[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4297 Engrossed in House (EH)]
109th CONGRESS
1st Session
H. R. 4297
_______________________________________________________________________
AN ACT
To provide for reconciliation pursuant to section 201(b) of the
concurrent resolution on the budget for fiscal year 2006.
109th CONGRESS
1st Session
H. R. 4297
_______________________________________________________________________
AN ACT
To provide for reconciliation pursuant to section 201(b) of the
concurrent resolution on the budget for fiscal year 2006.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE, ETC.
(a) Short Title.--This Act may be cited as the ``Tax Relief
Extension Reconciliation Act of 2005''.
(b) Amendment of 1986 Code.--Except as otherwise expressly
provided, whenever in this Act an amendment or repeal is expressed in
terms of an amendment to, or repeal of, a section or other provision,
the reference shall be considered to be made to a section or other
provision of the Internal Revenue Code of 1986.
(c) Table of Contents.--The table of contents for this Act is as
follows:
Sec. 1. Short title, etc.
TITLE I--EXTENSIONS OF CERTAIN PROVISIONS THROUGH 2006
Sec. 101. Allowance of nonrefundable personal credits against regular
and minimum tax liability.
Sec. 102. Tax incentives for business activities on Indian
reservations.
Sec. 103. Work opportunity credit.
Sec. 104. Welfare-to-work credit.
Sec. 105. Deduction for corporate donations of computer technology and
equipment.
Sec. 106. Availability of medical savings accounts.
Sec. 107. 15-year cost recovery for leasehold improvements.
Sec. 108. 15-year cost recovery for restaurant improvements.
Sec. 109. Taxable income limit on percentage depletion for oil and
natural gas produced from marginal
properties.
Sec. 110. District of Columbia Enterprise Zone.
Sec. 111. Possession tax credit with respect to American Samoa.
Sec. 112. Parity in the application of certain limits to mental health
benefits.
Sec. 113. Research credit.
Sec. 114. Qualified Zone Academy Bonds.
Sec. 115. Certain expenses of elementary and secondary school teachers.
Sec. 116. Qualified tuition and related expenses.
Sec. 117. State and local general sales taxes.
TITLE II--EXTENSIONS OF CERTAIN PROVISIONS FOR 2 ADDITIONAL YEARS AND
OTHER MODIFICATIONS
Sec. 201. Expensing of environmental remediation costs.
Sec. 202. Controlled foreign corporations.
Sec. 203. Capital gains and dividends rates.
Sec. 204. Saver's credit.
Sec. 205. Increased expensing for small business.
TITLE III--OTHER PROVISIONS
Sec. 301. Clarification of taxation of certain settlement funds.
Sec. 302. Modification of active business definition under section 355.
Sec. 303. Veterans' mortgage bonds.
Sec. 304. Capital gains treatment for certain self-created musical
works.
Sec. 305. Vessel tonnage limit.
Sec. 306. Modification of special arbitrage rule for certain funds.
TITLE I--EXTENSIONS OF CERTAIN PROVISIONS THROUGH 2006
SEC. 101. ALLOWANCE OF NONREFUNDABLE PERSONAL CREDITS AGAINST REGULAR
AND MINIMUM TAX LIABILITY.
(a) In General.--Paragraph (2) of section 26(a) (relating to
special rule for taxable years 2000 through 2005) is amended--
(1) in the text by striking ``or 2005'' and inserting
``2005, or 2006'', and
(2) in the heading by striking ``2005'' and inserting
``2006''.
(b) Conforming Provisions.--
(1) Subsection (i) of section 904 (relating to coordination
with nonrefundable personal credits) is amended by striking
``or 2005'' and inserting ``2005, or 2006''.
(2) The amendments made by sections 201(b), 202(f), and
618(b) of the Economic Growth and Tax Relief Reconciliation Act
of 2001 shall not apply to taxable years beginning during 2006.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2005.
SEC. 102. TAX INCENTIVES FOR BUSINESS ACTIVITIES ON INDIAN
RESERVATIONS.
(a) Indian Employment Tax Credit.--
(1) In general.--Subsection (f) of section 45A (relating to
termination) is amended by striking ``December 31, 2005'' and
inserting ``December 31, 2006''.
(2) Effective date.--The amendment made by paragraph (1)
shall apply to taxable years beginning after December 31, 2005.
(b) Accelerated Depreciation for Business Property on Indian
Reservations.--
(1) In general.--Paragraph (8) of section 168(j) (relating
to termination) is amended by striking ``December 31, 2005''
and inserting ``December 31, 2006''.
(2) Effective date.--The amendment made by paragraph (1)
shall apply with respect to property placed in service after
December 31, 2005.
SEC. 103. WORK OPPORTUNITY CREDIT.
(a) In General.--Subparagraph (B) of section 51(c)(4) (relating to
termination) is amended by striking ``December 31, 2005'' and inserting
``December 31, 2006''.
(b) Increase in Age Limit for Food Stamp Recipients.--Clause (i) of
section 51(d)(8)(A) (relating to qualified food stamp recipient) is
amended by striking ``25'' and inserting ``35''.
(c) Effective Date.--The amendments made by this section shall
apply to individuals who begin work for the employer after December 31,
2005.
SEC. 104. WELFARE-TO-WORK CREDIT.
(a) In General.--Subsection (f) of section 51A (relating to
termination) is amended by striking ``December 31, 2005'' and inserting
``December 31, 2006''.
(b) Effective Date.--The amendment made by subsection (a) shall
apply to individuals who begin work for the employer after December 31,
2005.
SEC. 105. DEDUCTION FOR CORPORATE DONATIONS OF COMPUTER TECHNOLOGY AND
EQUIPMENT.
(a) In General.--Subparagraph (G) of section 170(e)(6) (relating to
termination) is amended by striking ``December 31, 2005'' and inserting
``December 31, 2006''.
(b) Effective Date.--The amendment made by subsection (a) shall
apply to contributions made in taxable years beginning after December
31, 2005.
SEC. 106. AVAILABILITY OF MEDICAL SAVINGS ACCOUNTS.
(a) In General.--Paragraphs (2) and (3)(B) of section 220(i)
(defining cut-off year) are each amended by striking ``2005'' each
place it appears in the text and headings and inserting ``2006''.
(b) Conforming Amendments.--
(1) Paragraph (2) of section 220(j) is amended--
(A) in the text by striking ``or 2004'' each place
it appears and inserting ``2004, or 2005'', and
(B) in the heading by striking ``or 2004'' and
inserting ``2004, or 2005''.
(2) Subparagraph (A) of section 220(j)(4) is amended by
striking ``and 2004'' and inserting ``2004, and 2005''.
(c) Effective Date.--The amendments made by this section shall take
effect on the date of the enactment of this Act.
(d) Time for Filing Reports, Etc.--
(1) The report required by section 220(j)(4) of the
Internal Revenue Code of 1986 to be made on August 1, 2005,
shall be treated as timely if made before the close of the 90-
day period beginning on the date of the enactment of this Act.
(2) The determination and publication required by section
220(j)(5) of such Code with respect to calendar year 2005 shall
be treated as timely if made before the close of the 120-day
period beginning on the date of the enactment of this Act. If
the determination under the preceding sentence is that 2005 is
a cut-off year under section 220(i) of such Code, the cut-off
date under such section 220(i) shall be the last day of such
120-day period.
SEC. 107. 15-YEAR COST RECOVERY FOR LEASEHOLD IMPROVEMENTS.
(a) In General.--Clause (iv) of section 168(e)(3)(E) (relating to
15-year property) is amended by striking ``January 1, 2006'' and
inserting ``January 1, 2007''.
(b) Effective Date.--The amendment made by subsection (a) shall
apply to property placed in service after December 31, 2005.
SEC. 108. 15-YEAR COST RECOVERY FOR RESTAURANT IMPROVEMENTS.
(a) In General.--Clause (v) of section 168(e)(3)(E) (relating to
15-year property) is amended by striking ``January 1, 2006'' and
inserting ``January 1, 2007''.
(b) Effective Date.--The amendment made by subsection (a) shall
apply to property placed in service after December 31, 2005.
SEC. 109. TAXABLE INCOME LIMIT ON PERCENTAGE DEPLETION FOR OIL AND
NATURAL GAS PRODUCED FROM MARGINAL PROPERTIES.
(a) In General.--Subparagraph (H) of section 613A(c)(6) (relating
to oil and natural gas produced from marginal properties) is amended by
striking ``January 1, 2006'' and inserting ``January 1, 2007''.
(b) Effective Date.--The amendment made by subsection (a) shall
apply to taxable years beginning after December 31, 2005.
SEC. 110. DISTRICT OF COLUMBIA ENTERPRISE ZONE.
(a) Period for Which Designation Applicable.--Subsection (f) of
section 1400 (relating to time for which designation applicable) is
amended by striking ``December 31, 2005'' both places it appears and
inserting ``December 31, 2006''.
(b) Tax-Exempt Economic Development Bonds.--Subsection (b) of
section 1400A (relating to period of applicability) is amended by
striking ``December 31, 2005'' and inserting ``December 31, 2006''.
(c) Zero Percent Capital Gains Rate.--
(1) In general.--Subsection (b) of section 1400B (relating
to DC Zone Asset) is amended by striking ``January 1, 2006''
each place it appears and inserting ``January 1, 2007''.
(2) Conforming amendments.--
(A) Paragraph (2) of section 1400B(e) (relating to
gain before 1998 and after 2010 not qualified) is
amended--
(i) by striking ``December 31, 2010'' and
inserting ``December 31, 2011'', and
(ii) by striking ``2010'' in the heading
and inserting ``2011''.
(B) Paragraph (2) of section 1400B(g) (relating to
sales and exchanges of interests in partnerships and S
corporations which are DC Zone businesses) is amended
by striking ``December 31, 2010'' and inserting
``December 31, 2011''.
(C) Subsection (d) of section 1400F (relating to
certain rules to apply) is amended by striking
``December 31, 2010'' and inserting ``December 31,
2011''.
(d) First-Time Homebuyer Credit for District of Columbia.--
Subsection (i) of section 1400C (relating to application of section) is
amended by striking ``January 1, 2006'' and inserting ``January 1,
2007''.
(e) Effective Dates.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall take effect on January 1,
2006.
(2) Tax-exempt economic development bonds.--The amendment
made by subsection (b) shall apply to obligations issued after
the date of the enactment of this Act.
SEC. 111. POSSESSION TAX CREDIT WITH RESPECT TO AMERICAN SAMOA.
(a) In General.--Subparagraph (A) of section 936(j)(8) (relating to
special rules for certain possessions) is amended by inserting before
the period at the end the following: ``(before January 1, 2007, in the
case of American Samoa)''.
(b) Effective Date.--The amendment made by subsection (a) shall
apply to taxable years beginning after December 31, 2005.
SEC. 112. PARITY IN THE APPLICATION OF CERTAIN LIMITS TO MENTAL HEALTH
BENEFITS.
(a) In General.--Paragraph (3) of section 9812(f) (relating to
application of section) is amended by striking ``December 31, 2005''
and inserting ``December 31, 2006''.
(b) Effective Dates.--The amendment made by subsection (a) shall
take effect on the date of the enactment of this Act.
SEC. 113. RESEARCH CREDIT.
(a) Extension.--
(1) In general.--Subparagraph (B) of section 41(h)(1)
(relating to termination) is amended by striking ``December 31,
2005'' and inserting ``December 31, 2006''.
(2) Conforming amendment.--Subparagraph (D) of section
45C(b)(1) (relating to special rule) is amended by striking
``December 31, 2005'' and inserting ``December 31, 2006''.
(3) Effective date.--The amendments made by this subsection
shall apply to amounts paid or incurred after December 31,
2005.
(b) Increase in Rates of Alternative Incremental Credit.--
(1) In general.--Subparagraph (A) of section 41(c)(4)
(relating to election of alternative incremental credit) is
amended--
(A) by striking ``2.65 percent'' and inserting ``3
percent'',
(B) by striking ``3.2 percent'' and inserting ``4
percent'', and
(C) by striking ``3.75 percent'' and inserting ``5
percent''.
(2) Effective date.--The amendments made by this subsection
shall apply to taxable years ending after the date of the
enactment of this Act.
(c) Alternative Simplified Credit for Qualified Research
Expenses.--
(1) In general.--Subsection (c) of section 41 (relating to
base amount) is amended by redesignating paragraphs (5) and (6)
as paragraphs (6) and (7), respectively, and by inserting after
paragraph (4) the following new paragraph:
``(5) Election of alternative simplified credit.--
``(A) In general.--At the election of the taxpayer,
the credit determined under subsection (a)(1) shall be
equal to 12 percent of so much of the qualified
research expenses for the taxable year as exceeds 50
percent of the average qualified research expenses for
the 3 taxable years preceding the taxable year for
which the credit is being determined.
``(B) Special rule in case of no qualified research
expenses in any of 3 preceding taxable years.--
``(i) Taxpayers to which subparagraph
applies.--The credit under this paragraph shall
be determined under this subparagraph if the
taxpayer has no qualified research expenses in
any one of the 3 taxable years preceding the
taxable year for which the credit is being
determined.
``(ii) Credit rate.--The credit determined
under this subparagraph shall be equal to 6
percent of the qualified research expenses for
the taxable year.
``(C) Election.--An election under this paragraph
shall apply to the taxable year for which made and all
succeeding taxable years unless revoked with the
consent of the Secretary. An election under this
paragraph may not be made for any taxable year to which
an election under paragraph (4) applies.''.
(2) Coordination with election of alternative incremental
credit.--
(A) In general.--Section 41(c)(4)(B) (relating to
election) is amended by adding at the end the
following: ``An election under this paragraph may not
be made for any taxable year to which an election under
paragraph (5) applies.''.
(B) Transition rule.--In the case of an election
under section 41(c)(4) of the Internal Revenue Code of
1986 which applies to the taxable year which includes
the date of the enactment of this Act, such election
shall be treated as revoked with the consent of the
Secretary of the Treasury if the taxpayer makes an
election under section 41(c)(5) of such Code (as added
by subsection (a)) for such year.
(3) Effective date.--The amendments made by this subsection
shall apply to taxable years ending after the date of the
enactment of this Act.
SEC. 114. QUALIFIED ZONE ACADEMY BONDS.
(a) In General.--Paragraph (1) of section 1397E(e) (relating to
national limit) is amended by striking ``and 2005'' and inserting
``2005, and 2006''.
(b) Effective Date.--The amendment made by subsection (a) shall
apply to obligations issued after December 31, 2005.
SEC. 115. CERTAIN EXPENSES OF ELEMENTARY AND SECONDARY SCHOOL TEACHERS.
(a) In General.--Subparagraph (D) of section 62(a)(2) (relating to
certain expenses of elementary and secondary school teachers) is
amended by striking ``or 2005'' and inserting ``2005, or 2006''.
(b) Effective Date.--The amendment made by subsection (a) shall
apply to expenses paid or incurred in taxable years beginning after
December 31, 2005.
SEC. 116. QUALIFIED TUITION AND RELATED EXPENSES.
(a) In General.--Subsection (e) of section 222 (relating to
termination) is amended by striking ``December 31, 2005'' and inserting
``December 31, 2006''.
(b) Limitations.--Paragraph (2) of section 222(b) (relating to
applicable dollar limit) is amended by striking subparagraphs (A) and
(B), by redesignating subparagraph (C) as subparagraph (B), and by
inserting before subparagraph (B) (as so redesignated) the following:
``(A) 2006.--In the case of a taxable year
beginning in 2006, the applicable dollar amount shall
be equal to--
``(i) in the case of a taxpayer whose
adjusted gross income for the taxable year does
not exceed $65,000 ($130,000 in the case of a
joint return), $4,000,
``(ii) in the case of a taxpayer not
described in clause (i) whose adjusted gross
income for the taxable year does not exceed
$80,000 ($160,000 in the case of a joint
return), $2,000, and
``(iii) in the case of any other taxpayer,
zero.''.
(c) Effective Date.--The amendments made by this section shall
apply to payments made in taxable years beginning after December 31,
2005.
SEC. 117. STATE AND LOCAL GENERAL SALES TAXES.
(a) In General.--Subparagraph (I) of section 164(b)(5) (relating to
application of paragraph) is amended by striking ``January 1, 2006''
and inserting ``January 1, 2007''.
(b) Effective Date.--The amendment made by subsection (a) shall
apply to taxable years beginning after December 31, 2005.
TITLE II--EXTENSIONS OF CERTAIN PROVISIONS FOR 2 ADDITIONAL YEARS AND
OTHER MODIFICATIONS
SEC. 201. EXPENSING OF ENVIRONMENTAL REMEDIATION COSTS.
(a) Extension of Termination Date.--Subsection (h) of section 198
(relating to termination) is amended by striking ``December 31, 2005''
and inserting ``December 31, 2007''.
(b) Petroleum Products Treated as Hazardous Substance.--Paragraph
(1) of section 198(d) (relating to hazardous substance) is amended by
striking ``and'' at the end of subparagraph (A), by striking the period
at the end of subparagraph (B) and inserting ``, and'', and by adding
at the end the following new subparagraph:
``(C) any petroleum product (as defined in section
4612(a)(3)).''.
(c) Effective Date.--The amendments made by this section shall
apply to expenditures paid or incurred after December 31, 2005.
SEC. 202. CONTROLLED FOREIGN CORPORATIONS.
(a) Subpart F Exception for Active Financing.--
(1) Exempt insurance income.--Paragraph (10) of section
953(e) (relating to application) is amended--
(A) by striking ``January 1, 2007'' and inserting
``January 1, 2009'', and
(B) by striking ``December 31, 2006'' and inserting
``December 31, 2008''.
(2) Exception to treatment as foreign personal holding
company income.--Paragraph (9) of section 954(h) (relating to
application) is amended by striking ``January 1, 2007'' and
inserting ``January 1, 2009''.
(b) Look-Through Treatment of Payments Between Related Controlled
Foreign Corporations Under the Foreign Personal Holding Company
Rules.--Subsection (c) of section 954 (relating to foreign personal
holding company income) is amended by adding at the end the following
new paragraph:
``(6) Look-thru rule for related controlled foreign
corporations.--
``(A) In general.--For purposes of this subsection,
dividends, interest, rents, and royalties received or
accrued from a controlled foreign corporation which is
a related person shall not be treated as foreign
personal holding company income to the extent
attributable or properly allocable (determined under
rules similar to the rules of subparagraphs (C) and (D)
of section 904(d)(3)) to income of the related person
which is not subpart F income. For purposes of this
subparagraph, interest shall include factoring income
which is treated as income equivalent to interest for
purposes of paragraph (1)(E). The Secretary shall
prescribe such regulations as may be appropriate to
prevent the abuse of the purposes of this paragraph.
``(B) Application.--Subparagraph (A) shall apply to
taxable years of foreign corporations beginning after
December 31, 2005, and before January 1, 2009, and to
taxable years of United States shareholders with or
within which such taxable years of foreign corporations
end.''.
SEC. 203. CAPITAL GAINS AND DIVIDENDS RATES.
Section 303 of the Jobs and Growth Tax Relief Reconciliation Act of
2003 is amended by striking ``December 31, 2008'' and inserting
``December 31, 2010''.
SEC. 204. SAVER'S CREDIT.
Subsection (h) of section 25B (relating to elective deferrals and
IRA contributions by certain individuals) is amended by striking
``December 31, 2006'' and inserting ``December 31, 2008''.
SEC. 205. INCREASED EXPENSING FOR SMALL BUSINESS.
Subsections (b)(1), (b)(2), (b)(5), (c)(2), and (d)(1)(A)(ii) of
section 179(b) (relating to election to expense certain depreciable
business assets) are each amended by striking ``2008'' and inserting
``2010''.
TITLE III--OTHER PROVISIONS
SEC. 301. CLARIFICATION OF TAXATION OF CERTAIN SETTLEMENT FUNDS.
(a) In General.--Subsection (g) of section 468B (relating to
clarification of taxation of certain funds) is amended to read as
follows:
``(g) Clarification of Taxation of Certain Funds.--
``(1) In general.--Except as provided in paragraph (2),
nothing in any provision of law shall be construed as providing
that an escrow account, settlement fund, or similar fund is not
subject to current income tax. The Secretary shall prescribe
regulations providing for the taxation of any such account or
fund whether as a grantor trust or otherwise.
``(2) Exemption from tax for certain settlement funds.--An
escrow account, settlement fund, or similar fund shall be
treated as beneficially owned by the United States and shall be
exempt from taxation under this subtitle if--
``(A) it is established pursuant to a consent
decree entered by a judge of a United States District
Court,
``(B) it is created for the receipt of settlement
payments as directed by a government entity for the
sole purpose of resolving or satisfying one or more
claims asserting liability under the Comprehensive
Environmental Response, Compensation, and Liability Act
of 1980,
``(C) the authority and control over the
expenditure of funds therein (including the expenditure
of contributions thereto and any net earnings thereon)
is with such government entity, and
``(D) upon termination, any remaining funds will be
disbursed to such government entity for use in
accordance with applicable law.
For purposes of this paragraph, the term `government entity'
means the United States, any State or political subdivision
thereof, the District of Columbia, any possession of the United
States, and any agency or instrumentality of any of the
foregoing.
``(3) Termination.--Paragraph (2) shall not apply to
accounts and funds established after December 31, 2010.''.
(b) Effective Date.--The amendment made by subsection (a) shall
apply to accounts and funds established after the date of the enactment
of this Act.
SEC. 302. MODIFICATION OF ACTIVE BUSINESS DEFINITION UNDER SECTION 355.
Subsection (b) of section 355 (defining active conduct of a trade
or business) is amended by adding at the end the following new
paragraph:
``(3) Special rule relating to active business
requirement.--
``(A) In general.--In the case of any distribution
made after the date of the enactment of this paragraph
and before December 31, 2010, a corporation shall be
treated as meeting the requirement of paragraph (2)(A)
if and only if such corporation is engaged in the
active conduct of a trade or business.
``(B) Affiliated group rule.--For purposes of
subparagraph (A), all members of such corporation's
separate affiliated group shall be treated as one
corporation. For purposes of the preceding sentence, a
corporation's separate affiliated group is the
affiliated group which would be determined under
section 1504(a) if such corporation were the common
parent and section 1504(b) did not apply.
``(C) Transition rule.--Subparagraph (A) shall not
apply to any distribution pursuant to a transaction
which is--
``(i) made pursuant to an agreement which
was binding on the date of the enactment of
this paragraph and at all times thereafter,
``(ii) described in a ruling request
submitted to the Internal Revenue Service on or
before such date, or
``(iii) described on or before such date in
a public announcement or in a filing with the
Securities and Exchange Commission.
The preceding sentence shall not apply if the
distributing corporation elects not to have such
sentence apply to distributions of such corporation.
Any such election, once made, shall be irrevocable.
``(D) Special rule for certain pre-enactment
distributions.--For purposes of determining the
continued qualification under paragraph (2)(A) of
distributions made before the date of the enactment of
this paragraph as a result of an acquisition,
disposition, or other restructuring after such date and
before December 31, 2010, such distribution shall be
treated as made after the date of the enactment of this
paragraph for purposes of applying subparagraphs (A)
through (C) of this paragraph.''.
SEC. 303. VETERANS' MORTGAGE BONDS.
(a) All Veterans Eligible for State Home Loan Programs Funded by
Qualified Veterans' Mortgage Bonds.--
(1) In general.--Paragraph (4) of section 143(l) (defining
qualified veteran) is amended--
(A) by striking ``at some time before January 1,
1977'' in subparagraph (A), and
(B) by striking subparagraph (B) and inserting the
following:
``(B) who applied for the financing before the date
25 years after the last date on which such veteran left
active service.''.
(2) Effective date.--The amendments made by this subsection
shall apply to financing provided after the date of the
enactment of this Act.
(b) Revision of State Veterans Limit.--
(1) In general.--Subparagraph (B) of section 143(l)(3)
(relating to volume limitation) is amended to read as follows:
``(B) State veterans limit.--
``(i) In general.--A State veterans limit
for any calendar year is the amount equal to--
``(I) $53,750,000 for the State of
Texas,
``(II) $66,250,000 for the State of
California,
``(III) $25,000,000 for the State
of Oregon,
``(IV) $25,000,000 for the State of
Wisconsin, and
``(V) $25,000,000 for the State of
Alaska.
``(ii) Phasein.--In the case of calendar
years beginning before 2010, clause (i) shall
be applied by substituting for each of the
dollar amounts therein by the applicable
percentage. For purposes of the preceding
sentence, the applicable percentage shall be
determined in accordance with the following
table:
Applicable
``Calendar Year: percentage is:
2006.......................................... 20 percent
2007.......................................... 40 percent
2008.......................................... 60 percent
2009.......................................... 80 percent.
``(iii) Termination.--The State veterans
limit for any calendar year after 2010 is
zero.''.
(2) Effective date.--The amendment made by this subsection
shall apply to bonds issued after December 31, 2005.
SEC. 304. CAPITAL GAINS TREATMENT FOR CERTAIN SELF-CREATED MUSICAL
WORKS.
(a) In General.--Subsection (b) of section 1221 (relating to
capital asset defined) is amended by redesignating paragraph (3) as
paragraph (4) and by inserting after paragraph (2) the following new
paragraph:
``(3) Sale or exchange of self-created musical works.--At
the election of the taxpayer, paragraphs (1) and (3) of
subsection (a) shall not apply with respect to any sale or
exchange before January 1, 2011, of musical compositions or
copyrights in musical works by a taxpayer described in
subsection (a)(3).''.
(b) Limitation on Charitable Contributions.--Subparagraph (A) of
section 170(e)(1) is amended by inserting ``(determined without regard
to section 1221(b)(3))'' after ``long-term capital gain''.
(c) Effective Date.--The amendments made by this section shall
apply to sales and exchanges in taxable years beginning after the date
of the enactment of this Act.
SEC. 305. VESSEL TONNAGE LIMIT.
(a) In General.--Paragraph (4) of section 1355(a) (relating to
qualifying vessel) is amended by inserting ``(6,000, in the case of
taxable years beginning after December 31, 2005, and ending before
January 1, 2011)'' after ``10,000''.
(b) Effective Date.--The amendment made by subsection (a) shall
apply to taxable years beginning after December 31, 2005.
SEC. 306. MODIFICATION OF SPECIAL ARBITRAGE RULE FOR CERTAIN FUNDS.
In the case of bonds issued after the date of the enactment of this
Act and before August 31, 2009--
(1) the requirement of paragraph (1) of section 648 of the
Deficit Reduction Act of 1984 (98 Stat. 941) shall be treated
as met with respect to the securities or obligations referred
to in such section if such securities or obligations are held
in a fund the annual distributions from which cannot exceed 7
percent of the average fair market value of the assets held in
such fund except to the extent distributions are necessary to
pay debt service on the bond issue, and
(2) paragraph (3) of such section shall be applied by
substituting ``distributions from'' for ``the investment
earnings of'' both places it appears.
Passed the House of Representatives December 8, 2005.
Attest:
Clerk.