602. Partnership interests transferred in connection with
performance of services.
Sec. 603. Special rules for partners providing investment
management services to partnerships.
<enum>I</enum><header>Ending offshore
tax abuses</header>
<subtitle commented="no" id="IDB7B37F3468BB45E7AE5084CC36F6F83F" style="OLC"><enum>A</enum><header>Deterring the use of tax havens for tax
evasion</header>
<section id="id9BFBAD9CD61A4AF19DA8B5976FCB1BE9"><enum>101.</enum><header>Authorizing
special measures against foreign jurisdictions, financial institutions, and
others that significantly impede United States tax enforcement</header><text display-inline="no-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/31/5318A">Section 5318A</external-xref> of title 31, United States
Code, is amended—</text>
<paragraph id="idF4124E540E614EF78255810AF10BE771"><enum>(1)</enum><text>by striking the
section heading and inserting the following:</text>
<quoted-block display-inline="no-display-inline" id="id8E44AAE3AB514B39BFB0436BA8ABB62C" style="USC">
<section id="idB7F9F3BEF7CC45EC9862D003421C4BCA"><enum>5318A.</enum><header>Special
measures for jurisdictions, financial institutions, or international
transactions that are of primary money laundering concern or significantly
impede United States tax
enforcement</header>
</section><after-quoted-block>;</after-quoted-block></quoted-block>
</paragraph><paragraph id="id0EC66DA561DF4D4EA27D9F3018879455"><enum>(2)</enum><text>in subsection
(a), by striking the subsection heading and inserting the following:</text>
<quoted-block display-inline="no-display-inline" id="id4C257715FD3043F6A44167F303680CC5" style="USC">
<subsection id="id41080F3A7F1F49C28DE9C0BC453DB222"><enum>(a)</enum><header>Special
measures To counter money laundering and efforts to significantly impede United
States tax
enforcement</header>
</subsection><after-quoted-block>;</after-quoted-block></quoted-block>
</paragraph><paragraph id="id4A3C15CA3C2644E6AC4582C940CEEAEF"><enum>(3)</enum><text>in subsection
(c)—</text>
<subparagraph id="idA7A67EA7E52647ED905D9913A03B4F51"><enum>(A)</enum><text>by striking the
subsection heading and inserting the following:</text>
<quoted-block display-inline="no-display-inline" id="id16E8BD55D7E54C24A2A1DDCAEDDC6406" style="USC">
<subsection id="idF43F622F940D4097B815FBA64F909A9D"><enum>(c)</enum><header>Consultations
and information To be considered in finding jurisdictions, institutions, types
of accounts, or transactions To be of primary money laundering concern or To be
significantly impeding United States tax
enforcement</header>
</subsection><after-quoted-block>;
and</after-quoted-block></quoted-block>
</subparagraph><subparagraph id="idC31F3A23DB3E45D59DA9426C3021312A"><enum>(B)</enum><text>by inserting at
the end of paragraph (2) thereof the following new subparagraph:</text>
<quoted-block display-inline="no-display-inline" id="id247DB39BC01B4365932B4AC67FECC721" style="OLC">
<subparagraph id="id9DAFBFB871844215984F35E9DBAFC443"><enum>(C)</enum><header>Other
considerations</header><text>The fact that a jurisdiction or financial
institution is cooperating with the United States on implementing the
requirements specified in <external-xref legal-doc="usc-chapter" parsable-cite="usc-chapter/26/4">chapter 4</external-xref> of the Internal Revenue Code of 1986 may be
favorably considered in evaluating whether such jurisdiction or financial
institution is significantly impeding United States tax
enforcement.</text>
</subparagraph><after-quoted-block>;</after-quoted-block></quoted-block>
</subparagraph></paragraph><paragraph id="id9F17940EA8A84DEBBF1D9710B6E77154"><enum>(4)</enum><text>in subsection
(a)(1), by inserting <quote>or is significantly impeding United States tax
enforcement</quote> after <quote>primary money laundering
concern</quote>;</text>
</paragraph><paragraph id="id4AA6FD08A259462F9037F0210FC2E7B8"><enum>(5)</enum><text>in subsection
(a)(4)—</text>
<subparagraph id="id6C2800A414C941959AB41EE424ECBD32"><enum>(A)</enum><text>in subparagraph
(A)—</text>
<clause id="id864273A3DD344D83BBF14D6484651E94"><enum>(i)</enum><text>by
inserting <quote>in matters involving money laundering,</quote> before
<quote>shall consult</quote>; and</text>
</clause><clause id="idB2F69EF4D5864DC1ABC06A60EFDE908D"><enum>(ii)</enum><text>by
striking <quote>and</quote> at the end;</text>
</clause></subparagraph><subparagraph id="id17B4FB76D1814EF18DAD75F6321BB3C2"><enum>(B)</enum><text>by redesignating
subparagraph (B) as subparagraph (C); and</text>
</subparagraph><subparagraph id="id858B56F575014C8A8707A112D294C148"><enum>(C)</enum><text>by inserting
after subparagraph (A) the following:</text>
<quoted-block display-inline="no-display-inline" id="id5ADB7D5B9A6E4758B1A56C72EE85363E" style="OLC">
<subparagraph id="idDD48E440921A46AC99080C97CB5C26B4"><enum>(B)</enum><text>in matters
involving United States tax enforcement, shall consult with the Commissioner of
the Internal Revenue, the Secretary of State, the Attorney General of the
United States, and in the sole discretion of the Secretary, such other agencies
and interested parties as the Secretary may find to be appropriate;
and</text>
</subparagraph><after-quoted-block>;</after-quoted-block></quoted-block>
</subparagraph></paragraph><paragraph id="idDCA77BA32D954B1ABCF6CFAC493FD85B"><enum>(6)</enum><text>in each of
paragraphs (1)(A), (2), (3), and (4) of subsection (b), by inserting <quote>or
to be significantly impeding United States tax enforcement</quote> after
<quote>primary money laundering concern</quote> each place that term
appears;</text>
</paragraph><paragraph id="idFAACBE96F67A4DF6B5D54780C7F4BB45"><enum>(7)</enum><text>in subsection
(b), by striking paragraph (5) and inserting the following:</text>
<quoted-block display-inline="no-display-inline" id="id44F4CD3B6FE14AF2BEDC31C41F949E74" style="OLC">
<paragraph id="idBF6D855AD6EA4B06830706EC29D591A9"><enum>(5)</enum><header>Prohibitions or
conditions on opening or maintaining certain correspondent or payable-through
accounts or authorizing certain payment cards</header><text>If the Secretary
finds a jurisdiction outside of the United States, 1 or more financial
institutions operating outside of the United States, or 1 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 enforcement, the Secretary, in consultation with the Secretary of
State, the Attorney General of the United States, and the Chairman of the Board
of Governors of the Federal Reserve System, may prohibit, or impose conditions
upon—</text>
<subparagraph id="idB537F33EDC574FBB8FF5007BA47DAB3D"><enum>(A)</enum><text>the opening or
maintaining in the United States of a correspondent account or payable-through
account; or</text>
</subparagraph><subparagraph id="id7824CC085F484343BCD33C0F2DBA37AA"><enum>(B)</enum><text>the
authorization, approval, or use in the United States of a credit card, charge
card, debit card, or similar credit or debit financial instrument by any
domestic financial institution, financial agency, or credit card company or
association, for or on behalf of a foreign banking institution, if such
correspondent account, payable-through account, credit card, charge card, debit
card, or similar credit or debit financial instrument, involves any such
jurisdiction or institution, or if any such transaction may be conducted
through such correspondent account, payable-through account, credit card,
charge card, debit card, or similar credit or debit financial
instrument.</text>
</subparagraph></paragraph><after-quoted-block>;
and</after-quoted-block></quoted-block>
</paragraph><paragraph id="idF18F1BAAD9BE4A4DACDD61D43603B68A"><enum>(8)</enum><text>in subsection
(c)(1), by inserting <quote>or is significantly impeding United States tax
enforcement</quote> after <quote>primary money laundering
concern</quote>;</text>
</paragraph><paragraph id="id7E0E007D869F4DBCA62A31AE0378307B"><enum>(9)</enum><text>in subsection
(c)(2)(A)—</text>
<subparagraph id="idDE389038B2924B3882E22BB6DFD3A7C9"><enum>(A)</enum><text>in clause (ii),
by striking <quote>bank secrecy or special regulatory advantages</quote> and
inserting <quote>bank, tax, corporate, trust, or financial secrecy or
regulatory advantages</quote>;</text>
</subparagraph><subparagraph id="id486E738560B449289D56BFA4A9D48EC7"><enum>(B)</enum><text>in clause (iii),
by striking <quote>supervisory and counter-money</quote> and inserting
<quote>supervisory, international tax enforcement, and
counter-money</quote>;</text>
</subparagraph><subparagraph id="id248FC50E35A94F9189B90583102DA25C"><enum>(C)</enum><text>in clause (v), by
striking <quote>banking or secrecy</quote> and inserting <quote>banking, tax,
or secrecy</quote>; and</text>
</subparagraph><subparagraph id="id78618B0581D84DDC9F35885C8FFB86C9"><enum>(D)</enum><text>in clause (vi),
by inserting <quote>, tax treaty, or tax information exchange agreement</quote>
after <quote>treaty</quote>;</text>
</subparagraph></paragraph><paragraph id="idD71D3892F441459C915913E573FB209D"><enum>(10)</enum><text>in subsection
(c)(2)(B)—</text>
<subparagraph id="idA56473BC19484FBCB4E784DD59A9AD86"><enum>(A)</enum><text>in clause (i), by
inserting <quote>or tax evasion</quote> after <quote>money laundering</quote>;
and</text>
</subparagraph><subparagraph id="id907D875D9A664A76952F44146982CA6D"><enum>(B)</enum><text>in clause (iii),
by inserting <quote>, tax evasion,</quote> after <quote>money
laundering</quote>; and</text>
</subparagraph></paragraph><paragraph id="idDC8D7F569F4B47AF94AE2240931F5BCB"><enum>(11)</enum><text>in subsection
(d), by inserting <quote>involving money laundering, and shall notify, in
writing, 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</quote> after <quote>such action</quote>.</text>
</paragraph></section><section commented="no" display-inline="no-display-inline" id="id94F9AF51995B4B1592D21D60E9EFF60A"><enum>102.</enum><header>Strengthening
the Foreign Account Tax Compliance Act (FATCA)</header>
<subsection commented="no" display-inline="no-display-inline" id="idF7A6FC4DA8D9438FB4D27C6206AFC86A"><enum>(a)</enum><header>Reporting
activities with respect to passive foreign investment companies</header><text display-inline="yes-display-inline">Section 1298(f) is amended by inserting
<quote>, or who directly or indirectly forms, transfers assets to, is a
beneficiary of, has a beneficial interest in, or receives money or property or
the use thereof from,</quote> after <quote>shareholder of</quote>.</text>
</subsection><subsection commented="no" display-inline="no-display-inline" id="id2CA8F646CCF54CE9AD5EF74E271DD5BD"><enum>(b)</enum><header>Withholdable
payments to foreign financial institutions</header><text display-inline="yes-display-inline">Section 1471(d) is amended—</text>
<paragraph commented="no" display-inline="no-display-inline" id="id7238D3E4697946EBB2D2E902F68CE6AF"><enum>(1)</enum><text display-inline="yes-display-inline">by inserting <quote>or transaction</quote>
after <quote>any depository</quote> in paragraph (2)(A), and</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="idEF5CB2CA2F274260BA6A384FC6493B37"><enum>(2)</enum><text display-inline="yes-display-inline">by striking <quote>or any interest</quote>
and all that follows in paragraph (5)(C) and inserting <quote>derivatives, or
any interest (including a futures or forward contract, swap, or option) in such
securities, partnership interests, commodities, or derivatives.</quote>.</text>
</paragraph></subsection><subsection commented="no" display-inline="no-display-inline" id="idA1C0E63C876044BF91C444941A50012B"><enum>(c)</enum><header>Withholdable
payments to other foreign financial institutions</header><text display-inline="yes-display-inline">Section 1472 is amended—</text>
<paragraph commented="no" display-inline="no-display-inline" id="idCE96D6510C68480597B35FD4FD05A382"><enum>(1)</enum><text display-inline="yes-display-inline">by inserting <quote>as a result of any
customer identification, anti-money laundering, anti-corruption, or similar
obligation to identify account holders,</quote> after <quote>reason to
know,</quote> in subsection (b)(2), and</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="idE5FA28E5CA4A49349CD1FF7A21AE56B9"><enum>(2)</enum><text display-inline="yes-display-inline">by inserting <quote>as posing a low risk of
tax evasion</quote> after <quote>this subsection</quote> in subsection
(c)(1)(G).</text>
</paragraph></subsection><subsection commented="no" display-inline="no-display-inline" id="id6E6B9AC449474F09BD9346714D4703D4"><enum>(d)</enum><header>Definitions</header><text display-inline="yes-display-inline">Clauses (i) and (ii) of section 1473(2)(A)
are each amended by inserting <quote>or as a beneficial owner</quote> after
<quote>indirectly</quote>.</text>
</subsection><subsection commented="no" display-inline="no-display-inline" id="id1CFDED9D16FF49F18C2FB343018BCA60"><enum>(e)</enum><header>Special
rules</header><text display-inline="yes-display-inline">Section 1474(c) is
amended—</text>
<paragraph commented="no" display-inline="no-display-inline" id="idF15FCB9F7A0F46E7ACBCDE73D4C1096D"><enum>(1)</enum><text display-inline="yes-display-inline">by inserting <quote>, except that
information provided under sections 1471(c) or 1472(b) may be disclosed to any
Federal law enforcement agency, upon request or upon the initiation of the
Secretary, to investigate or address a possible violation of United States
law</quote> after <quote>shall apply</quote> in paragraph (1), and</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="idF82EBABE63374B98983AF82FBBE0B48C"><enum>(2)</enum><text display-inline="yes-display-inline">by inserting <quote>, or has had an
agreement terminated under such section,</quote> after <quote>section
1471(b)</quote> in paragraph (2).</text>
</paragraph></subsection><subsection commented="no" display-inline="no-display-inline" id="idFE1E714D94D441A18C3294D57AD28DF4"><enum>(f)</enum><header>Information
with respect to foreign financial assets</header><text display-inline="yes-display-inline">Section 6038D(a) is amended by inserting
<quote>ownership or beneficial ownership</quote> after <quote>holds
any</quote>.</text>
</subsection><subsection id="id8771332DF03846C7BEF1838E959DBFB7"><enum>(g)</enum><header>Establishing
presumptions for entities and transactions involving non-FATCA
institutions</header>
<paragraph id="idA2F109A12D8B4B8DB24F105AA940825C"><enum>(1)</enum><header>Presumptions
for tax purposes</header>
<subparagraph id="id73F2EB45BC054C25B4C281814B5DC18F"><enum>(A)</enum><header>In
general</header><text>Chapter 76 is amended by inserting after section 7491 the
following new subchapter:</text>
<quoted-block display-inline="no-display-inline" id="id9D74A738B7314E73B56A79ADDF379DDF" style="OLC">
<subchapter id="id21D7AB6E7E8144BEA7B0989927307B75"><enum>F</enum><header>Presumptions for
certain legal proceedings</header>
<toc>
<toc-entry idref="idE5D652CDDEB148FAA5E5F736D1A7FF7F" level="section">Sec. 7492. Presumptions pertaining to entities and transactions
involving non-FATCA institutions.</toc-entry>
</toc>
<section id="idE5D652CDDEB148FAA5E5F736D1A7FF7F"><enum>7492.</enum><header>Presumptions
pertaining to entities and transactions involving non-FATCA
institutions</header>
<subsection id="ID2398562b6c294b65890f023b0c9879e2"><enum>(a)</enum><header>Control</header><text>For
purposes of any United States civil judicial or administrative proceeding to
determine or collect tax, there shall be a rebuttable presumption that a United
States person (other than an entity with shares regularly traded on an
established securities market) who, directly or indirectly, formed, transferred
assets to, was a beneficiary of, had a beneficial interest in, or received
money or property or the use thereof from an entity, including a trust,
corporation, limited liability company, partnership, or foundation (other than
an entity with shares regularly traded on an established securities market),
that holds an account, or in any other manner has assets, in a non-FATCA
institution, exercised control over such entity. The presumption of control
created by this subsection shall not be applied to prevent the Secretary from
determining or arguing the absence of control.</text>
</subsection><subsection id="ID44f40aa924db435181ebddbb96c54f3b"><enum>(b)</enum><header>Transfers of
income</header><text>For purposes of any United States civil judicial or
administrative proceeding to determine or collect tax, there shall be a
rebuttable presumption that any amount or thing of value received by a United
States person (other than an entity with shares regularly traded on an
established securities market) directly or indirectly from an account or from
an entity (other than an entity with shares regularly traded on an established
securities market) that holds an account, or in any other manner has assets, in
a non-FATCA institution, constitutes income of such person taxable in the year
of receipt; and any amount or thing of value paid or transferred by or on
behalf of a United States person (other than an entity with shares regularly
traded on an established securities market) directly or indirectly to an
account, or entity (other than an entity with shares regularly traded on an
established securities market) that holds an account, or in any other manner
has assets, in a non-FATCA institution, represents previously unreported income
of such person taxable in the year of the transfer.</text>
</subsection><subsection id="IDbd6705cc730d44a7824b6792ca62de0d"><enum>(c)</enum><header>Rebutting the
presumptions</header><text>The presumptions established in this section may be
rebutted only by clear and convincing evidence, including detailed documentary,
testimonial, and transactional evidence, establishing that—</text>
<paragraph id="IDd7f61653873e4f9fa1acba24416aaf63"><enum>(1)</enum><text>in subsection
(a), such taxpayer exercised no control, directly or indirectly, over account
or entity at the time in question, and</text>
</paragraph><paragraph id="IDe5bc506d3e03422998be0699d010ce19"><enum>(2)</enum><text>in subsection
(b), such amounts or things of value did not represent income related to such
United States person.</text>
</paragraph><continuation-text continuation-text-level="subsection">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 document, or any other evidence supplied by a person outside
the jurisdiction of a United States court, unless such person appears before
the
court.</continuation-text></subsection></section></subchapter><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph><subparagraph id="ID7cdd13162ffb43e997f752cd00beb842"><enum>(B)</enum><text>The table of
subchapters for chapter 76 is amended by inserting after the item relating to
subchapter E the following new item:</text>
<quoted-block id="iddb7fc65e-879d-4243-9229-a27040e0b3ad" style="OLC">
<toc>
<toc-entry idref="id21D7AB6E7E8144BEA7B0989927307B75" level="subchapter">Subchapter F—Presumptions for certain legal
proceedings</toc-entry>
</toc>
<after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph></paragraph><paragraph id="ID7084d99cff2446d3b809c2d7b603fe81"><enum>(2)</enum><header>Definition of
non-fatca institution</header><text>Section 7701(a) is amended by adding at the
end the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="id6E35D8ED3AFB4D659EF18467A0933DB4" style="OLC">
<paragraph id="ID1ceb08bd6d3541b191297f7499751a06"><enum>(51)</enum><header>Non-fatca
institution</header><text>The term <term>non-FATCA institution</term> means any
financial institution that does not meet the reporting requirements of section
1471(b).</text>
</paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph commented="no" id="id897FDF4672644FB7A4B42816E2AC6EC3"><enum>(3)</enum><header>Presumptions
for securities law purposes</header><text>Section 21 of the Securities Exchange
Act of 1934 (<external-xref legal-doc="usc" parsable-cite="usc/15/78u">15 U.S.C. 78u</external-xref>) is amended by adding at the end the following new
subsection:</text>
<quoted-block display-inline="no-display-inline" id="id2D1944838B02446F9CD02119D414D6D5" style="OLC">
<subsection id="IDf4d8616139c04203a110e43c74c393cd"><enum>(j)</enum><header>Presumptions
pertaining to control and beneficial ownership</header>
<paragraph id="IDb212199fe90a4987811361ed869684ec"><enum>(1)</enum><header>Control</header><text>For
purposes of any civil judicial or administrative proceeding under this title,
there shall be a rebuttable presumption that a United States person (other than
an entity with shares regularly traded on an established securities market)
who, directly or indirectly, formed, transferred assets to, was a beneficiary
of, had a beneficial interest in, or received money or property or the use
thereof from an entity, including a trust, corporation, limited liability
company, partnership, or foundation (other than an entity with shares regularly
traded on an established securities market), that holds an account, or in any
other manner has assets, in a non-FATCA institution (as defined in section
7701(a)(51) of the Internal Revenue Code of 1986), exercised control over such
entity. The presumption of control created by this paragraph shall not be
applied to prevent the Commission from determining or arguing the absence of
control.</text>
</paragraph><paragraph id="ID74c02bf6b5214a3db7b94a8bd24e8a97"><enum>(2)</enum><header>Beneficial
ownership</header><text>For purposes of any civil judicial or administrative
proceeding under this title, there shall be a rebuttable presumption that
securities that are nominally owned by an entity, including a trust,
corporation, limited liability company, partnership, or foundation (other than
an entity with shares regularly traded on an established securities market),
and that are held in a non-FATCA institution (as so defined), are beneficially
owned by any United States person (other than an entity with shares regularly
traded on an established securities market) who directly or indirectly
exercised control over such entity. 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
ownership.</text>
</paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="ID12c4d95c47b7432eb379aac9638c60cf"><enum>(4)</enum><header>Presumption for
reporting purposes relating to foreign financial accounts</header><text>Section
5314 of title 31, United States Code, is amended by adding at the end the
following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="id861C1067AAAB4A4D99F4205B88D2F095" style="OLC">
<subsection id="IDb13c354e8f824c5d812fd37e5da8cc21"><enum>(d)</enum><header>Rebuttable
presumption</header><text>For purposes of this section, there shall be a
rebuttable presumption that any account with a non-FATCA institution (as
defined in <external-xref legal-doc="usc" parsable-cite="usc/26/7701">section 7701(a)(51)</external-xref> of the Internal Revenue Code of 1986) contains
funds in an amount that is at least sufficient to require a report prescribed
by regulations under this
section.</text>
</subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="IDd9fbd183ea7344e6a52b01e3ef694932"><enum>(5)</enum><header>Regulatory
authority</header><text>Not later than 180 days after the date of enactment of
this Act, 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 subsection. The Secretary and the
Chairman may, by regulation or guidance, provide that the presumption of
control shall not extend to particular classes of transactions, such as
corporate reorganizations or transactions below a specified dollar threshold,
if either determines that applying such amendments to such transactions is not
necessary to carry out the purposes of such amendments.</text>
</paragraph></subsection><subsection id="ID4c414671c2d545cfaf1d1d33431bc93b"><enum>(h)</enum><header>Effective
date</header><text>The amendments made by this section shall take effect on the
date which is 180 days after the date of enactment of this Act, whether or not
regulations are issued under subsection (g)(5).</text>
</subsection></section><section id="id5C504F6B52CE435AA920E9EC3647BC16"><enum>103.</enum><header>Treatment of
foreign corporations managed and controlled in the United States as domestic
corporations</header>
<subsection id="idBACDB95C263B47D28873C87FCE2AC89C"><enum>(a)</enum><header>In
general</header><text>Section 7701 is amended by redesignating subsection (p)
as subsection (q) and by inserting after subsection (o) the following new
subsection:</text>
<quoted-block display-inline="no-display-inline" id="id79140093B2894F6FAFD9B95A790406FB" style="OLC">
<subsection id="idAA6AC941C4BA430F892CAA2B5734F0BA"><enum>(p)</enum><header>Certain
corporations managed and controlled in the United States treated as domestic
for income tax</header>
<paragraph id="idE32052565C9F40A9864D07831B89DE5C"><enum>(1)</enum><header>In
general</header><text>Notwithstanding subsection (a)(4), in the case of a
corporation described in paragraph (2) if—</text>
<subparagraph id="id3C1B3308DC3744028EAC816BA411B781"><enum>(A)</enum><text>the corporation
would not otherwise be treated as a domestic corporation for purposes of this
title, but</text>
</subparagraph><subparagraph id="id249293B7AC814BDD90EC723AC59EC693"><enum>(B)</enum><text>the management
and control of the corporation occurs, directly or indirectly, primarily within
the United States,</text>
</subparagraph><continuation-text continuation-text-level="paragraph">then,
solely for purposes of chapter 1 (and any other provision of this title
relating to chapter 1), the corporation shall be treated as a domestic
corporation.</continuation-text></paragraph><paragraph id="id67E40F69D1794680BE8145E4753BD9D2"><enum>(2)</enum><header>Corporation
described</header>
<subparagraph id="id880B1CF2539E432099A4C5372506D8A9"><enum>(A)</enum><header>In
general</header><text>A corporation is described in this paragraph if—</text>
<clause id="id59809795AC644982BE332EFA61D921F4"><enum>(i)</enum><text>the stock of such
corporation is regularly traded on an established securities market, or</text>
</clause><clause id="id258AC5B95A27441F9BA8E888948C54B4"><enum>(ii)</enum><text>the aggregate
gross assets of such corporation (or any predecessor thereof), including assets
under management for investors, whether held directly or indirectly, at any
time during the taxable year or any preceding taxable year is $50,000,000 or
more.</text>
</clause></subparagraph><subparagraph id="idBEF400D4FDD042CAA0FB32E0D1B77267"><enum>(B)</enum><header>General
exception</header><text>A corporation shall not be treated as described in this
paragraph if—</text>
<clause id="id1C69FD700AE84B4DAAD4AAE055A3A1E1"><enum>(i)</enum><text>such corporation
was treated as a corporation described in this paragraph in a preceding taxable
year,</text>
</clause><clause id="id731D8713A31F469684AE4F564E5021DD"><enum>(ii)</enum><text>such
corporation—</text>
<subclause id="idAF91D14CA3CC4B4787B0CB2CDE197515"><enum>(I)</enum><text>is not regularly
traded on an established securities market, and</text>
</subclause><subclause id="id40C3B5E5F29D46919AB11FE1F9B6786B"><enum>(II)</enum><text>has, and is
reasonably expected to continue to have, aggregate gross assets (including
assets under management for investors, whether held directly or indirectly) of
less than $50,000,000, and</text>
</subclause></clause><clause id="idED22F8146E124D7491157702076EEC98"><enum>(iii)</enum><text>the Secretary
grants a waiver to such corporation under this subparagraph.</text>
</clause></subparagraph><subparagraph id="idDE46C579F9414083BC53A71DA14767A9"><enum>(C)</enum><header>Exception from
gross assets test</header><text>Subparagraph (A)(ii) shall not apply to a
corporation which is a controlled foreign corporation (as defined in section
957) and which is a member of an affiliated group (as defined section 1504, but
determined without regard to section 1504(b)(3)) the common parent of
which—</text>
<clause id="idCE84013606A04F84B0D1B97553210604"><enum>(i)</enum><text>is a domestic
corporation (determined without regard to this subsection), and</text>
</clause><clause id="id0453A5B413BD46138EE032118DB2C271"><enum>(ii)</enum><text>has substantial
assets (other than cash and cash equivalents and other than stock of foreign
subsidiaries) held for use in the active conduct of a trade or business in the
United States.</text>
</clause></subparagraph></paragraph><paragraph id="id8EB3CA3B928440F49B97427DF1B48450"><enum>(3)</enum><header>Management and
control</header>
<subparagraph id="idCA75CD2B5D774D38829E148821B2E797"><enum>(A)</enum><header>In
general</header><text>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 States.</text>
</subparagraph><subparagraph id="id480C9965EC994F4E9FF497A5AD37E22E"><enum>(B)</enum><header>Executive
officers and senior management</header><text>Such regulations shall provide
that—</text>
<clause id="id19893E630CA54EABA5191DF4D94754E3"><enum>(i)</enum><text>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 strategic, financial, and operational policies of the
corporation are located primarily within the United States, and</text>
</clause><clause id="id07C2B6E253FC4A4DA6907746729D294F"><enum>(ii)</enum><text>individuals who
are not executive officers and senior management of the corporation (including
individuals who are officers or employees of other corporations in the same
chain of corporations as the corporation) shall be treated as executive
officers and senior management if such individuals exercise the day-to-day
responsibilities of the corporation described in clause (i).</text>
</clause></subparagraph><subparagraph id="idEA1B1D7C54FD4FC6BB9A4A0A3D1509C4"><enum>(C)</enum><header>Corporations
primarily holding investment assets</header><text>Such regulations shall also
provide that the management and control of a corporation shall be treated as
occurring primarily within the United States if—</text>
<clause id="idF57272915E084F14BB8E0D8DC99E872D"><enum>(i)</enum><text>the assets of
such corporation (directly or indirectly) consist primarily of assets being
managed on behalf of investors, and</text>
</clause><clause id="idDCF158FD6B60403297ED00C5D980DC1F"><enum>(ii)</enum><text>decisions about
how to invest the assets are made in the United
States.</text>
</clause></subparagraph></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection commented="no" display-inline="no-display-inline" id="id38E8A919F7F74A39A0CD3165C6121442"><enum>(b)</enum><header>Effective
date</header><text>The amendments made by this section shall apply to taxable
years beginning on or after the date which is 2 years after the date of the
enactment of this Act, whether or not regulations are issued under section
7701(p)(3) of the Internal Revenue Code of 1986, as added by this
section.</text>
</subsection></section><section commented="no" display-inline="no-display-inline" id="id485CA00ABAD04157892337B8B6D2C093"><enum>104.</enum><header>Reporting
United States beneficial owners of foreign owned financial accounts</header>
<subsection id="ID3f1120c8e1db4a778ffdba12d7bddad8"><enum>(a)</enum><header>In
general</header><text>Subpart B of part III of subchapter A of chapter 61 is
amended by inserting after section 6045B the following new sections:</text>
<quoted-block display-inline="no-display-inline" id="id892D4F7F427C4CA0A49075EEF45138C0" style="OLC">
<section id="IDc0e81a22bb5d444f8596a8476238bb4c"><enum>6045C.</enum><header>Returns
regarding United States beneficial owners of financial accounts located in the
United States and held in the name of a foreign entity</header>
<subsection id="IDd32f2629b00f48b29fd94c855961d627"><enum>(a)</enum><header>Requirement of
return</header><text>If—</text>
<paragraph id="IDdae9a5deb4524a01b7263e88ea26c2e3"><enum>(1)</enum><text>any withholding
agent under sections 1441 and 1442 has the control, receipt, custody, disposal,
or payment of any amount constituting gross income from sources within the
United States of any foreign entity, including a trust, corporation, limited
liability company, partnership, or foundation (other than an entity with shares
regularly traded on an established securities market), and</text>
</paragraph><paragraph id="ID502541325d2040d5b8e36ef0e0fdabe8"><enum>(2)</enum><text>such withholding
agent determines for purposes of titles 14, 18, or 31 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 (hereafter in this section referred to
as <quote>United States beneficial owner</quote>),</text>
</paragraph><continuation-text continuation-text-level="subsection">then the
withholding agent shall make a return according to the forms or regulations
prescribed by the Secretary.</continuation-text></subsection><subsection id="IDa9c2351499aa4574a7111117b2290c42"><enum>(b)</enum><header>Required
information</header><text>For purposes of subsection (a) the information
required to be included on the return shall include—</text>
<paragraph id="ID4690fc5e52ed44049c96072a763ca968"><enum>(1)</enum><text>the name,
address, and, if known, the taxpayer identification number of the United States
beneficial owner,</text>
</paragraph><paragraph id="IDc74980a586df4f7cbb466c21a09ff9cd"><enum>(2)</enum><text>the known facts
pertaining to the relationship of such United States beneficial owner to the
foreign entity and the account,</text>
</paragraph><paragraph id="IDa523e99dd7314c5da8063565fc0ea0bd"><enum>(3)</enum><text>the gross amount
of income from sources within the United States (including gross proceeds from
brokerage transactions), and</text>
</paragraph><paragraph id="ID0d68005591c1498e840dd509328384dc"><enum>(4)</enum><text>such other
information as the Secretary may by forms or regulations provide.</text>
</paragraph></subsection><subsection id="ID7e3b7070a02f425bb458f5cb2251690a"><enum>(c)</enum><header>Statements To
Be furnished to beneficial owners with respect to whom information is required
To Be reported</header><text>A withholding agent required to make a return
under subsection (a) shall furnish to each United States beneficial owner whose
name is required to be set forth in such return a statement showing—</text>
<paragraph id="ID5551b4b5cefe4fbdafd8a10ba983a1d5"><enum>(1)</enum><text>the name,
address, and telephone number of the information contact of the person required
to make such return, and</text>
</paragraph><paragraph id="ID11be2c700a574c0782cc67d416c111ea"><enum>(2)</enum><text>the information
required to be shown on such return with respect to such United States
beneficial owner.</text>
</paragraph><continuation-text continuation-text-level="subsection">The
written statement required under the preceding sentence shall be furnished to
the United States beneficial owner on or before January 31 of the year
following the calendar year for which the return under subsection (a) was
required to be made. In the event the person filing such return does not have a
current address for the United States beneficial owner, such written statement
may be mailed to the address of the foreign entity.</continuation-text></subsection></section><section id="IDa8e1e6e331ae461181c9792881505afd"><enum>6045D.</enum><header>Returns by
financial institutions regarding establishment of accounts in non-FATCA
institutions</header>
<subsection id="ID56d55e532e0041b4b09a9282831175c0"><enum>(a)</enum><header>Requirement of
return</header><text>Any financial institution directly or indirectly opening a
bank, brokerage, or other financial account for or on behalf of an offshore
entity, including a trust, corporation, limited liability company, partnership,
or foundation (other than an entity with shares regularly traded on an
established securities market), in a non-FATCA institution (as defined in
section 7701(a)(51)) at the direction of, on behalf of, or for the benefit of a
United States person shall make a return according to the forms or regulations
prescribed by the Secretary.</text>
</subsection><subsection id="ID3f9b21e9d2b74319a28f10f495eb807a"><enum>(b)</enum><header>Required
information</header><text>For purposes of subsection (a) the information
required to be included on the return shall include—</text>
<paragraph id="ID74ec78810b854f62bc212d30e1bbe048"><enum>(1)</enum><text>the name,
address, and taxpayer identification number of such United States
person,</text>
</paragraph><paragraph id="IDb04f08eca6f04361954a64d60af67318"><enum>(2)</enum><text>the name and
address of the financial institution at which a financial account is opened,
the type of account, the account number, the name under which the account was
opened, and the amount of the initial deposit,</text>
</paragraph><paragraph id="ID317334d632144cffb2959ac18878c0bc"><enum>(3)</enum><text>if the account is
held in the name of an entity, the name and address of such entity, the type of
entity, and the name and address of any company formation agent or other
professional employed to form or acquire the entity, and</text>
</paragraph><paragraph id="ID71046cdaf6584a2d8cc9493618118c1e"><enum>(4)</enum><text>such other
information as the Secretary may by forms or regulations provide.</text>
</paragraph></subsection><subsection id="IDaa2447dbfe464b5fbee1d8aa72a5892e"><enum>(c)</enum><header>Statements To
be furnished to United States persons with respect to whom information is
required To be reported</header><text>A financial institution required to make
a return under subsection (a) shall furnish to each United States person whose
name is required to be set forth in such return a statement showing—</text>
<paragraph id="ID66ca090b90d8442faded17f92c274428"><enum>(1)</enum><text>the name,
address, and telephone number of the information contact of the person required
to make such return, and</text>
</paragraph><paragraph id="ID9116de0c722a4b38b14f5c6acf4faa55"><enum>(2)</enum><text>the information
required to be shown on such return with respect to such United States
person.</text>
</paragraph><continuation-text continuation-text-level="subsection">The
written statement required under the preceding sentence shall be furnished to
such United States person on or before January 31 of the year following the
calendar year for which the return under subsection (a) was required to be
made.</continuation-text></subsection><subsection id="ID36c2cb173c324d219ed4090d077d77b2"><enum>(d)</enum><header>Exemption</header><text>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 persons, accounts, or
entities is not necessary to carry out the purposes of this
section.</text>
</subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="idBB861C689FD94CF48CB0AAC49C93F1E1"><enum>(b)</enum><header>Penalties</header>
<paragraph id="id7024908A780F4CA6A9EBC0500A05E5C5"><enum>(1)</enum><header>Returns</header><text>Section
6724(d)(1)(B) is amended by striking <quote>or</quote> at the end of clause
(xxiv), by striking <quote>and</quote> at the end of clause (xxv), and by
adding after clause (xxv) the following new clauses:</text>
<quoted-block display-inline="no-display-inline" id="id6996B6E7CC4044258247056E3B8B9F9B" style="OLC">
<clause id="id80D20C0B4375492795BC92C06ADEA47C"><enum>(xxvi)</enum><text>section
6045C(a) (relating to returns regarding United States beneficial owners of
financial accounts located in the United States and held in the name of a
foreign entity), or</text>
</clause><clause id="id94D14B28162A4CD8830049C8906E9BAE"><enum>(xxvii)</enum><text>section
6045D(a) (relating to returns by financial institutions regarding establishment
of accounts at non-FATCA institutions),
and</text>
</clause><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="id4BFC7F367CC643E5BD7D4D365DF6EE3A"><enum>(2)</enum><header>Payee
statements</header><text>Section 6724(d)(2) is amended by striking
<quote>or</quote> at the end of subparagraph (GG), by striking the period at
the end of subparagraph (HH), and by inserting after subparagraph (HH) the
following new subparagraphs:</text>
<quoted-block display-inline="no-display-inline" id="idA552A5E61E7C4624924BD3B15E3ADD92" style="OLC">
<subparagraph id="id51BA97E5DF144214892FF947E3C875EB"><enum>(II)</enum><text>section 6045C(c)
(relating to returns regarding United States beneficial owners of financial
accounts located in the United States and held in the name of a foreign
entity),</text>
</subparagraph><subparagraph id="id76657412F91048218E8DBB627F4390E8"><enum>(JJ)</enum><text>section 6045D(c)
(relating to returns by financial institutions regarding establishment of
accounts at non-FATCA
institutions).</text>
</subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="id04E1BCF9F2594B1DACC49E22642A32B2"><enum>(c)</enum><header>Clerical
amendment</header><text>The table of sections for subpart B of part III of
subchapter A of chapter 61 is amended by inserting after the item relating to
section 6045B the following new items:</text>
<quoted-block display-inline="no-display-inline" id="id6E89AA517D144A0E8E77BCFB43660410" style="OLC">
<toc>
<toc-entry bold="off" level="section">Sec. 6045C. Returns regarding
United States beneficial owners of financial accounts located in the United
States and held in the name of a foreign entity.</toc-entry>
<toc-entry bold="off" level="section">Sec. 6045D. Returns by
financial institutions regarding establishment of accounts at non-FATCA
institutions.</toc-entry>
</toc>
<after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection commented="no" id="id9C4AA45377A1450DAA1AD425553E2890"><enum>(d)</enum><header>Additional
penalties</header>
<paragraph commented="no" id="id5444194394AC4560915BC9CCF5DD83F8"><enum>(1)</enum><header>Additional
penalties on banks</header><text>Section 5239(b)(1) of the Revised Statutes of
the United States (<external-xref legal-doc="usc" parsable-cite="usc/12/93">12 U.S.C. 93(b)(1)</external-xref>) is amended by inserting <quote>or any of
the provisions of <external-xref legal-doc="usc" parsable-cite="usc/26/6045D">section 6045D</external-xref> of the Internal Revenue Code of 1986,</quote>
after <quote>any regulation issued pursuant to,</quote>.</text>
</paragraph><paragraph commented="no" id="id12EA4C062FF54EB3B604A36923656731"><enum>(2)</enum><header>Additional
penalties on securities firms</header><text>Section 21(d)(3)(A) of the
Securities Exchange Act of 1934 (<external-xref legal-doc="usc" parsable-cite="usc/15/78u">15 U.S.C. 78u(d)(3)(A)</external-xref>) is amended by
inserting <quote>any of the provisions of section 6045D of the Internal Revenue
Code of 1986,</quote> after <quote>the rules or regulations
thereunder,</quote>.</text>
</paragraph></subsection><subsection id="ID1c879c843dd04293aaffd5e652c0d555"><enum>(e)</enum><header>Regulatory
authority and effective date</header>
<paragraph id="ID624de18b48c6403e8a1d77a54464f5ad"><enum>(1)</enum><header>Regulatory
Authority</header><text>Not later than 180 days after the date of the enactment
of this Act, the Secretary of the Treasury shall adopt regulations, forms, or
other guidance necessary to implement this section.</text>
</paragraph><paragraph id="ID6279a539b7144c9fb2409cbe417d9653"><enum>(2)</enum><header>Effective
Date</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/6045C">Section 6045C</external-xref> of the Internal Revenue Code of 1986 (as added
by this section) and the amendment made by subsection (d)(1) shall take effect
with respect to amounts paid into foreign owned accounts located in the United
States after December 31 of the year of the date of the enactment of this Act.
Section 6045D of such Code (as so added) and the amendment made by subsection
(d)(2) shall take effect with respect to accounts opened after December 31 of
the year of the date of the enactment of this Act.</text>
</paragraph></subsection></section><section id="idDCAB087D2DA7446E8077EBAA39360431"><enum>105.</enum><header>Swap payments
made from the United States to persons offshore</header>
<subsection id="ID077c339df6ce4388abaf7779eada2c25"><enum>(a)</enum><header>Tax on swap
payments received by foreign persons</header><text>Section 871(a)(1) is
amended—</text>
<paragraph id="ID0e5000a8a1524319b3e30bc6e2d72a4c"><enum>(1)</enum><text>by inserting
<quote>swap payments (as identified in section 1256(b)(2)(B)),</quote> after
<quote>annuities,</quote> in subparagraph (A), and</text>
</paragraph><paragraph id="ID7c226cedb9444ebe82f3f53d41ac6dfd"><enum>(2)</enum><text>by adding at the
end the following new sentence: <quote>In the case of swap payments, the source
of a swap payment is determined by reference to the location of the
payor.</quote>.</text>
</paragraph></subsection><subsection id="ID14996352c3674d03a7d0951ac34b7f05"><enum>(b)</enum><header>Tax on swap
payments received by foreign corporations</header><text>Section 881(a) is
amended—</text>
<paragraph id="id41C223B9895A4CAAA2040B90EFE88085"><enum>(1)</enum><text>by inserting
<quote>swap payments (as identified in section 1256(b)(2)(B)),</quote> after
<quote>annuities,</quote> in paragraph (1), and</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="id26222EA9671D48B591071B3986741120"><enum>(2)</enum><text>by adding at the
end the following new sentence: <quote>In the case of swap payments, the source
of a swap payment is determined by reference to the location of the
payor.</quote>.</text>
</paragraph></subsection></section></subtitle><subtitle id="idACA9F3B756974383B8294F5002A604F3"><enum>B</enum><header>Other measures To
combat tax haven and tax shelter abuses</header>
<section id="idb2d8ca6cd7fd46668987b45191a0b64a"><enum>111.</enum><header>Country-by-country
reporting</header>
<subsection id="ide6fab63543044a31a13efb4c6117f65c"><enum>(a)</enum><header>Country-by-Country
reporting</header><text>Section 13 of the Securities Exchange Act of 1934 (15
U.S.C. 78m) is amended by adding at the end the following new
subsection:</text>
<quoted-block display-inline="no-display-inline" id="idF816141485EC424DB9F1348AB5429704" style="OLC">
<subsection id="id3eaf0b9475d74097807391f39104862f"><enum>(s)</enum><header>Disclosure of
financial performance on a country-by-Country basis</header>
<paragraph id="idde3a9832636146c6af4f8ea35b61ef90"><enum>(1)</enum><header>Definitions</header><text>In
this subsection—</text>
<subparagraph id="id884f71c41dff4bffa8d7600ae7062108"><enum>(A)</enum><text>the term
<term>issuer group</term> means the issuer, each subsidiary of the issuer, and
each entity under the control of the issuer; and</text>
</subparagraph><subparagraph id="id992c19694fd049bb9222e052bd40d866"><enum>(B)</enum><text>the term
<term>country of operation</term> means each country in which a member of the
issuer group is incorporated, organized, maintains employees, or conducts
significant business activities.</text>
</subparagraph></paragraph><paragraph id="idc8af4ab244ad4009afa0ed31a9f1f9f6"><enum>(2)</enum><header>Rules
required</header><text>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 period, consisting
of—</text>
<subparagraph id="id414403ad8a354b4e93c8cbdf6539bb93"><enum>(A)</enum><text>a list of each
country of operation and the name of each entity of the issuer group domiciled
in each country of operation;</text>
</subparagraph><subparagraph id="id45a308515e074e8c91936b40b22ae82d"><enum>(B)</enum><text>the number of
employees physically working in each country of operation;</text>
</subparagraph><subparagraph id="idd5ed418981be47fdb443996fec36364f"><enum>(C)</enum><text>the total pre-tax
gross revenues of each member of the issuer group in each country of
operation;</text>
</subparagraph><subparagraph id="id70ef57c82d2744689fd898c84a64faea"><enum>(D)</enum><text>the total amount
of payments made to governments by each member of the issuer group in each
country of operation, without exception, including, and set forth according
to—</text>
<clause id="idceca863b94d448ceae0f6268e536e49f"><enum>(i)</enum><text>total Federal,
regional, local, and other tax assessed against each member of the issuer group
with respect to each country of operation during the covered period; and</text>
</clause><clause id="id13af75eb24ab49469ff19cdb55042b16"><enum>(ii)</enum><text>after any tax
deductions, tax credits, tax forgiveness, or other tax benefits or waivers, 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 period;
and</text>
</clause></subparagraph><subparagraph id="id2942534a4c9b4a178dd4036376cc2831"><enum>(E)</enum><text>such other
financial information as the Commission may determine is necessary or
appropriate in the public interest or for the protection of
investors.</text>
</subparagraph></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="idaf87b39b8a2b4fb7815252d8afbc3fbf"><enum>(b)</enum><header>Rulemaking</header>
<paragraph id="id767d0f04c77a498eb74df7e9ad7756ed"><enum>(1)</enum><header>Deadlines</header><text>The
Securities and Exchange Commission (in this section referred to as the
<quote>Commission</quote>) shall—</text>
<subparagraph id="id778F8AD856604B8491BFBA82A2273A7F"><enum>(A)</enum><text>not later than
270 days after the date of enactment of this Act, issue a proposed rule to
carry out this section and the amendment made by this section; and</text>
</subparagraph><subparagraph id="idED051274BAC84C2E97281162F637475A"><enum>(B)</enum><text>not later than 1
year after the date of enactment of this Act, issue a final rule to carry out
this section and the amendment made by this section.</text>
</subparagraph></paragraph><paragraph id="idafc6e48cfa1c4161af1c1ade18941827"><enum>(2)</enum><header>Data
format</header><text>The information required to be provided by this section
shall be provided by the issuer in a format prescribed by the Commission, and
shall be made available to the public online, in such format as the Commission
shall prescribe.</text>
</paragraph><paragraph id="id7b1ac2108aba4e4fad0c23f7aa7d0485"><enum>(3)</enum><header>Effective
date</header><text>Subsection (s) of section 13 of the Securities Exchange Act
of 1934, as added by this section, shall become effective 1 year after the date
on which the Commission issues a final rule under this section.</text>
</paragraph></subsection></section><section id="id194f4b0f30f845198be786f70029597c"><enum>112.</enum><header>Penalty for
failing to disclose offshore holdings</header>
<subsection id="idb2e7a87d75f040108f2b49b68d2832a6"><enum>(a)</enum><header>Securities
Exchange Act of 1934</header><text>Section 21(d)(3)(B) of the Securities
Exchange Act of 1934 (<external-xref legal-doc="usc" parsable-cite="usc/15/78u">15 U.S.C. 78u(d)(3)(B)</external-xref>) is amended by adding at the end
the following:</text>
<quoted-block display-inline="no-display-inline" id="id3af33a13341d428a89f0ee6a6abf18b9" style="OLC">
<clause id="ide0941908f92d457ea6812c47fbd87978"><enum>(iv)</enum><header>Fourth
tier</header><text>Notwithstanding clauses (i), (ii), and (iii), for each
violation, the amount of the penalty shall not exceed $1,000,000 for any
natural person or $10,000,000 for any other person, if—</text>
<subclause id="id31024d5274a7422fa4adeab4862c0268"><enum>(I)</enum><text>such person
directly or indirectly controlled any foreign entity, including any trust,
corporation, limited liability company, partnership, or foundation through
which an issuer purchased, sold, or held equity or debt instruments;</text>
</subclause><subclause id="id37b13df1da244dec9ae62a0287e6a69e"><enum>(II)</enum><text>such person
knowingly or recklessly failed to disclose any such holding, purchase, or sale
by the issuer; and</text>
</subclause><subclause id="idc96e537ceff54827aa17133cd4581c18"><enum>(III)</enum><text>the holding,
purchase, or sale would have been otherwise subject to disclosure by the issuer
or such person under this
title.</text>
</subclause></clause><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="id8bc0ecbeb92c4e0693a977c2d9d69cd2"><enum>(b)</enum><header>Securities Act
of 1933</header><text>Section 20(d)(2) of the Securities Act of 1933 (15 U.S.C.
77t(d)(2)) is amended by adding at the end the following:</text>
<quoted-block display-inline="no-display-inline" id="id7e5aace015984e8f83a55f079c68c376" style="OLC">
<subparagraph id="id2b1cac86e6a247a6ac14f6de9d45e6b3"><enum>(D)</enum><header>Fourth
tier</header><text>Notwithstanding subparagraphs (A), (B), and (C), for each
violation, the amount of the penalty shall not exceed $1,000,000 for any
natural person or $10,000,000 for any other person, if—</text>
<clause id="id57d5fe16e1ae411ba7a538624558fe0b"><enum>(i)</enum><text>such person
directly or indirectly controlled any foreign entity, including any trust,
corporation, limited liability company, partnership, or foundation through
which an issuer purchased, sold, or held equity or debt instruments;</text>
</clause><clause id="id597e3b051154493ba88a28fa7926b139"><enum>(ii)</enum><text>such person
knowingly or recklessly failed to disclose any such holding, purchase, or sale
by the issuer; and</text>
</clause><clause id="ida365e76340e94b7fb789ff4a1f7b9e30"><enum>(iii)</enum><text>the holding,
purchase, or sale would have been otherwise subject to disclosure by the issuer
or such person under this
title.</text>
</clause></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="ide517353e4696408f958b911982c87090"><enum>(c)</enum><header>Investment
Advisers Act of 1940</header><text>Section 203(i)(2) of the Investment Advisers
Act of 1940 (<external-xref legal-doc="usc" parsable-cite="usc/15/80b-3">15 U.S.C. 80b–3(i)(2)</external-xref>) is amended by adding at the end the
following:</text>
<quoted-block display-inline="no-display-inline" id="id8f8763bf77c348a3abe9c75c723c8ecc" style="OLC">
<subparagraph id="idc2e5e4fd685a4bc48914afd5d32dfb08"><enum>(D)</enum><header>Fourth
tier</header><text>Notwithstanding subparagraphs (A), (B), and (C), for each
violation, the amount of the penalty shall not exceed $1,000,000 for any
natural person or $10,000,000 for any other person, if—</text>
<clause id="idf7491a6e6b674fd4b7748210697eae87"><enum>(i)</enum><text>such person
directly or indirectly controlled any foreign entity, including any trust,
corporation, limited liability company, partnership, or foundation through
which an issuer purchased, sold, or held equity or debt instruments;</text>
</clause><clause id="id98f4fc6aabc74349859deb9464ac47b4"><enum>(ii)</enum><text>such person
knowingly or recklessly failed to disclose any such holding, purchase, or sale
by the issuer; and</text>
</clause><clause id="id2b1809ed52164a23bf9de71bbc44e91e"><enum>(iii)</enum><text>the holding,
purchase, or sale would have been otherwise subject to disclosure by the issuer
or such person under this
title.</text>
</clause></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection></section><section id="id1b614cd19e6f47de90e1443fb7d8cae0"><enum>113.</enum><header>Deadline for
anti-money laundering rule for investment advisers</header>
<subsection id="id52a8c1e52dd2455db939dc4cd70888ee"><enum>(a)</enum><header>Anti-Money
laundering obligations for investment advisers</header><text>Section 5312(a)(2)
of title 31, United States Code, is amended—</text>
<paragraph id="id901bf991b896447c8303aacdabad482e"><enum>(1)</enum><text>in subparagraph
(Y), by striking <quote>or</quote> at the end;</text>
</paragraph><paragraph id="idc7cad785dc5d464c83fc73d4ee0e50d4"><enum>(2)</enum><text>by redesigning
subparagraph (Z) as subparagraph (BB); and</text>
</paragraph><paragraph id="id08ce25641ded4e469a087152e707948f"><enum>(3)</enum><text>by inserting
after subparagraph (Y) the following:</text>
<quoted-block display-inline="no-display-inline" id="idfcc4ad5164764bfe9fe562cfa6a04b44" style="OLC">
<subparagraph id="ida34a322b27034906b347987393de7627"><enum>(Z)</enum><text>an investment
adviser;</text>
</subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="id8622215e52874d20b2d8d53b0bbbb36f"><enum>(b)</enum><header>Rules
required</header><text>The Secretary of the Treasury shall—</text>
<paragraph id="id6AB5A8C37C374E1E8D252BF9D0044FBD"><enum>(1)</enum><text>in consultation
with the Chairman of the Securities and Exchange Commission and the Chairman of
the Commodity Futures Trading Commission, not later than 270 days after the
date of enactment of this Act, publish a proposed rule in the Federal Register
to carry out the amendments made by this section; and</text>
</paragraph><paragraph id="id1bbed7f35fa34c32b2c9db447709cf6b"><enum>(2)</enum><text>not later than
180 days after the date of enactment of this Act, publish a final rule in the
Federal Register on the matter described in paragraph (1).</text>
</paragraph></subsection><subsection id="id17ab831351844865afff1cb17113f518"><enum>(c)</enum><header>Contents</header><text>The
final rule published under this section shall require, at a minimum, each
investment adviser (as defined in section 202(a)(11) of the Investment Advisers
Act of 1940 (<external-xref legal-doc="usc" parsable-cite="usc/15/80b-2">15 U.S.C. 80b–2(a)(11)</external-xref>)) registered with the Securities and
Exchange Commission pursuant to section 203 of that Act (15 U.S.C.
80b–3)—</text>
<paragraph id="idABAC833ABB134361BFCBF910226D3B2D"><enum>(1)</enum><text>to submit
suspicious activity reports and establish an anti-money laundering program
under subsections (g) and (h), respectively, of <external-xref legal-doc="usc" parsable-cite="usc/31/5318">section 5318</external-xref> of title 31,
United States Code; and</text>
</paragraph><paragraph id="id12B9451139334EDE8111D8AF0C694ABC"><enum>(2)</enum><text>to comply
with—</text>
<subparagraph id="idCCFF947BE4944021A76948BFC5C17617"><enum>(A)</enum><text>the customer
identification program requirements under <external-xref legal-doc="usc" parsable-cite="usc/31/5318">section 5318(l)</external-xref> of title 31, United
States Code; and</text>
</subparagraph><subparagraph id="id4A986CFE9D2B4BD8B2EB4DE7E02AE1D8"><enum>(B)</enum><text>the due diligence
requirements under <external-xref legal-doc="usc" parsable-cite="usc/31/5318">section 5318(i)</external-xref> of title 31, United States Code.</text>
</subparagraph></paragraph></subsection></section><section id="id54ae0abf4c054a39bd4f19a6bc229598"><enum>114.</enum><header>Anti-money
laundering requirements for formation agents</header>
<subsection id="idb9aae6504a7c45c6adcaed59a2d61a52"><enum>(a)</enum><header>Anti-Money
laundering obligations for formation agents</header><text>Section 5312(a)(2) of
title 31, United States Code, as amended by section 113 of this Act, is amended
by inserting after subparagraph (Z) the following:</text>
<quoted-block display-inline="no-display-inline" id="idde9fee7494bf476eab2ec4ab5eba1717" style="OLC">
<subparagraph id="id76e001b57441474391c996f5dd0046da"><enum>(AA)</enum><text>any person
engaged in the business of forming new corporations, limited liability
companies, partnerships, trusts, or other legal entities;
or</text>
</subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="id152cd768d21049dbaf3c4ac993f2b0f5"><enum>(b)</enum><header>Deadline for
anti-Money laundering rule for formation agents</header>
<paragraph id="id1ac484ec134a4ab4866fa3f5590c41ce"><enum>(1)</enum><header>Proposed
rule</header><text>The Secretary of the Treasury, in consultation with the
Attorney General of the United States, the Secretary of Homeland Security, and
the Commissioner of Internal Revenue, shall—</text>
<subparagraph id="id8898D73B8D6F4BF4A51A19C7AB92C0FB"><enum>(A)</enum><text>not later than
120 days after the date of enactment of this Act, publish a proposed rule in
the Federal Register requiring persons described in section 5312(a)(2)(AA) of
title 31, United States Code, as added by this section, to establish anti-money
laundering programs under section 5318(h) of that title; and</text>
</subparagraph><subparagraph id="id9186abad13b346a4bcce6ba908a45cb9"><enum>(B)</enum><text>not later than
270 days after the date of enactment of this Act, publish a final rule in the
Federal Register on the matter described in subparagraph (A).</text>
</subparagraph></paragraph><paragraph id="id56700cf06425450fa08f9fd4cc40ffc9"><enum>(2)</enum><header>Exclusions</header><text>The
rule promulgated under this subsection shall exclude from the category of
persons engaged in the business of forming new corporations or other
entities—</text>
<subparagraph id="id96ed6be2ef454cc8bc21146f9efd1afe"><enum>(A)</enum><text>any government
agency; and</text>
</subparagraph><subparagraph id="id75cae6444fc34c5aa32397820bf2fa36"><enum>(B)</enum><text>any attorney or
law firm that uses a paid formation agent operating within the United States to
form such corporations or other entities.</text>
</subparagraph></paragraph></subsection></section><section id="id943F503126C543BE862E09A8B5B6FBDE"><enum>115.</enum><header>Strengthening
John Doe summons proceedings</header>
<subsection id="idAD01FC475B804C9A81D67C0E9C3133C7"><enum>(a)</enum><header>In
general</header><text>Subsection (f) of section 7609 is amended to read as
follows:</text>
<quoted-block display-inline="no-display-inline" id="idD6B18C1880FD4C7E9397F5EF0E367EA1" style="OLC">
<subsection id="id5A3345F44FC547BAA3829CFDCA4CB363"><enum>(f)</enum><header>Additional
requirement in the case of a John Doe summons</header>
<paragraph id="id95EB7A5F0B0A47039BB86899A7B1D13F"><enum>(1)</enum><header>General
Rule</header><text>Any summons described in subsection (c)(1) 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—</text>
<subparagraph id="id4BD6034E54994B95BFD973CDD5E38E98"><enum>(A)</enum><text>the summons
relates to the investigation of a particular person or ascertainable group or
class of persons,</text>
</subparagraph><subparagraph id="idEA8C856213BC452ABAC27E9FD03CC522"><enum>(B)</enum><text>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 law, and</text>
</subparagraph><subparagraph id="id0748EBD76B584BD6AB1F132FAB3BE16C"><enum>(C)</enum><text>the information
sought to be obtained from the examination of the records or testimony (and the
identity of the person or persons with respect to whose liability the summons
is issued) is not readily available from other sources.</text>
</subparagraph></paragraph><paragraph id="IDa73e1efa1ab74872a78e3e4471d46240"><enum>(2)</enum><header>Exception</header><text>Paragraph
(1) shall not apply to any summons which specifies that it is limited to
information regarding a United States correspondent account (as defined in
<external-xref legal-doc="usc" parsable-cite="usc/31/5318A">section 5318A(e)(1)(B)</external-xref> of title 31, United States Code) or a United States
payable-through account (as defined in section 5318A(e)(1)(C) of such title) of
a financial institution that is held at a non-FATCA institution (as defined in
section 7701(a)(51)).</text>
</paragraph><paragraph id="IDca3bbdbdfcb44547afc2e9c381afcc05"><enum>(3)</enum><header>Presumption in
cases involving non-fatca institutions</header><text>For purposes of this
section, 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 (as defined in section 7701(a)(51)), 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 law.</text>
</paragraph><paragraph id="idB8C5EF97DCAA48CDBBBE2343B891F5B8"><enum>(4)</enum><header>Project John
Doe summonses</header>
<subparagraph id="idABB97A0F4D18405E8880B22666FED739"><enum>(A)</enum><header>In
general</header><text>Notwithstanding the requirements of paragraph (1), the
Secretary may issue a summons described in paragraph (1) if the summons—</text>
<clause id="idF5C997BB699447448CD0D09DF8748C79"><enum>(i)</enum><text>relates to a
project which is approved under subparagraph (B),</text>
</clause><clause id="id7219C115FF384A93A392058D9CD60865"><enum>(ii)</enum><text>is issued to a
person who is a member of the group or class established under subparagraph
(B)(i), and</text>
</clause><clause id="id1F96D4097DAB4EF796CEDCA24C685261"><enum>(iii)</enum><text>is issued
within 3 years of the date on which such project was approved under
subparagraph (B).</text>
</clause></subparagraph><subparagraph id="idB80F5B26EE394E69A680C3285531E537"><enum>(B)</enum><header>Approval of
projects</header><text>A project may only be approved under this subparagraph
after a court proceeding in which the Secretary establishes that—</text>
<clause id="id0F6842818DB54ED88C5D849611EDBF91"><enum>(i)</enum><text>any summons
issues with respect to the project will be issued to a member of an
ascertainable group or class of persons, and</text>
</clause><clause id="id5C58AA1B37BA4ABA9C67AF1F34BBAD20"><enum>(ii)</enum><text>any summons
issued with respect to such project will meet the requirements of paragraph
(1).</text>
</clause></subparagraph><subparagraph id="idE150F36D1FD843D0B5B42D9888FA0C17"><enum>(C)</enum><header>Extension</header><text>Upon
application of the Secretary, the court may extend the time for issuing such
summonses under subparagraph (A)(i) for additional 3-year periods, but only if
the court continues to exercise oversight of such project under subparagraph
(D).</text>
</subparagraph><subparagraph id="id9003E072C852419A8EDC541CE31DD41F"><enum>(D)</enum><header>Ongoing court
oversight</header><text>During any period in which the Secretary is authorized
to issue summonses in relation to a project approved under subparagraph (B)
(including during any extension under subparagraph (C)), the Secretary shall
report annually to the court on the use of such authority, provide copies of
all summonses with such report, and comply with the court's direction with
respect to the issuance of any John Doe summons under such
project.</text>
</subparagraph></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="id58EB5C4C2E584171BE347A73C1A9D41E"><enum>(b)</enum><header>Jurisdiction of
court</header>
<paragraph id="id8DAC8A508B134757A76FD53F4099F960"><enum>(1)</enum><header>In
general</header><text>Paragraph (1) of section 7609(h) is amended by inserting
after the first sentence the following new sentence: <quote>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 (f)(2)(B).</quote>.</text>
</paragraph><paragraph id="idA334D37650164C3994AEA99EB7A45848"><enum>(2)</enum><header>Conforming
amendment</header><text>The first sentence of section 7609(h)(1) is amended by
striking <quote>(f)</quote> and inserting <quote>(f)(1)</quote>.</text>
</paragraph></subsection><subsection id="id5B7D67303EBA48AAA14C79F9E5D49642"><enum>(c)</enum><header>Effective
date</header><text>The amendments made by this section shall apply to summonses
issued after the date of the enactment of this Act.</text>
</subsection></section><section id="id7B679E7CCEDD42ACA24E10D18C2D1F98"><enum>116.</enum><header>Improving
enforcement of foreign financial account reporting</header>
<subsection id="id6935F711F3054F718E23410ACFD1C994"><enum>(a)</enum><header>Clarifying the
connection of foreign financial account reporting to tax
administration</header><text>Paragraph (4) of section 6103(b) is amended by
adding at the end the following new sentence:</text>
<quoted-block display-inline="no-display-inline" id="idE89C6F78E9814D3A9584D026A8B3768B" style="OLC">
<quoted-block-continuation-text quoted-block-continuation-text-level="paragraph">For
purposes of subparagraph (A)(i), <external-xref legal-doc="usc" parsable-cite="usc/31/5314">section 5314</external-xref> of title 31, United States Code,
and sections 5321 and 5322 of such title (as such sections pertain to such
section 5314), shall be considered related
statutes.</quoted-block-continuation-text><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="idF18FC55273684A88995E657C65EE0FC5"><enum>(b)</enum><header>Simplifying the
calculation of foreign financial account reporting
penalties</header><text><external-xref legal-doc="usc" parsable-cite="usc/31/5321">Section 5321(a)(5)(D)(ii)</external-xref> of title 31, United States
Code, is amended by striking <quote>the balance in the account at the time of
the violation</quote> and inserting <quote>the highest balance in the account
during the reporting period to which the violation relates</quote>.</text>
</subsection><subsection commented="no" display-inline="no-display-inline" id="idB4853AB2F1FF4EF4B5665768309C2D29"><enum>(c)</enum><header>Clarifying the
use of suspicious activity reports under the Bank Secrecy Act for civil tax law
enforcement</header><text><external-xref legal-doc="usc" parsable-cite="usc/31/5319">Section 5319</external-xref> of title 31, United States Code, is
amended by inserting <quote>the civil and criminal enforcement divisions of the
Internal Revenue Service,</quote> after <quote>including</quote>.</text>
</subsection></section></subtitle><subtitle id="id28FAF690BF934E91B65449643448E259"><enum>C</enum><header>Ending offshore
tax avoidance</header>
<section display-inline="no-display-inline" id="H2E9F6CC15B284B3D91F7B5E5044DA200" section-type="subsequent-section"><enum>121.</enum><header>Allocation of
expenses and taxes on basis of repatriation of foreign income</header>
<subsection id="H43EF7191267E403DB37900BD3893E4B7"><enum>(a)</enum><header>In
general</header><text>Part III of subchapter N of chapter 1 is amended by
inserting after subpart G the following new subpart:</text>
<quoted-block display-inline="no-display-inline" id="HD52A43474A684C5BBFFF8CD500D88694" style="OLC">
<subpart id="H379C5A4DBB9B4D0CB2A0AB45FFF2A822"><enum>H</enum><header>Special Rules for
Allocation of Foreign-Related Deductions and Foreign Tax Credits</header>
<toc container-level="subpart-container" idref="H379C5A4DBB9B4D0CB2A0AB45FFF2A822" lowest-bolded-level="division-lowest-bolded" lowest-level="section" quoted-block="no-quoted-block" regeneration="yes-regeneration">
<toc-entry idref="H7AE93E10584D4685B195E2E37CE49BA4" level="section">Sec. 975. Deductions allocated to deferred foreign income may
not offset United States source income.</toc-entry>
<toc-entry idref="H72FAB5B02F094996A8936C84B561B7AC" level="section">Sec. 976. Amount of foreign taxes computed on overall
basis.</toc-entry>
<toc-entry idref="H3C198D1DE8E5436391F18F65A192533C" level="section">Sec. 977. Application of subpart.</toc-entry>
</toc>
<section id="H7AE93E10584D4685B195E2E37CE49BA4"><enum>975.</enum><header>Deductions
allocated to deferred foreign income may not offset United States source
income</header>
<subsection id="H558D4E2E71564782AF80ED7BE28D77AE"><enum>(a)</enum><header>Current year
deductions</header><text display-inline="yes-display-inline">For purposes of
this chapter, foreign-related deductions for any taxable year—</text>
<paragraph id="H3D4516BCB89B44BFA222A3EAC2E800E8"><enum>(1)</enum><text>shall be taken
into account for such taxable year only to the extent that such deductions are
allocable to currently-taxed foreign income, and</text>
</paragraph><paragraph id="H28B891782CD740DA8699D3006DAE383C"><enum>(2)</enum><text>to the extent not
so allowed, shall be taken into account in subsequent taxable years as provided
in subsection (b).</text>
</paragraph><continuation-text continuation-text-level="subsection">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 income.</continuation-text></subsection><subsection id="HC7F23126B1A44ABC977F7FEB92F63C9B"><enum>(b)</enum><header>Deductions
related to repatriated deferred foreign income</header>
<paragraph id="HE2A9287405DA41C7A943725EA92F3FE"><enum>(1)</enum><header>In
general</header><text>If there is repatriated foreign income for a taxable
year, 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 States. Any
such amount shall not be included in foreign-related deductions for purposes of
applying subsection (a) to such taxable year.</text>
</paragraph><paragraph id="H4716D1C410B64466AD1FFC5C23F9DBA8"><enum>(2)</enum><header>Portion of
previously deferred deductions</header><text>For purposes of paragraph (1), the
portion of the previously deferred deductions allocated to repatriated foreign
income is—</text>
<subparagraph id="H551707681223474AB2108E064631E00"><enum>(A)</enum><text>the amount which
bears the same proportion to such deductions, as</text>
</subparagraph><subparagraph id="H55EBAF4B3CFE43E9977E628D42E3A0CB"><enum>(B)</enum><text>the repatriated
income bears to the previously deferred foreign income.</text>
</subparagraph></paragraph></subsection><subsection id="HFFED56E6BE3D40E2841DA0899314E470"><enum>(c)</enum><header>Definitions and
special rule</header><text display-inline="yes-display-inline">For purposes of
this section—</text>
<paragraph id="HD8A1B4AD82EE4FC78635BA44EF4517E2"><enum>(1)</enum><header>Foreign-related
deductions</header><text>The term <term>foreign-related deductions</term> 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 account.</text>
</paragraph><paragraph display-inline="no-display-inline" id="HCD70A802166C4C82A83200DC4EF19B8D"><enum>(2)</enum><header>Currently-taxed
foreign income</header><text>The term <term>currently-taxed foreign
income</term> means the amount of gross income from sources without the United
States for the taxable year (determined without regard to repatriated foreign
income for such year).</text>
</paragraph><paragraph display-inline="no-display-inline" id="H97033661171740CAB35B4364E4B9CD57"><enum>(3)</enum><header>Deferred foreign
income</header><text>The term <term>deferred foreign income</term> means the
excess of—</text>
<subparagraph id="H79626A01C131458E961626248E3499FE"><enum>(A)</enum><text display-inline="yes-display-inline">the amount that would be includible in
gross income under subpart F of this part for the taxable year if—</text>
<clause id="HE5FDDEF44D4945928DAEDC1F782C51ED"><enum>(i)</enum><text>all controlled
foreign corporations were treated as one controlled foreign corporation,
and</text>
</clause><clause id="HBB8BF3A0A12149B296AE83FB48049E71"><enum>(ii)</enum><text>all earnings and
profits of all controlled foreign corporations were subpart F income (as
defined in section 952), over</text>
</clause></subparagraph><subparagraph id="H0485DC431041498A9350ADEFE3E6A012"><enum>(B)</enum><text>the sum of—</text>
<clause id="H23CFAAB66A814FF68EBA6608F7E98725"><enum>(i)</enum><text>all dividends
received during the taxable year from controlled foreign corporations,
plus</text>
</clause><clause id="H704E50F236BE41AC9421A54BACCCED5"><enum>(ii)</enum><text>amounts includible
in gross income under section 951(a).</text>
</clause></subparagraph></paragraph><paragraph id="H584938FDA0224A21A507768466FE0121"><enum>(4)</enum><header>Previously
deferred foreign income</header><text display-inline="yes-display-inline">The
term <term>previously deferred foreign income</term> means the aggregate amount
of deferred foreign income for all prior taxable years to which this part
applies, determined as of the beginning of the taxable year, reduced by the
repatriated foreign income for all such prior taxable years.</text>
</paragraph><paragraph id="HBC687988A56142B39213934B758832BC"><enum>(5)</enum><header>Repatriated
foreign income</header><text>The term <term>repatriated foreign income</term>
means the amount included in gross income on account of distributions out of
previously deferred foreign income.</text>
</paragraph><paragraph id="H2F202257ABB64BC0BF5B247CF0E7471C"><enum>(6)</enum><header>Previously
deferred deductions</header><text display-inline="yes-display-inline">The term
<term>previously deferred deductions</term> means the aggregate amount of
foreign-related deductions not taken into account under subsection (a) for all
prior taxable years (determined as of the beginning of the taxable year),
reduced by any amounts taken into account under subsection (b) for such prior
taxable years.</text>
</paragraph><paragraph id="H4C5FBB0E1F4B4BA396CD3D4D73007FFC"><enum>(7)</enum><header>Treatment of
certain foreign taxes</header>
<subparagraph id="H242E7E3B86844475BF3E725E1F386DD7"><enum>(A)</enum><header>Paid by
controlled foreign corporation</header><text display-inline="yes-display-inline">Section 78 shall not apply for purposes of
determining currently-taxed foreign income and deferred foreign income.</text>
</subparagraph><subparagraph id="H047053A21E294F6C94600063633D9703"><enum>(B)</enum><header>Paid by
taxpayer</header><text>For purposes of determining currently-taxed foreign
income, gross income from sources without the United States shall be reduced by
the aggregate amount of taxes described in the applicable paragraph of section
901(b) which are paid by the taxpayer (without regard to sections 902 and 960)
during the taxable year.</text>
</subparagraph></paragraph><paragraph id="HCB48493BE32A4A5CA500DB53A71EDE06"><enum>(8)</enum><header>Coordination
with section 976</header><text>In determining currently-taxed foreign income
and deferred foreign income, the amount of deemed foreign tax credits shall be
determined with regard to section 976.</text>
</paragraph></subsection></section><section id="H72FAB5B02F094996A8936C84B561B7AC"><enum>976.</enum><header>Amount of
foreign taxes computed on overall basis</header>
<subsection id="H055BDFFE1FF44810A6D76C36652D8790"><enum>(a)</enum><header>Current year
allowance</header><text display-inline="yes-display-inline">For purposes of
this chapter, 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—</text>
<paragraph id="HBD351B120AEF48B186DF2D20C0314F4E"><enum>(1)</enum><text>the
currently-taxed foreign income for such taxable year, bears to</text>
</paragraph><paragraph id="H141B124864E649C296851E00002FF91D"><enum>(2)</enum><text>the sum of the
currently-taxed foreign income and deferred foreign income for such
year.</text>
</paragraph><continuation-text continuation-text-level="subsection">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 (b) (and shall not be taken into account
for purposes of applying sections 902 and 960).</continuation-text></subsection><subsection display-inline="no-display-inline" id="HE59C0DB4729E4338B46F632039EDFEBC"><enum>(b)</enum><header>Allowance
related to repatriated deferred foreign income</header>
<paragraph id="HB18D79F8C96E41918C29D54585BE224D"><enum>(1)</enum><header>In
general</header><text display-inline="yes-display-inline">If there is
repatriated foreign income for any taxable year, 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 accrued. Any
such taxes so taken into account shall not be included in foreign income taxes
for purposes of applying subsection (a) to such taxable year.</text>
</paragraph><paragraph id="HA8EE892845CE4DF79F54152BA2D21DFF"><enum>(2)</enum><header>Portion of
previously deferred foreign income taxes</header><text>For purposes of
paragraph (1), the portion of the previously deferred foreign income taxes
allocated to repatriated deferred foreign income is—</text>
<subparagraph id="HD5C846BB74614C518129AAB7E4640086"><enum>(A)</enum><text>the amount which
bears the same proportion to such taxes, as</text>
</subparagraph><subparagraph id="H9E8C200714044E71BC304C49528C94F3"><enum>(B)</enum><text>the repatriated
deferred income bears to the previously deferred foreign income.</text>
</subparagraph></paragraph></subsection><subsection id="H0A0F0DF4F54546EC00F327A8886516F8"><enum>(c)</enum><header>Definitions and
special rule</header><text display-inline="yes-display-inline">For purposes of
this section—</text>
<paragraph id="H762F03EB740D4865B7BB3F9ED8AC1110"><enum>(1)</enum><header>Previously
deferred foreign income taxes</header><text display-inline="yes-display-inline">The term <term>previously deferred foreign
income taxes</term> means the aggregate amount of total foreign income taxes
not taken into account under subsection (a) for all prior taxable years
(determined as of the beginning of the taxable year), reduced by any amounts
taken into account under subsection (b) for such prior taxable years.</text>
</paragraph><paragraph id="H7C989BA37B7B4CDAABAA907CD116FB14"><enum>(2)</enum><header>Total foreign
income taxes</header><text display-inline="yes-display-inline">The term
<term>total foreign income taxes</term> means the sum of foreign income taxes
paid or accrued during the taxable year (determined without regard to section
904(c)) plus the increase in foreign income taxes that would be paid or accrued
during the taxable year under sections 902 and 960 if—</text>
<subparagraph id="HA105F74CCE6B4884864D89194E19CDE8"><enum>(A)</enum><text>all controlled
foreign corporations were treated as one controlled foreign corporation,
and</text>
</subparagraph><subparagraph id="H7C90AE2052B04A65A3B954EB67EAE042"><enum>(B)</enum><text>all earnings and
profits of all controlled foreign corporations were subpart F income (as
defined in section 952).</text>
</subparagraph></paragraph><paragraph id="HACC5F78C308B45EB8BA32400DBAB1362"><enum>(3)</enum><header>Foreign income
taxes</header><text display-inline="yes-display-inline">The term <term>foreign
income taxes</term> means any income, war profits, or excess profits taxes paid
by the taxpayer to any foreign country or possession of the United
States.</text>
</paragraph><paragraph id="H9388A62A5A98481AB711B77B0FCA56B"><enum>(4)</enum><header>Currently-taxed
foreign income and deferred foreign income</header><text display-inline="yes-display-inline">The terms <term>currently-taxed foreign
income</term> and <term>deferred foreign income</term> have the meanings given
such terms by section 975(c)).</text>
</paragraph></subsection></section><section id="H3C198D1DE8E5436391F18F65A192533C"><enum>977.</enum><header>Application of
subpart</header><text display-inline="no-display-inline">This subpart—</text>
<paragraph id="H278B262C823B431BB6E1FF00B1441C4"><enum>(1)</enum><text>shall be applied
before subpart A, and</text>
</paragraph><paragraph id="HDF333812472943F2A07CC7B697DBB61E"><enum>(2)</enum><text>shall be applied
separately with respect to the categories of income specified in section
904(d)(1).</text>
</paragraph></section></subpart><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="HA73E30222EEC40A7B91D60C64C17D5E"><enum>(b)</enum><header>Clerical
amendment</header><text>The table of subparts for part III of subpart N of
chapter 1 is amended by inserting after the item relating to subpart G the
following new item:</text>
<quoted-block display-inline="no-display-inline" id="HB28BF2482CD94943AF5D591BFD88EC8F" style="OLC">
<toc container-level="quoted-block-container" idref="HD52A43474A684C5BBFFF8CD500D88694" lowest-bolded-level="division-lowest-bolded" lowest-level="section" quoted-block="no-quoted-block" regeneration="yes-regeneration">
<toc-entry idref="H379C5A4DBB9B4D0CB2A0AB45FFF2A822" level="subpart">Subpart H. Special Rules for Allocation of Foreign-Related
Deductions and Foreign Tax
Credits.</toc-entry>
</toc>
<after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H9125BD1C6DE742C1A41C1C44F13D57C8"><enum>(c)</enum><header>Effective
date</header><text display-inline="yes-display-inline">The amendments made by
this section shall apply to taxable years beginning after the date of the
enactment of this Act.</text>
</subsection></section><section commented="no" display-inline="no-display-inline" id="HA5CB8DDB6144456F86CAB91F55046482" section-type="subsequent-section"><enum>122.</enum><header>Excess income from
transfers of intangibles to low-taxed affiliates treated as subpart F
income</header>
<subsection id="HCC639F9DC48641AC959DA1DF23E9E15D"><enum>(a)</enum><header>In
general</header><text display-inline="yes-display-inline">Subsection (a) of
section 954 is amended by inserting after paragraph (3) the following new
paragraph:</text>
<quoted-block display-inline="no-display-inline" id="H46868DAEA38E402D9B49911EFD83A165" style="OLC">
<paragraph id="H2B23C19F98F043E9BB3E3BEB0250A0F5"><enum>(4)</enum><text display-inline="yes-display-inline">the foreign base company excess intangible
income for the taxable year (determined under subsection (f) and reduced as
provided in subsection (b)(5)),
and</text>
</paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="HE6F6A338ECB6444F825CD667C7950823"><enum>(b)</enum><header>Foreign base
company excess intangible income</header><text>Section 954 is amended by
inserting after subsection (e) the following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="H4B0FA89F547A48C79FD6D3B9863C1664" style="OLC">
<subsection id="H06F2C141F2744BADBFEDA8E456E5E26D"><enum>(f)</enum><header>Foreign base
company excess intangible income</header><text display-inline="yes-display-inline">For purposes of subsection (a)(4) and this
subsection:</text>
<paragraph id="HE04C7B27416A4491973DA6FE2E9F24C0"><enum>(1)</enum><header>Foreign base
company excess intangible income defined</header>
<subparagraph id="H3806387D9A1C490796D3E0183584E893"><enum>(A)</enum><header>In
general</header><text>The term <quote>foreign base company excess intangible
income</quote> means, with respect to any covered intangible, the excess
of—</text>
<clause id="H315BE72D69EF4A65B1B95DA07856AC6C"><enum>(i)</enum><text>the sum of—</text>
<subclause id="HA78F4B22B611414DA23F87D7059657C6"><enum>(I)</enum><text>gross income from
the sale, lease, license, or other disposition of property in which such
covered intangible is used directly or indirectly, and</text>
</subclause><subclause id="H4A1CB1371C244FF98FB0219CBBA2E53D"><enum>(II)</enum><text>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 indirectly,
over</text>
</subclause></clause><clause id="H4722E7A25B2A4AE3B3A0F1CACF1DE222"><enum>(ii)</enum><text>150 percent of
the costs properly allocated and apportioned to the gross income taken into
account under clause (i) other than expenses for interest and taxes and any
expenses which are not directly allocable to such gross income.</text>
</clause></subparagraph><subparagraph commented="no" id="H01E013546B2A40F3A524CDE354AE3A53"><enum>(B)</enum><header>Same country
income not taken into account</header><text>If—</text>
<clause id="HCE17A60C5B344DDA942AB3099F345488"><enum>(i)</enum><text>the sale, lease,
license, or other disposition of the property referred to in subparagraph
(A)(i)(I) is for use, consumption, or disposition in the country under the laws
of which the controlled foreign corporation is created or organized, or</text>
</clause><clause id="H24898428011A4E7CAD7C646E0945E4BB"><enum>(ii)</enum><text>the services
referred to in subparagraph (A)(i)(II) are performed in such country,</text>
</clause><continuation-text continuation-text-level="subparagraph">the
gross income from such sale, lease, license, or other disposition, or provision
of services, shall not be taken into account under subparagraph (A)(i).</continuation-text></subparagraph></paragraph><paragraph id="HDCA04CB801CE41828CFE08472C6A867C"><enum>(2)</enum><header>Exception based
on effective foreign income tax rate</header>
<subparagraph id="HCC99CC5315F94F95B8C7A2AC032A253C"><enum>(A)</enum><header>In
general</header><text>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 5 percent.</text>
</subparagraph><subparagraph id="HA96EA1C1C62848B2AC3B4F3551B91D4D"><enum>(B)</enum><header>Applicable
percentage</header><text>For purposes of subparagraph (A), the term
<quote>applicable percentage</quote> means the ratio (expressed as a
percentage), not greater than 100 percent, of—</text>
<clause id="H2BC3BC0C7E124B599D6809510B940844"><enum>(i)</enum><text>the number of
percentage points by which the effective rate of income tax referred to in
subparagraph (A) exceeds 5 percentage points, over</text>
</clause><clause id="H3FCEED575D5F4A29A0C014F5D64B3D79"><enum>(ii)</enum><text>10 percentage
points.</text>
</clause></subparagraph><subparagraph id="H03FEAF123D594B599FD76536A1748512"><enum>(C)</enum><header>Treatment of
losses in determining effective rate of foreign income tax</header><text>For
purposes of determining the effective rate of income tax imposed by any foreign
country—</text>
<clause id="H3D89782CA2454EEB8C1224E20B9859B6"><enum>(i)</enum><text>such effective
rate shall be determined without regard to any losses carried to the relevant
taxable year, and</text>
</clause><clause id="HA6A38321C6624FAFA940C2A96FE10644"><enum>(ii)</enum><text>to the extent the
income with respect to such intangible reduces losses in the relevant taxable
year, such effective rate shall be treated as being the effective rate which
would have been imposed on such income without regard to such losses.</text>
</clause></subparagraph></paragraph><paragraph id="HB5546DFCA6C04646B3D3CEC7B6FE0362"><enum>(3)</enum><header>Covered
intangible</header><text>The term <quote>covered intangible</quote> means, with
respect to any controlled foreign corporation, any intangible property (as
defined in section 936(h)(3)(B))—</text>
<subparagraph id="HB0F168A477FF41A4B17A6E504F161E0F"><enum>(A)</enum><text>which is sold,
leased, licensed, or otherwise transferred (directly or indirectly) to such
controlled foreign corporation from a related person, or</text>
</subparagraph><subparagraph id="H63040072F71C481CB63C019E859EC0F0"><enum>(B)</enum><text>with respect to
which such controlled foreign corporation and one or more related persons has
(directly or indirectly) entered into any shared risk or development agreement
(including any cost sharing agreement).</text>
</subparagraph></paragraph><paragraph id="HAD1DCA54E6F54502AE7D67DFB83D1429"><enum>(4)</enum><header>Related
person</header><text>The term <quote>related person</quote> has the meaning
given such term in subsection
(d)(3).</text>
</paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H2469ACE3A4A8404DA421F986E17D6C36"><enum>(c)</enum><header>Separate basket
for foreign tax credit</header><text display-inline="yes-display-inline">Subsection (d) of section 904 is amended by
redesignating paragraph (7) as paragraph (8) and by inserting after paragraph
(6) the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="H28A528D57BA448D298950BB6A02510E9" style="OLC">
<paragraph id="H6AB06F67B21742C6B28DBE2BABA2B4AD"><enum>(6)</enum><header>Separate
application to foreign base company excess intangible income</header>
<subparagraph id="H1D5F0B41A410433BBC58475602CA4759"><enum>(A)</enum><header>In
general</header><text display-inline="yes-display-inline">Subsections (a), (b),
and (c) of this section and sections 902, 907, and 960 shall be applied
separately with respect to each item of income which is taken into account
under section 954(a)(4) as foreign base company excess intangible
income.</text>
</subparagraph><subparagraph id="HFD4764940D1C4DA69FF74512FC50BBAF"><enum>(B)</enum><header>Regulations</header><text>The
Secretary may issue such regulations or other guidance as is necessary or
appropriate to carry out the purposes of this subsection, including regulations
or other guidance which provides that related items of income may be aggregated
for purposes of this
paragraph.</text>
</subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H173F260176D4482795268FB1D278F9F6"><enum>(d)</enum><header>Conforming
amendments</header>
<paragraph id="H5705B69AC7A744D9BEFFDC1C46BC86D6"><enum>(1)</enum><text>Paragraph (4) of
section 954(b) is amended by inserting <quote>foreign base company excess
intangible income described in subsection (a)(4) or</quote> before
<quote>foreign base company oil-related income</quote> in the last sentence
thereof.</text>
</paragraph><paragraph id="HADE64B57E4344BCD8BB933AFF8A3B15F"><enum>(2)</enum><text>Subsection (b) of
section 954 is amended by adding at the end the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="HC39BAE812F40403CB2FC20C9CD23D623" style="OLC">
<paragraph id="H2E2A5ADBF2BB49AD90F1C626880A828A"><enum>(7)</enum><header>Foreign base
company excess intangible income not treated as another kind of base company
income</header><text display-inline="yes-display-inline">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 (2),
(3), or (5) of subsection
(a).</text>
</paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="H874447D075624ADE9E979D57FF18CE6C"><enum>(e)</enum><header>Effective
date</header><text>The amendments made by this section shall apply to taxable
years beginning after the date of the enactment of this Act.</text>
</subsection></section><section id="id721844706450447B8815468A0278B98D"><enum>123.</enum><header>Limitations on
income shifting through intangible property transfers</header>
<subsection id="idEF5DE56E8D284FF9B86BD8E0767F3344"><enum>(a)</enum><header>Clarification
of definition of intangible asset</header><text>Clause (vi) of section
936(h)(3)(B) is amended by inserting <quote>(including any section 197
intangible described in subparagraph (A), (B), or (C)(i) of subsection (d)(1)
of such section)</quote> after <quote>item</quote>.</text>
</subsection><subsection id="id01B91024456E4EF582351E32FB3288EF"><enum>(b)</enum><header>Clarification
of allowable valuation methods</header>
<paragraph id="id4E3241D35F4B43669E6D89297D42C3DC"><enum>(1)</enum><header>Foreign
corporations</header><text>Paragraph (2) of section 367(d) is amended by adding
at the end the following new subparagraph:</text>
<quoted-block act-name="" id="id30F3A2053D5947A2B51FCB11503D1014" style="OLC">
<subparagraph id="id53789CA957874BE9B191AA0ACE83EE92"><enum>(D)</enum><header>Regulatory
authority</header><text>For purposes of the last sentence of subparagraph (A),
the Secretary may require—</text>
<clause id="id8F5E5F77D5424FFEA73093EA43DA25AB"><enum>(i)</enum><text>the valuation of
transfers of intangible property on an aggregate basis, or</text>
</clause><clause id="id5D5A103616A3464B98F3082779064038"><enum>(ii)</enum><text>the valuation of
such a transfer on the basis of the realistic alternatives to such a
transfer,</text>
</clause><continuation-text continuation-text-level="subparagraph">in any
case in which the Secretary determines that such basis is the most reliable
means of valuation of such
transfers.</continuation-text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="id2F075E334B684285AFE21AF9AF19179E"><enum>(2)</enum><header>Allocation
among taxpayers</header><text>Section 482 is amended by adding at the end the
following: <quote>For purposes of the preceding sentence, 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 transfer, in any case in which the Secretary determines that such
basis is the most reliable means of valuation of such
transfers.</quote>.</text>
</paragraph></subsection><subsection id="idC6556F73D1E14042B629920A36E33DA5"><enum>(c)</enum><header>Effective
date</header>
<paragraph id="id0E40DA24FEB94BA6BC45F6277910284A"><enum>(1)</enum><header>In
general</header><text>The amendments made by this section shall apply to
transfers in taxable years beginning after the date of the enactment of this
Act.</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="idBD57E83689FE4EBE986523373BBDA043"><enum>(2)</enum><header>No
inference</header><text>Nothing in the amendment made by subsection (a) shall
be construed to create any inference with respect to the application of section
936(h)(3) of the Internal Revenue Code of 1986, or the authority of the
Secretary of the Treasury to provide regulations for such application, on or
before the date of the enactment of such amendment.</text>
</paragraph></subsection></section><section id="idCEDC0A042B65479DA12F1A648DAED108"><enum>124.</enum><header>Limitation on
earnings stripping by expatriated entities</header>
<subsection id="idF3062555D22E473DA65EF52DF6B57734"><enum>(a)</enum><header>In
general</header><text>Subsection (j) of section 163 is amended—</text>
<paragraph id="id1317B091E96B4D6481EA3C313C48FC0C"><enum>(1)</enum><text>by redesignating
paragraph (9) as paragraph (10), and</text>
</paragraph><paragraph id="id7B234B6871354612B89B723746BDA98C"><enum>(2)</enum><text>by inserting
after paragraph (8) the following new paragraph:</text>
<quoted-block act-name="" id="idB3E6BDF97F0642A59C6B7913DAADC25D" style="OLC">
<paragraph id="id9EBFB0793880424C81BCD289FC62E962"><enum>(9)</enum><header>Special rules
for expatriated entities</header>
<subparagraph id="id7071F1E38B784EC2A5AA4C054F10D905"><enum>(A)</enum><header>In
general</header><text>In the case of a corporation to which this subsection
applies which is an expatriated entity, this subsection shall apply to such
corporation with the following modifications:</text>
<clause id="idFB673097EFDB4E7FAF053E96CBB5BEA7"><enum>(i)</enum><text>Paragraph (2)(A)
shall be applied without regard to clause (ii) thereof.</text>
</clause><clause id="id159152E092664676A1FE7E3D4F47D08E"><enum>(ii)</enum><text>Paragraph (1)(B)
shall be applied—</text>
<subclause id="idE14779F05CA04413AFF93F0057DA3F6F"><enum>(I)</enum><text>without regard to
the parenthetical, and</text>
</subclause><subclause id="id1FD8770B6C6E4CADA4412743EBB04AA8"><enum>(II)</enum><text>by substituting
<quote>in the 1st succeeding taxable year and in the 2nd through 10th
succeeding taxable years to the extent not previously taken into account under
this subparagraph</quote> for <quote>in the succeeding taxable
year</quote>.</text>
</subclause></clause><clause id="id1ABC9D9D722D464F92999EED0AA770E6"><enum>(iii)</enum><text>Paragraph
(2)(B) shall be applied—</text>
<subclause id="id19AE5264DE624FB6B4D63A81AAED35A3"><enum>(I)</enum><text>without regard to
clauses (ii) and (iii), and</text>
</subclause><subclause id="id9035906285F4479483E67868DBD11581"><enum>(II)</enum><text>by substituting
<quote>25 percent of the adjusted taxable income of the corporation for such
taxable year</quote> for the matter of clause (i)(II) thereof.</text>
</subclause></clause></subparagraph><subparagraph id="id76FEF7D0D4A24FDFB5A82CF7BBBEC7AC"><enum>(B)</enum><header>Expatriated
entity</header><text>For purposes of this paragraph—</text>
<clause id="idC89149BDFCB54FF4A326EBB3F51A495C"><enum>(i)</enum><header>In
general</header><text>With respect to a corporation and a taxable year, the
term <term>expatriated entity</term> has the meaning given such term by section
7874(a)(2), 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 10, 1989.</text>
</clause><clause id="id91F000BA355140F4875B7A42B2594ED6"><enum>(ii)</enum><header>Exception for
surrogates treated as a domestic corporation</header><text>The term
<term>expatriated entity</term> does not include a surrogate foreign
corporation which is treated as a domestic corporation by reason of section
7874(b).</text>
</clause></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="idF6BFECF3CA204ADBA0FF12675CE7E25B"><enum>(b)</enum><header>Effective
date</header><text>The amendments made by this section shall apply to taxable
years beginning after the date of the enactment of this Act.</text>
</subsection></section><section id="idE32F684939214034A3D53BBC755E6ACF"><enum>125.</enum><header>Repeal of
check-the-box rules for certain foreign entities and CFC look-thru
rules</header>
<subsection id="id51AE8FBF0F304745887C8E4ADE888AD1"><enum>(a)</enum><header>Check-the-Box
rules</header><text>Paragraph (3) of section 7701(a) is amended—</text>
<paragraph id="id14BD9B41645B4DA3B9D46BC15F1F3A14"><enum>(1)</enum><text display-inline="yes-display-inline">by striking <quote>and</quote>, and</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="id9D6D0A8E9DE14CF2AC095AAB577662B3"><enum>(2)</enum><text display-inline="yes-display-inline">by inserting after <quote>insurance
companies</quote> the following:</text>
<quoted-block display-inline="yes-display-inline" id="id766A2D22E5B34299AA71C8FCF0F59F21" style="OLC">
<text>, and any
foreign business entity that—</text><subparagraph commented="no" display-inline="no-display-inline" id="idB0FABBAB42754B51B22BC98B25A2BA98"><enum>(A)</enum><text display-inline="yes-display-inline">has a single owner that does not have
limited liability, or</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="idAA0EBD8EE7AD4B3080702539939D2C54"><enum>(B)</enum><text display-inline="yes-display-inline">has one or more members all of which have
limited
liability</text>
</subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection commented="no" display-inline="no-display-inline" id="id9C83766C08BF418B883F55D8719344C7"><enum>(b)</enum><header>Look-Thru
rule</header><text>Subparagraph (C) of section 954(c)(6) is amended to read as
follows:</text>
<quoted-block display-inline="no-display-inline" id="idFE4CCA90BBC84D2C985F84AE2BBC041C" style="OLC">
<subparagraph commented="no" display-inline="no-display-inline" id="id51A5AA15FE9D498FAE410EBAC2B71F23"><enum>(C)</enum><header>Termination</header><text>Subparagraph
(A) shall not apply to dividends, interest, rents, and royalties received or
accrued after the date of the enactment of the CUT Loopholes
Act.</text>
</subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection></section><section id="id44193026BB094E399434B77F5DDE244F"><enum>126.</enum><header>Prohibition on
offshore loan abuse</header>
<subsection id="id1B06C2DA93F848E78CC5D8941EB822BA"><enum>(a)</enum><header>In
general</header><text>Subpart F of part III of subchapter N of chapter 1 is
amended by adding at the end the following new section:</text>
<quoted-block display-inline="no-display-inline" id="idCFF9E5AAC2A4439EA3AFB967CBC27E88" style="OLC">
<section id="id827D9997B42B492F8D22E56DC9BDC932"><enum>966.</enum><header>Income
inclusion for loans to United States shareholders from controlled foreign
corporations</header>
<subsection id="id69FD7D69ABCA44EA81FF7F66683DCC9D"><enum>(a)</enum><header>In
general</header><text>In the case of a United States shareholder, there shall
be included in income for the taxable year an amount equal to the disqualified
CFC loan amount.</text>
</subsection><subsection id="id7D374D1BB4074B2F8126B2E756D896F6"><enum>(b)</enum><header>Disqualified
CFC loan amount</header>
<paragraph id="idB3029B308E0B49F8B51C4D2FB14A5273"><enum>(1)</enum><header>In
general</header><text>For purposes of this section, the disqualified CFC loan
amount for any taxable year is an amount equal to the lesser of—</text>
<subparagraph id="id9F8E51AFC4724460B2465200B0AAE26A"><enum>(A)</enum><text>the aggregate
amount of obligations of the United States shareholder which originated in such
taxable year and are held (directly or indirectly) by controlled foreign
corporations, or</text>
</subparagraph><subparagraph id="idE7DF3B90310E42ADAA0EB1379D7A0D90"><enum>(B)</enum><text>the foreign group
earnings amount.</text>
</subparagraph></paragraph><paragraph id="idBB0F1D4116B244D780D06FE0D8E995B3"><enum>(2)</enum><header>Exception</header><text>In
determining the amount of obligations under subparagraph (A), there shall be
excluded any obligation described in section 956(c)(2)(C).</text>
</paragraph><paragraph id="id19C2B8B7ED314A8B976B4DC635B36E70"><enum>(3)</enum><header>Carryforward of
certain amounts</header><text>If, for any taxable year, the amount under
subparagraph (A) exceeds the amount under subparagraph (B), such excess shall
be taken into account as an obligation to which subparagraph (A) applies for
the succeeding taxable year.</text>
</paragraph><paragraph id="id493555CED84B4A919B9B6243C2C29D1F"><enum>(4)</enum><header>Foreign group
earnings amount</header><text>For purposes of this section, the term
<term>foreign group earnings amount</term> means the aggregate earnings and
profits of all controlled foreign corporations in the worldwide affiliated
group (as defined in section 864(f)(1)(C)) of the United States shareholder,
determined—</text>
<subparagraph id="id690AFF1A222C470CA6153598F72F721C"><enum>(A)</enum><text>as of the last
day of the taxable year of the United States shareholder, and</text>
</subparagraph><subparagraph id="id4C38E1E7C66346B2B581439FF6EAAC0C"><enum>(B)</enum><text>without regard to
any distributions made during such taxable year.</text>
</subparagraph></paragraph></subsection><subsection id="id97323432A634496BAA374FCA1972C099"><enum>(c)</enum><header>Denial of
interest deduction</header><text>No deduction shall be allowed for interest
paid or accrued with respect to obligations taken into account under subsection
(b).</text>
</subsection><subsection id="id6E56CFF7EB74447C9A47BECB767D2623"><enum>(d)</enum><header>Treatment of
income source</header><text>Any amount included in income under subsection (a)
shall be treated as income from sources within the United
States.</text>
</subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="id1F1B4903F6E6459D92A30AE99E5F5260"><enum>(b)</enum><header>Coordination
with section 956</header><text>Paragraph (2) of section 956(c) is amended by
striking <quote>and</quote> at the end of subparagraph (K), by striking the
period at the end of subparagraph (L)(ii) and inserting <quote>; and</quote>,
and by inserting after subparagraph (L) the following new subparagraph:</text>
<quoted-block display-inline="no-display-inline" id="idFF6C7F0041114ED7A4A9533592FA1560" style="OLC">
<subparagraph id="id5632944EDD2C4FDAABEC01EE92695706"><enum>(M)</enum><text display-inline="yes-display-inline">any obligation which is taken into account
in determining the disqualified CFC loan amount under section
966.</text>
</subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="idEBA0925FC983406BA20943AD9786574F"><enum>(c)</enum><header>Clerical
amendment</header><text>The table of sections for subpart F of part III of
subchapter N of chapter 1 is amended by adding at the end the following new
item:</text>
<quoted-block id="iddf161191-7484-48d6-8e03-3ca5ebf42da6" style="OLC">
<toc>
<toc-entry idref="id827D9997B42B492F8D22E56DC9BDC932" level="section">Sec. 966. Income inclusion for loans to certain United States
shareholders from controlled foreign
corporations.</toc-entry>
</toc>
<after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="id7DB39A38474E44FA8FCDA8F68DD4B1F9"><enum>(d)</enum><header>Effective
date</header><text>The amendments made by this section shall apply to
obligations originated after the date of the enactment of this Act.</text>
</subsection></section></subtitle><enum>II</enum><header>Strengthening
tax enforcement</header>
<subtitle id="id42F3432ABBFC42D4BDD03FAD1FEF66EA"><enum>A</enum><header>Combating tax
shelter promotion</header>
<section commented="no" display-inline="no-display-inline" id="ID11C14050FFC443B585AB2AF466C5631A" section-type="subsequent-section"><enum>201.</enum><header>Penalty for
promoting abusive tax shelters</header>
<subsection commented="no" display-inline="no-display-inline" id="IDC191FD6ECC134BE08A4DD36EBF164BF9"><enum>(a)</enum><header>Penalty for
promoting abusive tax shelters</header><text display-inline="yes-display-inline">Section 6700 is amended—</text>
<paragraph commented="no" display-inline="no-display-inline" id="ID8E6BA63D0D9E4A0AB7F9C233045611F7"><enum>(1)</enum><text display-inline="yes-display-inline">by redesignating subsections (b) and (c) as
subsections (d) and (e), respectively,</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="IDC147C205B821411D89C7B14B01155E78"><enum>(2)</enum><text display-inline="yes-display-inline">by striking <quote>a penalty</quote> and
all that follows through the period in the first sentence of subsection (a) and
inserting <quote>a penalty determined under subsection (b)</quote>, and</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="ID3F339C61AFEC4F9693593CBF597F3AF5"><enum>(3)</enum><text display-inline="yes-display-inline">by inserting after subsection (a) the
following new subsections:</text>
<quoted-block display-inline="no-display-inline" id="IDF2176A32171445B799848B1FF7D9B7EE" style="OLC">
<subsection commented="no" display-inline="no-display-inline" id="IDF634AD16E0654684A22ABDCA398311A8"><enum>(b)</enum><header>Amount of
penalty; calculation of penalty; liability for penalty</header>
<paragraph commented="no" display-inline="no-display-inline" id="ID18CDF84E2BAE4AC88C5CEFCCD8F7935E"><enum>(1)</enum><header>Amount of
penalty</header><text display-inline="yes-display-inline">The amount of the
penalty imposed by subsection (a) shall not exceed 150 percent of the gross
income derived (or to be derived) from such activity by the person or persons
subject to such penalty.</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="ID8A79F2D4AE2840DC8D220BF84F0DF6C4"><enum>(2)</enum><header>Calculation of
penalty</header><text display-inline="yes-display-inline">The penalty amount
determined under paragraph (1) shall be calculated with respect to each
instance of an activity described in subsection (a), each instance in which
income was derived by the person or persons subject to such penalty, and each
person who participated in such an activity.</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="ID151A527FFAB445F5927BAB7EF6F93981"><enum>(3)</enum><header>Liability for
penalty</header><text display-inline="yes-display-inline">If more than 1 person
is liable under subsection (a) with respect to such activity, all such persons
shall be jointly and severally liable for the penalty under such
subsection.</text>
</paragraph></subsection><subsection commented="no" display-inline="no-display-inline" id="ID04D255D7332C4450934E28ECA81C352F"><enum>(c)</enum><header>Penalty not
deductible</header><text display-inline="yes-display-inline">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
payment.</text>
</subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection commented="no" display-inline="no-display-inline" id="id36AB05EC798F4556AD06EC0D50177956"><enum>(b)</enum><header>Conforming
amendment</header><text display-inline="yes-display-inline">Section 6700(a) is
amended by striking the last sentence.</text>
</subsection><subsection commented="no" display-inline="no-display-inline" id="ID1F40E54953D24E9589B850A64C061561"><enum>(c)</enum><header>Effective
date</header><text display-inline="yes-display-inline">The amendments made by
this section shall apply to activities after the date of the enactment of this
Act.</text>
</subsection></section><section commented="no" display-inline="no-display-inline" id="IDC89B1464487542AE9ADD5C4140B8B0CB" section-type="subsequent-section"><enum>202.</enum><header>Penalty for aiding
and abetting the understatement of tax liability</header>
<subsection commented="no" display-inline="no-display-inline" id="ID8664EF7CD0824EE69836AE57E7DD9505"><enum>(a)</enum><header>In
general</header><text display-inline="yes-display-inline">Section 6701(a) is
amended—</text>
<paragraph commented="no" display-inline="no-display-inline" id="IDE1ACDDFE72D24812ABA00F0B4FE94F6E"><enum>(1)</enum><text display-inline="yes-display-inline">by inserting <quote>the tax liability
or</quote> after <quote>respect to,</quote> in paragraph (1),</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="ID1277CF0A15D442959E3EA465691ACBD2"><enum>(2)</enum><text display-inline="yes-display-inline">by inserting <quote>aid, assistance,
procurement, or advice with respect to such</quote> before
<quote>portion</quote> both places it appears in paragraphs (2) and (3),
and</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="IDC7112943CBD04C1FBA2235EDBBD93F12"><enum>(3)</enum><text display-inline="yes-display-inline">by inserting <quote>instance of aid,
assistance, procurement, or advice or each such</quote> before
<quote>document</quote> in the matter following paragraph (3).</text>
</paragraph></subsection><subsection commented="no" display-inline="no-display-inline" id="IDCFB74AD004D64FC9ADB428412F355615"><enum>(b)</enum><header>Amount of
penalty</header><text display-inline="yes-display-inline">Subsection (b) of
section 6701 is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="IDA022C9628E48481EACAA8F1F56C029B7" style="OLC">
<subsection commented="no" display-inline="no-display-inline" id="IDB3061E608CB545A0B2D5ADCE3A8D8314"><enum>(b)</enum><header>Amount of
penalty; calculation of penalty; liability for penalty</header>
<paragraph commented="no" display-inline="no-display-inline" id="ID645C297005A344E38E0E61A8AC8CAF26"><enum>(1)</enum><header>Amount of
penalty</header><text display-inline="yes-display-inline">The amount of the
penalty imposed by subsection (a) shall not exceed 150 percent of the gross
income derived (or to be derived) from such aid, assistance, procurement, or
advice provided by the person or persons subject to such penalty.</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="IDCE2F24ED668E4A6AB273AB756A980491"><enum>(2)</enum><header>Calculation of
penalty</header><text display-inline="yes-display-inline">The penalty amount
determined under paragraph (1) shall be calculated with respect to each
instance of aid, assistance, procurement, or advice described in subsection
(a), each instance in which income was derived by the person or persons subject
to such penalty, and each person who made such an understatement of the
liability for tax.</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="IDC84B698FF3F347FFB13EB40A9F7706DB"><enum>(3)</enum><header>Liability for
penalty</header><text display-inline="yes-display-inline">If more than 1 person
is liable under subsection (a) with respect to providing such aid, assistance,
procurement, or advice, all such persons shall be jointly and severally liable
for the penalty under such
subsection.</text>
</paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection commented="no" display-inline="no-display-inline" id="ID91D46BB06F834E94A323488B11CAC58A"><enum>(c)</enum><header>Penalty not
deductible</header><text display-inline="yes-display-inline">Section 6701 is
amended by adding at the end the following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="ID9F73DF3C04824E8A9A3F585F0A450F73" style="OLC">
<subsection commented="no" display-inline="no-display-inline" id="IDD71A22C9C6F04E6DBB28A000D2F99E40"><enum>(g)</enum><header>Penalty not
deductible</header><text display-inline="yes-display-inline">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
payment.</text>
</subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection commented="no" display-inline="no-display-inline" id="ID48117D41C97044A99C4B4B445B0CC598"><enum>(d)</enum><header>Effective
date</header><text display-inline="yes-display-inline">The amendments made by
this section shall apply to activities after the date of the enactment of this
Act.</text>
</subsection></section><section commented="no" display-inline="no-display-inline" id="ID9C823C7249F640DDB662DFE0173464E9" section-type="subsequent-section"><enum>203.</enum><header>Prohibited fee
arrangement</header>
<subsection commented="no" display-inline="no-display-inline" id="IDE47CA1D550664CD88E3C43479A65BFFC"><enum>(a)</enum><header>In
general</header><text display-inline="yes-display-inline">Section 6701, as
amended by this Act, is amended—</text>
<paragraph commented="no" display-inline="no-display-inline" id="IDCF901FE478844DABB9A9D359F7C3F1B0"><enum>(1)</enum><text display-inline="yes-display-inline">by redesignating subsections (f) and (g) as
subsections (g) and (h), respectively,</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="ID4EB5F59A2BA547C5947FEACA1DB060D2"><enum>(2)</enum><text display-inline="yes-display-inline">by striking <quote>subsection (a).</quote>
in paragraphs (2) and (3) of subsection (g) (as redesignated by paragraph (1))
and inserting <quote>subsection (a) or (f).</quote>, and</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="ID96021543EA1340A1B748045CE4138F8E"><enum>(3)</enum><text display-inline="yes-display-inline">by inserting after subsection (e) the
following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="ID4C1E8882D3DB4407B72594ED64B9C6C3" style="OLC">
<subsection commented="no" display-inline="no-display-inline" id="ID128D9B91243B4B378DBF0EDE99155635"><enum>(f)</enum><header>Prohibited fee
arrangement</header>
<paragraph commented="no" display-inline="no-display-inline" id="ID505CFEEE6A894BFC817DA2EECCB450FF"><enum>(1)</enum><header>In
general</header><text display-inline="yes-display-inline">Any person who makes
an agreement for, charges, or collects a fee which is for services provided in
connection with the internal revenue laws, and the amount of which is
calculated according to, or is dependent upon, a projected or actual amount
of—</text>
<subparagraph commented="no" display-inline="no-display-inline" id="IDE6E232562DB64C1195FB6C856BFBD2FD"><enum>(A)</enum><text display-inline="yes-display-inline">tax savings or benefits, or</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="IDF70A196BCE0646458674F81F5BA05344"><enum>(B)</enum><text display-inline="yes-display-inline">losses which can be used to offset other
taxable income,</text>
</subparagraph><continuation-text commented="no" continuation-text-level="paragraph">shall pay a penalty with respect to
each such fee activity in the amount determined under subsection (b).</continuation-text></paragraph><paragraph commented="no" display-inline="no-display-inline" id="ID7B6D4E08FEB8492994EE28D5B89F648C"><enum>(2)</enum><header>Rules</header><text display-inline="yes-display-inline">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
interest.</text>
</paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection commented="no" display-inline="no-display-inline" id="id2A3BFE8CBCB14288852A8587BE36AD35"><enum>(b)</enum><header>Effective
date</header><text display-inline="yes-display-inline">The amendments made by
this section shall apply to fee agreements, charges, and collections made after
the date of the enactment of this Act.</text>
</subsection></section><section id="id70FBAAAEF0614693A04BA10679270E51"><enum>204.</enum><header>Preventing tax
shelter activities by financial institutions</header>
<subsection commented="no" display-inline="no-display-inline" id="id0AC267A491144907BC202E0D909722A4"><enum>(a)</enum><header>Examinations</header>
<paragraph commented="no" display-inline="no-display-inline" id="id70EBEE58AB3D454A9B7A0A36330D3A40"><enum>(1)</enum><header>Development of
examination techniques</header><text display-inline="yes-display-inline">Each
of the Federal banking agencies and the Commission shall, in consultation with
the Internal Revenue Service, develop examination techniques to detect
potential violations of section 6700 or 6701 of the Internal Revenue Code of
1986, by depository institutions, brokers, dealers, and investment advisers, as
appropriate.</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="idEF3BA4E72E5E44F8AC4F4FA39D311FC4"><enum>(2)</enum><header>Implementation</header><text display-inline="yes-display-inline">Each of the Federal banking agencies and
the Commission shall implement the examination techniques developed under
paragraph (1) with respect to each of the depository institutions, brokers,
dealers, or investment advisers subject to their enforcement authority. Such
examination shall, to the extent possible, be combined with any examination by
such agency otherwise required or authorized by Federal law.</text>
</paragraph></subsection><subsection commented="no" display-inline="no-display-inline" id="id7F800287C74C43FAB84AB44D3EA0353F"><enum>(b)</enum><header>Report to
internal revenue service</header><text display-inline="yes-display-inline">In
any case in which an examination conducted under this section with respect to a
financial institution or other entity reveals a potential violation, such
agency shall promptly notify the Internal Revenue Service of such potential
violation for investigation and enforcement by the Internal Revenue Service, in
accordance with applicable provisions of law.</text>
</subsection><subsection commented="no" display-inline="no-display-inline" id="id3B3B399837504EA3B968BE3B7C6DF245"><enum>(c)</enum><header>Report to
congress</header><text display-inline="yes-display-inline">The Federal banking
agencies and the Commission shall submit a joint written report to Congress in
2014 on their progress in preventing violations of sections 6700 and 6701 of
the Internal Revenue Code of 1986, by depository institutions, brokers,
dealers, and investment advisers, as appropriate.</text>
</subsection><subsection commented="no" display-inline="no-display-inline" id="idB0F74313E1834F239DE55503CEF95BF0"><enum>(d)</enum><header>Definitions</header><text display-inline="yes-display-inline">For purposes of this section—</text>
<paragraph commented="no" display-inline="no-display-inline" id="id402FA538018F491A8DF75534543DE985"><enum>(1)</enum><text display-inline="yes-display-inline">the terms <term>broker</term>,
<term>dealer</term>, and <term>investment adviser</term> have the same meanings
as in section 3 of the Securities Exchange Act of 1934 (<external-xref legal-doc="usc" parsable-cite="usc/15/78c">15 U.S.C. 78c</external-xref>);</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="idAA65914592DF4DA2BCA42F1B852C0D2C"><enum>(2)</enum><text display-inline="yes-display-inline">the term <term>Commission</term> means the
Securities and Exchange Commission;</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="id552F8F8839324E46AF7252FE737C1A66"><enum>(3)</enum><text display-inline="yes-display-inline">the term <term>depository
institution</term> has the same meaning as in section 3(c) of the Federal
Deposit Insurance Act (<external-xref legal-doc="usc" parsable-cite="usc/12/1813">12 U.S.C. 1813(c)</external-xref>);</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="id8967360339094753A655BAABBD63F4E6"><enum>(4)</enum><text display-inline="yes-display-inline">the term <term>Federal banking
agencies</term> has the same meaning as in section 3(q) of the Federal Deposit
Insurance Act (<external-xref legal-doc="usc" parsable-cite="usc/12/1813">12 U.S.C. 1813(q)</external-xref>); and</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="idEA435AAADDE744CDA5698587B1510601"><enum>(5)</enum><text display-inline="yes-display-inline">the term <term>Secretary</term> means the
Secretary of the Treasury.</text>
</paragraph></subsection></section><section commented="no" display-inline="no-display-inline" id="ID97358E9C522C44789FAA6B645B958987" section-type="subsequent-section"><enum>205.</enum><header>Information sharing
for enforcement purposes</header>
<subsection commented="no" display-inline="no-display-inline" id="ID1E68AC35F4B646F1B802D46CEA447937"><enum>(a)</enum><header>Promotion of
prohibited tax shelters or tax avoidance schemes</header><text display-inline="yes-display-inline">Section 6103(h) is amended by adding at the
end the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="IDDFC3CB53CB4A4231992788F751F01663" style="OLC">
<paragraph commented="no" display-inline="no-display-inline" id="IDE0D8313F64F74C7FBDA5209B0A848D6F"><enum>(7)</enum><header>Disclosure of
returns and return information related to promotion of prohibited tax shelters
or tax avoidance schemes</header>
<subparagraph commented="no" display-inline="no-display-inline" id="IDD773C0232A2A4BF888C08CB4DA6AFBFF"><enum>(A)</enum><header>Written
request</header><text display-inline="yes-display-inline">Upon receipt by the
Secretary of a written request which meets the requirements of subparagraph (B)
from the head of the United States Securities and Exchange Commission, an
appropriate Federal banking agency as defined under section 1813(q) of title
12, United States Code, or the Public Company Accounting Oversight Board, a
return or return information shall be disclosed to such requestor’s officers
and employees who are personally and directly engaged in an investigation,
examination, or proceeding by such requestor to evaluate, determine, penalize,
or deter conduct by a financial institution, issuer, or public accounting firm,
or associated person, in connection with a potential or actual violation of
section 6700 (promotion of abusive tax shelters), 6701 (aiding and abetting
understatement of tax liability), or activities related to promoting or
facilitating inappropriate tax avoidance or tax evasion. Such disclosure shall
be solely for use by such officers and employees in such investigation,
examination, or proceeding. In the discretion of the Secretary, such disclosure
may take the form of the participation of Internal Revenue Service employees in
a joint investigation, examination, or proceeding with the Securities and
Exchange Commission, Federal banking agency, or Public Company Accounting
Oversight Board.</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="ID8306056B019E444BAA44478AF9C0A4A5"><enum>(B)</enum><header>Requirements</header><text display-inline="yes-display-inline">A request meets the requirements of this
subparagraph if it sets forth—</text>
<clause commented="no" display-inline="no-display-inline" id="ID221366AE94AA4DD0A623C1B53B2A7A7F"><enum>(i)</enum><text display-inline="yes-display-inline">the nature of the investigation,
examination, or proceeding,</text>
</clause><clause commented="no" display-inline="no-display-inline" id="ID58FC1602E9444B64A7E661637BE5FB27"><enum>(ii)</enum><text display-inline="yes-display-inline">the statutory authority under which such
investigation, examination, or proceeding is being conducted,</text>
</clause><clause commented="no" display-inline="no-display-inline" id="IDA6688048D13347BDA7C8E4F220ECA92B"><enum>(iii)</enum><text display-inline="yes-display-inline">the name or names of the financial
institution, issuer, or public accounting firm to which such return information
relates,</text>
</clause><clause commented="no" display-inline="no-display-inline" id="IDE1691FAC1FEB44E184F1E024003C5E71"><enum>(iv)</enum><text display-inline="yes-display-inline">the taxable period or periods to which such
return information relates, and</text>
</clause><clause commented="no" display-inline="no-display-inline" id="ID2AEDF81033774439BBA8C6CF76616F9D"><enum>(v)</enum><text display-inline="yes-display-inline">the specific reason or reasons why such
disclosure is, or may be, relevant to such investigation, examination or
proceeding.</text>
</clause></subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="ID0711839E7EA94A47B3C7C625F3A31A39"><enum>(C)</enum><header>Financial
institution</header><text display-inline="yes-display-inline">For the purposes
of this paragraph, the term <term>financial institution</term> means a
depository institution, foreign bank, insured institution, industrial loan
company, broker, dealer, investment company, investment advisor, or other
entity subject to regulation or oversight by the United States Securities and
Exchange Commission or an appropriate Federal banking
agency.</text>
</subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection commented="no" display-inline="no-display-inline" id="ID85B894FE336543A6A49C0182771EB3A5"><enum>(b)</enum><header>Financial and
accounting fraud investigations</header><text display-inline="yes-display-inline">Section 6103(i) is amended by adding at the
end the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="IDE55F5B28994E4EBC9A217855E91D3980" style="OLC">
<paragraph commented="no" display-inline="no-display-inline" id="ID5EF2CE26F9B1454895E14ABFDB12F840"><enum>(9)</enum><header>Disclosure of
returns and return information for use in financial and accounting fraud
investigations</header>
<subparagraph commented="no" display-inline="no-display-inline" id="ID05B0AB60BC21428092CC087694FC30AE"><enum>(A)</enum><header>Written
request</header><text display-inline="yes-display-inline">Upon receipt by the
Secretary of a written request which meets the requirements of subparagraph (B)
from the head of the United States Securities and Exchange Commission or the
Public Company Accounting Oversight Board, a return or return information shall
be disclosed to such requestor’s officers and employees who are personally and
directly engaged in an investigation, examination, or proceeding by such
requester to evaluate the accuracy of a financial statement or report, or to
determine whether to require a restatement, penalize, or deter conduct by an
issuer, investment company, or public accounting firm, or associated person, in
connection with a potential or actual violation of auditing standards or
prohibitions against false or misleading statements or omissions in financial
statements or reports. Such disclosure shall be solely for use by such officers
and employees in such investigation, examination, or proceeding.</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="ID8915873B554749EFAD9A5C44FFBA99A4"><enum>(B)</enum><header>Requirements</header><text display-inline="yes-display-inline">A request meets the requirements of this
subparagraph if it sets forth—</text>
<clause commented="no" display-inline="no-display-inline" id="ID184689123C2D4015931C32D2D024C8A5"><enum>(i)</enum><text display-inline="yes-display-inline">the nature of the investigation,
examination, or proceeding,</text>
</clause><clause commented="no" display-inline="no-display-inline" id="ID0B71359B09FC4F6BB561B9E1659ED855"><enum>(ii)</enum><text display-inline="yes-display-inline">the statutory authority under which such
investigation, examination, or proceeding is being conducted,</text>
</clause><clause commented="no" display-inline="no-display-inline" id="ID737544069DDF47418D656D54C26F9ABD"><enum>(iii)</enum><text display-inline="yes-display-inline">the name or names of the issuer, investment
company, or public accounting firm to which such return information
relates,</text>
</clause><clause commented="no" display-inline="no-display-inline" id="ID19305441D33A475B8FA7709E4A8456A5"><enum>(iv)</enum><text display-inline="yes-display-inline">the taxable period or periods to which such
return information relates, and</text>
</clause><clause commented="no" display-inline="no-display-inline" id="ID553FD9AF88F74FC99C1ECD5D00379BA7"><enum>(v)</enum><text display-inline="yes-display-inline">the specific reason or reasons why such
disclosure is, or may be, relevant to such investigation, examination or
proceeding.</text>
</clause></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection commented="no" display-inline="no-display-inline" id="ID5A82EBF08B74423EBA6F77AA9406DEA0"><enum>(c)</enum><header>Effective
date</header><text display-inline="yes-display-inline">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 Act.</text>
</subsection></section><section commented="no" display-inline="no-display-inline" id="IDB093A714B49A47868C15E5F1E219BC4C" section-type="subsequent-section"><enum>206.</enum><header>Disclosure of
information to Congress</header>
<subsection commented="no" display-inline="no-display-inline" id="ID6C37EEEC56914F438C96C7D72446DB8A"><enum>(a)</enum><header>Disclosure by
tax return preparer</header>
<paragraph commented="no" display-inline="no-display-inline" id="IDD687479CA18441E7B24701CCB0773A65"><enum>(1)</enum><header>In
general</header><text display-inline="yes-display-inline">Subparagraph (B) of
section 7216(b)(1) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="IDF738EECBF37141059860B198FAED43B3" style="OLC">
<subparagraph commented="no" display-inline="no-display-inline" id="ID705BFEFE21D147DB8070925892CF4119"><enum>(B)</enum><text display-inline="yes-display-inline">pursuant to any 1 of the following
documents, if clearly identified:</text>
<clause commented="no" display-inline="no-display-inline" id="IDB17CF96BA4CB4F80A78450A0063F9D9F"><enum>(i)</enum><text display-inline="yes-display-inline">The order of any Federal, State, or local
court of record.</text>
</clause><clause commented="no" display-inline="no-display-inline" id="ID65BA2E8732A24FEB9F7642E2FCC3744A"><enum>(ii)</enum><text display-inline="yes-display-inline">A subpoena issued by a Federal or State
grand jury.</text>
</clause><clause commented="no" display-inline="no-display-inline" id="IDB2196DF70B27460B94F07C7DDC38F6A2"><enum>(iii)</enum><text display-inline="yes-display-inline">An administrative order, summons, or
subpoena which is issued in the performance of its duties by—</text>
<subclause commented="no" display-inline="no-display-inline" id="ID2B80775056A04A228EE10F9EF33375B3"><enum>(I)</enum><text display-inline="yes-display-inline">any Federal agency, including Congress or
any committee or subcommittee thereof, or</text>
</subclause><subclause commented="no" display-inline="no-display-inline" id="IDF3E3263011544986B6BB9967A3C9D5D8"><enum>(II)</enum><text display-inline="yes-display-inline">any State agency, body, or commission
charged under the laws of the State or a political subdivision of the State
with the licensing, registration, or regulation of tax return
preparers.</text>
</subclause></clause></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="ID1C550F6197F841A997162D09997C7779"><enum>(2)</enum><header>Effective
date</header><text display-inline="yes-display-inline">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 date.</text>
</paragraph></subsection><subsection commented="no" display-inline="no-display-inline" id="ID8CD46D0A713848FDA405D3022CD4EC11"><enum>(b)</enum><header>Disclosure by
Secretary</header><text display-inline="yes-display-inline">Paragraph (2) of
section 6104(a) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="id85DF3A936C9541E2BEFC67D030832AE7" style="OLC">
<paragraph commented="no" display-inline="no-display-inline" id="IDA580E567EBF64244A433CD4663764F5B"><enum>(2)</enum><header>Inspection by
Congress</header>
<subparagraph commented="no" display-inline="no-display-inline" id="ID006A7E12176C42A487916EE73ED38AE0"><enum>(A)</enum><header>In
general</header><text display-inline="yes-display-inline">Upon receipt of a
written request from a committee or subcommittee of Congress, copies of
documents related to a determination by the Secretary to grant, deny, revoke,
or restore an organization’s exemption from taxation under section 501 shall be
provided to such committee or subcommittee, including any application, notice
of status, or supporting information provided by such organization to the
Internal Revenue Service; any letter, analysis, or other document produced by
or for the Internal Revenue Service evaluating, determining, explaining, or
relating to the tax exempt status of such organization (other than returns,
unless such returns are available to the public under this section or section
6103 or 6110); and any communication between the Internal Revenue Service and
any other party relating to the tax exempt status of such organization.</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="ID9DEB8125C1614753A921CE1B0C5E3DFB"><enum>(B)</enum><header>Additional
information</header><text display-inline="yes-display-inline">Section 6103(f)
shall apply with respect to—</text>
<clause commented="no" display-inline="no-display-inline" id="ID0FA263F5972B4E4FA12DCA63549575D1"><enum>(i)</enum><text display-inline="yes-display-inline">the application for exemption of any
organization described in subsection (c) or (d) of section 501 which is exempt
from taxation under section 501(a) for any taxable year and any application
referred to in subparagraph (B) of subsection (a)(1) of this section,
and</text>
</clause><clause commented="no" display-inline="no-display-inline" id="IDB24BF907A40E47AAA188C7F97FA62442"><enum>(ii)</enum><text display-inline="yes-display-inline">any other papers which are in the
possession of the Secretary and which relate to such application,</text>
</clause><continuation-text commented="no" continuation-text-level="subparagraph">as if such papers constituted
returns.</continuation-text></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection commented="no" display-inline="no-display-inline" id="IDE5A99CB0E23F425B9B7822AB496B5F34"><enum>(c)</enum><header>Effective
date</header><text display-inline="yes-display-inline">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 Act.</text>
</subsection></section><section commented="no" display-inline="no-display-inline" id="ID8DAC424D4AF9457C99DFA3B0B3F23FA1" section-type="subsequent-section"><enum>207.</enum><header>Tax opinion
standards for tax practitioners</header><text display-inline="no-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/31/330">Section 330(d)</external-xref> of title 31, United States
Code, is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="IDD04DE75E6EA5419899C2AF738AB0EB1D" style="OLC">
<subsection commented="no" display-inline="no-display-inline" id="ID24953C93B66D4EFE816FB2D052335805"><enum>(d)</enum><text display-inline="yes-display-inline">The Secretary of the Treasury shall impose
standards applicable to the rendering of written advice with respect to any
listed transaction or any entity, plan, arrangement, or other transaction which
has a potential for tax avoidance or evasion. Such standards shall address, but
not be limited to, the following issues:</text>
<paragraph commented="no" display-inline="no-display-inline" id="ID53700F31F067487F966031858E19D9F8"><enum>(1)</enum><text display-inline="yes-display-inline">Independence of the practitioner issuing
such written advice from persons promoting, marketing, or recommending the
subject of the advice.</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="ID8EDB76273E174DCBA52DEBBE32D86E3F"><enum>(2)</enum><text display-inline="yes-display-inline">Collaboration among practitioners, or
between a practitioner and other party, which could result in such
collaborating parties having a joint financial interest in the subject of the
advice.</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="ID2163F7E5DAD549DDBF34D1EEA3B57281"><enum>(3)</enum><text display-inline="yes-display-inline">Avoidance of conflicts of interest which
would impair auditor independence.</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="ID57A899985DCB4FDF9CEC15796AB20927"><enum>(4)</enum><text display-inline="yes-display-inline">For written advice issued by a firm,
standards for reviewing the advice and ensuring the consensus support of the
firm for positions taken.</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="ID6F47B43DA62940E193A1579A52DCC0B7"><enum>(5)</enum><text display-inline="yes-display-inline">Reliance on reasonable factual
representations by the taxpayer and other parties.</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="IDA98630CF550F46FBB063AF4C037090FD"><enum>(6)</enum><text display-inline="yes-display-inline">Appropriateness of the fees charged by the
practitioner for the written advice.</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="id86C6175D913F433E8EF50AC7571F5A16"><enum>(7)</enum><text display-inline="yes-display-inline">Preventing practitioners and firms from
aiding or abetting the understatement of tax liability by clients.</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="id232351265C614736A34CB566F3103AAB"><enum>(8)</enum><text display-inline="yes-display-inline">Banning the promotion of potentially
abusive or illegal tax
shelters.</text>
</paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</section></subtitle><subtitle id="id1476A11B29ED4892A8B6DF27898F8AAC"><enum>B</enum><header>Simplify tax lien
procedure</header>
<section commented="no" display-inline="no-display-inline" id="id2F89535EC7E94822A232704FEC2007BF" section-type="subsequent-section"><enum>211.</enum><header display-inline="yes-display-inline">Short title</header><text display-inline="no-display-inline">This subtitle may be cited as the
<quote><short-title>Tax Lien Simplification
Act</short-title></quote>.</text>
</section><section commented="no" display-inline="no-display-inline" id="idDB1C1546D5E94662AEE744536EE28B65" section-type="subsequent-section"><enum>212.</enum><header display-inline="yes-display-inline">Findings and purpose</header>
<subsection commented="no" display-inline="no-display-inline" id="ID771ea1c3aaa6414c9a16d6d22c1a5481"><enum>(a)</enum><header display-inline="yes-display-inline">Findings</header><text display-inline="yes-display-inline">Congress makes the following
findings:</text>
<paragraph commented="no" display-inline="no-display-inline" id="IDeffc6316ff7643bf9327808dc9cfa40b"><enum>(1)</enum><text display-inline="yes-display-inline">The present decentralized system for filing
Federal tax liens in local property offices, which was established before the
advent of modern computers, the Internet, and e-government programs, is
inefficient, burdensome, and expensive.</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="ID6f48e010131847f3ac147a6d36eb85db"><enum>(2)</enum><text display-inline="yes-display-inline">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 efficient, more timely, and less burdensome than the existing tax lien
filing system; which would expedite the release of liens; and which would be
less expensive for both taxpayers and users.</text>
</paragraph></subsection><subsection commented="no" display-inline="no-display-inline" id="IDdafbfb668273480ca430b3f1c2ace6f2"><enum>(b)</enum><header display-inline="yes-display-inline">Purpose</header><text display-inline="yes-display-inline">The purpose of this subtitle is to simplify
and modernize the process for filing notices of Federal tax liens, to improve
public access to tax lien information, and to save taxpayer dollars by
establishing a nationwide, Internet accessible, and fully searchable filing
system for Federal tax liens which would replace the current system of local
tax lien filings.</text>
</subsection></section><section commented="no" display-inline="no-display-inline" id="id908CEF051A234C46ABE9D3F672F8DC85" section-type="subsequent-section"><enum>213.</enum><header display-inline="yes-display-inline">National tax lien filing system</header>
<subsection commented="no" display-inline="no-display-inline" id="idFCC36D988AB4487890FD7013ECA0181A"><enum>(a)</enum><header display-inline="yes-display-inline">Filing of notice of lien</header><text display-inline="yes-display-inline">Subsection (f) of section 6323 is amended
to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="idE33BF8C8253C4F03A3F47F734260B5BC" style="OLC">
<subsection commented="no" display-inline="no-display-inline" id="idDD961ED980F643FA8638A8D4DDD76CB4"><enum>(f)</enum><header display-inline="yes-display-inline">Filing of notice; form</header>
<paragraph commented="no" display-inline="no-display-inline" id="id4CA94AC4787E4582AC1C0E2CD7BFF7ED"><enum>(1)</enum><header display-inline="yes-display-inline">Filing of notice</header><text display-inline="yes-display-inline">The notice referred to in subsection (a)
shall be filed in the Federal tax lien registry operated under subsection (k).
The filing of a notice of lien, or a certificate of release, discharge,
subordination, or nonattachment of lien, or a notice of withdrawal of a notice
of lien, 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 attaches.</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="idB4A82900823B4DBF91044BDE3E05318D"><enum>(2)</enum><header display-inline="yes-display-inline">Form</header><text display-inline="yes-display-inline">The form and content of the notice referred
to in subsection (a) shall be prescribed by the Secretary. Such notice shall be
valid notwithstanding any other provision of law regarding the form or content
of a notice of lien.</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="idE244004469C64B0982E2125B7FCB4C4C"><enum>(3)</enum><header display-inline="yes-display-inline">Other national filing systems</header><text display-inline="yes-display-inline">Once the Federal tax lien registry is
operational under subsection (k), 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
system.</text>
</paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection commented="no" display-inline="no-display-inline" id="id0371A319F34B4CD5900E7F2CC6C14F67"><enum>(b)</enum><header display-inline="yes-display-inline">Refiling of notice</header><text display-inline="yes-display-inline">Paragraph (2) of section 6323(g) is amended
to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="id7B41F962F6DD40CA9764298D7407ED09" style="OLC">
<paragraph commented="no" display-inline="no-display-inline" id="idC733024DAD42411FB883B5B4FA72DB56"><enum>(2)</enum><header display-inline="yes-display-inline">Refiling</header><text display-inline="yes-display-inline">A notice of lien may be refiled in the
Federal tax lien registry operated under subsection
(k).</text>
</paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection commented="no" display-inline="no-display-inline" id="ID1078dfa156ef4f5b8b007ca52738a706"><enum>(c)</enum><header display-inline="yes-display-inline">Release of tax liens or discharge of
property</header>
<paragraph commented="no" display-inline="no-display-inline" id="IDcfa07accfbd5456da72d412bbb336437"><enum>(1)</enum><header display-inline="yes-display-inline">In general</header><text display-inline="yes-display-inline">Section 6325(a) is amended by inserting
<quote>, and shall cause the certificate of release to be filed in the Federal
tax lien registry operated under section 6323(k),</quote> after <quote>internal
revenue tax</quote>.</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="id4EB9648EDA294A289F75FC8871E11F71"><enum>(2)</enum><header display-inline="yes-display-inline">Release of tax liens expedited from 30 to
20 days</header><text display-inline="yes-display-inline">Section 6325(a) is
amended by striking <quote>not later than 30 days</quote> and inserting
<quote>not later than 20 days</quote>.</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="ID4b02063072f449fea55af1cc70520e58"><enum>(3)</enum><header display-inline="yes-display-inline">Discharge of property from
lien</header><text display-inline="yes-display-inline">Section 6325(b) is
amended—</text>
<subparagraph commented="no" display-inline="no-display-inline" id="ID7f14af4094a94007af8f18d6fc36df86"><enum>(A)</enum><text display-inline="yes-display-inline">by inserting <quote>, and shall cause the
certificate of discharge to be filed in the Federal tax lien registry operated
under section 6323(k),</quote> after <quote>under this chapter</quote> in
paragraph (1),</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="IDb4b96aef2caa4afab78aa10614d5ab41"><enum>(B)</enum><text display-inline="yes-display-inline">by inserting <quote>, and shall cause the
certificate of discharge to be filed in such Federal tax lien registry,</quote>
after <quote>property subject to the lien</quote> in paragraph (2),</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="IDadecb4be62c5427b819911102d593219"><enum>(C)</enum><text display-inline="yes-display-inline">by inserting <quote>, and shall cause the
certificate of discharge to be filed in such Federal tax lien registry,</quote>
after <quote>property subject to the lien</quote> in paragraph (3), and</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="ID21aaf5eb218b4b14af55c25ab3496781"><enum>(D)</enum><text display-inline="yes-display-inline">by inserting <quote>, and shall cause the
certificate of discharge of property to be filed in such Federal tax lien
registry,</quote> after <quote>certificate of discharge of such
property</quote> in paragraph (4).</text>
</subparagraph></paragraph><paragraph commented="no" display-inline="no-display-inline" id="ID766eee2e012c40b18cadf7159b05a782"><enum>(4)</enum><header display-inline="yes-display-inline">Discharge of property from estate or gift
tax lien</header><text display-inline="yes-display-inline">Section 6325(c) is
amended by inserting <quote>, and shall cause the certificate of discharge to
be filed in the Federal tax lien registry operated under section
6323(k),</quote> after <quote>imposed by section 6324</quote>.</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="ID6ab355f4c9634934a2040942ed98da56"><enum>(5)</enum><header display-inline="yes-display-inline">Subordination of lien</header><text display-inline="yes-display-inline">Section 6325(d) is amended by inserting
<quote>, and shall cause the certificate of subordination to be filed in the
Federal tax lien registry operated under section 6323(k),</quote> after
<quote>subject to such lien</quote>.</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="ID16a74fb60a594b509778f463b7092748"><enum>(6)</enum><header display-inline="yes-display-inline">Nonattachment of lien</header><text display-inline="yes-display-inline">Section 6325(e) is amended by inserting
<quote>, and shall cause the certificate of nonattachment to be filed in the
Federal tax lien registry operated under section 6323(k),</quote> after
<quote>property of such person</quote>.</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="ID4db79ef7f14644a5aabbc02c6f6e9340"><enum>(7)</enum><header display-inline="yes-display-inline">Effect of certificate</header><text display-inline="yes-display-inline">Paragraphs (1) and (2)(B) of section
6325(f) are each amended by striking <quote>in the same office as the notice of
lien to which it relates is filed (if such notice of lien has been
filed)</quote> and inserting <quote>in the Federal tax lien registry operated
under section 6323(k)</quote>.</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="id79D62D75FD4A41C7B266DEC020B5DDAE"><enum>(8)</enum><header display-inline="yes-display-inline">Release following administrative
appeal</header><text display-inline="yes-display-inline">Section 6326(b) is
amended—</text>
<subparagraph commented="no" display-inline="no-display-inline" id="idF25CE0B65BC241C3B4774E8A25B42669"><enum>(A)</enum><text display-inline="yes-display-inline">by striking <quote>and shall
include</quote> and insert <quote>, shall include</quote>, and</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="idCE254B4F44304F44AEB16F4989B4BB3F"><enum>(B)</enum><text display-inline="yes-display-inline">by inserting <quote>, and shall cause the
certificate of release to be filed in the Federal tax lien registry operated
under section 6323(k),</quote> after <quote>erroneous</quote>.</text>
</subparagraph></paragraph><paragraph commented="no" display-inline="no-display-inline" id="id75A5E75B33904A438DE185AB185BC1EB"><enum>(9)</enum><header>Withdrawal of
notice</header><text>Section 6323(j)(1) is amended by striking <quote>at the
same office as the withdrawn notice</quote> and inserting <quote>in the Federal
tax lien registry operated under section 6323(k)</quote>.</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="IDf7fa2cb41a404873932aca62025aa6dc"><enum>(10)</enum><header display-inline="yes-display-inline">Conforming amendments</header><text display-inline="yes-display-inline">Section 6325 is amended by striking
subsection (g) and by redesignating subsection (h) as subsection (g).</text>
</paragraph></subsection><subsection commented="no" display-inline="no-display-inline" id="id31B67E686FF44BDC9A5011C8B5EC1438"><enum>(d)</enum><header display-inline="yes-display-inline">Federal tax lien registry</header><text display-inline="yes-display-inline">Section 6323 is amended by adding at the
end the following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="id58FE3378886C40B9B8D86ACC6413F5C4" style="OLC">
<subsection commented="no" display-inline="no-display-inline" id="id452279B5AD554181AFA86CC9A2F87399"><enum>(k)</enum><header display-inline="yes-display-inline">Federal tax lien registry</header>
<paragraph commented="no" display-inline="no-display-inline" id="idFCE151E63CAE4415B3EFB8DF26824A55"><enum>(1)</enum><header display-inline="yes-display-inline">In general</header><text display-inline="yes-display-inline">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 search. The registry shall identify the taxpayer to whom the
Federal tax lien applies and reflect the date and time the notice of lien was
filed, and shall be made searchable by, at a minimum, taxpayer name, the State
of the taxpayer’s address as shown on the notice of lien, the type of tax, and
the tax period. The registry shall also provide for the filing of certificates
of release, discharge, subordination, and nonattachment of Federal tax liens,
as authorized in sections 6325 and 6326, 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 (2)(C).</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="idCBE54EB5D0644B02952A65AE493D8356"><enum>(2)</enum><header display-inline="yes-display-inline">Administrative action</header>
<subparagraph commented="no" display-inline="no-display-inline" id="idCFABD493E44F4A2FA15D7A376DF28B47"><enum>(A)</enum><header display-inline="yes-display-inline">In general</header><text display-inline="yes-display-inline">The Secretary shall issue regulations or
other guidance providing for the maintenance, reliability, accessibility, and
use of the Federal tax lien registry established under paragraph (1). Such
regulations or guidance shall address, among other matters, issues related to
periods during which the registry may be unavailable for use due to routine
maintenance or other activities.</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="idB52CEA7B903545F796DB1ACB5FBC7631"><enum>(B)</enum><header>Fees</header><text display-inline="yes-display-inline">The Secretary may charge a taxpayer's
account with a reasonable filing fee for each notice of lien and each related
certificate, notice, or other filing recorded in the Federal tax lien registry
with respect to such taxpayer, in an amount determined by the Secretary to be
sufficient to defray the costs of operating the registry. The Secretary may
also charge a reasonable fee to any person who requests and receives under
section 6323(d)(1) information or a certified copy of a filing in the Federal
tax lien registry to defray the costs of providing such information or
copies.</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="id4F23568297F4409A94936B6C728D1BEC"><enum>(C)</enum><header>Filing of other
items on registry</header><text display-inline="yes-display-inline">The
Secretary may, by regulation, provide for the filing of items on the registry
other than Federal tax liens, including criminal fine judgments under section
3613 of title 18, United States Code, and civil judgments under section 3201 of
such title, if the Secretary determines that it would be useful and appropriate
to do
so.</text>
</subparagraph></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection commented="no" display-inline="no-display-inline" id="id6F83A48D7EEE47BCB10055FF6D9968E5"><enum>(e)</enum><header>Certified
copies of information from registry</header><text>Section 6323, as amended by
subsection (d), is amended by adding at the end the following new
subsection:</text>
<quoted-block display-inline="no-display-inline" id="id7728046AD6A74B2A907B25F9998698D0" style="OLC">
<subsection id="ID7763e1d3569847879b9667fda00c5687"><enum>(l)</enum><header>Certified
copies of information from Federal registry</header><text>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 Secretary:</text>
<paragraph id="ID9b7e9801bfa346c99ea67fcd311a59eb"><enum>(1)</enum><text>Whether there is
on file in the Federal tax lien registry operated under subsection (k) at a
date and time specified by the Secretary, but not a date earlier than 3 days
before the creation of the certificate, any notice of a lien that—</text>
<subparagraph id="id1216370CDF58459DA8C9F33751A824FC"><enum>(A)</enum><text>designates a
particular taxpayer,</text>
</subparagraph><subparagraph id="idC3EA15F5FFB04A948A52299697315A21"><enum>(B)</enum><text>has not been
fully satisfied, become legally unenforceable, or been released or withdrawn,
and</text>
</subparagraph><subparagraph id="idA865B047AB2A46DE93AC2E8D9CD68F3E"><enum>(C)</enum><text>if the request so
states, has been fully satisfied, become legally unenforceable, or been
released or withdrawn, and a record of which is maintained on the registry at
the time of filing of the request,</text>
</subparagraph></paragraph><paragraph id="id44498E6F62DF47AA91AE1AAEE200B23C"><enum>(2)</enum><text>the date and time
of filing of and the information provided in each notice of lien, and</text>
</paragraph><paragraph id="idCCC3B5A6B3D54816B1360BBFED347154"><enum>(3)</enum><text>if the request so
states, the date and time of filing of and the information provided in each
certificate of release, discharge, subordination, or non-attachment and each
notice of withdrawal recorded in the registry with respect to each notice of
lien.</text>
</paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection commented="no" display-inline="no-display-inline" id="id8032599354D347EE9B2C5DD0D0F6B22E"><enum>(f)</enum><header display-inline="yes-display-inline">Effective date; implementation of
registry</header>
<paragraph commented="no" display-inline="no-display-inline" id="idEBAED006081D4EED808863A033EC5D8D"><enum>(1)</enum><header display-inline="yes-display-inline">Effective
date</header><text display-inline="yes-display-inline">The amendments made by
this section shall take effect on the date determined by the Secretary of the
Treasury under paragraph (2)(E) and, except as provided in paragraph (2)(F),
shall apply to notices of liens filed after such date.</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="id3DF9C33AEF8C4C1A8B9B7F6E319F8B86"><enum>(2)</enum><header>Implementation
of Federal tax lien registry</header>
<subparagraph commented="no" display-inline="no-display-inline" id="idB887B267A23B4D2F9214798C1A74FB73"><enum>(A)</enum><header>Pilot
project</header><text display-inline="yes-display-inline">Prior to the
implementation of the Federal tax lien registry under section 6323(k)(1) of the
Internal Revenue Code of 1986 (as added by this section), the Secretary of the
Treasury, or the Secretary's delegate, shall conduct and shall complete by not
later than 2 years after the date of the enactment of this Act 1 or more pilot
projects to test the accessibility, reliability, and effectiveness of the
electronic systems designed to operate the registry.</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="id0110A7887B7E4985AFC08A97CFDA3332"><enum>(B)</enum><header>GAO
review</header><text display-inline="yes-display-inline">Within 3 months after
the completion of such a pilot project, the Government Accountability Office
shall provide a written evaluation of the project results and provide such
evaluation to the Secretary of the Treasury, the Commissioner of Internal
Revenue, and appropriate committees in Congress. The Secretary and Commissioner
shall cooperate with, and provide information requested by, the Government
Accountability Office to enable the evaluation to be completed by the date
specified.</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="id2A6DFAFF166B45A7895D79D32F63600A"><enum>(C)</enum><header>Nationwide
test</header><text display-inline="yes-display-inline">Upon the completion of 1
or more such pilot projects and after making a determination that the
electronic systems designed to operate the Federal tax lien registry are
sufficiently accessible, reliable, and effective, the Secretary of the
Treasury, or the Secretary's delegate, shall conduct a nationwide test of the
Federal tax lien registry to evaluate its capabilities and
functionality.</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="idE0AE96F0ACBE4F34A4B00ABD2C7CB428"><enum>(D)</enum><header>Data
protection</header><text display-inline="yes-display-inline">Prior to the
implementation of such registry, the Secretary of the Treasury, or the
Secretary's delegate, shall take appropriate steps to—</text>
<clause commented="no" display-inline="no-display-inline" id="id1A71F8CADDB147C095BB6FD3F8CA3BDD"><enum>(i)</enum><text display-inline="yes-display-inline">secure and prevent tampering with the data
recorded in the registry,</text>
</clause><clause commented="no" display-inline="no-display-inline" id="idE983D25AF0DB4D0397E6EFD24A01D4AE"><enum>(ii)</enum><text display-inline="yes-display-inline">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 registry, and</text>
</clause><clause commented="no" display-inline="no-display-inline" id="id9DF65CA98DBE46E5BCDE772122739379"><enum>(iii)</enum><text display-inline="yes-display-inline">develop a system, after consultation with
the States, industry, and other interested parties, and after consideration of
search criteria developed for other public filing systems including Article 9
of the Uniform Commercial Code, that will enable users of the registry, when
examining tax lien information for a taxpayer with a common name, to identify
through reasonable efforts the specific person to whom such tax lien
relates.</text>
</clause></subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="id6A9BA02E5B374088B9F61570ED1EA736"><enum>(E)</enum><header>Declaration of
registry effective date</header><text display-inline="yes-display-inline">Upon
the successful completion of a nationwide test of the Federal tax lien registry
system, the Secretary of the Treasury shall determine and announce publicly a
date upon which the registry shall take effect and become operational.</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="id76C85CED9BA7479D96C5F9E69B5471FE"><enum>(F)</enum><header>Orderly
transition</header><text display-inline="yes-display-inline">In order to permit
an orderly transition to the Federal tax lien registry, the Secretary of the
Treasury may by regulation prescribe for the continued filing of notices of
Federal tax liens in the offices of the States, counties, and other
governmental subdivisions after the determination of an effective date under
subparagraph (E) under the provisions of section 6323(f) as in effect before
such effective date, for an appropriate period not to exceed 2 years after such
effective date.</text>
</subparagraph></paragraph></subsection></section></subtitle><enum>III</enum><header>Ending
excessive corporate tax deductions for stock options</header>
<section commented="no" display-inline="no-display-inline" id="IDB50CA6E821AC4829BE00A83CCB7E00B3" section-type="subsequent-section"><enum>301.</enum><header display-inline="yes-display-inline">Consistent treatment of stock options by
corporations</header>
<subsection commented="no" display-inline="no-display-inline" id="IDE4B2851D10E24101A12E03CE2B22F356"><enum>(a)</enum><header display-inline="yes-display-inline">Consistent treatment for wage
deduction</header>
<paragraph commented="no" display-inline="no-display-inline" id="id067C6BD03EF5442F87271F4780946E97"><enum>(1)</enum><header display-inline="yes-display-inline">In general</header><text display-inline="yes-display-inline">Section 83(h) is amended—</text>
<subparagraph commented="no" display-inline="no-display-inline" id="ID40A9980754594A649BF33370874669ED"><enum>(A)</enum><text display-inline="yes-display-inline">by striking <quote>In the case of</quote>
and inserting:</text>
<quoted-block display-inline="no-display-inline" id="IDF0097A8DC9A742C5AA04AF683553FC64" style="OLC">
<paragraph commented="no" display-inline="no-display-inline" id="IDB2815E8B4950493A83AF20F8C966FB7C"><enum>(1)</enum><header display-inline="yes-display-inline">In general</header><text display-inline="yes-display-inline">In the case
of</text>
</paragraph><after-quoted-block>, and</after-quoted-block></quoted-block>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="ID077E9807BC204ADC8920C6EFEB9C976F"><enum>(B)</enum><text display-inline="yes-display-inline">by adding at the end the following new
paragraph:</text>
<quoted-block display-inline="no-display-inline" id="ID95A077C4F99747D18647D0E78DB15F00" style="OLC">
<paragraph commented="no" display-inline="no-display-inline" id="IDF40D7244CBA64C2C8D80D81CA55F4B6B"><enum>(2)</enum><header display-inline="yes-display-inline">Stock options</header><text display-inline="yes-display-inline">In the case of property transferred to a
person in connection with a stock option, any deduction related to such stock
option shall be allowed only under section 162(q) and paragraph (1) shall not
apply.</text>
</paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph></paragraph><paragraph commented="no" display-inline="no-display-inline" id="ID053c5de74bad4df3be190ec3b9a91690"><enum>(2)</enum><header display-inline="yes-display-inline">Treatment of compensation paid with stock
options</header><text display-inline="yes-display-inline">Section 162 is
amended by redesignating subsection (q) as subsection (r) and by inserting
after subsection (p) the following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="id6137BD18ABD74D18B9540F161B26F840" style="OLC">
<subsection commented="no" display-inline="no-display-inline" id="ID985be64811ef445e9d9766545a82b509"><enum>(q)</enum><header display-inline="yes-display-inline">Treatment of compensation paid with stock
options</header>
<paragraph commented="no" display-inline="no-display-inline" id="ID485e90db00ed41458fe95f9cf82fb63d"><enum>(1)</enum><header display-inline="yes-display-inline">In general</header><text display-inline="yes-display-inline">In the case of compensation for personal
services that is paid with stock options, the deduction under subsection (a)(1)
shall not exceed the amount the taxpayer has treated as compensation cost with
respect to such stock options for the purpose of ascertaining income, profit,
or loss in a report or statement to shareholders, partners, or other
proprietors (or to beneficiaries), and shall be taken into account in the same
period that such compensation cost is recognized for such purpose.</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="ID44d785a96d1640da954f91c41c12546f"><enum>(2)</enum><header display-inline="yes-display-inline">Special rules for controlled
groups</header><text display-inline="yes-display-inline">The Secretary may
prescribe rules for the application of paragraph (1) in cases where the stock
option is granted by—</text>
<subparagraph commented="no" display-inline="no-display-inline" id="idE3B0CC578CEA4759A48ECE4BE3F3C15B"><enum>(A)</enum><text display-inline="yes-display-inline">a parent or subsidiary corporation (within
the meaning of section 424) of the taxpayer, or</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="idF0252BC8A6454B1ABBE510B41296903D"><enum>(B)</enum><text display-inline="yes-display-inline">another
corporation.</text>
</subparagraph></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection commented="no" display-inline="no-display-inline" id="ID15D7C16BA13A4D18A07B648D21C41653"><enum>(b)</enum><header display-inline="yes-display-inline">Consistent treatment for research tax
credit</header><text display-inline="yes-display-inline">Section 41(b)(2)(D) is
amended by inserting at the end the following new clause:</text>
<quoted-block display-inline="no-display-inline" id="IDDD7AF33ADF9C4E6E9550C598443568D5" style="OLC">
<clause commented="no" display-inline="no-display-inline" id="ID78F97A97089C414B9482DEF6F6474068"><enum>(iv)</enum><header display-inline="yes-display-inline">Special rule for stock
options</header><text display-inline="yes-display-inline">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 162(q) with respect to such stock
option.</text>
</clause><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection commented="no" display-inline="no-display-inline" id="ID44cc16cf38a649cda52c210515c51b6c"><enum>(c)</enum><header display-inline="yes-display-inline">Application of amendments</header><text display-inline="yes-display-inline">The amendments made by this section shall
apply to stock options exercised after the date of the enactment of this Act,
except that—</text>
<paragraph commented="no" display-inline="no-display-inline" id="IDd9c3fea4bb994ab5bddfbb6141326d38"><enum>(1)</enum><text display-inline="yes-display-inline">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 15, 2005,</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="ID49f4780568f040058f81a3942cbde507"><enum>(2)</enum><text display-inline="yes-display-inline">for stock options that were granted before
such date of enactment and vested during taxable periods beginning after June
15, 2005, and ending before such date of enactment, a deduction under section
162(q) of the Internal Revenue Code of 1986 (as added by subsection (a)(2))
shall be allowed in the first taxable period of the taxpayer that ends after
such date of enactment,</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="ID18f6fdf11e0048108fb1fd982399ae5b"><enum>(3)</enum><text display-inline="yes-display-inline">for public entities reporting as small
business issuers and for non-public entities required to file public reports of
financial condition, paragraphs (1) and (2) shall be applied by substituting
<quote>December 15, 2005</quote> for <quote>June 15, 2005</quote>, and</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="ID51476b06889b462493d18e4e46ec2052"><enum>(4)</enum><text display-inline="yes-display-inline">no deduction shall be allowed under section
83(h) or section 162(q) 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 amendments.</text>
</paragraph></subsection></section><section commented="no" display-inline="no-display-inline" id="ID0a79042a69c945b4b20f2cbfc58d71f2" section-type="subsequent-section"><enum>302.</enum><header display-inline="yes-display-inline">Application of executive pay deduction
limit</header>
<subsection commented="no" display-inline="no-display-inline" id="IDfcf46be81b654622b7a816ce7b1fc938"><enum>(a)</enum><header display-inline="yes-display-inline">In general</header><text display-inline="yes-display-inline">Subparagraph (D) of section 162(m)(4) is
amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="idED6F8AB01621429EBD39D82C72A58E3B" style="OLC">
<subparagraph commented="no" display-inline="no-display-inline" id="IDd45e9c22ea2241939f4c725fbfb451b7"><enum>(D)</enum><header display-inline="yes-display-inline">Stock option compensation</header><text display-inline="yes-display-inline">The term <term>applicable employee
remuneration</term> shall include any compensation deducted under subsection
(q), and such compensation shall not qualify as performance-based compensation
under subparagraph
(C).</text>
</subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection commented="no" display-inline="no-display-inline" id="ID98f26001f2f24681b941059bc1a72d8b"><enum>(b)</enum><header display-inline="yes-display-inline">Effective
date</header><text display-inline="yes-display-inline">The amendment made by
this section shall apply to stock options exercised or granted after the date
of the enactment of this Act.</text>
</subsection></section><enum>IV</enum><header>Closing the
derivatives blended rate loophole</header>
<section id="idFAE828A3F4B7416BBE427F17B9A80FF2" section-type="subsequent-section"><enum>401.</enum><header>Short
title</header><text display-inline="no-display-inline">This title may be cited
as the <quote><short-title>Closing the Derivatives Blended
Rate Loophole Act</short-title></quote>.</text>
</section><section id="id01362CE826CB4474BD699F2CA6C4C585"><enum>402.</enum><header>Modifications
to treatment of section 1256 contracts</header>
<subsection id="id0B3F96B05D374A909774999658B5FA0A"><enum>(a)</enum><header>Elimination of
blended capital gain or loss treatment in favor of short-Term capital gain or
loss</header>
<paragraph id="id73D1D68D431D41FC8BA2DCF0F25BBBE9"><enum>(1)</enum><header>In
general</header><text>Paragraph (3) of section 1256(a) is amended to read as
follows:</text>
<quoted-block display-inline="no-display-inline" id="id35CCB2C68FB74A59A5F99F3F77101143" style="OLC">
<paragraph id="id3F5A15E52BD14666BA55789E7C3C71A7"><enum>(3)</enum><text>any gain or loss
with respect to a section 1256 contract shall be treated as short-term capital
gain or loss,
and</text>
</paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="id1D85CBD3A63C448EA7260C14DDC9FC43"><enum>(2)</enum><header>Conforming
amendments</header><text>Subsection (f) of section 1256 is amended by striking
paragraphs (2), (3), and (4) and by redesignating paragraph (5) as paragraph
(2).</text>
</paragraph></subsection><subsection id="idCAE8E8805C5B476FB9C432DCD5184ACE"><enum>(b)</enum><header>Conforming
amendments</header>
<paragraph id="id01310B65409C4AB5AA41703EE6C8C786"><enum>(1)</enum><text>Clause (iv) of
section 988(c)(1)(E) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="id6DBC08D20A5648FF90D599B78A29E0E8" style="OLC">
<clause id="idC99FCBA7DF3248E0873144708FEEC18E"><enum>(iv)</enum><header>Treatment of
certain currency contracts</header><text>Except as provided in regulations, in
the case of a qualified fund, any bank forward contract, any foreign currency
futures contract traded on a foreign exchange, or to the extent provided in
regulations any similar instrument, which is not otherwise a section 1256
contract shall be treated as a section 1256 contract for purposes of section
1256.</text>
</clause><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="id08EFF6BE5DBA4071A227DE60CF8AE42C"><enum>(2)</enum><text>Subparagraph (A)
of section 1212(c)(1) is amended by striking <quote>preceding taxable
year</quote> and all that follows and inserting <quote>preceding taxable year,
the amount so allowed shall be treated as short-term capital loss from section
1256 contracts.</quote>.</text>
</paragraph><paragraph id="id39D1F6FF52C944C6BC34DF0ABF93A27C"><enum>(3)</enum><text>Subparagraph (A)
of section 1212(c)(6) is amended by striking <quote>preceding taxable
year</quote> and all that follows and inserting <quote>preceding taxable year,
the amount allowed as a carryback shall be treated as short-term gain for the
loss year.</quote>.</text>
</paragraph><paragraph id="idEB1E8D6EBCFB45A59852BD98EB12406A"><enum>(4)</enum><text>Subparagraph (B)
of section 1212(c)(6) is amended by striking <quote>or
long-term</quote>.</text>
</paragraph><paragraph id="idCF2BF8AE05A441F6A18C28F4567D8CBA"><enum>(5)</enum><text>Subsection (f) of
section 1256 is amended by striking paragraphs (3) and (4) and by redesignating
paragraph (5) as paragraph (3).</text>
</paragraph></subsection><subsection id="idBFA68D50C2A4499283F5FF7BA381DCB6"><enum>(c)</enum><header>Effective
dates</header>
<paragraph id="id5BB3074CED084CD0A33CAA931CFF099A"><enum>(1)</enum><header>In
general</header><text>Except as provided in paragraph (2), the amendments made
by this section shall apply to taxable years beginning after the date of the
enactment of this Act.</text>
</paragraph><paragraph id="idD0B579FAABC549BCB0CD566A4AD74319"><enum>(2)</enum><header>Conforming
amendments</header><text>The amendments made by paragraphs (2), (3), and (4) of
subsection (b) shall apply to losses for taxable years beginning after the date
of the enactment of this Act.</text>
</paragraph></subsection></section><section id="id9A67C7F406004FBEBA29FC69988DA1FF"><enum>403.</enum><header>Modifications
to treatment of dealers in securities and commodities</header>
<subsection id="id006FF805C312430A9C207CF394433B15"><enum>(a)</enum><header>Modification of
definition of security</header><text>Paragraph (2) of section 475(c) is amended
by striking the second sentence.</text>
</subsection><subsection id="id405CE5F6FA54411E8EE33BBCC0181BEA"><enum>(b)</enum><header>Required mark
to market for dealers in commodities</header><text>Subsection (e) of section
475 is amended—</text>
<paragraph id="idBA3F9F89FAD840149469A8B5F16D598D"><enum>(1)</enum><text>by striking
<quote>In the case of a dealer in commodities who elects the application of
this subsection, this section shall apply to commodities held by such
dealer</quote> in paragraph (1) and inserting <quote>This section shall apply
to commodities held by a dealer in commodities</quote>, and</text>
</paragraph><paragraph id="idEFD91895E1DA472396C28698AA876AE7"><enum>(2)</enum><text>by striking
paragraph (3).</text>
</paragraph></subsection><subsection id="idF5231126310E4DAD95CEA43386D92567"><enum>(c)</enum><header>Commodities
derivatives dealers</header><text>Clause (i) of section 1221(b)(1)(B) is
amended by striking <quote>a note, bond, or other evidence of indebtedness, or
a section 1256 contract (as defined in section 1256(b))</quote> and inserting
<quote>or a note, bond, or other evidence of indebtedness)</quote>.</text>
</subsection><subsection id="idB2458B6B6F084164B594C9DAC74A4491"><enum>(d)</enum><header>Technical
amendment</header><text>Paragraph (1) of section 1402(i) is amended by striking
<quote>subsection (a)(3)(A)</quote> and inserting <quote>subsection
(a)(3)</quote>.</text>
</subsection><subsection commented="no" display-inline="no-display-inline" id="idFB1C6F3110EC4C91B3C35120851BA7C4"><enum>(e)</enum><header>Effective
date</header><text>The amendments made by this section shall apply to taxable
years beginning after the date of the enactment of this Act.</text>
</subsection></section><enum>V</enum><header>Ending the tar
sands oil spill loophole</header>
<section id="H67764FBDFECC4A6A93CE249F2BB6D957" section-type="subsequent-section"><enum>501.</enum><header>Short
title</header><text display-inline="no-display-inline">This title may be cited
as the <quote><short-title>Closing the Oil Spill Cleanup
Loophole Act</short-title></quote>.</text>
</section><section id="id033B11F56402470184F44B519F37952E" section-type="subsequent-section"><enum>502.</enum><header>Requirements for
contribution to the Oil Spill Liability Trust Fund</header>
<subsection id="H26B1F727B07C41AAB03F549AA0B0BA44"><enum>(a)</enum><header>In
general</header><text display-inline="yes-display-inline">Paragraph (1) of
section 4612(a) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="idE6C3D095C6B6487C9D2B8EAAA1FC5803" style="OLC">
<paragraph id="idF63A152DC36E4FE7A71B929BD5C9A4E7"><enum>(1)</enum><header>Crude
oil</header><text display-inline="yes-display-inline">The term <term>crude
oil</term> includes crude oil condensates, natural gasoline, shale oil, any
bitumen or bituminous mixture, any oil derived from a bitumen or bituminous
mixture, and any oil derived from kerogen-bearing
sources.</text>
</paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="id0A45C82033CD4E978D8FF72398BB4023"><enum>(b)</enum><header>Regulatory
authority To address other types of crude oil and petroleum
products</header><text>Subsection (a) of section 4612 is amended by adding at
the end the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="idA8E473783811471992D209B2E09B6E36" style="OLC">
<paragraph id="idCA74D6E015F74F74A9361B1938F2699D"><enum>(10)</enum><header>Regulatory
authority to address other types of crude oil and petroleum
products</header><text display-inline="yes-display-inline">Under such
regulations as the Secretary may prescribe, after consultation with the
Administrator of the Environmental Protection Agency, the Secretary may include
as crude oil or as a petroleum product subject to tax under section 4611, any
fuel feedstock or finished fuel product customarily transported by pipeline,
vessel, railcar, or tanker truck if the Secretary determines that—</text>
<subparagraph id="id175519C9E39248BE8274CC69D8D6D152"><enum>(A)</enum><text display-inline="yes-display-inline">the classification of such fuel feedstock
or finished fuel product is consistent with the definition of oil under the Oil
Pollution Act of 1990, and</text>
</subparagraph><subparagraph id="idE185B78D345C4446B3CE750BD40B77E8"><enum>(B)</enum><text display-inline="yes-display-inline">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
discharge.</text>
</subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="idC9CF72811C224E909B13C7AF831000FC"><enum>(c)</enum><header>Removing
restrictions relating to oil wells and extraction methods</header><text display-inline="yes-display-inline">Paragraph (2) of section 4612(a) is amended
by striking <quote>from a well located</quote>.</text>
</subsection><subsection id="HCAC58773C1A945E7B49EC9BEDC783F1C"><enum>(d)</enum><header>Effective
date</header><text>The amendments made by this section shall apply to oil and
petroleum products received or entered during calendar quarters beginning more
than 60 days after the date of the enactment of this Act, regardless of whether
the Secretary of the Treasury has promulgated regulations implementing such
amendments.</text>
</subsection></section><section id="idEF981CAE90B04D0DBBC8C03DB9153D7E"><enum>503.</enum><header>Extension of
Oil Spill Liability Trust Fund financing rate</header><text display-inline="no-display-inline">Section 4611 is amended by striking
subsection (f).</text>
</section><section commented="no" display-inline="no-display-inline" id="id27816433F3854D78AAA6BE758A190DDE" section-type="subsequent-section"><enum>504.</enum><header>Technical
amendment</header><text display-inline="no-display-inline">Subclause (I) of
section 4612(e)(2)(B)(ii) is amended by striking <quote>tranferred</quote> and
inserting <quote>transferred</quote>.</text>
</section><enum>VI</enum><header>Ending the
carried interest loophole</header>
<section display-inline="no-display-inline" id="H8D6E956B2F2E4935970100758D37839E" section-type="subsequent-section"><enum>601.</enum><header>Short title;
etc</header><text display-inline="no-display-inline">This title may be cited as
the <quote><short-title>Carried Interest Fairness Act of
2012</short-title></quote>.</text>
</section><section commented="no" display-inline="no-display-inline" id="H57425BB0DAD9475FB774E9F2F4BC1C90" section-type="subsequent-section"><enum>602.</enum><header>Partnership
interests transferred in connection with performance of services</header>
<subsection commented="no" id="H29F60B11490E4BEF840B52B4103CA83A"><enum>(a)</enum><header>Modification to
election To include partnership interest in gross income in year of
transfer</header><text display-inline="yes-display-inline">Subsection (c) of
section 83 is amended by redesignating paragraph (4) as paragraph (5) and by
inserting after paragraph (3) the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="H501867F6D9C94596A5781CEEF03C8A56" style="OLC">
<paragraph id="HFF5FEA3B4BF94EA080E0FFD0BBFC6DA3"><enum>(4)</enum><header>Partnership
interests</header><text display-inline="yes-display-inline">Except as provided
by the Secretary—</text>
<subparagraph id="H4CDA28B1760C438084A24A15AB354539"><enum>(A)</enum><header>In
general</header><text>In the case of any transfer of an interest in a
partnership in connection with the provision of services to (or for the benefit
of) such partnership—</text>
<clause id="HF585337F00F64D9F8B874BEFF9D4735A"><enum>(i)</enum><text display-inline="yes-display-inline">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 (at
the time of the transfer) all of its assets at fair market value and
distributed the proceeds of such sale (reduced by the liabilities of the
partnership) to its partners in liquidation of the partnership, and</text>
</clause><clause id="H47F2B76B9EE0463A81F497B8457A886A"><enum>(ii)</enum><text>the person
receiving such interest shall be treated as having made the election under
subsection (b)(1) unless such person makes an election under this paragraph to
have such subsection not apply.</text>
</clause></subparagraph><subparagraph id="HA125949BF7F44A8CAC54C1D6718BE92C"><enum>(B)</enum><header>Election</header><text>The
election under subparagraph (A)(ii) shall be made under rules similar to the
rules of subsection
(b)(2).</text>
</subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H3AAFE1197F8F44E3845F4480BDB0AA7F"><enum>(b)</enum><header>Effective
date</header><text>The amendments made by this section shall apply to interests
in partnerships transferred after the date of the enactment of this Act.</text>
</subsection></section><section display-inline="no-display-inline" id="H0CFEA5C29EAA4E8B96CF5572C134D247" section-type="subsequent-section"><enum>603.</enum><header>Special rules for
partners providing investment management services to partnerships</header>
<subsection id="HDF86C4CAC7E2481C8D72A77779863FB3"><enum>(a)</enum><header>In
general</header><text>Part I of subchapter K of chapter 1 is amended by adding
at the end the following new section:</text>
<quoted-block display-inline="no-display-inline" id="HEE22702F3BDE4BE5BC35214A76B5069E" style="OLC">
<section id="H81E230B949B349C4AB5E4D4A70CA990C"><enum>710.</enum><header>Special rules
for partners providing investment management services to partnerships</header>
<subsection id="H97BC7A3928424F61BBA66ECD451D7C24"><enum>(a)</enum><header>Treatment of
distributive share of partnership items</header><text display-inline="yes-display-inline">For purposes of this title, in the case of
an investment services partnership interest—</text>
<paragraph id="H7726C784B46549CFB34D1936811BCF01"><enum>(1)</enum><header>In
general</header><text>Notwithstanding section 702(b)—</text>
<subparagraph id="H6841F6B338414DA39D0EB6CA2CC498E7"><enum>(A)</enum><text>an amount equal to
the net capital gain with respect to such interest for any partnership taxable
year shall be treated as ordinary income, and</text>
</subparagraph><subparagraph id="H00CDD1ACDA6E4860B564B63FE99F9346"><enum>(B)</enum><text>subject to the
limitation of paragraph (2), an amount equal to the net capital loss with
respect to such interest for any partnership taxable year shall be treated as
an ordinary loss.</text>
</subparagraph></paragraph><paragraph id="HEAE837A3BEA3443B85FC15B8213BEAAC"><enum>(2)</enum><header>Recharacterization
of losses limited to recharacterized gains</header><text>The amount treated as
ordinary loss under paragraph (1)(B) for any taxable year shall not exceed the
excess (if any) of—</text>
<subparagraph id="H86988F5FAF444E348340DC65701785E7"><enum>(A)</enum><text>the aggregate
amount treated as ordinary income under paragraph (1)(A) with respect to the
investment services partnership interest for all preceding partnership taxable
years to which this section applies, over</text>
</subparagraph><subparagraph id="H2A470000880A497E82D03B21C4088DA2"><enum>(B)</enum><text>the aggregate
amount treated as ordinary loss under paragraph (1)(B) with respect to such
interest for all preceding partnership taxable years to which this section
applies.</text>
</subparagraph></paragraph><paragraph id="HFC66298B9C234E659D62DCDDC4AF0F40"><enum>(3)</enum><header>Allocation to
items of gain and loss</header>
<subparagraph id="HFB73C712DB744B68AFC3B12CB8551521"><enum>(A)</enum><header>Net capital
gain</header><text>The amount treated as ordinary income under paragraph (1)(A)
shall be allocated ratably among the items of long-term capital gain taken into
account in determining such net capital gain.</text>
</subparagraph><subparagraph id="H6A03E80566D84534BE9F2CF7021EF6C8"><enum>(B)</enum><header>Net capital
loss</header><text>The amount treated as ordinary loss under paragraph (1)(B)
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
loss.</text>
</subparagraph></paragraph><paragraph id="H59980574CA8F41C593B51D871A217CE3"><enum>(4)</enum><header>Terms relating
to capital gains and losses</header><text>For purposes of this section—</text>
<subparagraph id="H56906125679E4DCE8F46939DC9E7F6C1"><enum>(A)</enum><header>In
general</header><text>Net capital gain, long-term capital gain, and long-term
capital loss, with respect to any investment services partnership interest for
any taxable year, shall be determined under section 1222, except that such
section shall be applied—</text>
<clause id="HE059E65ADB40487A85D65DFB7EB9BD9D"><enum>(i)</enum><text>without regard to
the recharacterization of any item as ordinary income or ordinary loss under
this section,</text>
</clause><clause id="H51A9FCA546694039812A3DAB3CB39C1B"><enum>(ii)</enum><text>by only taking
into account items of gain and loss taken into account by the holder of such
interest under section 702 with respect to such interest for such taxable year,
and</text>
</clause><clause id="H262239005663479BBFE5A7EDA2162532"><enum>(iii)</enum><text>by treating
property which is taken into account in determining gains and losses to which
section 1231 applies as capital assets held for more than 1 year.</text>
</clause></subparagraph><subparagraph id="H92319DB8021040AEB9C47881A9BE01C9"><enum>(B)</enum><header>Net capital
loss</header><text>The term <term>net capital loss</term> means the excess of
the losses from sales or exchanges of capital assets over the gains from such
sales or exchanges. Rules similar to the rules of clauses (i) through (iii) of
subparagraph (A) shall apply for purposes of the preceding sentence.</text>
</subparagraph></paragraph><paragraph id="HA53EE80F596F4483A544C46A0CC64A68"><enum>(5)</enum><header>Special rules
for dividends</header>
<subparagraph id="H42A675FC41614E219824D267ECE3497D"><enum>(A)</enum><header>Individuals</header><text>Any
dividend allocated to any investment services partnership interest shall not be
treated as qualified dividend income for purposes of section 1(h).</text>
</subparagraph><subparagraph id="HE35A8B489EE7459CB56788171DAF279C"><enum>(B)</enum><header>Corporations</header><text>No
deduction shall be allowed under section 243 or 245 with respect to any
dividend allocated to any investment services partnership interest.</text>
</subparagraph></paragraph><paragraph id="HE981934896974C1787E5A4AFCAE3B1FB"><enum>(6)</enum><header>Special rule for
qualified small business stock</header><text display-inline="yes-display-inline">Section 1202 shall not apply to any gain
from the sale or exchange of qualified small business stock (as defined in
section 1202(c)) allocated with respect to any investment services partnership
interest.</text>
</paragraph></subsection><subsection id="H9BF82464237346CD8D7FB3C1DD0E87E8"><enum>(b)</enum><header>Dispositions of
partnership interests</header>
<paragraph id="HC03E0BE49EFC448791B70C0FD4E5D1A4"><enum>(1)</enum><header>Gain</header>
<subparagraph id="H8024A6DC00E046D9B2F0C623F07458A5"><enum>(A)</enum><header>In
general</header><text>Any gain on the disposition of an investment services
partnership interest shall be—</text>
<clause id="H0A95482448584CE280CE349283A0E688"><enum>(i)</enum><text>treated as
ordinary income, and</text>
</clause><clause id="H5ADC3E1527424454A3EF134D1D27FF0A"><enum>(ii)</enum><text>recognized
notwithstanding any other provision of this subtitle.</text>
</clause></subparagraph><subparagraph id="H35D84079453B4E00993AC159A9A94E51"><enum>(B)</enum><header>Gift and
transfers at death</header><text>In the case of a disposition of an investment
services partnership interest by gift or by reason of death of the
taxpayer—</text>
<clause id="H96BD748552024F20849D3E45ACB9E593"><enum>(i)</enum><text>subparagraph (A)
shall not apply,</text>
</clause><clause id="H130C920C0B2E4E2E92AB98ED949F753E"><enum>(ii)</enum><text>such interest
shall be treated as an investment services partnership interest in the hands of
the person acquiring such interest, and</text>
</clause><clause id="HC533523CD82D408FB87109AC88FB9682"><enum>(iii)</enum><text>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 691.</text>
</clause></subparagraph></paragraph><paragraph id="H9C631F135B554B4892156586F86EE470"><enum>(2)</enum><header>Loss</header><text>Any
loss on the disposition of an investment services partnership interest shall be
treated as an ordinary loss to the extent of the excess (if any) of—</text>
<subparagraph id="H375DFB460FC54C13B34131932821AC5C"><enum>(A)</enum><text>the aggregate
amount treated as ordinary income under subsection (a) with respect to such
interest for all partnership taxable years to which this section applies,
over</text>
</subparagraph><subparagraph id="H4B380026C5A44F2B8E639EA07A9DEF73"><enum>(B)</enum><text>the aggregate
amount treated as ordinary loss under subsection (a) with respect to such
interest for all partnership taxable years to which this section
applies.</text>
</subparagraph></paragraph><paragraph id="H0C7F424940504CA8AF2EFA3B855D83C8"><enum>(3)</enum><header>Election with
respect to certain exchanges</header><text>Paragraph (1)(A)(ii) shall not apply
to the contribution of an investment services partnership interest to a
partnership in exchange for an interest in such partnership if—</text>
<subparagraph id="HDC8F8BED778842D0A752E4FB9CBA2255"><enum>(A)</enum><text>the taxpayer makes
an irrevocable election to treat the partnership interest received in the
exchange as an investment services partnership interest, and</text>
</subparagraph><subparagraph id="H72A89189E01B464B959A382CBD4D7552"><enum>(B)</enum><text>the taxpayer
agrees to comply with such reporting and recordkeeping requirements as the
Secretary may prescribe.</text>
</subparagraph></paragraph><paragraph commented="no" display-inline="no-display-inline" id="HD06D59DE651A4C48BD4873C99F94BFB4"><enum>(4)</enum><header>Distributions of
partnership property</header>
<subparagraph id="HB76706612ECE4ACD99B5B6D3BC55C7E1"><enum>(A)</enum><header>In
general</header><text>In the case of any distribution of property by a
partnership with respect to any investment services partnership interest held
by a partner, the partner receiving such property shall recognize gain equal to
the excess (if any) of—</text>
<clause commented="no" id="H9E1B0556D6C2406C8E4E57B0821D7A4C"><enum>(i)</enum><text>the fair market
value of such property at the time of such distribution, over</text>
</clause><clause commented="no" id="H791BF7C5F65F46F4BC863C88F4A4AB0A"><enum>(ii)</enum><text>the adjusted
basis of such property in the hands of such partner (determined without regard
to subparagraph (C)).</text>
</clause></subparagraph><subparagraph id="H4F83EF3D6A01409F8FFC29202231DA72"><enum>(B)</enum><header>Treatment of
gain as ordinary income</header><text>Any gain recognized by such partner under
subparagraph (A) 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 (a) if,
immediately prior to the distribution, the partnership had sold the distributed
property at fair market value and all of the gain from such disposition were
allocated to such partner. For purposes of applying subsection (a)(2), any gain
treated as ordinary income under this subparagraph shall be treated as an
amount treated as ordinary income under subsection (a)(1)(A).</text>
</subparagraph><subparagraph id="H94BD2E4362174798B1B14CCE50B02184"><enum>(C)</enum><header>Adjustment of
basis</header><text>In the case a distribution to which subparagraph (A)
applies, the basis of the distributed property in the hands of the distributee
partner shall be the fair market value of such property.</text>
</subparagraph><subparagraph id="H93E1CDF64451433E8C26ADF347FEFB3A"><enum>(D)</enum><header>Special rules
with respect to mergers, divisions, and technical terminations</header><text>In
the case of a taxpayer which satisfies requirements similar to the requirements
of subparagraphs (A) and (B) of paragraph (3), this paragraph and paragraph
(1)(A)(ii) shall not apply to the distribution of a partnership interest if
such distribution is in connection with a contribution (or deemed contribution)
of any property of the partnership to which section 721 applies pursuant to a
transaction described in paragraph (1)(B) or (2) of section 708(b).</text>
</subparagraph></paragraph></subsection><subsection id="H9BD06301A2EB41048FA8FF1F69F7D384"><enum>(c)</enum><header>Investment
services partnership interest</header><text display-inline="yes-display-inline">For purposes of this section—</text>
<paragraph commented="no" id="H6A9FB051492F4576B4136672C1FDCB97"><enum>(1)</enum><header>In
general</header><text display-inline="yes-display-inline">The term
<term>investment services partnership interest</term> 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 (2) by such person (or
any person related to such person). An interest in an investment partnership
held by any person—</text>
<subparagraph id="H7FEDA508BE574254B7525976F34CA6F7"><enum>(A)</enum><text>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
business,</text>
</subparagraph><subparagraph id="H3C22614BB94E42C3990F02793C629A6D"><enum>(B)</enum><text>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 business,
and</text>
</subparagraph><subparagraph id="H0DEED4BE32234956B85FA460C3D72CC1"><enum>(C)</enum><text>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
interest.</text>
</subparagraph></paragraph><paragraph id="HC72478A2224F494786E9D4919F940467"><enum>(2)</enum><header>Businesses to
which this section applies</header><text display-inline="yes-display-inline">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 (directly or indirectly) by the investment partnership
referred to in paragraph (1):</text>
<subparagraph id="H8E4B0B15686441339693DD9E9E824D13"><enum>(A)</enum><text>Advising as to the
advisability of investing in, purchasing, or selling any specified
asset.</text>
</subparagraph><subparagraph id="H1B6A1FA2918C42B5ADCF9E76FB621613"><enum>(B)</enum><text>Managing,
acquiring, or disposing of any specified asset.</text>
</subparagraph><subparagraph id="H1EEF93F0194B4F2EAF626905E452BDEA"><enum>(C)</enum><text>Arranging
financing with respect to acquiring specified assets.</text>
</subparagraph><subparagraph id="HAE8CD1E46F9E42D38358C0789138B677"><enum>(D)</enum><text>Any activity in
support of any service described in subparagraphs (A) through (C).</text>
</subparagraph></paragraph><paragraph id="HE465C0CB4D264A44BD4F13D8A9DC7DFC"><enum>(3)</enum><header>Investment
partnership</header>
<subparagraph id="H5CC6FE6E1E454ACB8952042FAD3892AB"><enum>(A)</enum><header>In
general</header><text>The term <term>investment partnership</term> means any
partnership if, at the end of any calendar quarter ending after the date of
enactment of this section—</text>
<clause id="HCFF95B2F283346F5B15563C2293DD376"><enum>(i)</enum><text>substantially all
of the assets of the partnership are specified assets (determined without
regard to any section 197 intangible within the meaning of section 197(d)),
and</text>
</clause><clause id="H13CE77622AD34C9280B3579A176D0C54"><enum>(ii)</enum><text>more than half of
the capital of the partnership is attributable to qualified capital interests
which (in the hands of the owners of such interests) constitute property not
held in connection with a trade or business.</text>
</clause></subparagraph><subparagraph id="H303DA07D3151430DA0C3EC351E8CFC1B"><enum>(B)</enum><header>Special rules
for determining if property not held in connection with trade or
business</header><text>Except as otherwise provided by the Secretary, for
purposes of determining whether any interest in a partnership constitutes
property not held in connection with a trade or business under subparagraph
(A)(ii)—</text>
<clause id="H764F266DC60B479F8607FE0B8452F649"><enum>(i)</enum><text>any election under
subsection (e) or (f) of section 475 shall be disregarded, and</text>
</clause><clause id="HC967248320AA4BFAA38BCBBA46DC3A16"><enum>(ii)</enum><text>paragraph (5)(B)
shall not apply.</text>
</clause></subparagraph><subparagraph id="H388AD31E8CA746D3A0D8996ED820F6DE"><enum>(C)</enum><header>Antiabuse
rules</header><text>The Secretary may issue regulations or other guidance which
prevent the avoidance of the purposes of subparagraph (A), including
regulations or other guidance which treat convertible and contingent debt (and
other debt having the attributes of equity) as a capital interest in the
partnership.</text>
</subparagraph><subparagraph id="H6EF9AA0D12194671B0CDA48062475951"><enum>(D)</enum><header>Controlled
groups of entities</header>
<clause id="H217313E38D764C7BA86B5CC3036784E9"><enum>(i)</enum><header>In
general</header><text>In the case of a controlled group of entities, 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 (in the
hands of such member) constitute property held in connection with a trade or
business, then any interest in such partnership held by any member of such
group shall be treated for purposes of subparagraph (A) as constituting (in the
hands of such member) property held in connection with a trade or
business.</text>
</clause><clause display-inline="no-display-inline" id="HD6D0183E497E4AD7A9824D49AA5DE7B1"><enum>(ii)</enum><header>Controlled
group of entities</header><text display-inline="yes-display-inline">For
purposes of clause (i), the term <term>controlled group of entities</term>
means a controlled group of corporations as defined in section 1563(a)(1),
applied without regard to subsections (a)(4) and (b)(2) of section 1563. A
partnership or any other entity (other than a corporation) shall be treated as
a member of a controlled group of entities if such entity is controlled (within
the meaning of section 954(d)(3)) by members of such group (including any
entity treated as a member of such group by reason of this sentence).</text>
</clause></subparagraph><subparagraph id="H85B29F4C48E34DFBB48DCDD01E8AA2D1"><enum>(E)</enum><header>Special rule for
corporations</header><text>For purposes of this paragraph, in the case of a
corporation, the determination of whether property is held in connection with a
trade or business shall be determined as if the taxpayer were an
individual.</text>
</subparagraph></paragraph><paragraph id="H2BEA48B1A71147A7B07BE0D12A5C2BF2"><enum>(4)</enum><header>Specified
asset</header><text>The term <term>specified asset</term> means securities (as
defined in section 475(c)(2) without regard to the last sentence thereof), real
estate held for rental or investment, interests in partnerships, commodities
(as defined in section 475(e)(2)), cash or cash equivalents, or options or
derivative contracts with respect to any of the foregoing.</text>
</paragraph><paragraph display-inline="no-display-inline" id="H0F9B3BCCDB0C489F8898C2A4C3537EC8"><enum>(5)</enum><header>Related
persons</header>
<subparagraph id="H8296750B1DB14BC5974088E61F3C4653"><enum>(A)</enum><header>In
general</header><text>A person shall be treated as related to another person if
the relationship between such persons is described in section 267(b) or
707(b).</text>
</subparagraph><subparagraph id="HB55B451304E440B4BA432AC9A2321E8B"><enum>(B)</enum><header>Attribution of
partner services</header><text>Any service described in paragraph (2) which is
provided by a partner of a partnership shall be treated as also provided by
such partnership.</text>
</subparagraph></paragraph></subsection><subsection id="H1C2F849FF95F427CA6DEC4CAAA66CEC3"><enum>(d)</enum><header>Exception for
certain capital interests</header>
<paragraph id="HD35E04ED6E074F97842D2BAE7FAA4318"><enum>(1)</enum><header>In
general</header><text>In the case of any portion of an investment services
partnership interest which is a qualified capital interest, all items of gain
and loss (and any dividends) which are allocated to such qualified capital
interest shall not be taken into account under subsection (a) if—</text>
<subparagraph id="H1CFBC8F447CE4D01ACC45EC15F601341"><enum>(A)</enum><text>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 (c)(2)
and who are not related to the partner holding the qualified capital interest,
and</text>
</subparagraph><subparagraph id="H316AAF391B8A4C0FA84A9445129C61C2"><enum>(B)</enum><text>the allocations
made to such other interests are significant compared to the allocations made
to such qualified capital interest.</text>
</subparagraph></paragraph><paragraph id="H6B462D5358224FE1BDAF75B1174F843B"><enum>(2)</enum><header>Authority to
provide exceptions to allocation requirements</header><text display-inline="yes-display-inline">To the extent provided by the Secretary in
regulations or other guidance—</text>
<subparagraph id="HDA1E855D205F4257BD456316FF542258"><enum>(A)</enum><header>Allocations to
portion of qualified capital interest</header><text>Paragraph (1) may be
applied separately with respect to a portion of a qualified capital
interest.</text>
</subparagraph><subparagraph id="H6435072D688D4A70AFEAA3783C533372"><enum>(B)</enum><header>No or
insignificant allocations to nonservice providers</header><text display-inline="yes-display-inline">In any case in which the requirements of
paragraph (1)(B) are not satisfied, items of gain and loss (and any dividends)
shall not be taken into account under subsection (a) to the extent that such
items are properly allocable under such regulations or other guidance to
qualified capital interests.</text>
</subparagraph><subparagraph id="H8BC7AE9CFE10455181533437F159F5C3"><enum>(C)</enum><header>Allocations to
service providers’ qualified capital interests which are less than other
allocations</header><text>Allocations shall not be treated as failing to meet
the requirement of paragraph (1)(A) 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 paragraph.</text>
</subparagraph></paragraph><paragraph commented="no" id="HBE8E5D3CBE4E4E299DEE70DD623E1127"><enum>(3)</enum><header>Special rule for
changes in services and capital contributions</header><text display-inline="yes-display-inline">In the case of an interest in a partnership
which was not an investment services partnership interest and which, by reason
of a change in the services with respect to assets held (directly or
indirectly) by the partnership or by reason of a change in the capital
contributions to such partnership, becomes an investment services partnership
interest, the qualified capital interest of the holder of such partnership
interest immediately after such change shall not, for purposes of this
subsection, be less than the fair market value of such interest (determined
immediately before such change).</text>
</paragraph><paragraph id="H00187C904BD747A285703DAE4FAD81A2"><enum>(4)</enum><header>Special rule for
tiered partnerships</header><text>Except as otherwise provided by the
Secretary, in the case of tiered partnerships, all items which are allocated in
a manner which meets the requirements of paragraph (1) 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
partnership.</text>
</paragraph><paragraph id="H7B82CDA1003643DAA084E14A798DE46F"><enum>(5)</enum><header>Exception for
no-self-charged carry and management fee provisions</header><text>Except as
otherwise provided by the Secretary, an interest shall not fail to be treated
as satisfying the requirement of paragraph (1)(A) merely because the
allocations made by the partnership to such interest do not reflect the cost of
services described in subsection (c)(2) which are provided (directly or
indirectly) to the partnership by the holder of such interest (or a related
person).</text>
</paragraph><paragraph display-inline="no-display-inline" id="HD696D9B78F134032801977512707FEBB"><enum>(6)</enum><header>Special rule for
dispositions</header><text display-inline="yes-display-inline">In the case of
any investment services partnership interest any portion of which is a
qualified capital interest, subsection (b) 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—</text>
<subparagraph id="H05FDC377C062423080A53DCDA9DB15A6"><enum>(A)</enum><text display-inline="yes-display-inline">the distributive share of gain or loss that
would have been allocated to the qualified capital interest (consistent with
the requirements of paragraph (1)) if the partnership had sold all of its
assets at fair market value immediately before the disposition, bears to</text>
</subparagraph><subparagraph id="H795F30FCD2404094864B362332B5AE94"><enum>(B)</enum><text>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
part.</text>
</subparagraph></paragraph><paragraph commented="no" display-inline="no-display-inline" id="H297A15F31A234E28980E3FFBBC67C89A"><enum>(7)</enum><header>Qualified
capital interest</header><text>For purposes of this section—</text>
<subparagraph id="H3BEDFFDF4E9C4A9BADB816F4410C3596"><enum>(A)</enum><header>In
general</header><text>The term <term>qualified capital interest</term> means so
much of a partner’s interest in the capital of the partnership as is
attributable to—</text>
<clause commented="no" id="H29B1498F4C304DCF854F9E9E50224F4E"><enum>(i)</enum><text>the fair market
value of any money or other property contributed to the partnership in exchange
for such interest (determined without regard to section 752(a)),</text>
</clause><clause commented="no" id="H357434385BD44435BEA7F40B3D41F293"><enum>(ii)</enum><text>any amounts which
have been included in gross income under section 83 with respect to the
transfer of such interest, and</text>
</clause><clause commented="no" id="HA0205BB101A8420BA1E26A7E339D2F25"><enum>(iii)</enum><text>the excess (if
any) of—</text>
<subclause id="H16D4B22A91BD43C8A653B65CAC8CFF9E"><enum>(I)</enum><text>any items of
income and gain taken into account under section 702 with respect to such
interest, over</text>
</subclause><subclause id="H0DAEEE864FA54CC6BA89C00E8D423A40"><enum>(II)</enum><text>any items of
deduction and loss so taken into account.</text>
</subclause></clause></subparagraph><subparagraph id="H3D2DE42B067C4980A0184E861400C115"><enum>(B)</enum><header>Adjustment to
qualified capital interest</header>
<clause id="H535DB212647D4C9595EA4D38E2023B8C"><enum>(i)</enum><header>Distributions
and losses</header><text>The qualified capital interest shall be reduced by
distributions from the partnership with respect to such interest and by the
excess (if any) of the amount described in subparagraph (A)(iii)(II) over the
amount described in subparagraph (A)(iii)(I).</text>
</clause><clause id="H6279D9C117A54862A484AA438FC82899"><enum>(ii)</enum><header>Special rule
for contributions of property</header><text>In the case of any contribution of
property described in subparagraph (A)(i) with respect to which the fair market
value of such property is not equal to the adjusted basis of such property
immediately before such contribution, 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 provide.</text>
</clause></subparagraph><subparagraph id="H04ED0D58B29D47DABB52773B8E21903E"><enum>(C)</enum><header>Technical
terminations, etc., disregarded</header><text>No increase or decrease in the
qualified capital interest of any partner shall result from a termination,
merger, consolidation, or division described in section 708, or any similar
transaction.</text>
</subparagraph></paragraph><paragraph id="H0AC4686291374B339D1A43E7C32B1445"><enum>(8)</enum><header>Treatment of
certain loans</header>
<subparagraph id="H48E7FB6DFBDB40588D2EB650A124AFCA"><enum>(A)</enum><header>Proceeds of
partnership loans not treated as qualified capital interest of service
providing partners</header><text display-inline="yes-display-inline">For
purposes of this subsection, 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 guaranteed, directly or indirectly, by any other partner or the partnership
(or any person related to any such other partner or the partnership). 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
sentence.</text>
</subparagraph><subparagraph id="H5A2AEF03A1344C93AB0F9C9EE0E697EA"><enum>(B)</enum><header>Reduction in
allocations to qualified capital interests for loans from nonservice-providing
partners to the partnership</header><text>For purposes of this subsection, any
loan or other advance to the partnership made or guaranteed, directly or
indirectly, by a partner not providing services described in subsection (c)(2)
to the partnership (or any person related to such partner) shall be taken into
account in determining the qualified capital interests of the partners in the
partnership.</text>
</subparagraph></paragraph></subsection><subsection id="HD715EA19392B44A98AA162864BF2298F"><enum>(e)</enum><header>Other income and
gain in connection with investment management services</header>
<paragraph id="H00E9545D66A44BC8AC41C88D76C7520D"><enum>(1)</enum><header>In
general</header><text display-inline="yes-display-inline">If—</text>
<subparagraph id="HC6E98F776AB340A1BCD3C78CDCE63868"><enum>(A)</enum><text>a person performs
(directly or indirectly) investment management services for any investment
entity,</text>
</subparagraph><subparagraph id="HD33501EAB5934509981655F3DAE5D7A2"><enum>(B)</enum><text>such person holds
(directly or indirectly) a disqualified interest with respect to such entity,
and</text>
</subparagraph><subparagraph id="H8B3BF8EB6F9C440EB25D2CFCFD58AED1"><enum>(C)</enum><text display-inline="yes-display-inline">the value of such interest (or payments
thereunder) is substantially related to the amount of income or gain (whether
or not realized) from the assets with respect to which the investment
management services are performed,</text>
</subparagraph><continuation-text continuation-text-level="paragraph">any income
or gain with respect to such interest shall be treated as ordinary income.
Rules similar to the rules of subsections (a)(5) and (d) shall apply for
purposes of this subsection.</continuation-text></paragraph><paragraph id="H827E448D6D7A4279ABA094CBCE4E2C57"><enum>(2)</enum><header>Definitions</header><text>For
purposes of this subsection—</text>
<subparagraph id="HD4DBC18DE8BF4D3BA028DE42027542B4"><enum>(A)</enum><header>Disqualified
interest</header>
<clause id="H3835B6BDA7BC49BB8D3571BAEFDAAAEB"><enum>(i)</enum><header>In
general</header><text>The term <term>disqualified interest</term> means, with
respect to any investment entity—</text>
<subclause id="H67C05F3FFF3745B8A1D989BB34993C32"><enum>(I)</enum><text>any interest in
such entity other than indebtedness,</text>
</subclause><subclause id="HC01A48CF5C7D4558ADDF5188B5D8BCB3"><enum>(II)</enum><text>convertible or
contingent debt of such entity,</text>
</subclause><subclause id="H43496E85B925427DA46B3E9A7662A51D"><enum>(III)</enum><text>any option or
other right to acquire property described in subclause (I) or (II), and</text>
</subclause><subclause id="HC63E01F5C3B5443A896020E6DF7ACBD9"><enum>(IV)</enum><text>any derivative
instrument entered into (directly or indirectly) with such entity or any
investor in such entity.</text>
</subclause></clause><clause id="H605A1FA1E9F9460D95A7D17D5F61CB09"><enum>(ii)</enum><header>Exceptions</header><text>Such
term shall not include—</text>
<subclause id="H5EBD540885954081B4FE2EAA1F170AE6"><enum>(I)</enum><text>a partnership
interest,</text>
</subclause><subclause id="HE7BC3CC437A842DCA3CA1ABEA449251D"><enum>(II)</enum><text>except as
provided by the Secretary, any interest in a taxable corporation, and</text>
</subclause><subclause id="HD0632D5A542249B9B1684EDA1EA8EB97"><enum>(III)</enum><text>except as
provided by the Secretary, stock in an S corporation.</text>
</subclause></clause></subparagraph><subparagraph id="HF3C502158977474595EEA8EBD86F7641"><enum>(B)</enum><header>Taxable
corporation</header><text>The term <term>taxable corporation</term>
means—</text>
<clause id="H7B5804B41E55421E88E778CAF49E21C5"><enum>(i)</enum><text>a
domestic C corporation, or</text>
</clause><clause id="H62358AC0AB2343A18B4B855DEA68979B"><enum>(ii)</enum><text>a
foreign corporation substantially all of the income of which is—</text>
<subclause id="H43D8509D0F954B3BA778E4B2787F046F"><enum>(I)</enum><text>effectively
connected with the conduct of a trade or business in the United States,
or</text>
</subclause><subclause id="HBDE192DA2F684B7EB6A54B36FC7D13C8"><enum>(II)</enum><text>subject to a
comprehensive foreign income tax (as defined in section 457A(d)(2)).</text>
</subclause></clause></subparagraph><subparagraph id="H1C106DC4CCE146A7A8BFA3D987FF7B17"><enum>(C)</enum><header>Investment
management services</header><text>The term <term>investment management
services</term> means a substantial quantity of any of the services described
in subsection (c)(2).</text>
</subparagraph><subparagraph id="HE9CA26C246BB4B65A34E8457559692C1"><enum>(D)</enum><header>Investment
entity</header><text>The term <term>investment entity</term> means any entity
which, if it were a partnership, would be an investment partnership.</text>
</subparagraph></paragraph></subsection><subsection commented="no" id="H7FDD60C58FD5499AB49053648CE31DF9"><enum>(f)</enum><header>Regulations</header><text>The
Secretary shall prescribe such regulations or other guidance as is necessary or
appropriate to carry out the purposes of this section, including regulations or
other guidance to—</text>
<paragraph commented="no" id="H2E7C80AC15F84C8A966E0B58142078A7"><enum>(1)</enum><text>provide
modifications to the application of this section (including treating related
persons as not related to one another) to the extent such modification is
consistent with the purposes of this section,</text>
</paragraph><paragraph id="H6B3248B5C66F4A6B8B06137C72BCB6DD"><enum>(2)</enum><text display-inline="yes-display-inline">prevent the avoidance of the purposes of
this section, and</text>
</paragraph><paragraph commented="no" id="H3B8BD768818C4AF191EE3A7CBCD52CA2"><enum>(3)</enum><text>coordinate this
section with the other provisions of this title.</text>
</paragraph></subsection><subsection commented="no" id="H7D043EDE1E3C4742AB226AC4C0C01719"><enum>(g)</enum><header>Cross-Reference</header><text>For
40 percent penalty on certain underpayments due to the avoidance of this
section, see section
6662.</text>
</subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H49607A27CAF7459DAA4A7F6AB2D22AC2"><enum>(b)</enum><header>Application of
section 751 to indirect dispositions of investment services partnership
interests</header>
<paragraph id="HC5CEE53783E44212A9805E075C7A5AF8"><enum>(1)</enum><header>In
general</header><text>Subsection (a) of section 751 is amended by striking
<quote>or</quote> at the end of paragraph (1), by inserting <quote>or</quote>
at the end of paragraph (2), and by inserting after paragraph (2) the following
new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="HD8C31AE8BF534796B261684E948A522D" style="OLC">
<paragraph id="HBD7226F0EDAB42E99EF0EA4EF3B43D0A"><enum>(3)</enum><text display-inline="yes-display-inline">investment services partnership interests
held by the
partnership,</text>
</paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="H4F5470130786441E8FDBF4A5034673DA"><enum>(2)</enum><header>Certain
distributions treated as sales or exchanges</header><text>Subparagraph (A) of
section 751(b)(1) is amended by striking <quote>or</quote> at the end of clause
(i), by inserting <quote>or</quote> at the end of clause (ii), and by inserting
after clause (ii) the following new clause:</text>
<quoted-block display-inline="no-display-inline" id="HCB63E95543184F54BA571BE748474998" style="OLC">
<clause id="H04C1C13D414F4B48989CC113367A530A"><enum>(iii)</enum><text display-inline="yes-display-inline">investment services partnership interests
held by the
partnership,</text>
</clause><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="HC2AA590F6B2843DDBF5CCE2DCA6C2523"><enum>(3)</enum><header>Application of
special rules in the case of tiered partnerships</header><text>Subsection (f)
of section 751 is amended—</text>
<subparagraph id="H331E7B109DE54E9797A24BCD8C343FE4"><enum>(A)</enum><text>by striking
<quote>or</quote> at the end of paragraph (1), by inserting <quote>or</quote>
at the end of paragraph (2), and by inserting after paragraph (2) the following
new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="HADD9569C71C646BA8ADBF79D3F0B1728" style="OLC">
<paragraph id="H157C33AD7EB5456D8B17B2361FD5106E"><enum>(3)</enum><text display-inline="yes-display-inline">an investment services partnership interest
held by the partnership,</text>
</paragraph><after-quoted-block>,
and</after-quoted-block></quoted-block>
</subparagraph><subparagraph id="HA2E95BCF6D7C46B48E264B764B75633C"><enum>(B)</enum><text>by striking
<quote>partner.</quote> and inserting <quote>partner (other than a partnership
in which it holds an investment services partnership interest).</quote>.</text>
</subparagraph></paragraph><paragraph id="H9A71B9D3F80F4C4899B40EC4C1AAA4B7"><enum>(4)</enum><header>Investment
services partnership interests; qualified capital
interests</header><text>Section 751 is amended by adding at the end the
following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="HABD19B5CFAC34786988B4664A3517DD4" style="OLC">
<subsection id="HF4BFE0AA842C48C1BFB47015E1D25586"><enum>(g)</enum><header>Investment
services partnership interests</header><text display-inline="yes-display-inline">For purposes of this section—</text>
<paragraph id="HFAAC5B92632A4E66B07B456F147558BC"><enum>(1)</enum><header>In
general</header><text display-inline="yes-display-inline">The term
<term>investment services partnership interest</term> has the meaning given
such term by section 710(c).</text>
</paragraph><paragraph id="H2D9DC2D2A8E74AF1B822FCD5793771EF"><enum>(2)</enum><header>Adjustments for
qualified capital interests</header><text>The amount to which subsection (a)
applies by reason of paragraph (3) 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 (determined under rules similar
to the rules of section 710(d)).</text>
</paragraph><paragraph id="HF9D8128C344E47208CC0B2192C6DDADD"><enum>(3)</enum><header>Exception for
publicly traded partnerships</header><text>In the case of an exchange of an
interest in a publicly traded partnership (as defined in section 7704) to which
subsection (a) applies—</text>
<subparagraph id="H88F1424FB00B471B9286EFF55FE6EBFE"><enum>(A)</enum><text>this section shall
be applied without regard to subsections (a)(3), (b)(1)(A)(iii), and (f)(3),
and</text>
</subparagraph><subparagraph id="H9ED8829754FB4AE9825009CB8DA56C28"><enum>(B)</enum><text display-inline="yes-display-inline">such partnership shall be treated as owning
its proportionate share of the property of any other partnership in which it is
a partner.</text>
</subparagraph></paragraph><paragraph id="H4811AA64E8B948A5BEFB297AC97BA3B0"><enum>(4)</enum><header>Recognition of
gains</header><text>Any gain with respect to which subsection (a) applies by
reason of paragraph (3) thereof shall be recognized notwithstanding any other
provision of this title.</text>
</paragraph><paragraph id="H6035E977A12D43A7B7D0D4405A417E9C"><enum>(5)</enum><header>Coordination
with inventory items</header><text>An investment services partnership interest
held by the partnership shall not be treated as an inventory item of the
partnership.</text>
</paragraph><paragraph id="HE084B8A6E2014EDE95274AF8C2F53A2B"><enum>(6)</enum><header>Prevention of
double counting</header><text display-inline="yes-display-inline">Under
regulations or other guidance prescribed by the Secretary, subsection (a)(3)
shall not apply with respect to any amount to which section 710 applies.</text>
</paragraph><paragraph id="HC364E031042642F88D32AD8856815F88"><enum>(7)</enum><header>Valuation
methods</header><text display-inline="yes-display-inline">The Secretary shall
prescribe regulations or other guidance which provide the acceptable methods
for valuing investment services partnership interests for purposes of this
section.</text>
</paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="H6D35FB0BF139417D855F0D50111E017A"><enum>(c)</enum><header>Treatment for
purposes of section 7704</header><text>Subsection (d) of section 7704 is
amended by adding at the end the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="H483C7CF14FC946FD8B4C29FE53AD1F73" style="OLC">
<paragraph id="H2C4D89ED13574B098776B88FBB3D4F11"><enum>(6)</enum><header>Income from
certain carried interests not qualified</header>
<subparagraph id="H7A5C785D9E974ED888A132C2FC8AA4E8"><enum>(A)</enum><header>In
general</header><text>Specified carried interest income shall not be treated as
qualifying income.</text>
</subparagraph><subparagraph id="H318BCC5950084F3EA416BAB2F8055637"><enum>(B)</enum><header>Specified
carried interest income</header><text>For purposes of this paragraph—</text>
<clause id="H8B843C29172E411FB1A0837036519D64"><enum>(i)</enum><header>In
general</header><text>The term <term>specified carried interest income</term>
means—</text>
<subclause id="HE4D5FBB97A824419AA8A5CF90FE7D02F"><enum>(I)</enum><text>any item of income
or gain allocated to an investment services partnership interest (as defined in
section 710(c)) held by the partnership,</text>
</subclause><subclause id="HD23564F53FA74C11B2F52DF827A86B0A"><enum>(II)</enum><text>any gain on the
disposition of an investment services partnership interest (as so defined) or a
partnership interest to which (in the hands of the partnership) section 751
applies, and</text>
</subclause><subclause id="H686BB03FBBA94AFEB7D6977B8E21045F"><enum>(III)</enum><text>any income or
gain taken into account by the partnership under subsection (b)(4) or (e) of
section 710.</text>
</subclause></clause><clause id="H31E55E04516E480CB3232BF76CDD903D"><enum>(ii)</enum><header>Exception for
qualified capital interests</header><text>A rule similar to the rule of section
710(d) shall apply for purposes of clause (i).</text>
</clause></subparagraph><subparagraph id="H61711AAD7B794CCEB95571F3F5CF6234"><enum>(C)</enum><header>Coordination
with other provisions</header><text>Subparagraph (A) shall not apply to any
item described in paragraph (1)(E) (or so much of paragraph (1)(F) as relates
to paragraph (1)(E)).</text>
</subparagraph><subparagraph id="H87B3E8D598CD4EB2A78856E388112DC3"><enum>(D)</enum><header>Special rules
for certain partnerships</header>
<clause id="HF79A76EDCB77499F862371591740E2C3"><enum>(i)</enum><header>Certain
partnerships owned by real estate investment trusts</header><text>Subparagraph
(A) shall not apply in the case of a partnership which meets each of the
following requirements:</text>
<subclause id="HF8AD5F35E25440AC98AE26BD24F363A2"><enum>(I)</enum><text>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 traded.</text>
</subclause><subclause id="H47EC79DE6F2D42BF84EB29FEF1A2C509"><enum>(II)</enum><text display-inline="yes-display-inline">Fifty percent or more of the capital and
profits interests of such partnership are owned, directly or indirectly, at all
times during the taxable year by such real estate investment trust (determined
with the application of section 267(c)).</text>
</subclause><subclause id="HD24C15CD85BF41C5AB42CD64F5D3A077"><enum>(III)</enum><text>Such partnership
meets the requirements of paragraphs (2), (3), and (4) of section
856(c).</text>
</subclause></clause><clause id="HF3B74FD17FF846E5A6E757D698D4558A"><enum>(ii)</enum><header>Certain
partnerships owning other publicly traded
partnerships</header><text>Subparagraph (A) shall not apply in the case of a
partnership which meets each of the following requirements:</text>
<subclause id="HDF888FAC3D5849E48C1D24384D271CAF"><enum>(I)</enum><text>Substantially all
of the assets of such partnership consist of interests in one or more publicly
traded partnerships (determined without regard to subsection (b)(2)).</text>
</subclause><subclause commented="no" id="H526FCEB8A8204AB0AD8CF81C718D25DA"><enum>(II)</enum><text>Substantially all
of the income of such partnership is ordinary income or section 1231 gain (as
defined in section 1231(a)(3)).</text>
</subclause></clause></subparagraph><subparagraph id="H9DC7455ED2934EEA80F01FA84668F6CE"><enum>(E)</enum><header>Transitional
rule</header><text>Subparagraph (A) shall not apply to any taxable year of the
partnership beginning before the date which is 10 years after the date of the
enactment of this
paragraph.</text>
</subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H7546864F4C4B49F0B36F883F7FB21E92"><enum>(d)</enum><header>Imposition of
penalty on underpayments</header>
<paragraph id="H459B7B61E5C3455E89E0654BED33F4A9"><enum>(1)</enum><header>In
general</header><text>Subsection (b) of section 6662 is amended by inserting
after paragraph (7) the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="HE903C63C9D204EB6B624F6FFDE56AA31" style="OLC">
<paragraph id="H07BE26C9616046A4BA3171071797591A"><enum>(8)</enum><text>The application of
section 710(e) or the regulations or other guidance prescribed under section
710(f) to prevent the avoidance of the purposes of section
710.</text>
</paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="H66B8449F14014CAEA70990FC46F6C1B6"><enum>(2)</enum><header>Amount of
penalty</header>
<subparagraph id="HD12A5EC29C454D71816C1B68F9EE5AAD"><enum>(A)</enum><header>In
general</header><text>Section 6662 is amended by adding at the end the
following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="HDA3300B3D69342E69E6253246CCC1756" style="OLC">
<subsection id="H932B363BA6044D74B03858D1A9661EDE"><enum>(k)</enum><header>Increase in
penalty in case of property transferred for investment management
services</header><text>In the case of any portion of an underpayment to which
this section applies by reason of subsection (b)(8), subsection (a) shall be
applied with respect to such portion by substituting <quote>40 percent</quote>
for <quote>20
percent</quote>.</text>
</subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph><subparagraph display-inline="no-display-inline" id="H88ABB511F2144B0FA80489EA126A7BA1"><enum>(B)</enum><header>Conforming
amendment</header><text>Subparagraph (B) of section 6662A(e)(2) is amended by
striking <quote>or (i)</quote> and inserting <quote>, (i), or
(k)</quote>.</text>
</subparagraph></paragraph><paragraph display-inline="no-display-inline" id="HD7FC54E3DC9A4606BCA192414335DA18"><enum>(3)</enum><header>Special rules
for application of reasonable cause exception</header><text>Subsection (c) of
section 6664 is amended—</text>
<subparagraph id="HDFD6F858F7EA4D6CABCFA4FA379A7F56"><enum>(A)</enum><text>by redesignating
paragraphs (3) and (4) as paragraphs (4) and (5), respectively;</text>
</subparagraph><subparagraph id="H34F0DFEBA33C4F739C0078AEF8AA1E80"><enum>(B)</enum><text>by striking
<quote>paragraph (3)</quote> in paragraph (5)(A), as so redesignated, and
inserting <quote>paragraph (4)</quote>; and</text>
</subparagraph><subparagraph id="H28712E7430B74FDEBE337376841E10DA"><enum>(C)</enum><text>by inserting after
paragraph (2) the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="H172416EDEE87475294657071327CF213" style="OLC">
<paragraph id="HACB4E449AB1A416E8E354A6520EAC3EE"><enum>(3)</enum><header>Special rule for
underpayments attributable to investment management services</header>
<subparagraph id="HEAA851E9E898417ABED84B8799BB68A4"><enum>(A)</enum><header>In
general</header><text>Paragraph (1) shall not apply to any portion of an
underpayment to which section 6662 applies by reason of subsection (b)(8)
unless—</text>
<clause id="H0B8B03483C8343B08C3EBE2726E47826"><enum>(i)</enum><text display-inline="yes-display-inline">the relevant facts affecting the tax
treatment of the item are adequately disclosed,</text>
</clause><clause id="HFA41139E3775453BA5D56A22224D7688"><enum>(ii)</enum><text>there is or was
substantial authority for such treatment, and</text>
</clause><clause id="H2D72CB89ABB84D1CBD7D3536675C504D"><enum>(iii)</enum><text>the taxpayer
reasonably believed that such treatment was more likely than not the proper
treatment.</text>
</clause></subparagraph><subparagraph id="H48553A76ECF242B7BC199AD328C43C1A"><enum>(B)</enum><header>Rules relating
to reasonable belief</header><text>Rules similar to the rules of subsection
(d)(3) shall apply for purposes of subparagraph
(A)(iii).</text>
</subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph></paragraph></subsection><subsection id="H3D745F3F2B404EDB8CF2999C1BFF9AE2"><enum>(e)</enum><header>Income and loss
from investment services partnership interests taken into account in
determining net earnings from self-Employment</header>
<paragraph id="HC6FD69F59E9B4E6A9E0589428429697B"><enum>(1)</enum><header>Internal Revenue
Code</header>
<subparagraph id="H839684FC71C04A119C3D258BCAF33459"><enum>(A)</enum><header>In
general</header><text>Section 1402(a) is amended by striking <quote>and</quote>
at the end of paragraph (16), by striking the period at the end of paragraph
(17) and inserting <quote>; and</quote>, and by inserting after paragraph (17)
the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="H2CE2906D46A14476803E5CBF7BEBBEA3" style="OLC">
<paragraph id="H823722D9F10A4EC18F07A21AFF401E83"><enum>(18)</enum><text display-inline="yes-display-inline">notwithstanding the preceding provisions of
this subsection, in the case of any individual engaged in the trade or business
of providing services described in section 710(c)(2) with respect to any
entity, investment services partnership income or loss (as defined in
subsection (m)) of such individual with respect to such entity shall be taken
into account in determining the net earnings from self-employment of such
individual.</text>
</paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph><subparagraph id="H2BBBFDC79A7D41CC8451521355A40723"><enum>(B)</enum><header>Investment
services partnership income or loss</header><text>Section 1402 is amended by
adding at the end the following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="H201C3DF217604590A397E48316E959CD" style="OLC">
<subsection id="H0F7EBD9465604CE98F10E03709D4F3E6"><enum>(m)</enum><header>Investment
services partnership income or loss</header><text display-inline="yes-display-inline">For purposes of subsection (a)—</text>
<paragraph commented="no" id="H02869117949D4D44977AE4C3ED962CEB"><enum>(1)</enum><header>In
general</header><text>The term <term>investment services partnership income or
loss</term> means, with respect to any investment services partnership interest
(as defined in section 710(c)) or disqualified interest (as defined in section
710(e)), the net of—</text>
<subparagraph commented="no" id="H56E601EC82084415B7A32E2045432233"><enum>(A)</enum><text>the amounts
treated as ordinary income or ordinary loss under subsections (b) and (e) of
section 710 with respect to such interest,</text>
</subparagraph><subparagraph commented="no" id="H40B0BCD24A064A6896B3C2CBF1B06157"><enum>(B)</enum><text>all items of
income, gain, loss, and deduction allocated to such interest, and</text>
</subparagraph><subparagraph commented="no" id="HBE7FA3C7EDCE4B2197EC30416CBB4551"><enum>(C)</enum><text>the amounts
treated as realized from the sale or exchange of property other than a capital
asset under section 751 with respect to such interest.</text>
</subparagraph></paragraph><paragraph id="H3E4FE83FC247449A80EDF2A646721EDE"><enum>(2)</enum><header>Exception for
qualified capital interests</header><text>A rule similar to the rule of section
710(d) shall apply for purposes of applying paragraph
(1)(B).</text>
</paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph></paragraph><paragraph display-inline="no-display-inline" id="H0FCB1B2B44C141388A90122973C9576A"><enum>(2)</enum><header>Social Security
Act</header><text>Section 211(a) of the Social Security Act is amended by
striking <quote>and</quote> at the end of paragraph (15), by striking the
period at the end of paragraph (16) and inserting <quote>; and</quote>, and by
inserting after paragraph (16) the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="HFA82B85986244B2195CA68A554398349" style="OLC">
<paragraph id="H1815DF0C7261482FA395185DD9A30BA5"><enum>(17)</enum><text display-inline="yes-display-inline">Notwithstanding the preceding provisions of
this subsection, in the case of any individual engaged in the trade or business
of providing services described in section 710(c)(2) of the Internal Revenue
Code of 1986 with respect to any entity, investment services partnership income
or loss (as defined in section 1402(m) of such Code) shall be taken into
account in determining the net earnings from self-employment of such
individual.</text>
</paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="H111A53C1ED1843C6B5B243D4B50D5318"><enum>(f)</enum><header>Conforming
amendments</header>
<paragraph id="H3C43806E048F4935B5218411370A6546"><enum>(1)</enum><text>Subsection (d) of
section 731 is amended by inserting <quote>section 710(b)(4) (relating to
distributions of partnership property),</quote> after <quote>to the extent
otherwise provided by</quote>.</text>
</paragraph><paragraph id="HB914624AB1FD4A60A2601C72167C6A3F"><enum>(2)</enum><text>Section 741 is
amended by inserting <quote>or section 710 (relating to special rules for
partners providing investment management services to partnerships)</quote>
before the period at the end.</text>
</paragraph><paragraph id="HC68C05AD03064C4FBE58D719C159CFA8"><enum>(3)</enum><text display-inline="yes-display-inline">The table of sections for part I of
subchapter K of chapter 1 is amended by adding at the end the following new
item:</text>
<quoted-block display-inline="no-display-inline" id="HC3CF0E4427354964A749F424AEF478F7" style="OLC">
<toc container-level="quoted-block-container" idref="HEE22702F3BDE4BE5BC35214A76B5069E" lowest-bolded-level="division-lowest-bolded" lowest-level="section" quoted-block="no-quoted-block" regeneration="yes-regeneration">
<toc-entry idref="H81E230B949B349C4AB5E4D4A70CA990C" level="section">Sec. 710. Special rules for partners providing investment
management services to
partnerships.</toc-entry>
</toc>
<after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="H802F0282698B4169A3158A6EC85E5F79"><enum>(g)</enum><header>Effective
date</header>
<paragraph id="H9B6822A29C674BD6B3DDF39CB617179E"><enum>(1)</enum><header>In
general</header><text>Except as otherwise provided in this subsection, the
amendments made by this section shall apply to taxable years ending after the
date of the enactment of this Act.</text>
</paragraph><paragraph id="H24A1653E114A4E07AE252B31A1094002"><enum>(2)</enum><header>Partnership
taxable years which include effective date</header><text display-inline="yes-display-inline">In applying section 710(a) of the Internal
Revenue Code of 1986 (as added by this section) in the case of any partnership
taxable year which includes the date of the enactment of this Act, 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 date.</text>
</paragraph><paragraph id="H6E3A7D2A3265409BB1886315AD3AA3FC"><enum>(3)</enum><header>Dispositions of
partnership interests</header>
<subparagraph id="HD89579ABF9D14F6B8AE64B2F2AF21B92"><enum>(A)</enum><header>In
general</header><text>Section 710(b) of such Code (as added by this section)
shall apply to dispositions and distributions after the date of the enactment
of this Act.</text>
</subparagraph><subparagraph id="H587F8352FC4F49FA8F41A04922E67AD1"><enum>(B)</enum><header>Indirect
dispositions</header><text>The amendments made by subsection (b) shall apply to
transactions after the date of the enactment of this Act.</text>
</subparagraph></paragraph><paragraph commented="no" display-inline="no-display-inline" id="HD39BADEB9AB248D683586AD3C8BD70C9"><enum>(4)</enum><header>Other income and
gain in connection with investment management services</header><text display-inline="yes-display-inline">Section 710(e) of such Code (as added by
this section) shall take effect on the date of the enactment of this
Act.</text>
</paragraph></subsection></section>