113 S277 IS: Job Preservation and Economic Certainty Act of 2013
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.Short title; table of contents
(a)This Act may be cited as the Job Preservation and Economic Certainty Act of 2013
.
(b)The table of contents of this Act is as follows:
Sec. 1. Short title; table of contents.
TITLE I—Elimination of sequestration
Sec. 101. Discretionary spending limits.
TITLE II—Elimination of Tax Loopholes for High-Income Taxpayers
Sec. 201. Minimum tax for high-income earners.
Sec. 202. Requiring high-income professionals to pay their payroll taxes.
Sec. 203. Elimination of private jet giveaway.
Sec. 204. Limitation on itemized deductions to 28-percent rate bracket.
TITLE III—Elimination of tax loopholes for offshoring manufacturers
Sec. 301. Ending tax breaks for offshoring manufacturers.
TITLE IV—Elimination of tax loopholes for oil and gas companies
Sec. 401. Modifications of foreign tax credit rules applicable to major integrated oil companies which are dual capacity taxpayers.
Sec. 402. Limitation on section 199 deduction attributable to oil, natural gas, or primary products thereof.
Sec. 403. Limitation on deduction for intangible drilling and development costs.
Sec. 404. Limitation on percentage depletion allowance for oil and gas wells.
Sec. 405. Limitation on deduction for tertiary injectants.
Sec. 406. Repeal of outer Continental Shelf deep water and deep gas royalty relief.
TITLE V—Ending International Tax Abuses
Sec. 501. Allocation of expenses and taxes on basis of repatriation of foreign income.
Sec. 502. Excess income from transfers of intangibles to low-taxed affiliates treated as subpart F income.
Sec. 503. Limitations on income shifting through intangible property transfers.
Sec. 504. Limitation on earnings stripping by expatriated entities.
Sec. 505. Modifications of foreign tax credit rules applicable to dual capacity taxpayers.
Sec. 506. Separate basket treatment taxes paid on foreign oil and gas income.
TITLE VI—Financial crisis responsibility fee
Sec. 601. Definitions and special rules.
Sec. 602. Financial crisis responsibility fee.
Sec. 603. Other provisions.
TITLE VII—Tax on trading transactions
Sec. 701. Transaction tax.
TITLE VIII—Modification of accounting rules
Sec. 801. Repeal of last-in, first-out method of inventory.
Sec. 802. Repeal of lower of cost or market method of inventory.
TITLE IX—Fair treatment of options
Sec. 901. Consistent treatment of stock options by corporations.
Sec. 902. Application of executive pay deduction limit.
<enum>I</enum><header>Elimination of sequestration</header>
<section id="idFFFA50A99E5A46CBB41D7D0CF9B362D8"><enum>101.</enum><header>Discretionary spending limits</header>
<subsection id="idFEC599A5D154465AA3E1F03F7F6A5D39"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Part C of title II of the Balanced Budget and Emergency Deficit Control Act of 1985 (<external-xref legal-doc="usc" parsable-cite="usc/2/900">2 U.S.C. 900 et seq.</external-xref>) is amended—</text>
<paragraph id="idD3CB1739CAFE4767A239C342133E0959"><enum>(1)</enum><text>by striking section 251(c) (<external-xref legal-doc="usc" parsable-cite="usc/2/901">2 U.S.C. 901(c)</external-xref>) and inserting the following:</text>
<quoted-block display-inline="no-display-inline" id="idA272C8C6523C437EA138E4D3DFE7622F" style="OLC">
<subsection commented="no" display-inline="no-display-inline" id="H4DF0070CC4E84EF19A8C905377E1FEA2"><enum>(c)</enum><header display-inline="yes-display-inline">Discretionary spending limit</header><text display-inline="yes-display-inline">As used in this part, the term <quote>discretionary spending limit</quote> means—</text>
<paragraph commented="no" display-inline="no-display-inline" id="HF9243ACC4E3741259619230BA22C755F"><enum>(1)</enum><text display-inline="yes-display-inline">with respect to fiscal year 2012—</text>
<subparagraph commented="no" display-inline="no-display-inline" id="H3C24B732DE0F4751A124A5B27A8EC5CD"><enum>(A)</enum><text display-inline="yes-display-inline">for the security category, $684,000,000,000 in new budget authority; and</text> </subparagraph>
<subparagraph commented="no" display-inline="no-display-inline" id="H71D4E7D89DF947EE95CA542F05DFE692"><enum>(B)</enum><text display-inline="yes-display-inline">for the nonsecurity category, $359,000,000,000 in new budget authority;</text> </subparagraph></paragraph>
<paragraph commented="no" display-inline="no-display-inline" id="H27FBBDB51ED247F09E1FB3E1B64C3CF9"><enum>(2)</enum><text display-inline="yes-display-inline">with respect to fiscal year 2013—</text>
<subparagraph commented="no" display-inline="no-display-inline" id="H7788EB7638DE437D971D0D495B73AB06"><enum>(A)</enum><text display-inline="yes-display-inline">for the security category, $686,000,000,000 in new budget authority; and</text> </subparagraph>
<subparagraph commented="no" display-inline="no-display-inline" id="H025D8A62DC844D08B3EF510ABF81E4CC"><enum>(B)</enum><text display-inline="yes-display-inline">for the nonsecurity category, $361,000,000,000 in new budget authority;</text> </subparagraph></paragraph>
<paragraph commented="no" display-inline="no-display-inline" id="H5EF729D777254E5E8B66713393239D49"><enum>(3)</enum><text display-inline="yes-display-inline">with respect to fiscal year 2014, for the discretionary category, $1,066,000,000,000 in new budget authority;</text> </paragraph>
<paragraph commented="no" display-inline="no-display-inline" id="H145D6BEFEAAE44B8A39E33699594ECD7"><enum>(4)</enum><text display-inline="yes-display-inline">with respect to fiscal year 2015, for the discretionary category, $1,086,000,000,000 in new budget authority;</text> </paragraph>
<paragraph commented="no" display-inline="no-display-inline" id="HDB6F02AD36684E6FA024DFB7BFBD3514"><enum>(5)</enum><text display-inline="yes-display-inline">with respect to fiscal year 2016, for the discretionary category, $1,107,000,000,000 in new budget authority;</text> </paragraph>
<paragraph commented="no" display-inline="no-display-inline" id="H7A02F3A87B73462BA163D344B11AA6EB"><enum>(6)</enum><text display-inline="yes-display-inline">with respect to fiscal year 2017, for the discretionary category, $1,131,000,000,000 in new budget authority;</text> </paragraph>
<paragraph commented="no" display-inline="no-display-inline" id="H0575294F11D14907ADF96842099A5F88"><enum>(7)</enum><text display-inline="yes-display-inline">with respect to fiscal year 2018, for the discretionary category, $1,156,000,000,000 in new budget authority;</text> </paragraph>
<paragraph commented="no" display-inline="no-display-inline" id="H66B2A11729834C33A87802B926A6B14A"><enum>(8)</enum><text display-inline="yes-display-inline">with respect to fiscal year 2019, for the discretionary category, $1,182,000,000,000 in new budget authority;</text> </paragraph>
<paragraph commented="no" display-inline="no-display-inline" id="H15563D4F63AB4E15A9866EB43A2F526D"><enum>(9)</enum><text display-inline="yes-display-inline">with respect to fiscal year 2020, for the discretionary category, $1,208,000,000,000 in new budget authority; and</text> </paragraph>
<paragraph commented="no" display-inline="no-display-inline" id="H0CA4321CA8B64EBEB9D74832F263814E"><enum>(10)</enum><text display-inline="yes-display-inline">with respect to fiscal year 2021, for the discretionary category, $1,234,000,000,000 in new budget authority;</text> </paragraph><continuation-text commented="no" continuation-text-level="subsection">as adjusted in strict conformance with subsection (b).</continuation-text></subsection><after-quoted-block>; </after-quoted-block></quoted-block> </paragraph>
<paragraph id="id453D026979D445EB95D7C8862A98A59B"><enum>(2)</enum><text>by striking section 251A (<external-xref legal-doc="usc" parsable-cite="usc/2/901a">2 U.S.C. 901a</external-xref>); and</text> </paragraph>
<paragraph id="id64BE25B9B36E42038F367D127FBCBFBA"><enum>(3)</enum><text>in the table of contents set forth in section 250(a), by striking the item relating to section 251A.</text> </paragraph></subsection>
<subsection id="id82EE44ACECD44BBE944807E7B27462C1"><enum>(b)</enum><header>Technical and conforming amendment</header><text>Section 901(e) of the American Taxpayer Relief Act of 2012 (<external-xref legal-doc="public-law" parsable-cite="pl/112/240">Public Law 112–240</external-xref>) is repealed.</text> </subsection></section>
<enum>II</enum><header>Elimination of Tax Loopholes for High-Income Taxpayers</header>
<section id="idB3198222122447ABBA12613638D23236"><enum>201.</enum><header>Minimum tax for high-income earners</header>
<subsection id="ID471f4f9c7ce444c6bdafa3f70c8957e3"><enum>(a)</enum><header>In general</header><text>Subchapter A of chapter 1 is amended by adding at the end the following new part:</text>
<quoted-block display-inline="no-display-inline" id="id28F15319176D4FB1AB1024B0667191D1" style="OLC">
<part id="id52F739CDD1254829A7C4FDBA34D0A9E1"><enum>VIII</enum><header>Fair share tax on high-income taxpayers</header>
<toc>
<toc-entry idref="id769FF3336EE94D5CB6DC7DB75DBBD233" level="section">Sec. 59B. Fair share tax.</toc-entry> </toc>
<section id="id769FF3336EE94D5CB6DC7DB75DBBD233"><enum>59B.<?LEXA-Enum 59B.?></enum><header>Fair share tax</header>
<subsection id="id61BAD049439C44B4AD36D7515F056795"><enum>(a)</enum><header>General rule</header>
<paragraph id="idFF5D2371F8E344378DA1C36A849945A0"><enum>(1)</enum><header>Phase-in of tax</header><text>In the case of any high-income taxpayer, there is hereby imposed for a taxable year (in addition to any other tax imposed by this subtitle) a tax equal to the product of—</text>
<subparagraph id="idFDCE8D7D745242E388B7392B4D56E924"><enum>(A)</enum><text>the amount determined under paragraph (2), and</text> </subparagraph>
<subparagraph id="id9E02CFF4C6C241B1BA4409E3EE558006"><enum>(B)</enum><text>a fraction (not to exceed 1)—</text>
<clause id="id1794986A9F2746968116CD93D1E84DC2"><enum>(i)</enum><text>the numerator of which is the excess of—</text>
<subclause id="id28D87A9013DD4722A1C1EF144578FBB3"><enum>(I)</enum><text>the taxpayer's adjusted gross income, over</text> </subclause>
<subclause id="id6D5B155F69D04E4FA82D8521E316C84F"><enum>(II)</enum><text>the dollar amount in effect under subsection (c)(1), and</text> </subclause></clause>
<clause id="idAB0ADE8EF6304AD9958A2DEF99533296"><enum>(ii)</enum><text>the denominator of which is the dollar amount in effect under subsection (c)(1).</text> </clause></subparagraph></paragraph>
<paragraph id="id2BE6F98D92A94AA68E2FCC064DD5E88A"><enum>(2)</enum><header>Amount of tax</header><text>The amount of tax determined under this paragraph is an amount equal to the excess (if any) of—</text>
<subparagraph id="id332A6913BADF48F6BE4D5959EE7392BC"><enum>(A)</enum><text>the tentative fair share tax for the taxable year, over</text> </subparagraph>
<subparagraph id="id46536D3AF7D1429E94DDA13646557E79"><enum>(B)</enum><text>the excess of—</text>
<clause id="id29BDE53EB97A4D24BDBCB9513C0FC6A6"><enum>(i)</enum><text>the sum of—</text>
<subclause id="id42879461F5CE4CE1B6825C2C97A2AF66"><enum>(I)</enum><text>the regular tax liability (as defined in section 26(b)) for the taxable year, determined without regard to any tax liability determined under this section,</text> </subclause>
<subclause id="idA603AE8697FB4868930030B7DD24084A"><enum>(II)</enum><text>the tax imposed by section 55 for the taxable year, plus</text> </subclause>
<subclause id="idD7F9BF72579A45D9A24DAAAA00D1057C"><enum>(III)</enum><text>the payroll tax for the taxable year, over</text> </subclause></clause>
<clause id="id08CBA04DC3A548E6BDBE94C81E05163D"><enum>(ii)</enum><text>the credits allowable under part IV of subchapter A (other than sections 27(a), 31, and 34).</text> </clause></subparagraph></paragraph></subsection>
<subsection id="idE57E46EC06E14CEDA08E62CF1B490F39"><enum>(b)</enum><header>Tentative fair share tax</header><text>For purposes of this section—</text>
<paragraph id="idF516F4D1420D46C69187FAA5FC9370E1"><enum>(1)</enum><header>In general</header><text>The tentative fair share tax for the taxable year is 30 percent of the excess of—</text>
<subparagraph id="idA1820FD499B241E7B68EECC0B9C48AAA"><enum>(A)</enum><text>the adjusted gross income of the taxpayer, over</text> </subparagraph>
<subparagraph id="id96EF7417666E4763B86E7BF0F72578BD"><enum>(B)</enum><text>the modified charitable contribution deduction for the taxable year.</text> </subparagraph></paragraph>
<paragraph id="id72B669B1E81A4D7BB454311EBFE35640"><enum>(2)</enum><header>Modified charitable contribution deduction</header><text>For purposes of paragraph (1)—</text>
<subparagraph id="idA7E0623A2F6248E6955C9039D2490FD0"><enum>(A)</enum><header>In general</header><text>The modified charitable contribution deduction for any taxable year is an amount equal to the amount which bears the same ratio to the deduction allowable under section 170 (section 642(c) in the case of a trust or estate) for such taxable year as—</text>
<clause id="id09C282E720854724AB6AD18036C85E58"><enum>(i)</enum><text>the amount of itemized deductions allowable under the regular tax (as defined in section 55) for such taxable year, determined after the application of section 68, bears to</text> </clause>
<clause id="idEFD53F3D7DD7455DA3FFBC22F720C204"><enum>(ii)</enum><text>such amount, determined before the application of section 68.</text> </clause></subparagraph>
<subparagraph id="id32A6B7194658493AA0F5DBA8151D968B"><enum>(B)</enum><header>Taxpayer must itemize</header><text>In the case of any individual who does not elect to itemize deductions for the taxable year, the modified charitable contribution deduction shall be zero.</text> </subparagraph></paragraph></subsection>
<subsection id="idF6366F4AAA144AE3B9B36065FFA4DDFA"><enum>(c)</enum><header>High-Income taxpayer</header><text>For purposes of this section—</text>
<paragraph id="idA865BD7E47DC49038DD83CC0227D6289"><enum>(1)</enum><header>In general</header><text>The term <term>high-income taxpayer</term> means, with respect to any taxable year, any taxpayer (other than a corporation) with an adjusted gross income for such taxable year in excess of $1,000,000 (50 percent of such amount in the case of a married individual who files a separate return).</text> </paragraph>
<paragraph id="id4E74A13C415446869B152F87D6158F22"><enum>(2)</enum><header>Inflation adjustment</header>
<subparagraph id="ID9f20a6d599d747f79c06ab5437f64b42"><enum>(A)</enum><header>In general</header><text>In the case of a taxable year beginning after 2013, the $1,000,000 amount under paragraph (1) shall be increased by an amount equal to—</text>
<clause id="ID9f2d4a37624c40fab5b1ec09249a800c"><enum>(i)</enum><text>such dollar amount, multiplied by</text> </clause>
<clause id="ID5f1194ed00474951baade0befa5a6a92"><enum>(ii)</enum><text>the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting <quote>calendar year 2012</quote> for <quote>calendar year 1992</quote> in subparagraph (B) thereof.</text> </clause></subparagraph>
<subparagraph id="ID84a4d142d70845b281289e53b3894b52"><enum>(B)</enum><header>Rounding</header><text>If any amount as adjusted under subparagraph (A) is not a multiple of $10,000, such amount shall be rounded to the next lowest multiple of $10,000.</text> </subparagraph></paragraph></subsection>
<subsection id="id583E38523AC1430C93E97150A2C3F7BF"><enum>(d)</enum><header>Payroll tax</header><text>For purposes of this section, the payroll tax for any taxable year is an amount equal to the excess of—</text>
<paragraph id="idF6A3FDE92418419EA2151EE1461A9847"><enum>(1)</enum><text>the taxes imposed on the taxpayer under sections 1401, 1411, 3101, 3201, and 3211(a) (to the extent such tax is attributable to the rate of tax in effect under section 3101) with respect to such taxable year or wages or compensation received during such taxable year, over</text> </paragraph>
<paragraph id="id2FB04995F68B462B9BD9CB355CB60E63"><enum>(2)</enum><text>the deduction allowable under section 164(f) for such taxable year.</text> </paragraph></subsection>
<subsection id="id857955860220407A810BBE146622B997"><enum>(e)</enum><header>Special rule for estates and trusts</header><text>For purposes of this section, in the case of an estate or trust, adjusted gross income shall be computed in the manner described in section 67(e).</text> </subsection>
<subsection commented="no" id="IDc88d296dce014c7e83446cd26faeb1d1"><enum>(f)</enum><header>Not treated as tax imposed by this chapter for certain purposes</header><text>The tax imposed under this section shall not be treated as tax imposed by this chapter for purposes of determining the amount of any credit under this chapter (other than the credit allowed under section 27(a)) or for purposes of section 55.</text> </subsection></section></part><after-quoted-block>.</after-quoted-block></quoted-block> </subsection>
<subsection id="idA8E4A587BBA045998A4468D5E2E9A61E"><enum>(b)</enum><header>Clerical amendment</header><text>The table of parts for subchapter A of chapter 1 is amended by adding at the end the following new item:</text>
<quoted-block id="ida5a95c9a-9bc6-4fee-8389-a66fdd660686" style="OLC">
<toc>
<toc-entry idref="id52F739CDD1254829A7C4FDBA34D0A9E1" level="part">Part VIII—Fair share tax on high-Income taxpayers</toc-entry> </toc> <after-quoted-block>.</after-quoted-block></quoted-block> </subsection>
<subsection commented="no" display-inline="no-display-inline" id="id1A85806DDA7A466BA8007BB2EED1E8A0"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2012.</text> </subsection></section>
<section id="id3D70129967D140BEB5F375C88C8E854C"><enum>202.</enum><header>Requiring high-income professionals to pay their payroll taxes</header>
<subsection id="id1C3CBE39E0B242DBB2FA86C774F34769"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/1402">Section 1402</external-xref> of the Internal Revenue Code of 1986 is amended by adding at the end the following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="id556FF05001654CDCA30E86E74015D1A6" style="OLC">
<subsection id="id3955DCC7BDA748329B87EE84B5816286"><enum>(m)</enum><header>Special rules for professional service businesses</header>
<paragraph id="id592D0FFA30F5448F8A26A34B1E11161B"><enum>(1)</enum><header>Shareholders providing services to specified S corporations</header>
<subparagraph id="id0464c092c3314c748843dd5a4323799a"><enum>(A)</enum><header>In general</header><text>In the case of an applicable shareholder who provides substantial services with respect to a professional service business referred to in subparagraph (C) of a specified S corporation—</text>
<clause id="id596EADE34D6F4536A779972D48C37B3B"><enum>(i)</enum><text>such shareholder shall be treated as engaged in the trade or business of such professional service business with respect to items of income or loss described in section 1366 which are attributable to such business, and</text> </clause>
<clause id="id5AD1EA8801844F1FAA9651638F176EB9"><enum>(ii)</enum><text>such shareholder's net earnings from self-employment shall include such shareholder’s pro rata share of such items of income or loss, except that in computing such pro rata share of such items the exceptions provided in subsection (a) shall apply.</text> </clause></subparagraph>
<subparagraph id="idF15276E3CFD547A39FE54B98BDC4212A"><enum>(B)</enum><header>Treatment of family members</header><text display-inline="yes-display-inline">Except as otherwise provided by the Secretary, the applicable shareholder’s pro rata share of items referred to in subparagraph (A) shall be increased by the pro rata share of such items of each member of such applicable shareholder’s family (within the meaning of section 318(a)(1)) who does not provide substantial services with respect to such professional service business.</text> </subparagraph>
<subparagraph id="idBC5E9F6E23B1431E991F91F51CBB08F6"><enum>(C)</enum><header>Specified S corporation</header><text>For purposes of this subsection, the term <term>specified S corporation</term> means—</text>
<clause id="id9DD8B114BED245D592175731D6C1D5A2"><enum>(i)</enum><text>any S corporation which is a partner in a partnership which is engaged in a professional service business if substantially all of the activities of such S corporation are performed in connection with such partnership, and</text> </clause>
<clause id="id434C3863AA014063837A8270A86391B9"><enum>(ii)</enum><text>any other S corporation which is engaged in a professional service business if 75 percent or more of the gross income of such business is attributable to service of 3 or fewer shareholders of such corporation.</text> </clause></subparagraph>
<subparagraph id="id752C23DE609E49CB8D5E88AAAB90281F"><enum>(D)</enum><header>Applicable shareholder</header><text>For purposes of this paragraph, the term <term>applicable shareholder</term> means any shareholder whose modified adjusted gross income for the taxable year exceeds—</text>
<clause id="idBB70AB732F09436DA6430F2FAEA73BCE"><enum>(i)</enum><text>in the case of a shareholder making a joint return under section 6013 or a surviving spouse (as defined in section 2(a)), $250,000,</text> </clause>
<clause id="idC5EA667FBD284D90BCD51FC186249B7E"><enum>(ii)</enum><text>in the case of a married shareholder (as defined in section 7703) filing a separate return, half of the dollar amount determined under clause (i), and</text> </clause>
<clause id="id0CA81DB59B504842A025A497276413B6"><enum>(iii)</enum><text>in any other case, $200,000.</text> </clause></subparagraph></paragraph>
<paragraph id="idB3C3719FC22A42A4B4A4084D7A6A5310"><enum>(2)</enum><header>Partners</header>
<subparagraph id="id509D6C0ED33C4309B9B1C697B3F90FED"><enum>(A)</enum><header>In general</header><text>In the case of any partnership which is engaged in a professional service business, subsection (a)(13) shall not apply to any applicable partner who provides substantial services with respect to such professional service business.</text> </subparagraph>
<subparagraph id="id6060B360112E4349A9752A1131E3EE63"><enum>(B)</enum><header>Applicable partner</header><text>For purposes of this paragraph, the term <term>applicable partner</term> means any partner whose modified adjusted gross income for the taxable year exceeds—</text>
<clause id="idEBB2114E7F4D4430933165FB9630C392"><enum>(i)</enum><text>in the case of a partner making a joint return under section 6013 or a surviving spouse (as defined in section 2(a)), $250,000,</text> </clause>
<clause id="idDCFD568E82954EC68F74ADD5C1E9A76F"><enum>(ii)</enum><text>in the case of a married partner (as defined in section 7703) filing a separate return, half of the dollar amount determined under clause (i), and</text> </clause>
<clause id="idDEC10280702240189B484CCA12827066"><enum>(iii)</enum><text>in any other case, $200,000.</text> </clause></subparagraph></paragraph>
<paragraph id="id859BF0B97C69404E962F49FB479A84A6"><enum>(3)</enum><header>Professional service business</header><text>For purposes of this subsection, the term <quote>professional service business</quote> means any trade or business (or portion thereof) providing services in the fields of health, law, lobbying, engineering, architecture, accounting, actuarial science, performing arts, consulting, athletics, investment advice or management, or brokerage services.</text> </paragraph>
<paragraph id="id258281DB50204915A21C35FE4B276113"><enum>(4)</enum><header>Modified adjusted gross income</header><text>For purposes of this subsection, the term <term>modified adjusted gross income</term> means adjusted gross income—</text>
<subparagraph id="id313822C3C3EB4F22A29C0B1FA8D35232"><enum>(A)</enum><text>determined without regard to any deduction allowed under section 164(f), and</text> </subparagraph>
<subparagraph id="id7BE85D1FB7354EE4887A08B029557B05"><enum>(B)</enum><text>increased by the amount excluded from gross income under section 911(a)(1).</text> </subparagraph></paragraph>
<paragraph id="id78681EB9B3F04DC1A2D7F4B29BEA0382"><enum>(5)</enum><header>Regulations</header><text>The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this subsection, including regulations which prevent the avoidance of the purposes of this subsection through tiered entities or otherwise.</text> </paragraph>
<paragraph display-inline="no-display-inline" id="id7B6CEB2F26824CAD9232647945DE7E2D"><enum>(6)</enum><header>Cross reference</header><text display-inline="yes-display-inline">For employment tax treatment of wages paid to shareholders of S corporations, see subtitle C.</text> </paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block> </subsection>
<subsection id="id35CCECDBB75543D3AACF112429A72E02"><enum>(b)</enum><header>Conforming amendment</header><text display-inline="yes-display-inline">Section 211 of the Social Security Act is amended by adding at the end the following new subsection:</text>
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<subsection display-inline="no-display-inline" id="idB05D166DC9AD4BEBA9B7CD11B6E47943"><enum>(l)</enum><header>Special rules for professional service businesses</header>
<paragraph id="id1F8F695A647D4190963BC119C74C17AD"><enum>(1)</enum><header>Shareholders providing services to specified S corporations</header>
<subparagraph id="idED862F68310E4739952BCD6495C2E40D"><enum>(A)</enum><header>In general</header><text>In the case of an applicable shareholder who provides substantial services with respect to a professional service business referred to in subparagraph (C) of a specified S corporation—</text>
<clause id="id16254BD2BB44408CABE8C59E864D8509"><enum>(i)</enum><text>such shareholder shall be treated as engaged in the trade or business of such professional service business with respect to items of income or loss described in <external-xref legal-doc="usc" parsable-cite="usc/26/1366">section 1366</external-xref> of the Internal Revenue Code of 1986 which are attributable to such business, and</text> </clause>
<clause id="id6C794508EA30482CA5AA7F2E1B484687"><enum>(ii)</enum><text>such shareholder's net earnings from self-employment shall include such shareholder’s pro rata share of such items of income or loss, except that in computing such pro rata share of such items the exceptions provided in subsection (a) shall apply.</text> </clause></subparagraph>
<subparagraph display-inline="no-display-inline" id="idB3D978888E2C436CBB700429C688D6DC"><enum>(B)</enum><header>Treatment of family members</header><text display-inline="yes-display-inline">Except as otherwise provided by the Secretary of the Treasury, the applicable shareholder’s pro rata share of items referred to in subparagraph (A) shall be increased by the pro rata share of such items of each member of such applicable shareholder’s family (within the meaning of <external-xref legal-doc="usc" parsable-cite="usc/26/318">section 318(a)(1)</external-xref> of the Internal Revenue Code of 1986) who does not provide substantial services with respect to such professional service business.</text> </subparagraph>
<subparagraph id="idCCC04FFEED9E48969C19425367FD504A"><enum>(C)</enum><header>Specified S corporation</header><text>For purposes of this subsection, the term <quote>specified S corporation</quote> means—</text>
<clause id="id9BAC51E78025463C814D576C090055E0"><enum>(i)</enum><text>any S corporation (as defined in <external-xref legal-doc="usc" parsable-cite="usc/26/1361">section 1361(a)</external-xref> of the Internal Revenue Code of 1986) which is a partner in a partnership which is engaged in a professional service business if substantially all of the activities of such S corporation are performed in connection with such partnership, and</text> </clause>
<clause id="idA8010DC54E2D4A69AB2DC8B61C8CABC5"><enum>(ii)</enum><text>any other S corporation (as so defined) which is engaged in a professional service business if 75 percent or more of the gross income of such business is attributable to service of 3 or fewer shareholders of such corporation.</text> </clause></subparagraph>
<subparagraph id="idD2FBD8E0EDAB429B9E8B35AAB7C69AE0"><enum>(D)</enum><header>Applicable shareholder</header><text>For purposes of this paragraph, the term <term>applicable shareholder</term> means any shareholder whose modified adjusted gross income for the taxable year exceeds—</text>
<clause id="id5248BAEFBB5B4B159EE40FEDD742EB46"><enum>(i)</enum><text>in the case of a shareholder making a joint return under <external-xref legal-doc="usc" parsable-cite="usc/26/6013">section 6013</external-xref> of the Internal Revenue Code of 1986 or a surviving spouse (as defined in section 2(a) of such Code), $250,000,</text> </clause>
<clause id="id049A6AF5378B4FFBB7CD3C431D1F4472"><enum>(ii)</enum><text>in the case of a married shareholder (as defined in section 7703 of such Code) filing a separate return, half of the dollar amount determined under clause (i), and</text> </clause>
<clause id="id75E0BD7B79CA4AA68361273130A7B64B"><enum>(iii)</enum><text>in any other case, $200,000.</text> </clause></subparagraph></paragraph>
<paragraph id="id8B71FCA65F13469ABC91796C1A12B17A"><enum>(2)</enum><header>Partners</header>
<subparagraph id="id72C3954E4711476B8BD21C1692128D89"><enum>(A)</enum><header>In general</header><text>In the case of any partnership which is engaged in a professional service business, subsection (a)(12) shall not apply to any applicable partner who provides substantial services with respect to such professional service business.</text> </subparagraph>
<subparagraph id="id2C42D14874A046F39843C1C482C1BF3B"><enum>(B)</enum><header>Applicable partner</header><text>For purposes of this paragraph, the term <term>applicable partner</term> means any partner whose modified adjusted gross income for the taxable year exceeds—</text>
<clause id="id35DA738513D9429F90B37D12545E2D1B"><enum>(i)</enum><text>in the case of a partner making a joint return under <external-xref legal-doc="usc" parsable-cite="usc/26/6013">section 6013</external-xref> of the Internal Revenue Code of 1986 or a surviving spouse (as defined in section 2(a) of such Code), $250,000,</text> </clause>
<clause id="id61CEC6A22BAF4EE5BB991E55F996B047"><enum>(ii)</enum><text>in the case of a married partner (as defined in section 7703 of such Code) filing a separate return, half of the dollar amount determined under clause (i), and</text> </clause>
<clause id="id6419947D85EA4A9CBC314D1D0BAD2778"><enum>(iii)</enum><text>in any other case, $200,000.</text> </clause></subparagraph></paragraph>
<paragraph id="id599531BAE932432BA6BC7075C0A48FD7"><enum>(3)</enum><header>Professional service business</header><text>For purposes of this subsection, the term <quote>professional service business</quote> means any trade or business (or portion thereof) providing services in the fields of health, law, lobbying, engineering, architecture, accounting, actuarial science, performing arts, consulting, athletics, investment advice or management, or brokerage services.</text> </paragraph>
<paragraph id="id52ACCC4B9B444E71AA5EEE715C7C2D92"><enum>(4)</enum><header>Modified adjusted gross income</header><text>For purposes of this subsection, the term <term>modified adjusted gross income</term> means adjusted gross income as determined under <external-xref legal-doc="usc" parsable-cite="usc/26/62">section 62</external-xref> of the Internal Revenue Code of 1986—</text>
<subparagraph id="id74769487178B4FDEA93F76EC42C8585E"><enum>(A)</enum><text>determined without regard to any deduction allowed under section 164(f) of such Code, and</text> </subparagraph>
<subparagraph id="idEDAC64557E0A4A1EB27B31198DE84048"><enum>(B)</enum><text>increased by the amount excluded from gross income under section 911(a)(1) of such Code.</text> </subparagraph></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block> </subsection>
<subsection commented="no" display-inline="no-display-inline" id="idBE8DFE80FC004F658688FC5C1D2473DE"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2012.</text> </subsection></section>
<section id="id5CFD53BA77394CF1BB2919DA12B7CBF3"><enum>203.</enum><header>Elimination of private jet giveaway</header>
<subsection id="H74151880DC5448E7933E318A4B359823"><enum>(a)</enum><header>In general</header><text>Subparagraph (C) of <external-xref legal-doc="usc" parsable-cite="usc/26/168">section 168(e)(3)</external-xref> of the Internal Revenue Code of 1986 is amended by striking <quote>and</quote> at the end of clause (iv), by redesignating clause (v) as clause (vi), and by inserting after clause (iv) the following new clause:</text>
<quoted-block id="H3B3D2C2AD9B24042B31C61B5BD4BE999" style="OLC">
<subsection id="H83A6286315FC4FC5B834C109B5C08F09" indent="down3"><enum>(v)</enum><text>any general aviation aircraft, and</text> </subsection><after-quoted-block>.</after-quoted-block></quoted-block> </subsection>
<subsection id="HAF1534F735C64CE6B15CAC4C07171556"><enum>(b)</enum><header>Class Life</header><text>Paragraph (3) of <external-xref legal-doc="usc" parsable-cite="usc/26/168">section 168(g)</external-xref> of the Internal Revenue Code of 1986 is amended by inserting after subparagraph (E) the following new subparagraph:</text>
<quoted-block id="H8D9299BAB690478AA4829B9629489CB3" style="OLC">
<subparagraph id="HC8932B84726047A5B0FD78E984EB3A5E"><enum>(F)</enum><header>General aviation aircraft</header><text>In the case of any general aviation aircraft, the recovery period used for purposes of paragraph (2) shall be 12 years.</text> </subparagraph><after-quoted-block>.</after-quoted-block></quoted-block> </subsection>
<subsection id="HDB6A664DDB3D4A32978FBBC512DBFA88"><enum>(c)</enum><header>General aviation aircraft</header><text>Subsection (i) of <external-xref legal-doc="usc" parsable-cite="usc/26/168">section 168</external-xref> of the Internal Revenue Code of 1986 is amended by inserting after paragraph (19) the following new paragraph:</text>
<quoted-block id="H5A4BEE18EFC7441A9CFFF22A9BCCD5F4" style="OLC">
<paragraph id="HCF8C5DA0B50F41B7B18BCAF9AC72BFC5"><enum>(20)</enum><header>General aviation aircraft</header><text>The term <quote>general aviation aircraft</quote> means any airplane or helicopter (including airframes and engines) not used in commercial or contract carrying of passengers or freight, but which primarily engages in the carrying of passengers.</text> </paragraph><after-quoted-block>.</after-quoted-block></quoted-block> </subsection>
<subsection id="HC7C1B3A702BC45BE916673EC8E46E449"><enum>(d)</enum><header>Effective date</header><text>This section shall be effective for property placed in service after December 31, 2012.</text> </subsection></section>
<section id="H1B058370C8794061992F4B4F3FA9FDB4"><enum>204.</enum><header>Limitation on itemized deductions to 28-percent rate bracket</header>
<subsection id="HE5D7BE9A027F4937987741980F0276AC"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">The Internal Revenue Code of 1986 is amended by inserting after section 68 the following new section:</text>
<quoted-block display-inline="no-display-inline" id="H2387E12B126845AD90FEAF8E3470CEE3" style="OLC">
<section id="H2744EEEE556B4726A4E7BB340FBB2016"><enum>68A.</enum><header>Benefit of itemized deductions limited to 28-percent rate bracket</header>
<subsection id="HF9935DAD373C4B34BF23D07672A474E9"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">In the case of an individual whose adjusted gross income exceeds $200,000 ($250,000 in the case of a joint return), the amount of the itemized deductions otherwise allowable for the taxable year shall be reduced by an amount necessary to increase the amount of regular tax liability of the taxpayer to an amount that would be imposed if such deductions reduced the regular tax liability by not more than the amount such deductions would reduce the tax imposed by section 1 on taxable income within the 28-percent bracket amount.</text> </subsection>
<subsection id="HBF48710B09724AEDBE7569980E0143B6"><enum>(b)</enum><header>Regular tax liability</header><text>For purposes of this section, the term <quote>regular tax liability</quote> has the meaning given such term by section 26(b).</text> </subsection>
<subsection id="H09DD7E76A9ED4A5989223BE84C52FEE2"><enum>(c)</enum><header>Coordination with section <enum-in-header>68</enum-in-header></header><text>This section shall apply after the application of section 68.</text> </subsection></section><after-quoted-block>.</after-quoted-block></quoted-block> </subsection>
<subsection id="H2E3E3D22D04348D69BE51269B210CC20"><enum>(b)</enum><header>Alternative minimum tax</header>
<paragraph id="H374BECCF6F2D4251A7120982AAE52033"><enum>(1)</enum><header>In general</header><text>Subsection (b) of section 55 is amended by adding at the end the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="H688AF94150644B9F877A19408582F305" style="OLC">
<paragraph id="H8CB4E77F8ACF4ED9ACB222939F03800A"><enum>(5)</enum><header>Coordination with section 68A</header><text display-inline="yes-display-inline">In the case of an individual, for purposes of paragraph (2), alternative minimum taxable income shall be determined by reducing the amount of any itemized deductions otherwise allowed in determining alternative minimum taxable income by an amount which bears the same ratio to the amount by which the itemized deductions of the taxpayer were reduced for the taxable year under section 68A as—</text>
<subparagraph id="H0AD0E513D2B241FFB790C9A214639568"><enum>(A)</enum><text>the amount of itemized deductions otherwise allowed in determining the alternative minimum taxable income for the taxable year, bears to</text> </subparagraph>
<subparagraph id="HB8BD92232A9F4A0AA0096E02101D9F94"><enum>(B)</enum><text>the aggregate amount of itemized deductions of the taxpayer for the taxable year (determined without regard to section 68A).</text> </subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph>
<paragraph id="H25306B09E6FD41A694883B593D2E3F55"><enum>(2)</enum><header>Conforming amendment</header><text>Paragraph (1) of section 56(b) is amended by adding at the end the following new subparagraph:</text>
<quoted-block display-inline="no-display-inline" id="HBD3E9DCBEFC54AF3830B1CCA5E11DB23" style="OLC">
<subparagraph id="H0E609B5C0D53402AABE69301D54FB3AB"><enum>(G)</enum><header>Section 68A not applicable</header><text display-inline="yes-display-inline">Section 68A shall not apply.</text> </subparagraph><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph></subsection>
<subsection id="H50634AD5F4544CDAA4B43F42F77D2EC1"><enum>(c)</enum><header>Clerical amendment</header><text>The table of sections for part I of subchapter B of chapter 1 is amended by adding at the end the following new item:</text>
<quoted-block display-inline="no-display-inline" id="H67D71BD5F27940D4840C9E466A4C4594" style="OLC">
<toc regeneration="no-regeneration">
<toc-entry level="section">Sec. 68A. Benefit of itemized deductions limited to 28-percent rate bracket.</toc-entry> </toc> <after-quoted-block>.</after-quoted-block></quoted-block> </subsection>
<subsection commented="no" display-inline="no-display-inline" id="H7FCBFC1D90C946C791F9A5226DF7CF37"><enum>(d)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2012.</text> </subsection></section>
<enum>III</enum><header>Elimination of tax loopholes for offshoring manufacturers</header>
<section id="id2E60BBAFA3A64806AA0915E63C25A35C"><enum>301.</enum><header>Ending tax breaks for offshoring manufacturers</header>
<subsection id="ID1CB82BB9E232404C860338A93DB4D1CE"><enum>(a)</enum><header>General Rule</header><text>Subsection (a) of <external-xref legal-doc="usc" parsable-cite="usc/26/954">section 954</external-xref> of the Internal Revenue Code of 1986 is amended by striking the period at the end of paragraph (5) and inserting <quote>, and</quote>, by redesignating paragraph (5) as paragraph (4), and by adding at the end the following new paragraph:</text>
<quoted-block id="ID5BDAC310149246F183AA06327F385B18" style="OLC">
<paragraph id="ID102D28439F6C4B668A2FA9F90CB91F00"><enum>(5)</enum><text>imported property income for the taxable year (determined under subsection (j) and reduced as provided in subsection (b)(5)).</text> </paragraph><after-quoted-block>.</after-quoted-block></quoted-block> </subsection>
<subsection id="ID6D1D93DC7C654257B0512E11D41A3148"><enum>(b)</enum><header>Definition of Imported Property Income</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/954">Section 954</external-xref> of the Internal Revenue Code of 1986 is amended by adding at the end the following new subsection:</text>
<quoted-block id="IDC82ED20BC007428CBF4831408CB6E6B1" style="OLC">
<subsection id="ID5ABFA047007849DCAB0D82A7FEA9E504"><enum>(j)</enum><header>Imported Property Income</header>
<paragraph id="ID68FE72D3F7744BD1B878130DF02CFA77"><enum>(1)</enum><header>In general</header><text>For purposes of subsection (a)(5), the term <term>imported property income</term> means income (whether in the form of profits, commissions, fees, or otherwise) derived in connection with—</text>
<subparagraph id="IDF027510C6ADB4194A2DE4D829714A368"><enum>(A)</enum><text>manufacturing, producing, growing, or extracting imported property;</text> </subparagraph>
<subparagraph id="ID2EA2B95B13724FAF87C8DC6AC8162E62"><enum>(B)</enum><text>the sale, exchange, or other disposition of imported property; or</text> </subparagraph>
<subparagraph id="ID90F2D5C306674400AE6DAEF041E5B5F0"><enum>(C)</enum><text>the lease, rental, or licensing of imported property.</text> </subparagraph><continuation-text continuation-text-level="paragraph">Such term shall not include any foreign oil and gas extraction income (within the meaning of section 907(c)) or any foreign oil related income (within the meaning of section 907(c)).</continuation-text></paragraph>
<paragraph id="IDE7BD18DB53AA49D6BD67E72BD5E3FD34"><enum>(2)</enum><header>Imported property</header><text>For purposes of this subsection—</text>
<subparagraph id="ID0961E19468874DE69F348433FA9AEC0C"><enum>(A)</enum><header>In general</header><text>Except as otherwise provided in this paragraph, the term <term>imported property</term> means property which is imported into the United States by the controlled foreign corporation or a related person.</text> </subparagraph>
<subparagraph id="ID0C77D59EEBFC47F9B55AC318F260B237"><enum>(B)</enum><header>Imported property includes certain property imported by unrelated persons</header><text>The term <term>imported property</term> includes any property imported into the United States by an unrelated person if, when such property was sold to the unrelated person by the controlled foreign corporation (or a related person), it was reasonable to expect that—</text>
<clause id="ID9CD588352746492E9787F9E9F8650B52"><enum>(i)</enum><text>such property would be imported into the United States; or</text> </clause>
<clause id="IDAC5E75EA54A14A6193AF29834F2FAA2B"><enum>(ii)</enum><text>such property would be used as a component in other property which would be imported into the United States.</text> </clause></subparagraph>
<subparagraph id="ID4857227D80264023B537A082A6B06DB2"><enum>(C)</enum><header>Exception for property subsequently exported</header><text>The term <term>imported property</term> does not include any property which is imported into the United States and which—</text>
<clause id="IDDD55F7D29E234688A7249A87E524D106"><enum>(i)</enum><text>before substantial use in the United States, is sold, leased, or rented by the controlled foreign corporation or a related person for direct use, consumption, or disposition outside the United States; or</text> </clause>
<clause id="ID5B519C0CA1884A96B767FF3BC29DC78D"><enum>(ii)</enum><text>is used by the controlled foreign corporation or a related person as a component in other property which is so sold, leased, or rented.</text> </clause></subparagraph>
<subparagraph id="idEEC634691CCE41E1ACCC3800C192CADE"><enum>(D)</enum><header>Exception for certain agricultural commodities</header><text>The term <term>imported property</term> does not include any agricultural commodity which is not grown in the United States in commercially marketable quantities.</text> </subparagraph></paragraph>
<paragraph id="ID0CDAB1DE8FEA42B08C6273870AD41889"><enum>(3)</enum><header>Definitions and special rules</header>
<subparagraph id="ID9408F98654E84BC2A9520E2AD6FB3410"><enum>(A)</enum><header>Import</header><text>For purposes of this subsection, the term <term>import</term> means entering, or withdrawal from warehouse, for consumption or use. Such term includes any grant of the right to use intangible property (as defined in section 936(h)(3)(B)) in the United States.</text> </subparagraph>
<subparagraph id="ID5A6848EFD4474709A50D1827BC629781"><enum>(B)</enum><header>United states</header><text>For purposes of this subsection, the term <term>United States</term> includes the Commonwealth of Puerto Rico, the Virgin Islands of the United States, Guam, American Samoa, and the Commonwealth of the Northern Mariana Islands.</text> </subparagraph>
<subparagraph id="ID95B783D9BA6040629C809825094F90B0"><enum>(C)</enum><header>Unrelated person</header><text>For purposes of this subsection, the term <term>unrelated person</term> means any person who is not a related person with respect to the controlled foreign corporation.</text> </subparagraph>
<subparagraph id="ID8811ABC96FE94B89B469CDA9C84D2C7B"><enum>(D)</enum><header>Coordination with foreign base company sales income</header><text>For purposes of this section, the term <term>foreign base company sales income</term> shall not include any imported property income.</text> </subparagraph></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block> </subsection>
<subsection id="ID0785B6D4B4E0457FA13A15F6E3F600FA"><enum>(c)</enum><header>Separate Application of Limitations on Foreign Tax Credit for Imported Property Income</header>
<paragraph id="ID08DB284A81A44E7AAB43C92E19773731"><enum>(1)</enum><header>In general</header><text>Paragraph (1) of <external-xref legal-doc="usc" parsable-cite="usc/26/904">section 904(d)</external-xref> of the Internal Revenue Code of 1986 is amended by striking <quote>and</quote> at the end of subparagraph (A), by redesignating subparagraph (B) as subparagraph (C), and by inserting after subparagraph (A) the following new subparagraph:</text>
<quoted-block id="ID71CC174F5C8646B4B93FE1FBC2B138E5" style="OLC">
<subparagraph id="IDDB059A6AB54B447B9DF7C323734BF616"><enum>(B)</enum><text>imported property income, and</text> </subparagraph><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph>
<paragraph id="IDB25F06C59C6E4B2990EB4A7825D6BC42"><enum>(2)</enum><header>Imported property income defined</header><text>Paragraph (2) of section 904(d) of such Code is amended by redesignating subparagraphs (I), (J), and (K) as subparagraphs (J), (K), and (L), respectively, and by inserting after subparagraph (H) the following new subparagraph:</text>
<quoted-block id="IDB1DBFA39475E4685A3CBBE52C939BFD8" style="OLC">
<subparagraph id="ID9D6C93D98F774D919E6D67DCCD9C929E"><enum>(I)</enum><header>Imported property income</header><text>The term <term>imported property income</term> means any income received or accrued by any person which is of a kind which would be imported property income (as defined in section 954(j)).</text> </subparagraph><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph>
<paragraph id="ID7C99769D99C04320A7BA7A18A68D346F"><enum>(3)</enum><header>Conforming amendment</header><text>Clause (ii) of section 904(d)(2)(A) of such Code is amended by inserting <quote>or imported property income</quote> after <quote>passive category income</quote>.</text> </paragraph></subsection>
<subsection id="IDD5859A2B3F624997A206E14EE450EE0E"><enum>(d)</enum><header>Technical Amendments</header>
<paragraph id="IDB3507E3E38DE4E7DADF1643514DB15CC"><enum>(1)</enum><text>Clause (iii) of <external-xref legal-doc="usc" parsable-cite="usc/26/952">section 952(c)(1)(B)</external-xref> of the Internal Revenue Code of 1986 is amended—</text>
<subparagraph id="IDB15975E4ED54465A968093E63E17D775"><enum>(A)</enum><text>by redesignating subclauses (II), (III), (IV), and (V) as subclauses (III), (IV), (V), and (VI), and</text> </subparagraph>
<subparagraph id="IDA3A313417F934DA0A1FE87070C1A8012"><enum>(B)</enum><text>by inserting after subclause (I) the following new subclause:</text>
<quoted-block id="IDCBA1006C11EC4F27B296923C585C1625" style="OLC">
<subclause id="ID84020A2EA66A47EF9F8767EACEB4B90A"><enum>(II)</enum><text>imported property income,</text> </subclause><after-quoted-block>.</after-quoted-block></quoted-block> </subparagraph></paragraph>
<paragraph id="idEC1D6B4B52DE41A8AA41D51EBC3EB821"><enum>(2)</enum><text>The last sentence of paragraph (4) of section 954(b) of such Code is amended by striking <quote>subsection (a)(5)</quote> and inserting <quote>subsection (a)(4)</quote>.</text> </paragraph>
<paragraph id="IDF4824877857040D68BBC29A336CBF342"><enum>(3)</enum><text>Paragraph (5) of section 954(b) of such Code is amended by striking <quote>and the foreign base company oil related income</quote> and inserting <quote>the foreign base company oil related income, and the imported property income</quote>.</text> </paragraph></subsection>
<subsection id="ID4F091632A17F4C1E89E10E7E25AA60F7"><enum>(e)</enum><header>Effective Date</header><text>The amendments made by this section shall apply to taxable years of foreign corporations beginning after the date of the enactment of this Act, and to taxable years of United States shareholders within which or with which such taxable years of such foreign corporations end.</text> </subsection></section>
<enum>IV</enum><header>Elimination of tax loopholes for oil and gas companies</header>
<section commented="no" display-inline="no-display-inline" id="id85C40D5C4E7C454E86A56B984305EA75"><enum>401.</enum><header>Modifications of foreign tax credit rules applicable to major integrated oil companies which are dual capacity taxpayers</header>
<subsection commented="no" display-inline="no-display-inline" id="id870C10B6A3A9401B8D2647B1A0E15EC0"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/901">Section 901</external-xref> of the Internal Revenue Code of 1986 is amended by redesignating subsection (n) as subsection (o) and by inserting after subsection (m) the following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="id59B4564047054D9F8EFB25B05BC5AF1E" style="OLC">
<subsection commented="no" display-inline="no-display-inline" id="id832013D669AB496E9217A5D70E41E716"><enum>(n)</enum><header>Special rules relating to major integrated oil companies which are dual capacity taxpayers</header>
<paragraph commented="no" display-inline="no-display-inline" id="idA86BDC3205EF48378545D9D088E03443"><enum>(1)</enum><header>General rule</header><text display-inline="yes-display-inline">Notwithstanding any other provision of this chapter, any amount paid or accrued by a dual capacity taxpayer which is a major integrated oil company (as defined in section 167(h)(5)(B)) to a foreign country or possession of the United States for any period shall not be considered a tax—</text>
<subparagraph commented="no" display-inline="no-display-inline" id="idCE1206A91A254CEFA030EAF1D94F610A"><enum>(A)</enum><text display-inline="yes-display-inline">if, for such period, the foreign country or possession does not impose a generally applicable income tax, or</text> </subparagraph>
<subparagraph commented="no" display-inline="no-display-inline" id="id1430720C4FEC4AF1BAEDD845D4A2DE7E"><enum>(B)</enum><text display-inline="yes-display-inline">to the extent such amount exceeds the amount (determined in accordance with regulations) which—</text>
<clause commented="no" display-inline="no-display-inline" id="id3616EAF2E4174061B78DB6C614CBB2C4"><enum>(i)</enum><text display-inline="yes-display-inline">is paid by such dual capacity taxpayer pursuant to the generally applicable income tax imposed by the country or possession, or</text> </clause>
<clause commented="no" display-inline="no-display-inline" id="idBBD48C80AE584E7AAE22BC2F3F750626"><enum>(ii)</enum><text display-inline="yes-display-inline">would be paid if the generally applicable income tax imposed by the country or possession were applicable to such dual capacity taxpayer.</text> </clause></subparagraph><continuation-text commented="no" continuation-text-level="paragraph">Nothing in this paragraph shall be construed to imply the proper treatment of any such amount not in excess of the amount determined under subparagraph (B).</continuation-text></paragraph>
<paragraph commented="no" display-inline="no-display-inline" id="id2BE54CFB0E9F46AEABB5E04C1E1553D1"><enum>(2)</enum><header>Dual capacity taxpayer</header><text display-inline="yes-display-inline">For purposes of this subsection, the term <term>dual capacity taxpayer</term> means, with respect to any foreign country or possession of the United States, a person who—</text>
<subparagraph commented="no" display-inline="no-display-inline" id="id114FA007ACB04E589C34FD9AE707FF40"><enum>(A)</enum><text display-inline="yes-display-inline">is subject to a levy of such country or possession, and</text> </subparagraph>
<subparagraph commented="no" display-inline="no-display-inline" id="idB48A3E58EACB4262A062681509EBC2D3"><enum>(B)</enum><text display-inline="yes-display-inline">receives (or will receive) directly or indirectly a specific economic benefit (as determined in accordance with regulations) from such country or possession.</text> </subparagraph></paragraph>
<paragraph commented="no" display-inline="no-display-inline" id="id4221398EC1FE4603A1915AC3F6F4FF31"><enum>(3)</enum><header>Generally applicable income tax</header><text display-inline="yes-display-inline">For purposes of this subsection—</text>
<subparagraph commented="no" display-inline="no-display-inline" id="id9A25BF879E264980B24CFC517824B854"><enum>(A)</enum><header>In general</header><text display-inline="yes-display-inline">The term <term>generally applicable income tax</term> means an income tax (or a series of income taxes) which is generally imposed under the laws of a foreign country or possession on income derived from the conduct of a trade or business within such country or possession.</text> </subparagraph>
<subparagraph commented="no" display-inline="no-display-inline" id="id6008C386B2034848BC16753211264648"><enum>(B)</enum><header>Exceptions</header><text display-inline="yes-display-inline">Such term shall not include a tax unless it has substantial application, by its terms and in practice, to—</text>
<clause commented="no" display-inline="no-display-inline" id="id8EFBAC16675449C2ABDBF167616DBFA1"><enum>(i)</enum><text display-inline="yes-display-inline">persons who are not dual capacity taxpayers, and</text> </clause>
<clause commented="no" display-inline="no-display-inline" id="idFE15C6C70615499EB6717AE075351274"><enum>(ii)</enum><text display-inline="yes-display-inline">persons who are citizens or residents of the foreign country or possession.</text> </clause></subparagraph></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block> </subsection>
<subsection commented="no" display-inline="no-display-inline" id="id2003AD9F498E450E87059BCEDDDD5689"><enum>(b)</enum><header>Effective Date</header>
<paragraph commented="no" display-inline="no-display-inline" id="id2C2A93FA1BB14247A7D590BFFC676441"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">The amendments made by this section shall apply to taxes paid or accrued in taxable years beginning after the date of the enactment of this Act.</text> </paragraph>
<paragraph commented="no" display-inline="no-display-inline" id="idF5637FD489954B729A309CFCDB650390"><enum>(2)</enum><header>Contrary treaty obligations upheld</header><text display-inline="yes-display-inline">The amendments made by this section shall not apply to the extent contrary to any treaty obligation of the United States.</text> </paragraph></subsection></section>
<section display-inline="no-display-inline" id="idD36DA8177A7144CFBF7A1B681A26FAC2"><enum>402.</enum><header>Limitation on section 199 deduction attributable to oil, natural gas, or primary products thereof</header>
<subsection id="id4EDE82BB1896423CAC005CECEA288DF2"><enum>(a)</enum><header>Denial of deduction</header><text>Paragraph (4) of <external-xref legal-doc="usc" parsable-cite="usc/26/199">section 199(c)</external-xref> of the Internal Revenue Code of 1986 is amended by adding at the end the following new subparagraph:</text>
<quoted-block display-inline="no-display-inline" id="id2210F32B480A46E2AC61114E84235138" style="OLC">
<subparagraph id="id6407FC188C044D07833FBF6465572FA7"><enum>(E)</enum><header>Special rule for certain oil and gas income</header><text>In the case of any taxpayer who is a major integrated oil company (as defined in section 167(h)(5)(B)) for the taxable year, the term <term>domestic production gross receipts</term> shall not include gross receipts from the production, transportation, or distribution of oil, natural gas, or any primary product (within the meaning of subsection (d)(9)) thereof.</text> </subparagraph><after-quoted-block>.</after-quoted-block></quoted-block> </subsection>
<subsection commented="no" display-inline="no-display-inline" id="idDBB26ED5A91244F4861028F78CCB4383"><enum>(b)</enum><header>Effective date</header><text>The amendment made by this section shall apply to taxable years beginning after December 31, 2012.</text> </subsection></section>
<section commented="no" display-inline="no-display-inline" id="id403D99C1C16848C48F5209F4984C4B56"><enum>403.</enum><header>Limitation on deduction for intangible drilling and development costs</header>
<subsection commented="no" display-inline="no-display-inline" id="idE1C6CA4AEAFC44B1B4063EF0543F48BC"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/263">Section 263(c)</external-xref> of the Internal Revenue Code of 1986 is amended by adding at the end the following new sentence: <quote>This subsection shall not apply to amounts paid or incurred by a taxpayer in any taxable year in which such taxpayer is a major integrated oil company (as defined in section 167(h)(5)(B)).</quote>.</text> </subsection>
<subsection commented="no" display-inline="no-display-inline" id="idED920A4A6A5B4A26BC8B338B4E7B37D5"><enum>(b)</enum><header>Effective date</header><text display-inline="yes-display-inline">The amendment made by this section shall apply to amounts paid or incurred in taxable years beginning after December 31, 2012.</text> </subsection></section>
<section commented="no" display-inline="no-display-inline" id="idEBDA974B3B2449F6AD96FC529404DCFC" section-type="subsequent-section"><enum>404.</enum><header display-inline="yes-display-inline">Limitation on percentage depletion allowance for oil and gas wells</header>
<subsection commented="no" display-inline="no-display-inline" id="idD496B7DFC3B14DF282E5667BF776AB1D"><enum>(a)</enum><header display-inline="yes-display-inline">In general</header><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/613A">Section 613A</external-xref> of the Internal Revenue Code of 1986 is amended by adding at the end the following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="idD45339352F7447D0AA745594CCCAED20" style="OLC">
<subsection commented="no" display-inline="no-display-inline" id="idF845C6D7007B4C8E842C3BB31F28E006"><enum>(f)</enum><header display-inline="yes-display-inline">Application with respect to major integrated oil companies</header><text display-inline="yes-display-inline">In the case of any taxable year in which the taxpayer is a major integrated oil company (as defined in section 167(h)(5)(B)), the allowance for percentage depletion shall be zero.</text> </subsection><after-quoted-block>.</after-quoted-block></quoted-block> </subsection>
<subsection commented="no" display-inline="no-display-inline" id="id3C74932924574C798E37E2F28D0C565C"><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 taxable years beginning after December 31, 2012.</text> </subsection></section>
<section commented="no" display-inline="no-display-inline" id="id2F1FB5D5F7E346B98CBBC0EA3C1E3FBC"><enum>405.</enum><header>Limitation on deduction for tertiary injectants</header>
<subsection commented="no" display-inline="no-display-inline" id="idBF9377D05B604E8480EEB031445D9565"><enum>(a)</enum><header>In general</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/193">Section 193</external-xref> of the Internal Revenue Code of 1986 is amended by adding at the end the following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="id57DA761F659040E3A9495A0210B69564" style="OLC">
<subsection commented="no" display-inline="no-display-inline" id="id1C24D288BC784E0594C10F14AA09860C"><enum>(d)</enum><header>Application with respect to major integrated oil companies</header><text display-inline="yes-display-inline">This section shall not apply to amounts paid or incurred by a taxpayer in any taxable year in which such taxpayer is a major integrated oil company (as defined in section 167(h)(5)(B)).</text> </subsection><after-quoted-block>.</after-quoted-block></quoted-block> </subsection>
<subsection commented="no" display-inline="no-display-inline" id="idD1309F3F5A1E4A838C6DC30FC0B72391"><enum>(b)</enum><header>Effective date</header><text display-inline="yes-display-inline">The amendment made by this section shall apply to amounts paid or incurred in taxable years beginning after December 31, 2012.</text> </subsection></section>
<section id="idC1DA2680506941FEB12BA0AB7D5BBF45"><enum>406.</enum><header>Repeal of outer Continental Shelf deep water and deep gas royalty relief</header>
<subsection id="ID88967378382d4559bfe0b6d77e073454"><enum>(a)</enum><header>In general</header><text>Sections 344 and 345 of the Energy Policy Act of 2005 (<external-xref legal-doc="usc" parsable-cite="usc/42/15904">42 U.S.C. 15904</external-xref>, 15905) are repealed.</text> </subsection>
<subsection commented="no" display-inline="no-display-inline" id="ID9684bc5301944d2a8a169adf21e1b2b7"><enum>(b)</enum><header>Administration</header><text>The Secretary of the Interior shall not be required to provide for royalty relief in the lease sale terms beginning with the first lease sale held on or after the date of enactment of this Act for which a final notice of sale has not been published.</text> </subsection></section>
<enum>V</enum><header>Ending International Tax Abuses</header>
<section display-inline="no-display-inline" id="H2E9F6CC15B284B3D91F7B5E5044DA200" section-type="subsequent-section"><enum>501.</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 <external-xref legal-doc="usc-chapter" parsable-cite="usc-chapter/26/1">chapter 1</external-xref> of the Internal Revenue Code of 1986 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 of such Code 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>502.</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 <external-xref legal-doc="usc" parsable-cite="usc/26/954">section 954</external-xref> of the Internal Revenue Code of 1986 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 of such Code 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 of such Code 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) of such Code 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 of such Code 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>503.</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 <external-xref legal-doc="usc" parsable-cite="usc/26/936">section 936(h)(3)(B)</external-xref> of the Internal Revenue Code of 1986 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 <external-xref legal-doc="usc" parsable-cite="usc/26/367">section 367(d)</external-xref> of the Internal Revenue Code of 1986 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 of such Code 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 <external-xref legal-doc="usc" parsable-cite="usc/26/936">section 936(h)(3)</external-xref> 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>504.</enum><header>Limitation on earnings stripping by expatriated entities</header>
<subsection id="idF3062555D22E473DA65EF52DF6B57734"><enum>(a)</enum><header>In general</header><text>Subsection (j) of <external-xref legal-doc="usc" parsable-cite="usc/26/163">section 163</external-xref> of the Internal Revenue Code of 1986 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 commented="no" display-inline="no-display-inline" 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="idB158DDFC73814B12B20A1CBD7EA34E73"><enum>505.</enum><header>Modifications of foreign tax credit rules applicable to dual capacity taxpayers</header>
<subsection id="HF640F0C224D048B485AC603CECD700D6"><enum>(a)</enum><header>In general</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/901">Section 901</external-xref> of the Internal Revenue Code of 1986 is amended by redesignating subsection (n) as subsection (o) and by inserting after subsection (m) the following new subsection:</text>
<quoted-block id="HB9149A239BE44D51B44BBF495C7A480B" style="OLC">
<subsection id="HD3B9CB3537D941C8B137A7167858889E"><enum>(n)</enum><header>Special Rules Relating to Dual Capacity Taxpayers</header>
<paragraph id="HC4A08FF0FC6049AD8CCFD6708DA6FF20"><enum>(1)</enum><header>General rule</header><text>Notwithstanding any other provision of this chapter, any amount paid or accrued by a dual capacity taxpayer or any member of the worldwide affiliated group of which such dual capacity taxpayer is also a member to any foreign country or to any possession of the United States for any period shall not be considered a tax to the extent such amount exceeds the amount (determined in accordance with regulations) which would have been required to be paid if the taxpayer were not a dual capacity taxpayer.</text> </paragraph>
<paragraph id="HC4A08FF0FC6049AD8CCFD6708DA6FF21"><enum>(2)</enum><header>Dual capacity taxpayer</header><text>For purposes of this subsection, the term ‘dual capacity taxpayer’ means, with respect to any foreign country or possession of the United States, a person who—</text>
<subparagraph id="HC4A08FF0FC6049AD8CCFD6708DA5FF21"><enum>(A)</enum><text>is subject to a levy of such country or possession, and</text> </subparagraph>
<subparagraph id="HC4A08FF0FC6049AD8CCFD3708DA6FF21"><enum>(B)</enum><text>receives (or will receive) directly or indirectly a specific economic benefit (as determined in accordance with regulations) from such country or possession.</text> </subparagraph></paragraph>
<paragraph id="HC4A08FF0FC6049AD8CCFD2708DA6FF21"><enum>(3)</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.</text> </paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block> </subsection>
<subsection id="HC4A08FF0FC6049AD8CCFD1708DA6FF21"><enum>(b)</enum><header>Contrary Treaty Obligations Upheld</header><text>The amendments made by this section shall not apply to the extent contrary to any treaty obligation of the United States.</text> </subsection>
<subsection id="HC4A08FF0FC6049AD9CCFD6708DA6FF21"><enum>(c)</enum><header>Effective Date</header><text>The amendments made by this section shall apply to amounts that, if such amounts were an amount of tax paid or accrued, would be considered paid or accrued in taxable years beginning after December 31, 2012.</text> </subsection></section>
<section id="HC4A08FF0FC6049AD8CCFD6708DA4FF21"><enum>506.</enum><header>Separate basket treatment taxes paid on foreign oil and gas income</header>
<subsection id="HC4A08FF0FC6049AD8CCFD6728DA6FF21"><enum>(a)</enum><header>Separate Basket for Foreign Tax Credit</header><text>Paragraph (1) of <external-xref legal-doc="usc" parsable-cite="usc/26/904">section 904(d)</external-xref> of the Internal Revenue Code of 1986 is amended by striking <quote>and</quote> at the end of subparagraph (A), by striking the period at the end of subparagraph (B) and inserting <quote>, and</quote>, and by adding at the end the following:</text>
<quoted-block id="HC2A08FF0FC6049AD8CCFD6708DA5FF21">
<subparagraph id="HC4A08FF0FC6049AD8CCFD9708DA6FF21"><enum>(C)</enum><text>combined foreign oil and gas income (as defined in section 907(b)(1)).</text> </subparagraph><after-quoted-block>.</after-quoted-block></quoted-block> </subsection>
<subsection id="HEEE3A3A8295B4DB990CDB0777A5766D4"><enum>(b)</enum><header>Coordination</header><text>Section 904(d)(2) of such Code is amended by redesignating subparagraphs (J) and (K) as subparagraphs (K) and (L) and by inserting after subparagraph (I) the following:</text>
<quoted-block id="H31828F327B6044419D11E72B0A562A57" style="OLC">
<subparagraph id="HEBA3F61C94864ED9BF5E9455FB76A1B2"><enum>(J)</enum><header>Coordination with combined foreign oil and gas income</header><text>For purposes of this section, passive category income and general category income shall not include combined foreign oil and gas income (as defined in section 907(b)(1)).</text> </subparagraph><after-quoted-block>.</after-quoted-block></quoted-block> </subsection>
<subsection id="HFCA5CC4A628B4D99B3A83775E8D55F00"><enum>(c)</enum><header>Conforming amendments</header>
<paragraph id="HF46076CCA7DE454297AD7E16EF39B3C7"><enum>(1)</enum><text>Section 907(a) of such Code is hereby repealed.</text> </paragraph>
<paragraph id="HEE6C9E83535D49929B6E37AE2932D2D2"><enum>(2)</enum><text>Section 907(c)(4) of such Code is hereby repealed.</text> </paragraph>
<paragraph id="HC8F0419B33BE4AFFA9F92AAD8B60A3F2"><enum>(3)</enum><text>Section 907(f) of such Code is hereby repealed.</text> </paragraph></subsection>
<subsection id="H153A54B07782424AB803C7CBC23ED060"><enum>(d)</enum><header>Effective dates</header>
<paragraph id="H122FE16C8E9E4451B147E4B5B9BE5728"><enum>(1)</enum><header>In general</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2012.</text> </paragraph>
<paragraph id="HF108C25925E349E4A2B8BD04EB454E0D"><enum>(2)</enum><header>Transitional rules</header>
<subparagraph id="HBFA30D3FD4B1453D9C441825C5F2D146"><enum>(A)</enum><header>Carryovers</header><text>Any unused foreign oil and gas taxes which under section 907(f) of such Code (as in effect before the amendment made by subsection (c)(3)) would have been allowable as a carryover to the taxpayer’s first taxable year beginning after December 31, 2012 (without regard to the limitation of paragraph (2) of such section 907(f) for first taxable year) shall be allowed as carryovers under section 904(c) of such Code in the same manner as if such taxes were unused taxes under such section 904(c) with respect to foreign oil and gas extraction income.</text> </subparagraph>
<subparagraph commented="no" display-inline="no-display-inline" id="HDE87C1C6AAF543BBBD47316393FEB39B"><enum>(B)</enum><header>Losses</header><text>The amendment made by subsection (c)(2) shall not apply to foreign oil and gas extraction losses arising in taxable years beginning on or before the date of the enactment of this Act.</text> </subparagraph></paragraph></subsection></section>
<enum>VI</enum><header>Financial crisis responsibility fee</header>
<section id="IDc060a9aeed0e4be3a78a07f4c2df723a"><enum>601.</enum><header>Definitions and special rules</header>
<subsection id="idCEEA709E3A35458A9F807FC137E8C0BD"><enum>(a)</enum><header>Definitions</header><text display-inline="yes-display-inline">In this title, the following definitions shall apply:</text>
<paragraph id="IDaa120c726ac64056b08f152a7ef8329e"><enum>(1)</enum><header>Appropriate Federal agency</header><text>The term <term>appropriate Federal agency</term> means—</text>
<subparagraph id="ID65ff160e895d4d11beb8b218653216ed"><enum>(A)</enum><text>for a covered firm that is a bank holding company, a savings and loan holding company, any company controlled by a bank holding company or savings and loan institution (other than a depository institution), a state member bank, a branch or agency of a foreign bank, a foreign bank that does not operate an insured branch, an agency or commercial lending company other than a Federal agency or any company that controls a registered broker or dealer but does not also control an insured depository institution, the Board of Governors of the Federal Reserve System;</text> </subparagraph>
<subparagraph id="IDaade9ad7fe9c45c4b3280ffc73906b32"><enum>(B)</enum><text>for a covered firm that is a national banking association, a Federal branch or agency of a foreign bank, or a federal savings association, the Office of the Comptroller of the Currency;</text> </subparagraph>
<subparagraph id="ID8dee34891465436b945a592b71252ef1"><enum>(C)</enum><text>for a covered firm that is a state nonmember insured bank, a foreign bank that has an insured branch, a state savings association, or a company that controls an insured depository institution and is not regulated as a bank holding company or a savings and loan association holding company, the Federal Deposit Insurance Corporation; and</text> </subparagraph>
<subparagraph id="IDb493b364cf9d4af8bfd6a4ff15d59be2"><enum>(D)</enum><text>for a covered firm that is a covered broker or dealer, the Securities and Exchange Commission.</text> </subparagraph></paragraph>
<paragraph commented="no" id="IDab0debba460d4855b0a6412bfa72e5f7"><enum>(2)</enum><header>Bank holding company</header><text>The term <term>bank holding company</term> has the same meaning as in section 3(w)(2) of the Federal Deposit Insurance Act (<external-xref legal-doc="usc" parsable-cite="usc/12/1813">12 U.S.C. 1813(w)(2)</external-xref>).</text> </paragraph>
<paragraph id="ID79c340cdc37549f3b2b2c613bcbd613d"><enum>(3)</enum><header>Covered broker or dealer</header><text>The term <term>covered broker or dealer</term> means a broker or dealer designated by the Board of Governors of the Federal Reserve System or the Federal Reserve Bank of New York as a primary dealer in government debt instruments.</text> </paragraph>
<paragraph id="IDa4404b44e3524f02afa2a129bb21dfe3"><enum>(4)</enum><header>Covered firm</header><text>The term <term>covered firm</term> means any corporation or other entity that is organized under the laws of the United States or any state or territory thereof if—</text>
<subparagraph id="IDf7adfca152b04a62a376f97850cd8de6"><enum>(A)</enum><text>as of January 14, 2012, such corporation or other entity was, or is at any time during a the beginning of the fiscal year for which this section is applicable, an insured depository institution, a bank holding company, a savings and loan holding company, a company that directly or indirectly controls an insured depository institution, a covered broker or dealer, or a company that directly or indirectly controls a covered broker or dealer; and</text> </subparagraph>
<subparagraph id="IDb85488345fae41b884e02b3aa8dd5f7a"><enum>(B)</enum><text>has $50,000,000,000 or more in total consolidated balance sheet assets that are associated with activities that are permissible for a bank holding company or a financial holding company under sections 3 and 4 of the Bank Holding Company Act of 1956 (12 U.S.C. 1842 and 1843) at the beginning of the fiscal year.</text> </subparagraph></paragraph>
<paragraph id="IDeb695339181c40238bbc4d8afcebad17"><enum>(5)</enum><header>Fee</header><text>The term <term>fee</term> means the Financial Crisis Responsibility Fee authorized under section 502.</text> </paragraph>
<paragraph id="ID87469d288a4a4d838e85a15bf320b551"><enum>(6)</enum><header>Financial holding company</header><text>The term <term>financial holding company</term> has the same meaning as in section 2(p) of the Bank Holding Company Act of 1956, (12 U.S.C. 1841(2)(q)).</text> </paragraph>
<paragraph id="ID96fa801faa2c4c04a25a360f52d011dd"><enum>(7)</enum><header>Fiscal year</header><text>The term <term>fiscal year</term> means the Government’s fiscal year beginning on October 1.</text> </paragraph>
<paragraph id="ID96a4417642df48ceb65c566ee573f005"><enum>(8)</enum><header>Foreign banking organization</header><text>The term <term>foreign banking organization</term> means—</text>
<subparagraph id="ID68dccc29138345aa815a542a4859cc8d"><enum>(A)</enum><text>a foreign bank, as defined in section 1(b)(7) of the International Banking Act of 1978 (<external-xref legal-doc="usc" parsable-cite="usc/12/3101">12 U.S.C. 3101(7)</external-xref>), that—</text>
<clause id="ID889f8313a69440ec98f18625280823aa"><enum>(i)</enum><text>operates a branch, agency, or commercial lending company subsidiary in the United States;</text> </clause>
<clause id="ID47978b78a38242d68e9b8949933c5bca"><enum>(ii)</enum><text>controls a bank in the United States; or</text> </clause>
<clause id="ID6b4b6da4feb746e3a1a1c81f01e1c97b"><enum>(iii)</enum><text>controls an Edge corporation acquired after March 5, 1987; and</text> </clause></subparagraph>
<subparagraph id="ID986535b92b0f49e7a97323d28764ecba"><enum>(B)</enum><text>any company that directly or indirectly controls the foreign bank.</text> </subparagraph></paragraph>
<paragraph id="IDa51c12235c9e47bc80823c92edfb1216"><enum>(9)</enum><header>Secretary</header><text>The term <term>Secretary</term> means the Secretary of the Treasury.</text> </paragraph>
<paragraph id="IDa6aac6d5e21542bbb753b5abc42daea9"><enum>(10)</enum><header>Top-tier covered firm</header><text>The term <term>top-tier covered firm</term> means a covered firm that controls one or more other covered firms but is not itself directly or indirectly controlled by another covered firm.</text> </paragraph>
<paragraph id="IDc54513d0a28340e08947ca1c03ce72e2"><enum>(11)</enum><header>Additional definitions</header><text>For purposes of this chapter, the terms <term>insured depository institution</term> and <term>savings and loan holding company</term> shall have the same meanings as in section 3 of the Federal Deposit Insurance Act (<external-xref legal-doc="usc" parsable-cite="usc/12/1813">12 U.S.C. 1813</external-xref>).</text> </paragraph></subsection>
<subsection id="IDd4c215c3dba443908cf8f21d992367d8"><enum>(b)</enum><header>Special rules</header>
<paragraph id="ID22f1cf4bfa094339870974513def0bcf"><enum>(1)</enum><header>Determination of control</header><text>For purposes of this Act, a person shall be considered to control another person if the first such person directly or indirectly owns (or otherwise has the power to vote) 25 percent or more of any class of voting securities of the second such person.</text> </paragraph>
<paragraph id="IDa9b43b3dd25943d8b956de23e1dbc4a7"><enum>(2)</enum><header>Treatment of certain affiliated companies</header><text>For purposes of determining the applicability of this Act and the amount of the Fee payable under section 502, the total consolidated balance sheet assets of any two or more corporations or other entities that are organized under the laws of the United States or any state or territory thereof that each meet any of the criteria described in subsection (a)(4)(A) and that are under common control, directly or indirectly, by the same person but that are not under common control, directly or indirectly, by any top-tier covered firm shall be consolidated together. If, following such consolidation, the amount and other characteristics of the combined balance sheet assets of such firms satisfy the criteria specified in subsection (a)(4)(B), each such firm shall be deemed a covered firm and the resulting amount of fee shall be appropriately apportioned by the Secretary.</text> </paragraph></subsection></section>
<section id="IDbcddfcaaef7e4cb6a363181eef282fbe"><enum>602.</enum><header>Financial crisis responsibility fee</header>
<subsection id="IDacabfd18e8d04ca09d32a1902d0ec8ab"><enum>(a)</enum><header>Amount To be collected</header><text>In order to recover the costs to the Federal Government of assistance provided through the Troubled Asset Relief Program and other Federal programs and activities, the Secretary, during the 10-year period beginning in fiscal year 2014 and continuing through the end of fiscal year 2023, shall assess a risk-based Financial Crisis Responsibility Fee that shall collect a total of $30,000,000,000, net of any estimated corporate income tax deductions attributable to the Fee, during that period.</text> </subsection>
<subsection id="IDb2af6dace2694938b5d044850af276a3"><enum>(b)</enum><header>Assessment and schedule</header>
<paragraph id="idEAF43BD4A92041F09136B98E1F655AA0"><enum>(1)</enum><header>In general</header><text>To collect the fee authorized by this section, the Secretary shall establish, by regulation, an assessment schedule by fiscal year, including assessment base and rates, that—</text>
<subparagraph id="id6ADF31229F0A4D84BCB640656351FD11"><enum>(A)</enum><text>is designed, in the Secretary’s judgment, to result in the collection of a total of $30,000,000,000, net of the estimated corporate income tax deduction, by the end of fiscal year 2023; and</text> </subparagraph>
<subparagraph id="id310C00A7CD064F3C8B8DC234110F13F3"><enum>(B)</enum><text>shall apply to—</text>
<clause id="id973C04BA46914FFA99F3E7425EAA45F9"><enum>(i)</enum><text>a top-tiered covered firm, with respect to the group consisting of such top-tier covered firm and each other covered firm controlled by such top-tier covered firm; and</text> </clause>
<clause id="idEC61F58CBD6546B8989B9A04592CC348"><enum>(ii)</enum><text>a covered firm, if such covered firm is not controlled by a top-tier covered firm.</text> </clause></subparagraph></paragraph>
<paragraph id="id45DEF7F8DEBC475982EF60CEBF32BFEA"><enum>(2)</enum><header>Phase in</header><text>To promote the full recovery of the economy and financial sector, the Secretary shall phase-in the assessment rate over the 10-year period, in a manner determined by the Secretary.</text> </paragraph></subsection>
<subsection id="IDec97867815f34aafbb8c113258d67015"><enum>(c)</enum><header>Annual adjustment</header><text>For each fiscal year, starting with fiscal year 2015, the Secretary—</text>
<paragraph id="ID07a355563067412eb36036b6a1aaec07"><enum>(1)</enum><text>shall apply the fee to—</text>
<subparagraph id="ID051008ba498140eb80254d1365b2f7f5"><enum>(A)</enum><text>a top-tiered covered firm, with respect to the group consisting of such top-tier covered firm and each other covered firm controlled by such top-tier covered firm; and</text> </subparagraph>
<subparagraph id="IDc73360a61c12412f9f2187c439c2225d"><enum>(B)</enum><text>a covered firm, if such covered firm is not controlled by a top-tier covered firm; and</text> </subparagraph></paragraph>
<paragraph id="ID9b9c98eb07e54eb49d46c83d65a20830"><enum>(2)</enum><text>shall adjust the rates under this subsection in a manner that is designed, in the judgment of the Secretary, to result in the collection of a total of $30,000,000,000, net of the estimated corporate income tax deduction, by the end of fiscal year 2023.</text> </paragraph></subsection>
<subsection id="IDd7f0281d293c4f9babb96b5717fc29fd"><enum>(d)</enum><header>Extension of the financial crisis responsibility fee</header>
<paragraph id="idF7312E8948EB4ADD892AA3576747D9E2"><enum>(1)</enum><header>In general</header><text>If the estimated cost of the Troubled Asset Relief Program, as projected in the Fiscal Year 2024 Budget of the U.S. Government, exceeds the total fee collections received as of the end of Fiscal Year 2023, the Secretary shall extend the operation of the Fee beyond the end of fiscal year 2023 in order to collect such excess amount.</text> </paragraph>
<paragraph id="idB91229FF2E3D4994870FCE79D9AEA2E4"><enum>(2)</enum><header>Assessment schedule under extension</header><text>In order to collect, by the end of fiscal year 2028, the excess amount determined under paragraph (d), the Secretary shall establish, by regulation, an assessment schedule, including assessment base and rates, that—</text>
<subparagraph id="id7030AB1BE7E4427FB8A102DCE6663B14"><enum>(A)</enum><text>is designed, in the judgment of the Secretary, to result in the collection of such excess amount by the end of fiscal year 2028; and</text> </subparagraph>
<subparagraph id="id23D97D305A0B46F7AE600CACEEEA0863"><enum>(B)</enum><text>shall apply to—</text>
<clause id="id7A231157199B41F2A32EC65EC2E54B49"><enum>(i)</enum><text>a top-tiered covered firm, with respect to the group consisting of such top-tier covered firm and each other covered firm controlled by such top-tier covered firm; and</text> </clause>
<clause id="idE5303F7288A84DAEBD505280B18A6834"><enum>(ii)</enum><text>a covered firm, if such covered firm is not controlled by a top-tier covered firm.</text> </clause></subparagraph></paragraph>
<paragraph id="id99DEF2C666564149AD0B7F9E30A2FAAD"><enum>(3)</enum><header>Annual adjustment</header><text>For each fiscal year, starting with fiscal year 2024, the Secretary—</text>
<subparagraph id="id949D950C2F8B431191202351164B2B9A"><enum>(A)</enum><text>shall apply the fee required by this section to—</text>
<clause id="idA73FE8C7755E448C9CFE5872FB94A54F"><enum>(i)</enum><text>a top-tiered covered firm, with respect to the group consisting of such top-tier covered firm and each other covered firm controlled by such top-tier covered firm; and</text> </clause>
<clause id="id64D8A3169DEF47F6B91D5A156FB91FD1"><enum>(ii)</enum><text>a covered firm, if such covered firm is not controlled by a top-tier covered firm; and</text> </clause></subparagraph>
<subparagraph id="id55131F27346940FFBD0CD36CDB3303F4"><enum>(B)</enum><text>shall adjust the rates under this subsection in a manner that is designed, in the judgment of the Secretary, to result in the collection of such excess amount as may be determined under this section by the end of fiscal year 2028.</text> </subparagraph></paragraph></subsection>
<subsection id="ID9b60d2cb4a564924bba91f5388f6fcd4"><enum>(e)</enum><header>Deposit of collections</header><text>All amounts collected pursuant to the fee, during fiscal year 2014 and each fiscal year thereafter (including during the extension period, if applicable)—</text>
<paragraph id="IDacdb06b2368a4ec5a87099bc00b3c475"><enum>(1)</enum><text>shall be deposited and credited as general revenue of the Treasury for the purposes of deficit reduction; and</text> </paragraph>
<paragraph id="IDb39d65d0fbd74ebeaa51149c26e37eb1"><enum>(2)</enum><text>shall not be available for obligation.</text> </paragraph></subsection></section>
<section id="ID36189b0d1e274de2a621433c57eaf591"><enum>603.</enum><header>Other provisions</header>
<subsection id="ID34c57cc9596548d2a33c5c46063d5c98"><enum>(a)</enum><header>Assistance with assessment and collection</header><text>The appropriate Federal agencies shall respond promptly to any request for information or assistance from the Secretary with regard to the determination or collection of any Fee to be determined or imposed under this Act.</text> </subsection>
<subsection id="ID9b2412bba2984ac5a5e210af6ed77b65"><enum>(b)</enum><header>Severability; rule of construction</header><text>It is the intent of Congress that the provisions of this Act be severable, and be construed to avoid the constitutional invalidity of any provision of the Act or any application of any provision of the Act to any person or circumstance. If a provision of this Act is held invalid, all valid provisions shall remain in effect. If a provision of this Act is held invalid in one or more of its applications to any person or circumstance, the Act shall remain in effect in all its valid applications. In any challenge to the constitutionality of any provision of this Act, a reviewing court shall construe such provision as necessary to avoid any constitutional invalidity.</text> </subsection></section>
<enum>VII</enum><header>Tax on trading transactions</header>
<section id="H5002ECF4318846FA9DFBAFCF969E2135"><enum>701.</enum><header>Transaction tax</header>
<subsection id="H7E834BA7EF1A443793B368E069A116C4"><enum>(a)</enum><header>In general</header><text><external-xref legal-doc="usc-chapter" parsable-cite="usc-chapter/26/36">Chapter 36</external-xref> of the Internal Revenue Code of 1986 is amended by inserting after subchapter B the following new subchapter:</text>
<quoted-block display-inline="no-display-inline" id="HB6DD0A72565F4E199C2B9BD90E15BAF8" style="OLC">
<subchapter id="H58CD976E77304C2C8CFDEEC50A75BC0A"><enum>C</enum><header>Tax on Trading Transactions</header>
<toc container-level="subchapter-container" idref="H58CD976E77304C2C8CFDEEC50A75BC0A" lowest-bolded-level="division-lowest-bolded" lowest-level="section" quoted-block="no-quoted-block" regeneration="yes-regeneration">
<toc-entry idref="HA108187EBD8D498FBBEC218A5B020846" level="section">Sec. 4475. Tax on trading transactions.</toc-entry> </toc>
<section id="HA108187EBD8D498FBBEC218A5B020846"><enum>4475.</enum><header>Tax on trading transactions</header>
<subsection id="HD82628C6CDA74F6B9313D79A2D044814"><enum>(a)</enum><header>Imposition of tax</header><text display-inline="yes-display-inline">There is hereby imposed a tax on each covered transaction with respect to any security.</text> </subsection>
<subsection id="H4F4FD6BB2D774C20A19E3BDDF56A1A60"><enum>(b)</enum><header>Rate of tax</header><text display-inline="yes-display-inline">The tax imposed under subsection (a) with respect to any covered transaction shall be 0.03 percent of the specified base amount with respect to such covered transaction.</text> </subsection>
<subsection id="H1BDEF86777524E4C90A9B4A114ACA3B2"><enum>(c)</enum><header>Specified base amount</header><text>For purposes of this section, the term <quote>specified base amount</quote> means—</text>
<paragraph id="H79B6D74B19FA485F8D6B8F55DE20C766"><enum>(1)</enum><text>except as provided in paragraph (2), the fair market value of the security (determined as of the time of the covered transaction), and</text> </paragraph>
<paragraph id="H65963D7E177243FAB36E01994B965962"><enum>(2)</enum><text>in the case of any payment described in subsection (h), the amount of such payment.</text> </paragraph></subsection>
<subsection id="H790A4A35C6834105AE54640CF96C567D"><enum>(d)</enum><header>Covered transaction</header><text>For purposes of this section, the term <quote>covered transaction</quote> means—</text>
<paragraph id="H7CE3BAE09B0E43009DEA183358C2D1C1"><enum>(1)</enum><text>except as provided in paragraph (2), any purchase if—</text>
<subparagraph id="H4D4C50AA024B4C499EF910B0FFA5C676"><enum>(A)</enum><text>such purchase occurs or is cleared on a facility located in the United States, or</text> </subparagraph>
<subparagraph id="H5C27B05865BC47A984116D142E9C1A72"><enum>(B)</enum><text>the purchaser or seller is a United States person, and</text> </subparagraph></paragraph>
<paragraph id="H3CE8E732BFF4455CA296E88E8AE87754"><enum>(2)</enum><text>any transaction with respect to a security described in subparagraph (D), (E), or (F) of subsection (e)(1), if—</text>
<subparagraph id="HEEACC89FF4C1499ABF821F94BF6AC0E2"><enum>(A)</enum><text>such security is traded or cleared on a facility located in the United States, or</text> </subparagraph>
<subparagraph id="H4DC650554D7A46899DAB90000350FB22"><enum>(B)</enum><text>any party with rights under such security is a United States person.</text> </subparagraph></paragraph></subsection>
<subsection id="HB803EC35EC1C417F92D310A5C465C5BE"><enum>(e)</enum><header>Security and other definitions</header><text>For purposes of this section—</text>
<paragraph id="H8615E598481F4E7793995D79F0257804"><enum>(1)</enum><header>In general</header><text>The term <term>security</term> means—</text>
<subparagraph id="HC1FA1EC4B5C24759A64EEB7F7E122ECC"><enum>(A)</enum><text>any share of stock in a corporation,</text> </subparagraph>
<subparagraph id="H34531B7B266C4EF4803CEA2BEC04D433"><enum>(B)</enum><text>any partnership or beneficial ownership interest in a partnership or trust,</text> </subparagraph>
<subparagraph id="H05EF4E92FAB6483A9C8B55EC4F5A309F"><enum>(C)</enum><text>any note, bond, debenture, or other evidence of indebtedness,</text> </subparagraph>
<subparagraph id="HB094D25B3A3E459CA81DEA8633E60C45"><enum>(D)</enum><text>any evidence of an interest in, or a derivative financial instrument with respect to, any security or securities described in subparagraph (A), (B), or (C),</text> </subparagraph>
<subparagraph id="H4721730B954443CD99E46B731DEDAE20"><enum>(E)</enum><text>any derivative financial instrument with respect to any currency or commodity, and</text> </subparagraph>
<subparagraph id="HA166DB0C407342C888965E18538E1D78"><enum>(F)</enum><text>any notional principal contract.</text> </subparagraph></paragraph>
<paragraph id="H7469BF9F97A74202B7D390C25E183DF1"><enum>(2)</enum><header>Derivative financial instrument</header><text>The term <term>derivative financial instrument</term> includes any option, forward contract, futures contract, or any similar financial instrument.</text> </paragraph>
<paragraph id="H77BD2DB3493143858A1996D1E94595B5"><enum>(3)</enum><header>Notional principal contract</header><text display-inline="yes-display-inline">Except as otherwise provided by the Secretary, the term <quote>notional principal contract</quote> means any financial instrument which requires two or more payments at specified intervals calculated by reference to a specified index upon one or more notional principal amounts. An amount shall not fail to be treated as a payment described in the preceding sentence merely because such amount is fixed on one date and paid or otherwise taken into account on a different date.</text> </paragraph>
<paragraph id="H80459F9B69334961B5733DAAFD8DF566"><enum>(4)</enum><header>Specified index</header><text>The term <term>specified index</term> means any 1 or more of any combination of—</text>
<subparagraph id="HD020E9BBD3314F4499083C7F06E013D5"><enum>(A)</enum><text>a fixed rate, price, or amount, or</text> </subparagraph>
<subparagraph id="HD2D478B684444BE8A597FB7C7132C156"><enum>(B)</enum><text>a variable rate, price, or amount, </text> </subparagraph>
<subparagraph id="H1C9A0417393749208FD7D23824EE7B0C"><enum>(C)</enum><text>any index based on any objectively determinable information (including the occurrence or nonoccurrence of any event) which is not within the control of any of the parties to the instrument and is not unique to any of the parties’ circumstances, and</text> </subparagraph>
<subparagraph id="HE059865F09CA4E99AAC402BE86D710E5"><enum>(D)</enum><text>any other index as the Secretary may prescribe.</text> </subparagraph></paragraph>
<paragraph id="HDB0FE1A086CF4618B4E62E47A30838FA"><enum>(5)</enum><header>Treatment of exchanges</header>
<subparagraph id="HFDBD2F2A3E124885859ADFAB2883ED9F"><enum>(A)</enum><header>In general</header><text display-inline="yes-display-inline">An exchange shall be treated as the sale of the property transferred and a purchase of the property received by each party to the exchange.</text> </subparagraph>
<subparagraph id="H582FA0E98E1D43149AD5DA76CB793B16"><enum>(B)</enum><header>Certain deemed exchanges</header><text>In the case of a distribution treated as an exchange for stock under section 302 or 331, the corporation making such distribution shall be treated as having purchased such stock for purposes of this section.</text> </subparagraph></paragraph></subsection>
<subsection id="HAB8F164CC14C45E4B0C97F419E65CF36"><enum>(f)</enum><header>Exceptions</header>
<paragraph id="H90ED114D19E944E6970FDE58A46369C2"><enum>(1)</enum><header>Exception for initial issues</header><text display-inline="yes-display-inline">No tax shall be imposed under subsection (a) on any covered transaction with respect to the initial issuance of any security described in subparagraph (A), (B), or (C) of subsection (e)(1).</text> </paragraph>
<paragraph id="H24ADBA9DAEA8410C9A47E32AB2E192AE"><enum>(2)</enum><header>Exception for certain traded short-term indebtedness</header><text>A note, bond, debenture, or other evidence of indebtedness which—</text>
<subparagraph id="H7270EBE0E8374EB9941988A91BA0DCF1"><enum>(A)</enum><text>is traded on a trading facility located in the United States, and</text> </subparagraph>
<subparagraph id="H71600BE80CCC445EB2A07CE0EB20213D"><enum>(B)</enum><text>has a fixed maturity of not more than 100 days,</text> </subparagraph><continuation-text continuation-text-level="paragraph">shall not be treated as described in subsection (e)(1)(C).</continuation-text></paragraph>
<paragraph id="H068DAB48C86F4804953D9DFAF0F97250"><enum>(3)</enum><header>Exception for securities lending arrangements</header><text>No tax shall be imposed under subsection (a) on any covered transaction with respect to which gain or loss is not recognized by reason of section 1058.</text> </paragraph></subsection>
<subsection id="H2DC82DCF27704C08A76822672CEE9A01"><enum>(g)</enum><header>By whom paid</header>
<paragraph id="HF8151F6B0CFA417B8E270E2F851A0876"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">The tax imposed by this section shall be paid by—</text>
<subparagraph id="H6BF081A8D5594038853F8817F87FC2FE"><enum>(A)</enum><text>in the case of a transaction which occurs or is cleared on a facility located in the United States, such facility, and</text> </subparagraph>
<subparagraph id="H9EAF9229A4F9430E8F9AE17490370BFD"><enum>(B)</enum><text>in the case of a purchase not described in subparagraph (A) which is executed by a broker (as defined in section 6045(c)(1)) which is a United States person, such broker.</text> </subparagraph></paragraph>
<paragraph id="HE8D894B7478E4E24A33661B1A4DEC1A9"><enum>(2)</enum><header>Special rules for direct, etc., transactions</header><text>In the case of any transaction to which paragraph (1) does not apply, the tax imposed by this section shall be paid by—</text>
<subparagraph id="H7C377C183EF44D9DA9A1D44A5A2D2ECB"><enum>(A)</enum><text>in the case of a transaction described in subsection (d)(1)—</text>
<clause id="HC20F07AFA8314F40BA86E3E69E5DAE8F"><enum>(i)</enum><text>the purchaser if the purchaser is a United States person, and</text> </clause>
<clause id="H7DA989B504C94024A5380AC7FCECF964"><enum>(ii)</enum><text>the seller if the purchaser is not a United States person, and</text> </clause></subparagraph>
<subparagraph id="HCE3F348C3EFB408FB8ABD8BC7CBA4A75"><enum>(B)</enum><text>in the case of a transaction described in subsection (d)(2)—</text>
<clause id="H551E096AA3B046DF8B53CEEEF7F9F9EC"><enum>(i)</enum><text>the payor if the payor is a United States person, and</text> </clause>
<clause id="H8D267E4537CC46FDB3DCB6B95977E8AA"><enum>(ii)</enum><text>the payee if the payor is not a United States person.</text> </clause></subparagraph></paragraph></subsection>
<subsection commented="no" id="HDCAA5AB6833343E6B96EFEF632EBA7F1"><enum>(h)</enum><header>Certain payments treated as separate transactions</header><text display-inline="yes-display-inline">Except as otherwise provided by the Secretary, any payment with respect to a security described in subparagraph (D), (E), or (F) of subsection (e)(1) shall be treated as a separate transaction for purposes of this section, including—</text>
<paragraph id="HA5F201B97B7E4D5488C5569F5AAFB62E"><enum>(1)</enum><text>any net initial payment, net final or terminating payment, or net periodical payment with respect to a notional principal contract (or similar financial instrument),</text> </paragraph>
<paragraph commented="no" id="H4A562F98701947E29F488721B796D990"><enum>(2)</enum><text>any payment with respect to any forward contract (or similar financial instrument), and</text> </paragraph>
<paragraph id="H9F713C43ABCD45CF9438B0CB9171DE09"><enum>(3)</enum><text>any premium paid with respect to any option (or similar financial instrument).</text> </paragraph></subsection>
<subsection id="HBC00DD215F3442D499893A78EF4CAC75"><enum>(i)</enum><header>Application to transactions by controlled foreign corporations</header>
<paragraph id="HC2EE248A36D741A988ADAA1F18ADDEBB"><enum>(1)</enum><header>In general</header><text>For purposes of this section, a controlled foreign corporation shall be treated as a United States person.</text> </paragraph>
<paragraph id="HF2581431C2A747E794BE39B5875F5C10"><enum>(2)</enum><header>Special rules for payment of tax on direct, etc., transactions</header><text display-inline="yes-display-inline">In the case of any transaction which is a covered transaction solely by reason of paragraph (1) and which is not described in subsection (g)(1)—</text>
<subparagraph id="H6D5B6600E3BE48B7A0F1830706B7E7B8"><enum>(A)</enum><header>Payment by United States shareholders</header><text>Any tax which would (but for this paragraph) be payable under subsection (g)(2) by the controlled foreign corporation shall, in lieu thereof, be paid by the United States shareholders of such controlled foreign corporation as provided in subparagraph (B).</text> </subparagraph>
<subparagraph id="H8DB783D191594B3A992A9EFAAE17B8A1"><enum>(B)</enum><header>Pro rata shares</header><text display-inline="yes-display-inline">Each such United States shareholder shall pay the same proportion of such tax as—</text>
<clause id="H947D1702E1054A88BEB3FA11A5BDDFFA"><enum>(i)</enum><text>the stock which such United States shareholder owns (within the meaning of section 958(a)) in such controlled foreign corporation, bears to</text> </clause>
<clause id="H1B779016FAD1440598DC91CFDB10B3A0"><enum>(ii)</enum><text>the stock so owned by all United States shareholders in such controlled foreign corporation.</text> </clause></subparagraph>
<subparagraph id="HF7EC5649626849B38DC69A5A95AAF53E"><enum>(C)</enum><header>Definitions</header><text>For purposes of this subsection, the terms <quote>United States shareholder</quote> and <quote>controlled foreign corporation</quote> have the meanings given such terms in sections 951(b) and 957(a), respectively.</text> </subparagraph></paragraph></subsection>
<subsection id="HC79F605546AD44C492BA63D3B608B989"><enum>(j)</enum><header>Administration</header><text>The Secretary shall carry out this section in consultation with the Securities and Exchange Commission and the Commodity Futures Trading Commission.</text> </subsection>
<subsection id="HF2A52D84D9554ECABCDA31153928ACE9"><enum>(k)</enum><header>Guidance; regulations</header><text>The Secretary shall—</text>
<paragraph id="H23269A21F65646BEA3582452614779C4"><enum>(1)</enum><text>provide guidance regarding such information reporting concerning covered transactions as the Secretary deems appropriate, and</text> </paragraph>
<paragraph id="HBDF8140E45A6491EA4A11E480B849F31"><enum>(2)</enum><text>prescribe such regulations as are necessary or appropriate to prevent avoidance of the purposes of this section, including the use of non-United States persons in such transactions.</text> </paragraph></subsection></section></subchapter><after-quoted-block>.</after-quoted-block></quoted-block> </subsection>
<subsection id="H93F804BD0EEA454EBD80524869D07F8A"><enum>(b)</enum><header>Credit with respect to certain tax-Favored accounts To offset transaction tax</header>
<paragraph id="H25ED2160D5314E2984ACEECBF0E87413"><enum>(1)</enum><header>In general</header><text>Subpart C of part IV of subchapter A of chapter 1 of such Code is amended by inserting after section 36B the following new section:</text>
<quoted-block display-inline="no-display-inline" id="H8F5C63D266CD409989239531A4FC3F7C" style="OLC">
<section id="H986DFA384114468AB09AB77DA873C140"><enum>36C.</enum><header>Offset for transaction tax with respect to certain tax-favored accounts</header>
<subsection id="H8884AB8A309649FB84429F3292DF64BE"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">There shall be allowed as a credit against the tax imposed by this subtitle for the taxable year an amount equal to 0.03 percent of the qualified tax-favored account contributions of the taxpayer for the taxable year.</text> </subsection>
<subsection id="HDDA001D68A9B4483AA0AEA8AE3B53320"><enum>(b)</enum><header>Qualified tax-Favored account contributions</header><text>For purposes of this section, the term <quote>qualified tax-favored account contributions</quote> means, with respect to any taxable year, the sum of—</text>
<paragraph id="HF046903C171B4039A38B26F632701CB8"><enum>(1)</enum><text>with respect to qualified retirement plans (as defined in section 4974(c)) of the taxpayer, the amount contributed to such plans for such taxable year to the extent that such contributions are allowable as a deduction or are excludable from gross income (or, in the case of a Roth IRA (as defined in section 408A(b)), the amount contributed),</text> </paragraph>
<paragraph id="HB71CF42F79FD4976A6737D42C2AE5C2F"><enum>(2)</enum><text>with respect to Archer MSAs of the taxpayer, the amount allowed as a deduction under section 220 for such taxable year,</text> </paragraph>
<paragraph id="HD23E546F06EC4FE69CDCFF743F0E9861"><enum>(3)</enum><text>with respect to health savings accounts of the taxpayer, the amount allowed as a deduction under section 223 for such taxable year, plus</text> </paragraph>
<paragraph id="H1B6ECDC3879546C796B847F6E831A394"><enum>(4)</enum><text>with respect to qualified tuition programs (as defined in section 529) and Coverdell education savings accounts (as defined in section 530) with respect to which the taxpayer is the designated beneficiary (or, in the case of a designated beneficiary with respect to whom another taxpayer is allowed a deduction under section 151, such other taxpayer in lieu of such designated beneficiary), the amount contributed for such taxable year.</text> </paragraph></subsection></section><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph>
<paragraph id="HC7D1CFA9459942C7A019DA4BF89C5671"><enum>(2)</enum><header>Conforming amendments</header>
<subparagraph id="HFCB9E8BBE69A4ADB979ECDF19FF567A0"><enum>(A)</enum><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/31/1324">Section 1324(b)(2)</external-xref> of title 31, United States Code, is amended by inserting <quote>, 36C</quote> after <quote>36B</quote>.</text> </subparagraph>
<subparagraph id="H60E91AA896734DAA8DDF2E010960D871"><enum>(B)</enum><text display-inline="yes-display-inline">The table of sections for subpart C of part IV of subchapter A of <external-xref legal-doc="usc-chapter" parsable-cite="usc-chapter/26/1">chapter 1</external-xref> of the Internal Revenue Code of 1986 is amended by inserting before the item relating to section 37 the following new item:</text>
<quoted-block display-inline="no-display-inline" id="H29FA2FBDAB05497ABD6BD4AC78D243FD" style="OLC">
<toc container-level="quoted-block-container" idref="H8F5C63D266CD409989239531A4FC3F7C" lowest-bolded-level="division-lowest-bolded" lowest-level="section" quoted-block="no-quoted-block" regeneration="yes-regeneration">
<toc-entry idref="H986DFA384114468AB09AB77DA873C140" level="section">Sec. 36C. Offset for transaction tax on contributions to certain tax-favored accounts.</toc-entry> </toc> <after-quoted-block>.</after-quoted-block></quoted-block> </subparagraph></paragraph></subsection>
<subsection id="H9AD18EB3AF9A4A358864938B4D10B971"><enum>(c)</enum><header>Information reporting with respect to controlled foreign corporations</header><text>Subparagraph (B) of section 6038(a)(1) is amended by inserting <quote>and transactions which are covered transactions for purposes of section 4475 by reason of the application of section 4475(i)(1) to such corporation</quote> before the semicolon at the end.</text> </subsection>
<subsection id="H678BA24DA21340C7912745B6F83CD9A8"><enum>(d)</enum><header>Clerical amendment</header><text>The table of subchapters for <external-xref legal-doc="usc-chapter" parsable-cite="usc-chapter/26/36">chapter 36</external-xref> of the Internal Revenue Code of 1986 is amended by inserting after the item relating to subchapter B the following new item:</text>
<quoted-block display-inline="no-display-inline" id="H43CDEB75A70D4E52B05BC2FC55EE79A6" style="OLC">
<toc container-level="quoted-block-container" idref="HB6DD0A72565F4E199C2B9BD90E15BAF8" lowest-bolded-level="division-lowest-bolded" lowest-level="section" quoted-block="no-quoted-block" regeneration="yes-regeneration">
<toc-entry level="section">Subchapter C. Tax on trading transactions.</toc-entry> </toc> <after-quoted-block>.</after-quoted-block></quoted-block> </subsection>
<subsection id="H83292E7D0CE44FC3AD15EE441BB7A382"><enum>(e)</enum><header>Effective date</header><text>The amendments made by this section shall apply to transactions after December 31, 2013.</text> </subsection></section>
<enum>VIII</enum><header>Modification of accounting rules</header>
<section id="HB2911E76A6814676AA93FBA7F2C8297E"><enum>801.</enum><header>Repeal of last-in, first-out method of inventory</header>
<subsection id="HE124CE7684AD485183741397160D823F"><enum>(a)</enum><header>In general</header><text>Subpart D of part II of subchapter E of chapter 1 is amended by striking sections 472 (relating to last-in, first-out inventories), 473 (relating to qualified liquidations of LIFO inventories), and 474 (relating to simplified dollar-value LIFO method for certain small businesses).</text> </subsection>
<subsection id="H23D1B74CF9DE449C972B0CA321A4BC32"><enum>(b)</enum><header>Conforming amendments</header>
<paragraph id="HFFAD61F55F9D4E23AE6C264871A1CCD0"><enum>(1)</enum>
<subparagraph commented="no" display-inline="yes-display-inline" id="HD42BAF46ABDB4938A7636DA3195A5D59"><enum>(A)</enum><text>Section 312(n) is amended by striking paragraph (4) and by redesignating paragraphs (5) through (8) as paragraphs (4) through (7), respectively.</text> </subparagraph>
<subparagraph id="H585046B448374300A004E759E05C5376" indent="up1"><enum>(B)</enum><text>Section 312(n)(7), as redesignated by subparagraph (A), is amended—</text>
<clause id="H9E18040E438C4C68A3612DF9D5F71CA7"><enum>(i)</enum><text>by striking <quote>paragraphs (4) and (6)</quote> in subparagraph (A) and inserting <quote>paragraph (5)</quote>, and</text> </clause>
<clause id="H551B50BFD9D24A26A2DCB7D0669C1F48"><enum>(ii)</enum><text>by striking <quote>paragraph (5)</quote> in subparagraph (B) and inserting <quote>paragraph (4)</quote>.</text> </clause></subparagraph>
<subparagraph id="H638CF91946884A638A687E1B39ABEFD3" indent="up1"><enum>(C)</enum><text>Section 56(g)(4)(D) is amended by striking clause (iii) and by redesignating clause (iv) as clause (iii).</text> </subparagraph></paragraph>
<paragraph id="HE948B43E57A04EC3A225B1295495D84F"><enum>(2)</enum><text>Section 1363 is amended by striking subsection (d).</text> </paragraph></subsection>
<subsection id="H67CABFAD374D4803AD90AC3ADAF0D72F"><enum>(c)</enum><header>Effective date</header>
<paragraph id="HF0C71781AEAA42ADB6D4089FE39C85DA"><enum>(1)</enum><header>In general</header><text>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="H5178B3B9BEC244CA8EA45F724C89660C"><enum>(2)</enum><header>Change in method of accounting</header><text>In the case of any taxpayer required by the amendments made by this section to change its method of accounting for its first taxable year beginning after the date of the enactment of this Act—</text>
<subparagraph id="H3CDF6C0E3A6B412A910A33EB23219A97"><enum>(A)</enum><text>such change shall be treated as initiated by the taxpayer,</text> </subparagraph>
<subparagraph id="H1F647E5A6C104346BE3A63D9D3A6557C"><enum>(B)</enum><text>such change shall be treated as made with the consent of the Secretary of the Treasury, and</text> </subparagraph>
<subparagraph id="HCE7D4B98EAE043B38B4777F5B8083F7D"><enum>(C)</enum><text>if the net amount of the adjustments required to be taken into account by the taxpayer under <external-xref legal-doc="usc" parsable-cite="usc/26/481">section 481</external-xref> of the Internal Revenue Code of 1986 is positive, such amount shall be taken into account over a period of 8 years beginning with such first taxable year.</text> </subparagraph></paragraph></subsection></section>
<section id="H99FAD81EE3FB4DA4AC0C9E6FA1E259A9"><enum>802.</enum><header>Repeal of lower of cost or market method of inventory</header>
<subsection id="HC967F1CD8DB6407988573B3EC633789B"><enum>(a)</enum><header>In general</header><text>Section 471 is amended by redesignating subsection (c) as subsection (d) and by inserting after subsection (b) the following new subsection:</text>
<quoted-block id="H0FCC1035E4DA48F381A107D9A6CFED17" style="OLC">
<subsection id="H4D6D9DA65DCD44CC943D5C56348EA3A4"><enum>(c)</enum><header>Inventories taken into account at cost</header><text>A method of determining inventories shall not be treated as clearly reflecting income unless such method provides that inventories shall be taken into account at cost.</text> </subsection><after-quoted-block>.</after-quoted-block></quoted-block> </subsection>
<subsection id="HC25E509C25E142EBAF6629D6D861663C"><enum>(b)</enum><header>Effective date</header>
<paragraph id="HA43A4AA39DE94F81BB6F420A65D06892"><enum>(1)</enum><header>In general</header><text>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="H5BCC2D0E4C554760BD2AFF1D30DCE612"><enum>(2)</enum><header>Change in method of accounting</header><text>In the case of any taxpayer required by the amendments made by this section to change its method of accounting for its first taxable year beginning after the date of the enactment of this Act—</text>
<subparagraph id="HE11F8C6C1A5F488DB76784471C945585"><enum>(A)</enum><text>such change shall be treated as initiated by the taxpayer,</text> </subparagraph>
<subparagraph id="H0160781373C040A18035A45AAFC3C86A"><enum>(B)</enum><text>such change shall be treated as made with the consent of the Secretary of the Treasury, and</text> </subparagraph>
<subparagraph id="HAE9D54055CF84A838BCDF102D91997C0"><enum>(C)</enum><text>if the net amount of the adjustments required to be taken into account by the taxpayer under <external-xref legal-doc="usc" parsable-cite="usc/26/481">section 481</external-xref> of the Internal Revenue Code of 1986 is positive, such amount shall be taken into account over a period of 8 years beginning with such first taxable year.</text> </subparagraph></paragraph></subsection></section>
<enum>IX</enum><header>Fair treatment of options</header>
<section commented="no" display-inline="no-display-inline" id="IDB50CA6E821AC4829BE00A83CCB7E00B3" section-type="subsequent-section"><enum>901.</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 <external-xref legal-doc="usc" parsable-cite="usc/26/162">section 162(q)</external-xref> 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>902.</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>