[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4840 Engrossed in House (EH)]


  2d Session

                               H. R. 4840

_______________________________________________________________________

                                 AN ACT

To amend the Internal Revenue Code of 1986 to simplify the taxation of 
                              businesses.
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
108th CONGRESS
  2d Session
                                H. R. 4840

_______________________________________________________________________

                                 AN ACT


 
To amend the Internal Revenue Code of 1986 to simplify the taxation of 
                              businesses.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Tax Simplification for America's Job 
Creators Act of 2004''.

SEC. 2. 2-YEAR EXTENSION OF INCREASED EXPENSING FOR SMALL BUSINESS.

    Subsections (b), (c), and (d) of section 179 of the Internal 
Revenue Code of 1986 are each amended by striking ``2006'' each place 
it appears and inserting ``2008''.

SEC. 3. INDEXING OF GROSS RECEIPTS TEST FOR CASH METHOD OF ACCOUNTING.

    (a) In General.--Section 448(c) of the Internal Revenue Code of 
1986 is amended by adding at the end the following new paragraph:
            ``(4) Inflation adjustment of gross receipts test.--In the 
        case of any taxable year beginning in a calendar year after 
        2003, the $5,000,000 dollar amount in paragraph (1) shall be 
        increased by an amount equal to--
                    ``(A) such dollar amount, multiplied by
                    ``(B) the cost-of-living adjustment determined 
                under section 1(f)(3) for such calendar year by 
                substituting `calendar year 2002' for `calendar year 
                1992' in subparagraph (B) thereof.
If any amount as adjusted under the preceding sentence is not a 
multiple of $100,000, such amount shall be rounded to the nearest 
multiple of $100,000.''.
    (b) Conforming Amendments.--
            (1) Section 448(b)(3) of such Code is amended by striking 
        ``$5,000,000'' both places it appears in the heading and text.
            (2) Section 448(c) of such Code is amended by striking 
        ``$5,000,000'' in the heading and the first place it appears in 
        paragraph (1) thereof.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2003.

SEC. 4. SIMPLIFICATION THROUGH ELIMINATION OF INOPERATIVE PROVISIONS.

    (a) In General.--
            (1) General business credits.--Subsection (d) of section 38 
        of the Internal Revenue Code of 1986 is amended by striking 
        paragraph (3).
            (2) Carryback and carryforward of unused credits.--
        Subsection (d) of section 39 of such Code is amended by 
        striking paragraphs (1) through (8) and by redesignating 
        paragraphs (9) and (10) as paragraphs (1) and (2), 
        respectively.
            (3) Adjustments based on adjusted current earnings.--Clause 
        (ii) of section 56(g)(4)(F) of such Code is amended by striking 
        ``In the case of any taxable year beginning after December 31, 
        1992, clause'' and inserting ``Clause''.
            (4) Items of tax preference; depletion.--Paragraph (1) of 
        section 57(a) of such Code is amended by striking ``Effective 
        with respect to taxable years beginning after December 31, 
        1992, this'' and inserting ``This''.
            (5) Intangible drilling costs.--
                    (A) Clause (i) of section 57(a)(2)(E) of such Code 
                is amended by striking ``In the case of any taxable 
                year beginning after December 31, 1992, this'' and 
                inserting ``This''.
                    (B) Clause (ii) of section 57(a)(2)(E) of such Code 
                is amended by striking ``(30 percent in the case of 
                taxable years beginning in 1993)''.
            (6) Great plains conservation program.--Section 126(a) of 
        such Code is amended by striking paragraph (6) and by 
        redesignating paragraphs (7), (8), (9), and (10) as paragraphs 
        (6), (7), (8), and (9), respectively.
            (7) Treble damage payments under the antitrust law.--
        Section 162(g) of such Code is amended by striking the last 
        sentence.
            (8) Charitable, etc., contributions and gifts.--Section 170 
        of such Code is amended by striking subsection (k).
            (9) Net operating loss carrybacks and carryovers.--
                    (A) Section 172 of such Code is amended--
                            (i) by striking subparagraph (D) of 
                        subsection (b)(1) and by redesignating 
                        subparagraphs (E), (F), (G), and (H) as 
                        subparagraphs (D), (E), (F), and (G), 
                        respectively,
                            (ii) by striking ``ending after August 2, 
                        1989'' in subsection (b)(1)(D)(i)(II) (as 
                        redesignated by clause (i)),
                            (iii) by striking ``subparagraph (F)'' in 
                        subsection (b)(1)(G) (as redesignated by clause 
                        (i)) and inserting ``subparagraph (E)'',
                            (iv) by striking subsection (g), and
                            (v) by striking subparagraph (F) of 
                        subsection (h)(2).
                    (B) Section 172(h)(4) of such Code is amended by 
                striking ``subsection (b)(1)(E)'' each place it appears 
                and inserting ``subsection (b)(1)(D)''.
                    (C) Section 172(i)(3) of such Code is amended by 
                striking ``subsection (b)(1)(G)'' each place it appears 
and inserting ``subsection (b)(1)(F)''.
                    (D) Section 172(j) of such Code is amended by 
                striking ``subsection (b)(1)(H)'' each place it appears 
                and inserting ``subsection (b)(1)(G)''.
                    (E) Section 172 of such Code, as amended by 
                subparagraphs (A) through (D) of this paragraph, is 
                amended--
                            (i) by redesignating subsections (h), (i), 
                        and (j) as subsections (g), (h), and (i), 
                        respectively,
                            (ii) by striking ``subsection (h)'' each 
                        place it appears and inserting ``subsection 
                        (g)'', and
                            (iii) by striking ``subsection (i)'' each 
                        place it appears and inserting ``subsection 
                        (h)''.
            (10) Research and experimental expenditures.--Subparagraph 
        (A) of section 174(a)(2) of such Code is amended to read as 
        follows:
                    ``(A) Without consent.--A taxpayer may, without the 
                consent of the Secretary, adopt the method provided in 
                this subsection for his first taxable year for which 
                expenditures described in paragraph (1) are paid or 
                incurred.''.
            (11) Amortization of certain research and experimental 
        expenditures.--Paragraph (2) of section 174(b) of such Code is 
        amended by striking ``beginning after December 31, 1953''.
            (12) Soil and water conservation expenditures.--Paragraph 
        (1) of section 175(d) of such Code is amended to read as 
        follows:
            ``(1) Without consent.--A taxpayer may, without the consent 
        of the Secretary, adopt the method provided in this section for 
        the taxpayer's first taxable year for which expenditures 
        described in subsection (a) are paid or incurred.''.
            (13) Activities not engaged in for profit.--Section 
        183(e)(1) of such Code is amended by striking the last 
        sentence.
            (14) Dividends received on certain preferred stock; and 
        dividends paid on certain preferred stock of public 
        utilities.--
                    (A) Sections 244 and 247 of such Code are hereby 
                repealed, and the table of sections for part VIII of 
                subchapter B of chapter 1 of such Code is amended by 
                striking the items relating to sections 244 and 247.
                    (B) Paragraph (5) of section 172(d) of such Code is 
                amended to read as follows:
            ``(5) Computation of deduction for dividends received.--The 
        deductions allowed by section 243 (relating to dividends 
        received by corporations) and 245 (relating to dividends 
        received from certain foreign corporations) shall be computed 
        without regard to section 246(b) (relating to limitation on 
        aggregate amount of deductions).''.
                    (C) Paragraph (1) of section 243(c) of such Code is 
                amended to read as follows:
            ``(1) In general.--In the case of any dividend received 
        from a 20-percent owned corporation, subsection (a)(1) shall be 
        applied by substituting `80 percent' for `70 percent'.''.
                    (D) Section 243(d) of such Code is amended by 
                striking paragraph (4).
                    (E) Section 246 of such Code is amended--
                            (i) by striking ``, 244,'' in subsection 
                        (a)(1),
                            (ii) in subsection (b)(1)--
                                    (I) by striking ``sections 
                                243(a)(1), and 244(a),'' the first 
                                place it appears and inserting 
                                ``section 243(a)(1)'',
                                    (II) by striking ``244(a),'' the 
                                second place it appears, and
                                    (III) by striking ``subsection (a) 
                                or (b) of section 245, and 247,'' and 
                                inserting ``and subsection (a) or (b) 
                                of section 245,'', and
                            (iii) by striking ``, 244,'' in subsection 
                        (c)(1).
                    (F) Section 246A of such Code is amended by 
                striking ``, 244,'' both places it appears in 
                subsections (a) and (e).
                    (G) Sections 263(g)(2)(B)(iii), 277(a), 301(e)(2), 
                469(e)(4), 512(a)(3)(A), subparagraphs (A), (C), and 
                (D) of section 805(a)(4), 805(b)(5), 812(e)(2)(A), 
                815(c)(2)(A)(iii), 832(b)(5), 833(b)(3)(E), and 
                1059(b)(2)(B) of such Code are each amended by striking 
                ``, 244,'' each place it appears.
                    (H) Section 1244(c)(2)(C) of such Code is amended 
                by striking ``244,''.
                    (I) Section 805(a)(4)(B) of such Code is amended by 
                striking ``, 244(a),'' each place it appears.
                    (J) Section 810(c)(2)(B) of such Code is amended by 
                striking ``244 (relating to dividends on certain 
                preferred stock of public utilities),''.
            (15) Organization expenses.--Section 248(c) of such Code is 
        amended by striking ``beginning after December 31, 1953,'' and 
        by striking the last sentence.
            (16) Amount of gain where loss previously disallowed.--
        Section 267(d) of such Code is amended by striking ``(or by 
        reason of section 24(b) of the Internal Revenue Code of 1939)'' 
        in paragraph (1), by striking ``after December 31, 1953,'' in 
        paragraph (2), by striking the second sentence, and by striking 
        ``or by reason of section 118 of the Internal Revenue Code of 
        1939'' in the last sentence.
            (17) Acquisitions made to evade or avoid income tax.--
        Paragraphs (1) and (2) of section 269(a) of such Code are each 
        amended by striking ``or acquired on or after October 8, 
        1940,''.
            (18) Interest on indebtedness incurred by corporations to 
        acquire stock or assets of another corporation.--Section 279 of 
        such Code is amended--
                    (A) by striking ``after December 31, 1967,'' in 
                subsection (a)(2),
                    (B) by striking ``after October 9, 1969,'' in 
                subsection (b), and
                    (C) by striking ``after October 9, 1969, and'' in 
                subsection (d)(5).
            (19) Special rules relating to corporate preference 
        items.--Paragraph (4) of section 291(a) of such Code is amended 
        by striking ``In the case of taxable years beginning after 
        December 31, 1984, section'' and inserting ``Section''.
            (20) Tax credit employee stock ownership plans.--Section 
        409 of such Code is amended by striking subsection (q).
            (21) Funding standards.--Section 412(m)(4) of such Code is 
        amended--
                    (A) by striking ``the applicable percentage'' in 
                subparagraph (A) and inserting ``25 percent'', and
                    (B) by striking subparagraph (C) and by 
                redesignating subparagraph (D) as subparagraph (C).
            (22) Retiree health accounts.--Section 420 of such Code is 
        amended--
                    (A) by striking paragraph (4) of subsection (b) and 
                by redesignating paragraph (5) as paragraph (4), and
                    (B) by amending paragraph (2) of subsection (c) to 
                read as follows:
            ``(2) Requirements relating to pension benefits accruing 
        before transfer.--The requirements of this paragraph are met if 
        the plan provides that the accrued pension benefits of any 
        participant or beneficiary under the plan become nonforfeitable 
        in the same manner which would be required if the plan had 
        terminated immediately before the qualified transfer (or in the 
        case of a participant who separated during the 1-year period 
        ending on the date of the transfer, immediately before such 
        separation).''.
            (23) Employee stock purchase plans.--Section 423(a) of such 
        Code is amended by striking ``after December 31, 1963,''.
            (24) Limitation on deductions for certain farming.--
                    (A) Section 464 of such Code is amended by striking 
                ``any farming syndicate (as defined in subsection 
                (c))'' both places it appears in subsections (a) and 
                (b) and inserting ``any taxpayer to whom subsection (d) 
                applies''.
                    (B)(i) Subsection (c) of section 464 of such Code 
                is hereby moved to the end of section 461 and 
                redesignated as subsection (j).
                    (ii) Such subsection (j) of such Code is amended--
                            (I) by striking ``For purposes of this 
                        section'' in paragraph (1) and inserting ``For 
                        purposes of subsection (i)(4)'', and
                            (II) by adding at the end the following new 
                        paragraphs:
            ``(3) Farming.--For purposes of this subsection, the term 
        `farming' has the meaning given to such term by section 464(e).
            ``(4) Limited entrepreneur.--For purposes of this 
        subsection, the term `limited entrepreneur' means a person 
        who--
                    ``(A) has an interest in an enterprise other than 
                as a limited partner, and
                    ``(B) does not actively participate in the 
                management of such enterprise.''.
                    (iii) Paragraph (4) of section 461(i) of such Code 
                is amended by striking ``section 464(c)'' and inserting 
                ``subsection (j)''.
                    (C) Section 464 of such Code is amended--
                            (i) by striking subsections (e) and (g) and 
                        redesignating subsections (d) and (f) as 
                        subsections (c) and (d), respectively, and
                            (ii) by adding at the end the following new 
                        subsection:
    ``(e) Farming.--For purposes of this section, the term `farming' 
means the cultivation of land or the raising or harvesting of any 
agricultural or horticultural commodity including the raising, 
shearing, feeding, caring for, training, and management of animals. For 
purposes of the preceding sentence, trees (other than trees bearing 
fruit or nuts) shall not be treated as an agricultural or horticultural 
commodity.''.
                    (D) Subsection (d) of section 464 of such Code, as 
                redesignated by subparagraph (C), is amended--
                            (i) by striking paragraph (1) and 
                        redesignating paragraphs (2), (3), and (4) as 
                        paragraphs (1), (2), and (3), respectively, and
                            (ii) by striking ``Subsections (a) and (b) 
                        to Apply to'' in the subsection heading.
                    (E) Subparagraph (A) of section 58(a)(2) of such 
                Code is amended by striking ``section 464(c)'' and 
                inserting ``section 461(j)''.
            (25) Deductions limited to amount at risk.--Paragraph (3) 
        of section 465(c) of such Code is amended by striking ``In the 
        case of taxable years beginning after December 31, 1978, this'' 
        and inserting ``This''.
            (26) Nuclear decommissioning costs.--Section 468A(e)(2) of 
        such Code is amended--
                    (A) by striking ``at the rate set forth in 
                subparagraph (B)'' in subparagraph (A) and inserting 
                ``at the rate of 20 percent'', and
                    (B) by striking subparagraph (B) and by 
                redesignating subparagraphs (C) and (D) as 
                subparagraphs (B) and (C), respectively.
            (27) Passive activity losses and credits limited.--
                    (A) Section 469 of such Code is amended by striking 
                subsection (m).
                    (B) Subsection (b) of section 58 of such Code is 
                amended by adding ``and'' at the end of paragraph (1), 
by striking paragraph (2), and by redesignating paragraph (3) as 
paragraph (2).
            (28) Adjustments required by changes in method of 
        accounting.--Section 481(b)(3) of such Code is amended by 
        striking subparagraph (C).
            (29) Exemption from tax on corporations, certain trusts, 
        etc.--Section 501 of such Code is amended by striking 
        subsection (q).
            (30) Requirements for exemption.--
                    (A) Section 503(a)(1) of such Code is amended to 
                read as follows:
            ``(1) General rule.--An organization described in paragraph 
        (17) or (18) of section 501(c) or described in section 401(a) 
        and referred to in section 4975(g)(2) or (3) shall not be 
        exempt from taxation under section 501(a) if it has engaged in 
        a prohibited transaction.''.
                    (B) Paragraph (2) of section 503(a) of such Code is 
                amended by striking ``described in section 501(c)(17) 
                or (18) or paragraph (a)(1)(B)'' and inserting 
                ``described in paragraph (1)''.
                    (C) Subsection (c) of section 503 of such Code is 
                amended by striking ``described in section 501(c)(17) 
                or (18) or subsection (a)(1)(B)'' and inserting 
                ``described in subsection (a)(1)''.
            (31) Insurance company taxable income.--
                    (A) Section 832(e) of such Code is amended by 
                striking ``of taxable years beginning after December 
                31, 1966,''.
                    (B) Section 832(e)(6) of such Code is amended by 
                striking ``In the case of any taxable year beginning 
                after December 31, 1970, the'' and inserting ``The''.
            (32) Property on which lessee has made improvements.--
        Section 1019 of such Code is amended by striking the last 
        sentence.
            (33) Involuntary conversion.--Section 1033 of such Code is 
        amended by striking subsection (j) and by redesignating 
        subsection (k) as subsection (j).
            (34) Property acquired during affiliation.--Section 1051 of 
        such Code is hereby repealed, and the table of sections for 
        part IV of subchapter O of chapter 1 is amended by striking the 
        item relating to section 1051.
            (35) Holding period of property.--
                    (A) Paragraph (5) of section 1223 of such Code is 
                amended by striking ``(or under so much of section 
                1052(c) as refers to section 113(a)(23) of the Internal 
                Revenue Code of 1939)''.
                    (B) Paragraph (7) of section 1223 of such Code is 
                amended by striking the last sentence.
                    (C) Paragraph (9) of section 1223 of such Code is 
                repealed.
            (36) Property used in the trade or business and involuntary 
        conversions.--Subparagraph (A) of section 1231(c)(2) of such 
        Code is amended by striking ``beginning after December 31, 
        1981''.
            (37) Sale or exchange of patents.--Section 1235 of such 
        Code is amended--
                    (A) by striking subsection (c) and by redesignating 
                subsections (d) and (e) as subsections (c) and (d), 
                respectively, and
                    (B) by striking ``subsection (d)'' in subsection 
                (b) and inserting ``subsection (c)''.
            (38) Dealers in securities.--Subsection (b) of section 1236 
        of such Code is amended by striking ``after November 19, 
        1951,''.
            (39) Sale of patents.--Subsection (a) of section 1249 of 
        such Code is amended by striking ``after December 31, 1962,''.
            (40) Gain from disposition of farm land.--Paragraph (1) of 
        section 1252(a) of such Code is amended by striking ``after 
        December 31, 1969,'' both places it appears.
            (41) Treatment of amounts received on retirement or sale or 
        exchange of debt instruments.--Subsection (c) of section 1271 
        of such Code is amended to read as follows:
    ``(c) Special Rule for Certain Obligations With Respect to Which 
Original Issue Discount Not Currently Includible.--
            ``(1) In general.--On the sale or exchange of debt 
        instruments issued by a government or political subdivision 
        thereof after December 31, 1954, and before July 2, 1982, or by 
        a corporation after December 31, 1954, and on or before May 27, 
        1969, any gain realized which does not exceed--
                    ``(A) an amount equal to the original issue 
                discount, or
                    ``(B) if at the time of original issue there was no 
                intention to call the debt instrument before maturity, 
                an amount which bears the same ratio to the original 
                issue discount as the number of complete months that 
                the debt instrument was held by the taxpayer bears to 
                the number of complete months from the date of original 
                issue to the date of maturity,
        shall be considered as ordinary income.
            ``(2) Subsection (a)(2)(A) not to apply.--Subsection 
        (a)(2)(A) shall not apply to any debt instrument referred to in 
        subparagraph (A) of this paragraph.
            ``(3) Cross reference.--

                                ``For current inclusion of original 
issue discount, see section 1272.''.
            (42) Amount and method of adjustment.--Section 1314 of such 
        Code is amended by striking subsection (d) and by redesignating 
        subsection (e) as subsection (d).
            (43) Election; revocation; termination.--Clause (iii) of 
        section 1362(d)(3) of such Code is amended by striking 
        ``unless'' and all that follows and inserting ``unless the 
        corporation was an S corporation for such taxable year.''.
            (44) Affiliated group defined.--Subparagraph (A) of section 
        1504(a)(3) of such Code is amended by striking ``for a taxable 
        year which includes any period after December 31, 1984'' 
in clause (i) and by striking ``in a taxable year beginning after 
December 31, 1984'' in clause (ii).
            (45) Disallowance of the benefits of the graduated 
        corporate rates and accumulated earnings credit.--
                    (A) Subsection (a) of section 1551 of such Code is 
                amended--
                            (i) by striking paragraph (1) and by 
                        redesignating paragraphs (2) and (3) as 
                        paragraphs (1) and (2), respectively, and
                            (ii) by striking ``after June 12, 1963,'' 
                        each place it appears.
                    (B) Section 1551(b) of such Code is amended--
                            (i) by striking ``or (2)'' in paragraph 
                        (1), and
                            (ii) by striking ``(a)(3)'' in paragraph 
                        (2) and inserting ``(a)(2)''.
            (46) Definition of wages.--
                    (A) Section 3121(b) of such Code is amended by 
                striking paragraph (17).
                    (B) Section 210(a) of the Social Security Act is 
                amended by striking paragraph (17).
            (47) Credits against tax.--
                    (A) Paragraph (4) of section 3302(f) of such Code 
                is amended--
                            (i) by striking ``subsection--'' and all 
                        that follows through ``(A) In general.--The'' 
                        and inserting ``subsection, the,
                            (ii) by striking subparagraph (B),
                            (iii) by redesignating clauses (i) and (ii) 
                        as subparagraphs (A) and (B), respectively, and
                            (iv) by moving the text of such 
                        subparagraphs (as so redesignated) 2 ems to the 
                        left.
                    (B) Paragraph (5) of section 3302(f) of such Code 
                is amended by striking subparagraph (D) and by 
                redesignating subparagraph (E) as subparagraph (D).
            (48) Domestic service employment taxes.--Section 3510(b) of 
        such Code is amended by striking paragraph (4).
            (49) Tax on fuel used in commercial transportation on 
        inland waterways.--Section 4042(b)(2)(A) of such Code is 
        amended to read as follows:
                    ``(A) The Inland Waterways Trust Fund financing 
                rate is 20 cents per gallon.''.
            (50) Transportation by air.--Section 4261(e) of such Code 
        is amended--
                    (A) in paragraph (1) by striking subparagraph (C), 
                and
                    (B) by striking paragraph (5).
            (51) Taxes on failure to distribute income.--
                    (A) Paragraph (2) of section 4942(f) of such Code 
                is amended by striking the semicolon at the end of 
                subparagraph (B) and inserting ``, and'', by striking 
                ``; and'' at the end of subparagraph (C) and inserting 
                a period, and by striking subparagraph (D).
                    (B) Subsection (g) of section 4942 of such Code is 
                amended--
                            (i) by striking ``For all taxable years 
                        beginning on or after January 1, 1975, 
                        subject'' in paragraph (2)(A) and inserting 
                        ``Subject'', and
                            (ii) by striking paragraph (4).
                    (C) Section 4942(i)(2) of such Code is amended by 
                striking ``beginning after December 31, 1969, and''.
            (52) Taxes on taxable expenditures.--Section 4945(f) of 
        such Code is amended by striking ``(excluding therefrom any 
        preceding taxable year which begins before January 1, 1970)''.
            (53) Returns.--Subsection (a) of section 6039D of such Code 
        is amended by striking ``beginning after December 31, 1984,''.
            (54) Information returns.--Subsection (c) of section 6060 
        of such Code is amended by striking ``year'' and all that 
        follows and inserting ``year.''.
            (55) Canal zone.--Subparagraph (A) of section 6103(b)(5) of 
        such Code is amended by striking ``the Canal Zone,''.
            (56) Abatements.--Section 6404(f) of such Code is amended 
        by striking paragraph (3).
            (57) Failure by corporation to pay estimated income tax.--
        Clause (i) of section 6655(g)(4)(A) of such Code is amended by 
        striking ``(or the corresponding provisions of prior law)''.
            (58) Merchant marine capital construction funds.--Paragraph 
        (4) of section 7518(g) of such Code is amended by striking 
        ``any nonqualified withdrawal'' and all that follows through 
        ``shall be determined'' and inserting ``any nonqualified 
        withdrawal shall be determined''.
            (59) Valuation tables.--
                    (A) Subsection (c) of section 7520 of such Code is 
                amended by striking paragraph (2) and by redesignating 
                paragraph (3) as paragraph (2).
                    (B) Paragraph (2) of section 7520(c) of such Code, 
                as so redesignated, is amended--
                            (i) by striking ``Not later than December 
                        31, 1989, the'' and inserting ``The'', and
                            (ii) by striking ``thereafter'' in the last 
                        sentence thereof.
            (60) Administration and collection of taxes in 
        possessions.--Section 7651 of such Code is amended by striking 
        paragraph (4) and by redesignating paragraph (5) as paragraph 
        (4).
            (61) Definition of employee.--Section 7701(a)(20) of such 
        Code is amended by striking ``chapter 21'' and all that follows 
        and inserting ``chapter 21.''.
    (b) Effective Date.--
            (1) General rule.--Except as otherwise provided in 
        paragraph (2), the amendments made by subsection (a) shall take 
        effect on the date of enactment of this Act.
            (2) Savings provision.--If--
                    (A) any provision amended or repealed by subsection 
                (a) applied to--
                            (i) any transaction occurring before the 
                        date of the enactment of this Act,
                            (ii) any property acquired before such date 
                        of enactment, or
                            (iii) any item of income, loss, deduction, 
                        or credit taken into account before such date 
                        of enactment, and
                    (B) the treatment of such transaction, property, or 
                item under such provision would (without regard to the 
                amendments made by subsection (a)) affect the liability 
                for tax for periods ending after such date of 
                enactment,
        nothing in the amendments made by subsection (a) shall be 
        construed to affect the treatment of such transaction, 
        property, or item for purposes of determining liability for tax 
        for periods ending after such date of enactment.

            Passed the House of Representatives July 21, 2004.

            Attest:

                                                                 Clerk.