110 HR 3970 IH: Tax Reduction and Reform Act of
U.S. House of Representatives
2007-10-25
text/xml
EN
Pursuant to Title 17 Section 105 of the United States Code, this file is not subject to copyright protection and is in the public domain.
1.
(a)This Act may be cited
as the Tax Reduction and Reform Act of
2007
.
(b)Except as otherwise expressly provided,
whenever in this Act an amendment or repeal is expressed in terms of an
amendment to, or repeal of, a section or other provision, the reference shall
be considered to be made to a section or other provision of the Internal
Revenue Code of 1986.
(c)The table of contents for this Act is as follows:
Sec. 1. Short title, etc.
Title I—Individual tax provisions
Subtitle A—Individual tax relief
Part 1—General tax reductions
Sec. 1001. Increase in standard deduction.
Sec. 1002. Modification of earned income credit amount for
individuals with no qualifying children.
Sec. 1003. Change in refundable child credit.
Part 2—AMT relief
Subpart A—AMT extension for 2007
Sec. 1011. Extension of alternative minimum tax relief for
nonrefundable personal credits.
Sec. 1012. Extension of increased alternative minimum tax
exemption amount.
Subpart B—Repeal of the individual AMT
Sec. 1021. Repeal of alternative minimum tax on
individuals.
Sec. 1022. Limitation of benefits of individual AMT
repeal.
Sec. 1023. High income individuals subject to overall
limitation on itemized deductions and phaseout of deductions for personal
exemptions.
Sec. 1024. Modification of 2-percent floor on miscellaneous
itemized deductions.
Subpart C—Conforming amendments
Sec. 1031. Conforming amendments, etc.
Subtitle B—Other reforms
Part 1—Provisions related to certain investment
partnerships
Sec. 1201. Income of partners for performing investment
management services treated as ordinary income received for performance of
services.
Sec. 1202. Nonqualified deferred compensation for investment
services.
Sec. 1203. Indebtedness incurred by a partnership in acquiring
securities and commodities not treated as acquisition indebtedness for
organizations which are partners with limited liability.
Sec. 1204. Application to partnership interests and tax sharing
agreements of rule treating certain gain on sales between related persons as
ordinary income.
Part 2—Self-employment tax treatment of certain interest holders
in service providing entities
Sec. 1211. Certain service providing S corporation shareholders
and partners subject to self-employment taxes.
Part 3—Broker reporting of customer’s basis in securities
transactions
Sec. 1221. Broker reporting of customer’s basis in securities
transactions.
Title II—One-year extenders
Sec. 2001. Research credit.
Sec. 2002. Indian employment credit.
Sec. 2003. New markets tax credit.
Sec. 2004. Railroad track maintenance.
Sec. 2005. Mortgage insurance premiums treated as
interest.
Sec. 2006. Deduction for State and local sales
taxes.
Sec. 2007. Fifteen-year straight-line cost recovery for
qualified leasehold improvements and qualified restaurant property.
Sec. 2008. Seven-year cost recovery period for motorsports
racing track facility.
Sec. 2009. Accelerated depreciation for business property on
Indian reservation.
Sec. 2010. Expensing of environmental remediation
costs.
Sec. 2011. Deduction allowable with respect to income
attributable to domestic production activities in Puerto Rico.
Sec. 2012. Deduction of qualified tuition and related
expenses.
Sec. 2013. Modification of tax treatment of certain payments to
controlling exempt organizations.
Sec. 2014. Treatment of certain dividends of regulated
investment companies.
Sec. 2015. Extension and modification of credit to holders of
qualified zone academy bonds.
Sec. 2016. Tax incentives for investment in the District of
Columbia.
Sec. 2017. Disclosure for combined employment tax
reporting.
Sec. 2018. Disclosure of return information to apprise
appropriate officials of terrorist activities.
Sec. 2019. Disclosure upon request of information relating to
terrorist activities.
Sec. 2020. Disclosure of return information to carry out income
contingent repayment of student loans.
Sec. 2021. Authority for undercover operations.
Sec. 2022. Increase in limit on cover over of rum excise tax to
Puerto Rico and the Virgin Islands.
Sec. 2023. Parity in the application of certain limits to
mental health benefits.
Sec. 2024. Extension of economic development credit for
American Samoa.
Sec. 2025. Qualified conservation contributions.
Sec. 2026. Enhanced charitable deduction for contributions of
food inventory.
Sec. 2027. Enhanced charitable deduction for contributions of
book inventory to public schools.
Sec. 2028. Enhanced deduction for qualified computer
contributions.
Sec. 2029. Tax-free distributions from individual retirement
plans for charitable purposes.
Sec. 2030. Basis adjustment to stock of S corporations making
charitable contributions of property.
Sec. 2031. Deduction for certain expenses of elementary and
secondary school teachers.
Sec. 2032. Election to include combat pay as earned income for
purposes of earned income tax credit.
Sec. 2033. Modification of mortgage revenue bonds for
veterans.
Sec. 2034. Distributions from retirement plans to individuals
called to active duty.
Sec. 2035. Stock in RIC for purposes of determining estates of
nonresidents not citizens.
Sec. 2036. Qualified investment entities.
Sec. 2037. Disclosure of return information for certain
veterans programs.
Title III—Corporate tax reform
Subtitle A—Corporate rate reduction
Sec. 3001. Reduction in top corporate marginal
rate.
Subtitle B—Repeal of deduction for income attributable to
domestic production activities
Sec. 3101. Repeal of deduction for income attributable to
domestic production activities.
Subtitle C—Provisions related to foreign source
income
Sec. 3201. Allocation of expenses and taxes on basis of
repatriation of foreign income.
Sec. 3202. Foreign currency conversion for determination of
foreign taxes and foreign corporation’s earnings and profits.
Sec. 3203. Repeal of worldwide allocation of
interest.
Sec. 3204. Limitation on treaty benefits for certain deductible
payments.
Subtitle D—Modification of accounting rules
Sec. 3301. Repeal of last-in, first-out method of
inventory.
Sec. 3302. Repeal of lower of cost or market method of
inventory.
Sec. 3303. Special rule for service providers on accrual method
not applicable to C corporations.
Subtitle E—Modification to expensing and depreciation
rules
Sec. 3401. Small business expensing provisions made
permanent.
Sec. 3402. Amortization of goodwill and other
intangibles.
Subtitle F—Codification of economic substance
doctrine
Sec. 3501. Codification of economic substance
doctrine.
Sec. 3502. Penalties for underpayments.
Subtitle G—Modifications to deductions for dividends
received
Sec. 3601. Modifications to deductions for dividends
received.
Subtitle H—Other provisions
Sec. 3701. Recognition of ordinary income on sale or exercise
of stock option in S corporation with an ESOP.
Sec. 3702. Termination of special rules for domestic
international sales corporations.
Sec. 3703. Treatment of securities of a controlled corporation
exchanged for assets in certain reorganizations.
<enum>I</enum><header>Individual tax
provisions</header>
<subtitle id="HD5D51540EA23409EAB7B4F76ADB28CA4"><enum>A</enum><header>Individual tax
relief</header>
<part id="H82C2256DC37B4B8C95E33CCC3EFA43B7"><enum>1</enum><header>General tax
reductions</header>
<section id="H12139F20109449F290B83C2965C06EDB"><enum>1001.</enum><header>Increase in
standard deduction</header>
<subsection id="H8258F3D52455446DA2C6F700B91C29DC"><enum>(a)</enum><header>In
general</header><text>Paragraph (1) of section 63(c) (defining standard
deduction) 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 inserting after subparagraph (B) the
following:</text>
<quoted-block display-inline="no-display-inline" id="HE031A326724E4FAAA68B9BC141C29894" style="OLC">
<subparagraph id="HD8C4ADA84009420EBE4D32323CBF25B5"><enum>(C)</enum><text>the additional
amount.</text>
</subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="HAA91B9C92F534A9D986525BF062F74D"><enum>(b)</enum><header>Additional
amount</header><text display-inline="yes-display-inline">Subsection (c) of
section 63 (defining standard deduction) is amended by adding at the end the
following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="HD127C0B86A464A0B9D00BE6FD1DC37A" style="OLC">
<paragraph id="H014C7411BE4145ABB15E0322C6C8A93B"><enum>(8)</enum><header>Additional
amount</header><text display-inline="yes-display-inline">For purposes of
paragraph (1), the additional amount is—</text>
<subparagraph id="H5B861AC11D534787BF928EA064914D00"><enum>(A)</enum><text display-inline="yes-display-inline">200 percent of the amount in effect under
subparagraph (C) for the taxable year in the case of a joint return or a
surviving spouse (as defined in section 2(a)),</text>
</subparagraph><subparagraph id="H42BC8F879EE84E2EB78E1534CBBF0066"><enum>(B)</enum><text display-inline="yes-display-inline">$625 in the case of a head of household (as
defined in section 2(b)), and</text>
</subparagraph><subparagraph id="HE13CBDC45BC24DEC89C85B8F02655BA3"><enum>(C)</enum><text>$425 in any other
case.</text>
</subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H5847F549E3B74C32AAB4CAB92C6EAF00"><enum>(c)</enum><header>Adjustment for
inflation</header>
<paragraph id="H9BF726A9A8464DC6B792B0F100001F3E"><enum>(1)</enum><header>In
general</header><text>Section 63(c)(4) (relating to adjustments for inflation)
is amended—</text>
<subparagraph id="H3B4729B2DBAB4BA18825AE00CAF5C8C8"><enum>(A)</enum><text>in the matter
preceding subparagraph (A) by striking <quote>or (5)</quote> and inserting
<quote>(5), (8)(B), or (8)(C)</quote>, and</text>
</subparagraph><subparagraph id="HA763D5976F76412AA74151B62C1BCAA6"><enum>(B)</enum><text>in subparagraph
(B) by striking <quote>and</quote> at the end of clause (i), by striking the
period at the end of clause (ii) and inserting <quote>, and</quote>, and by
inserting after clause (ii) the following new clause:</text>
<quoted-block display-inline="no-display-inline" id="HC3A3076D4DB34DEBB8B9EDE12B51F699" style="OLC">
<clause id="H169024DEF90C4F9D000000263030BFF5"><enum>(iii)</enum><text display-inline="yes-display-inline"><quote>calendar year 2007</quote> in the
case of the dollar amounts contained in paragraph (8)(B) or
(8)(C).</text>
</clause><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph></paragraph><paragraph id="H2C68DAD1FC424295BFFAADB930952B10"><enum>(2)</enum><header>Rounding</header><text>Section
1(f)(6) (relating to rounding) is amended by adding at the end the following
new subparagraph:</text>
<quoted-block display-inline="no-display-inline" id="H03D84AD6580147419600DF57BDF1B000" style="OLC">
<subparagraph id="HB04BA585C5464D2D9D104CAAE2296789"><enum>(C)</enum><header>Special rule for
standard deduction additional amount</header><text display-inline="yes-display-inline">In the case of an increase with respect to
section 63(c)(8) by reason of section 63(c)(4), subparagraph (A) shall be
applied by substituting <quote>$25</quote> for <quote>$50</quote> each place it
appears and subparagraph (B) shall not
apply.</text>
</subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="H1DB7FE9F61FF4D3890DFA77569276CB"><enum>(d)</enum><header>Effective
date</header><text>The amendments made by this section shall apply to taxable
years beginning after December 31, 2007.</text>
</subsection></section><section display-inline="no-display-inline" id="H85F4C24733B1417FAD575FA5C168AFD7" section-type="subsequent-section"><enum>1002.</enum><header>Modification of
earned income credit amount for individuals with no qualifying
children</header>
<subsection id="HF1EF0A77FEC44DD3AEB1FB5D5E8CD1E1"><enum>(a)</enum><header>Increase in
credit percentage and phaseout percentage for individuals with no
children</header><text>The table contained in subparagraph (A) of section
32(b)(1) is amended by striking <quote>7.65</quote> each place it appears and
inserting <quote>15.3</quote>.</text>
</subsection><subsection id="HC933832660784A95A3C775B8EB471305"><enum>(b)</enum><header>Increase in
beginning phaseout amount</header>
<paragraph id="H3CD6093249FA4ED9BCC3FD237DBB9C87"><enum>(1)</enum><header>In
general</header><text display-inline="yes-display-inline">The table contained
in subparagraph (A) of section 32(b)(2) is amended by striking
<quote>$5,280</quote> and inserting <quote>$10,900</quote>.</text>
</paragraph><paragraph id="HCFFC641CEE07438CB5AAC6027C91EF"><enum>(2)</enum><header>Inflation
adjustment</header><text>Subparagraph (B) of section 32(j)(1) is
amended—</text>
<subparagraph id="H4C2136D503E042E0AB81105DDD9CBB80"><enum>(A)</enum><text>by striking
<quote>and</quote> at the end of clause (i), by redesignating clause (ii) as
clause (iii), and by inserting after clause (i) the following new
clause:</text>
<quoted-block display-inline="no-display-inline" id="H58A50259B71C44268DF88D11FF5C6B29" style="OLC">
<clause id="H8202F9A7068A46959C4582096DD2D3C9"><enum>(ii)</enum><text>in the case of
the $10,900 amount in subsection (b)(2)(A), by substituting <quote>calendar
year 2007</quote> for <quote>calendar year 1992</quote> in subparagraph (B)
thereof, and</text>
</clause><after-quoted-block>,
and</after-quoted-block></quoted-block>
</subparagraph><subparagraph id="H4C6991CD4B0C422FA3BC89996642DFB0"><enum>(B)</enum><text>in clause (i) by
inserting <quote>except as provided in clause (ii),</quote> before <quote>in
the case of</quote>.</text>
</subparagraph></paragraph></subsection><subsection display-inline="no-display-inline" id="HBBFB62D2A05749A7B4B3AD44CF753678"><enum>(c)</enum><header>Effective
date</header><text>The amendments made by this section shall apply to taxable
years beginning after December 31, 2007.</text>
</subsection></section><section display-inline="no-display-inline" id="H66B4BA10F055449685011142801233B0" section-type="subsequent-section"><enum>1003.</enum><header>Change in
refundable child credit</header>
<subsection commented="no" id="H180F2958CC8D4B40B4A305AC78248965"><enum>(a)</enum><header>Modification of
threshold amount</header><text display-inline="yes-display-inline">Clause (i)
of section 24(d)(1)(B) is amended by striking <quote>$10,000</quote> and
inserting <quote>$8,500</quote>.</text>
</subsection><subsection id="H1CC5D900347B40229D52FAAC6D81ABE1"><enum>(b)</enum><header>Repeal of
inflation adjustment to earned income base</header><text>Subsection (d) of
section 24 (relating to portion of credit refundable) is amended by striking
paragraph (3).</text>
</subsection><subsection id="H4ED8E032E58145C5A325F3DECD6C71B"><enum>(c)</enum><header>Effective
date</header><text>The amendment made by subsection (a) shall apply to taxable
years beginning after December 31, 2007.</text>
</subsection></section></part><part id="H0C65C87B72A6444AB9370094329F46BA"><enum>2</enum><header>AMT
relief</header>
<subpart id="HA0CF963CCFBA4EDABDEE6C5543B2DAB7"><enum>A</enum><header>AMT
extension for 2007</header>
<section id="H463981564A0643DBB38F6BE23995B396"><enum>1011.</enum><header>Extension of
alternative minimum tax relief for nonrefundable personal credits</header>
<subsection id="H2756CC1EFA184942B7F8E259B5B278B"><enum>(a)</enum><header>In
general</header><text>Paragraph (2) of section 26(a) (relating to special rule
for taxable years 2000 through 2006) is amended—</text>
<paragraph id="H9058038BAB4B404DA56165D4EFA8EA9D"><enum>(1)</enum><text>by striking
<quote>or 2006</quote> and inserting <quote>2006, or 2007</quote>, and</text>
</paragraph><paragraph id="H5E5FEB479635436FBFD688D439A8AB3B"><enum>(2)</enum><text>by striking
<quote><header-in-text level="paragraph" style="OLC">2006</header-in-text></quote> in the heading thereof and inserting
<quote><header-in-text level="paragraph" style="OLC">2007</header-in-text></quote>.</text>
</paragraph></subsection><subsection id="H4A76469D763349B492C7D4228431A854"><enum>(b)</enum><header> Effective
date</header><text>The amendments made by this section shall apply to taxable
years beginning after December 31, 2006.</text>
</subsection></section><section display-inline="no-display-inline" id="H8F1765F391FE4AED9600CDF10947D7FB" section-type="subsequent-section"><enum>1012.</enum><header>Extension of
increased alternative minimum tax exemption amount</header>
<subsection id="H9F0B6C1C492443C295A71BD5ADF19B77"><enum>(a)</enum><header>In
general</header><text>Paragraph (1) of section 55(d) (relating to exemption
amount) is amended—</text>
<paragraph id="H31238A1F69DB4F17B94262F8305D064E"><enum>(1)</enum><text>by striking
<quote>($62,550 in the case of taxable years beginning in 2006)</quote> in
subparagraph (A) and inserting <quote>($64,950 in the case of taxable years
beginning in 2007)</quote>, and</text>
</paragraph><paragraph id="H9177071775D8438DBA972000D85925FE"><enum>(2)</enum><text>by striking
<quote>($42,500 in the case of taxable years beginning in 2006)</quote> in
subparagraph (B) and inserting <quote>($44,150 in the case of taxable years
beginning in 2007)</quote>.</text>
</paragraph></subsection><subsection id="H8E69BC8DC49944FA836755A5DCEC79"><enum>(b)</enum><header>Effective
date</header><text>The amendments made by this section shall apply to taxable
years beginning after December 31, 2006.</text>
</subsection></section></subpart><subpart id="H4ADF1D0B2E51411B8CCE5890AAC8930"><enum>B</enum><header>Repeal of the
individual AMT</header>
<section id="H496EA759E651488E80E0699E0096F4D8" section-type="subsequent-section"><enum>1021.</enum><header>Repeal of
alternative minimum tax on individuals</header>
<subsection id="H29022013C06F4AC28F00B1089B88F968"><enum>(a)</enum><header>In
general</header><text>Subsection (a) of section 55 (relating to alternative
minimum tax imposed) is amended by adding at the end the following new flush
sentence:</text>
<quoted-block display-inline="no-display-inline" id="H9049302ED4784D1B88E9B1CCD4CC91F4" style="OLC">
<quoted-block-continuation-text quoted-block-continuation-text-level="subsection">Except in
the case of a corporation, no tax shall be imposed by this section for any
taxable year beginning after December 31, 2007, and the tentative minimum tax
of any taxpayer other than a corporation for any such taxable year shall be
zero for purposes of this
title.</quoted-block-continuation-text><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H8A627E91643F4488954434C82344ACE1"><enum>(b)</enum><header>Effective
date</header><text>The amendment made by this section shall apply to taxable
years beginning after December 31, 2007.</text>
</subsection></section><section display-inline="no-display-inline" id="H8F82E324E7814626BBF6773DF8A7796F" section-type="subsequent-section"><enum>1022.</enum><header>Limitation of
benefits of individual AMT repeal</header>
<subsection id="H6CD460C8EA8644608394005500BCFA3E"><enum>(a)</enum><header>In
general</header><text>Part VI of subchapter A of chapter 1 (relating to
alternative minimum tax) is amended by inserting after section 55 the following
new section:</text>
<quoted-block display-inline="no-display-inline" id="HE969598923174204A203FD6600C0AA29" style="OLC">
<section id="HA254ABECB2004E70800807F4F1E5C71F"><enum>55A.</enum><header>Limitation of
benefits of individual AMT repeal</header>
<subsection id="HFED3A21F010A46E2A27FE44B9DA7787B"><enum>(a)</enum><header>General
rule</header><text>In the case of a taxpayer other than a corporation, there is
hereby imposed (in addition to any other tax imposed by this subtitle) a tax
equal to the sum of—</text>
<paragraph id="HD6A87C9CD8954CE38E3380A83335A71C"><enum>(1)</enum><text display-inline="yes-display-inline">4 percent of so much of modified adjusted
gross income as exceeds the initial threshold amount, plus</text>
</paragraph><paragraph id="HE7FFEA0D24464AF598BED28FA5A79827"><enum>(2)</enum><text display-inline="yes-display-inline">0.6 percent of so much of modified adjusted
gross income as exceeds $250,000 ($500,000 in the case of a joint return or a
surviving spouse (as defined in section 2(a)).</text>
</paragraph></subsection><subsection id="H5F5AA67BBBF645B5803454EA1261D854"><enum>(b)</enum><header>Initial
threshold amount</header><text>For purposes of this section—</text>
<paragraph id="HF4F2246C24EF48019BF9844163C6586B"><enum>(1)</enum><header>In
general</header><text>The term <term>initial threshold amount</term>
means—</text>
<subparagraph id="HA9BCF1496AF14FF8AF0089B6B47BE2C2"><enum>(A)</enum><text display-inline="yes-display-inline">in the case of a joint return or a
surviving spouse (as defined in section 2(a)), the greater of—</text>
<clause id="H821C62CF945B471BBA76384792058936"><enum>(i)</enum><text>the amount which
the Secretary estimates is the lowest adjusted gross income level (rounded to
the nearest multiple of $10,000) above which at least 90 percent of married
individuals filing a joint return would (but for the repeal of such tax) be
affected by the alternative minimum tax for their first taxable year beginning
in 2008, or</text>
</clause><clause id="H901824AAEFB04FA0BC6E26AD5614FDD"><enum>(ii)</enum><text>$200,000,</text>
</clause></subparagraph><subparagraph id="H107C529173054D3D92FCC8C97F001F62"><enum>(B)</enum><text>in the case of any
married individual filing a separate return, <fraction>½</fraction> of the
amount determined under subparagraph (A), and</text>
</subparagraph><subparagraph id="H5187323149364309BE60E3978C89A91B"><enum>(C)</enum><text>in any other case,
<fraction>3/4</fraction> of the amount determined under subparagraph
(A).</text>
</subparagraph></paragraph><paragraph id="HA10B3CFBB8824986858667C900120058"><enum>(2)</enum><header>Citizens and
residents living abroad</header><text>The initial threshold amount determined
under paragraph (1) shall be decreased by any amount excluded from the
taxpayer’s gross income under section 911.</text>
</paragraph></subsection><subsection id="HCC86422E4A0D413FB103D23C8F884CDC"><enum>(c)</enum><header>Modified
adjusted gross income</header><text>For purposes of this section, the term
<term>modified adjusted gross income</term> means adjusted gross income reduced
by any deduction allowed for investment interest (as defined in section
163(d)).</text>
</subsection><subsection id="H9D417F4B7612487EAA3700ADC51DF64B"><enum>(d)</enum><header>Nonresident
alien</header><text display-inline="yes-display-inline">In the case of a
nonresident alien individual, only amounts taken into account in connection
with the tax imposed under section 871(b) shall be taken into account under
this section.</text>
</subsection><subsection display-inline="no-display-inline" id="HFA448E8AE81140FD8948D5CAF8B3A3C7"><enum>(e)</enum><header>Inflation
adjustments</header>
<paragraph id="H4F1AC1D23DCA48D9A9DE66664BCCF392"><enum>(1)</enum><header>In
general</header><text display-inline="yes-display-inline">In the case of
taxable years beginning after 2008, the amount in effect under subsection
(b)(1)(A) for taxable years beginning in 2008 shall be increased by an amount
equal to—</text>
<subparagraph id="H8B16A74B427441BD9E37110420095925"><enum>(A)</enum><text>such dollar
amount, multiplied by</text>
</subparagraph><subparagraph id="HCD2D66A0CC2B4D48AFB1586B1C008B45"><enum>(B)</enum><text>the cost-of-living
adjustment determined under section 1(f)(3) for the calendar year in which the
taxable year begins, by substituting <quote>calendar year 2007</quote> for
<quote>calendar year 1992</quote> in subparagraph (B) thereof.</text>
</subparagraph></paragraph><paragraph id="H138DB5276EF24EB7840038C8F709127"><enum>(2)</enum><header>Rounding</header><text display-inline="yes-display-inline">If any amount as adjusted under paragraph
(1) is not a multiple of $5,000, such amount shall be rounded to the next
lowest multiple of $5,000.</text>
</paragraph></subsection><subsection id="HC4DC11098D964461AD7912A7CCA3FD58"><enum>(f)</enum><header>Marital
status</header><text>For purposes of this section, marital status shall be
determined under section
7703.</text>
</subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H1978C8DFFCB243DFB8B5EDB3A87B37C8"><enum>(b)</enum><header>Conforming
amendment</header><text>Subparagraph (A) of section 26(b)(2) is amended by
striking <quote>section 55</quote> and inserting <quote>sections 55 and
55A</quote>.</text>
</subsection><subsection id="H2578AACFD96D425EA9DD53EA957CF7B"><enum>(c)</enum><header>Effective
date</header><text>The amendments made by this section shall apply to taxable
years beginning after December 31, 2007.</text>
</subsection></section><section display-inline="no-display-inline" id="H7111C30BFF7844A39F83164575F050A4" section-type="subsequent-section"><enum>1023.</enum><header>High income
individuals subject to overall limitation on itemized deductions and phaseout
of deductions for personal exemptions</header>
<subsection id="HCDDC9AFA84A44932A46D009D9C2E2921"><enum>(a)</enum><header>Overall
limitation on itemized deductions</header><text>Section 68 (relating to overall
limitation on itemized deductions) is amended by striking subsections (f) and
(g) and inserting the following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="HA815260F77B24C489E5C01FDD88836C8" style="OLC">
<subsection id="HC07C2187E97B414CA79BC5B7B2047C45"><enum>(f)</enum><header>Phaseout of
limitation</header>
<paragraph id="H5038C97A86C94DD1A232BBD8432334C3"><enum>(1)</enum><header>In
general</header><text>In the case of a taxpayer whose adjusted gross income is
not more than $250,000 ($500,000 in the case of a joint return or a surviving
spouse (as defined in section 2(a))—</text>
<subparagraph id="H3A40484E999848ABB5273062EF01F5BA"><enum>(A)</enum><text>in the case of any
taxable year beginning in 2008 or 2009, the reduction under subsection (a)
shall be equal to <fraction>1/3</fraction> of the amount which would (but for
this subsection) be the amount of such reduction, and</text>
</subparagraph><subparagraph id="HCCD7EC94FB3F4298A11E858B69DD6E67"><enum>(B)</enum><text>in the case of any
taxable year beginning after 2009, subsection (a) shall not apply.</text>
</subparagraph></paragraph><paragraph id="H6BC4C0EAE96E4B438FB3CFA0CBC54769"><enum>(2)</enum><header>Phaseout based
on income</header>
<subparagraph id="HFCD9F0EC70C14530B62E789548E9A975"><enum>(A)</enum><header>In
general</header><text>In the case of a taxpayer whose adjusted gross income is
more than $250,000 ($500,000 in the case of a joint return or a surviving
spouse (as defined in section 2(a)), the reduction under subsection (a) shall
be equal to the applicable fraction of the amount which would (but for this
subsection) be the amount of such reduction.</text>
</subparagraph><subparagraph id="HA14AB4C2C4F54ABAB8D10012888BC2EE"><enum>(B)</enum><header>Applicable
fraction</header><text>For purposes of subparagraph (A), the term
<term>applicable fraction</term> means—</text>
<clause id="H1ACAEB6D616D46DDAC1E1854EF4F84F6"><enum>(i)</enum><text>in
the case of any taxable year beginning in 2008 or 2009, a fraction (not in
excess of 1) equal to the sum of—</text>
<subclause id="H21AC3902E4A34EE586428E195B81C694"><enum>(I)</enum><text><fraction>1/3</fraction>,
plus</text>
</subclause><subclause id="H02DDDF419C844DAF9C92FA7C8B9982B2"><enum>(II)</enum><text><fraction>1/30</fraction>
for each $1,000 (or fraction thereof) by which the taxpayer’s adjusted gross
income exceeds $250,000 ($500,000 in the case of a joint return or a surviving
spouse (as defined in section 2(a)), and</text>
</subclause></clause><clause id="H33C25FA082144B8F844558EABEE1F714"><enum>(ii)</enum><text>in the case of
any taxable year beginning in 2010, a fraction (not in excess of 1) equal to
<fraction>1/20</fraction> for each $1,000 (or fraction thereof) by which the
taxpayer’s adjusted gross income exceeds $250,000 ($500,000 in the case of a
joint return or a surviving spouse (as defined in section
2(a)).</text>
</clause></subparagraph></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="HB597ED73951145B8B7AB98C1DE667C4C"><enum>(b)</enum><header>Phaseout of
deductions for personal exemptions</header><text>Paragraph (3) of section
151(d) is amended by striking subparagraphs (E) and (F) and inserting the
following new subparagraphs:</text>
<quoted-block display-inline="no-display-inline" id="HFBC8ECC763664685ABBC267BEEC92783" style="OLC">
<subparagraph id="HA741496711224BE9BFABA5ECDB14B1AC"><enum>(E)</enum><header>Reduction of
phaseout</header><text>In the case of a taxpayer whose adjusted gross income is
not more than $250,000 ($500,000 in the case of a joint return or a surviving
spouse (as defined in section 2(a))—</text>
<clause id="H8EDE9DDA35054F41B8E00B5661DA338"><enum>(i)</enum><text>in
the case of any taxable year beginning in 2008 or 2009, the reduction under
subparagraph (A) shall be equal to <fraction>1/3</fraction> of the amount which
would (but for this subparagraph) be the amount of such reduction, and</text>
</clause><clause id="H69814A496606498982E5D3B8D2D69FEC"><enum>(ii)</enum><text>in the case of
any taxable year beginning after 2009, subparagraph (A) shall not apply.</text>
</clause></subparagraph><subparagraph id="H39239F355343448E002F1415BEC9592F"><enum>(F)</enum><header>Phaseout based
on income</header><text>In the case of a taxpayer whose adjusted gross income
is more than $250,000 ($500,000 in the case of a joint return or a surviving
spouse (as defined in section 2(a)), the reduction under subparagraph (A) shall
be equal to the applicable fraction of the amount which would (but for this
subparagraph) be the amount of such reduction.</text>
</subparagraph><subparagraph id="H37D4198BF9164C0AA0C8E67346BF367"><enum>(G)</enum><header>Applicable
fraction</header><text>For purposes of subparagraph (F), the term
<term>applicable fraction</term> means—</text>
<clause id="HE6049F53CC2541809E38E11399AC1F28"><enum>(i)</enum><text>in
the case of any taxable year beginning in 2008 or 2009, the fraction (not in
excess of 1) equal to the sum of—</text>
<subclause id="HEFBE1A16A3B54B8FACE9782D098FF3AE"><enum>(I)</enum><text><fraction>1/3</fraction>,
plus</text>
</subclause><subclause id="HBF49E7F81DB04167827065B3148B80EB"><enum>(II)</enum><text><fraction>1/30</fraction>
for each $1,000 (or fraction thereof) by which the taxpayer’s adjusted gross
income exceeds $250,000 ($500,000 in the case of a joint return or a surviving
spouse (as defined in section 2(a)), and</text>
</subclause></clause><clause id="H2F6820440CF14E88902593C74FA2E000"><enum>(ii)</enum><text>in the case of
any taxable year beginning in 2010, the fraction (not in excess of 1) equal to
<fraction>1/20</fraction> for each $1,000 (or fraction thereof) by which the
taxpayer’s adjusted gross income exceeds $250,000 ($500,000 in the case of a
joint return or a surviving spouse (as defined in section
2(a)).</text>
</clause></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H974DEC7958924A738D361258766907BA"><enum>(c)</enum><header>Effective
date</header><text>The amendments made by this section shall apply to taxable
years beginning after December 31, 2007.</text>
</subsection></section><section display-inline="no-display-inline" id="HF3652D6194FD421399CC7EA3673EFD36" section-type="subsequent-section"><enum>1024.</enum><header>Modification of
2-percent floor on miscellaneous itemized deductions</header>
<subsection id="HB19E92415E68475500E9B1D9DDE304B6"><enum>(a)</enum><header>In
general</header><text display-inline="yes-display-inline">Subsection (a) of
section 67 is amended by striking <quote>exceeds</quote> and all that follows
and inserting</text>
<quoted-block display-inline="yes-display-inline" id="HBF80993B634442D9A78872FC905723E0" style="OLC">
<text>exceeds the sum
of—</text><paragraph id="H1F372E0D8A57476FA6B91662FCC24D08"><enum>(1)</enum><text display-inline="yes-display-inline">2 percent of so much of modified adjusted
gross income (as defined in section 55A(c)) as does not exceed the initial
threshold amount applicable to the taxpayer under section 55A, plus</text>
</paragraph><paragraph id="H6A9981C939904841A856E933254FDAE"><enum>(2)</enum><text>5 percent of so
much of modified adjusted gross income (as so defined) as exceeds such initial
threshold
amount.</text>
</paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H6CB035E3E0314F6D97EF23008E7F9121"><enum>(b)</enum><header>Conforming
amendment</header>
<paragraph id="H336AA3846AF849A099544F3D06E34A8"><enum>(1)</enum><text>The heading for
section 67 is amended by striking <quote><header-in-text level="section" style="OLC">2-percent floor</header-in-text></quote> and inserting
<quote><header-in-text level="section" style="OLC">Floor</header-in-text></quote>.</text>
</paragraph><paragraph id="H84F30BF710854516B85200322413848D"><enum>(2)</enum><text>The item in the
table of sections for part I of subchapter B of chapter 1 relating to section
67 is amended by striking <quote>2-percent floor</quote> and inserting
<quote>Floor</quote>.</text>
</paragraph></subsection><subsection id="H8FEF25D3529C408C8558EAF327D29193"><enum>(c)</enum><header>Effective
date</header><text>The amendments made by this section shall apply to taxable
years beginning after December 31, 2007.</text>
</subsection></section></subpart><subpart id="H3AEC06EBA03E48D8A1B82341B257C62E"><enum>C</enum><header>Conforming
amendments</header>
<section id="H7C0FEEDB8E724C31837977BB9E2F20BB"><enum>1031.</enum><header>Conforming
amendments, etc</header>
<subsection display-inline="no-display-inline" id="HAA303A7433AD45F78FA9F33DD17B8F15"><enum>(a)</enum><header>Conforming
amendments related to repeal of alternative minimum tax on individuals</header>
<paragraph id="HF5BB467897BD42489801D43D61396C30"><enum>(1)</enum><text>Subparagraph (B)
of section 1(g)(7) is amended by adding <quote>and</quote> at the end of clause
(i), by striking <quote>, and</quote> at the end of clause (ii) and inserting a
period, and by striking clause (iii).</text>
</paragraph><paragraph id="HA4E6287130B3478FB5EFCAE04E7F8E9"><enum>(2)</enum><text>Section 2(d) is
amended by striking <quote>taxes imposed by sections 1 and 55</quote> and
inserting <quote>tax imposed by section 1</quote>.</text>
</paragraph><paragraph id="HBEB36F6F49734411BBE769C528172C8"><enum>(3)</enum><text>Section 5(a) is
amended by striking paragraph (4).</text>
</paragraph><paragraph id="H7E220D672B6C4A7E00FB64A4D8DDB51"><enum>(4)</enum><text>Section 23 is
amended—</text>
<subparagraph id="HF3ABA176411D43E1AAE683B8683B8F00"><enum>(A)</enum><text>by striking
subsection (b)(4), and</text>
</subparagraph><subparagraph id="H1F7E87AD19B84B7EA6CF31E9F0C0DDDF"><enum>(B)</enum><text>by amending
subsection (c) by striking paragraphs (1) and (2), by redesignating paragraph
(3) as paragraph (2) and inserting before paragraph (2) (as so redesignated)
the following:</text>
<quoted-block display-inline="no-display-inline" id="H34BAECEBC93541F3A341B4221C1B61EC" style="OLC">
<paragraph id="H8E9B0D0E6BF543E99F1C89157DFDEA81"><enum>(1)</enum><header>In
general</header><text>If the credit allowable under subsection (a) for any
taxable year exceeds the limitation imposed by section 26(a) for such taxable
year reduced by the sum of the credits allowable under this subpart (other than
this section and sections 25D and 1400C), such excess shall be carried to the
next succeeding taxable year and added to the credit allowable under subsection
(a) for such succeeding taxable
year.</text>
</paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph></paragraph><paragraph id="H98D574E45F624F2CABE6EC462262E000"><enum>(5)</enum><text>Section 24(b) is
amended by striking paragraph (3).</text>
</paragraph><paragraph id="HD6F2F1A21FF74BA08FCB119DE225ED60"><enum>(6)</enum><text>Section 24(d)(1)
is amended—</text>
<subparagraph id="H6294C5764EF34B679535023B3212A25C"><enum>(A)</enum><text>by striking
<quote>section 26(a)(2) or subsection (b)(3), as the case may be</quote> in
subparagraph (A) and inserting <quote>section 26(a)</quote>, and</text>
</subparagraph><subparagraph id="H2F8CF82FDC9447FC957251C159BFE402"><enum>(B)</enum><text display-inline="yes-display-inline">by striking <quote>section 26(a)(2) or
subsection (b)(3), as the case may be,</quote> in subparagraph (B) and
inserting <quote>section 26(a)</quote>.</text>
</subparagraph></paragraph><paragraph id="HD4FAF55C9F9C49519B8FC6DFCD680124"><enum>(7)</enum><text>Section
25(e)(1)(C) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H1333C3AA3D8B4501AAE3AA7F972B6C17" style="OLC">
<subparagraph id="H75B257C763334EAAB0A6FAD25F208DDD"><enum>(C)</enum><header>Applicable tax
limit</header><text>For purposes of this paragraph, the term <term>applicable
tax limit</term> means the limitation imposed by section 26(a) for the taxable
year reduced by the sum of the credits allowable under this subpart (other than
this section and sections 23, 25D, and
1400C).</text>
</subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="HC27C495F1FAE425E93212955C3AAFCF4"><enum>(8)</enum><text>Section 25B is
amended by striking subsection (g).</text>
</paragraph><paragraph id="HA70F3D5630D24A08AE517800183458DB"><enum>(9)</enum><text>Section 25D(c) is
amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="HEDF81A50E5D043FDAE110853FF492DD" style="OLC">
<subsection id="HC444195BE98543EB9F2127185986B649"><enum>(c)</enum><header>Carryforward of
unused credit</header><text>If the credit allowable under subsection (a) for
any taxable year exceeds the limitation imposed by section 26(a) for such
taxable year reduced by the sum of the credits allowable under this subpart
(other than this section), such excess shall be carried to the next succeeding
taxable year and added to the credit allowable under subsection (a) for such
succeeding taxable
year.</text>
</subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="H430B402553A2443D8B91C2D4B4341948"><enum>(10)</enum><text>Section 26 is
amended—</text>
<subparagraph id="H91AEB87C24B045F6B198E3BE1C2D87C9"><enum>(A)</enum><text>by striking
subsection (c), and</text>
</subparagraph><subparagraph id="H0D29D52EF0DE4B359CF85637006865C0"><enum>(B)</enum><text>by amending
subsection (a) to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H289033FD305A435B8346661442F2C7B9" style="OLC">
<subsection id="H5F42FBB9829B48F7B8BD7BC8B995EB86"><enum>(a)</enum><header>In
general</header><text>The aggregate amount of credits allowable by this subpart
for the taxable year shall not exceed the taxpayer’s regular tax liability for
the taxable
year.</text>
</subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph></paragraph><paragraph id="HA1BC8414F84543CBB10047A7C937DEB"><enum>(11)</enum><text>Sections 30B(g)(2)
and 30C(d)(2) are each amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H6DF88500F02741489800237F00BE689C" style="OLC">
<paragraph id="HA225DC4CC12B40B5ADA5411FD397704"><enum>(2)</enum><header>Personal
credit</header><text>The credit allowed under subsection (a) (after the
application of paragraph (1)) shall be treated as a credit allowable under
subpart
A.</text>
</paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="H39A9E6FAC3E14943BEE70315F9DD2B37"><enum>(12)</enum><text>Subsection (c) of
section 38 is amended by inserting at the end the following new
paragraph:</text>
<quoted-block display-inline="no-display-inline" id="H05BE9B6C9CE0411C9D9687357454DBEA" style="OLC">
<paragraph id="H392E60A4EAF7439B00BFBD662D6056BF"><enum>(6)</enum><header>Tentative
minimum tax</header><text>For purposes of this part, the term <term>tentative
minimum tax</term> has the meaning given to such term by section 55.</text>
</paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="H486D88A57F6B42E200163DCC3555D59"><enum>(13)</enum><text>Section 53 is
amended—</text>
<subparagraph id="HAA5C6B2FF72C4204B845B08B54B3ACE2"><enum>(A)</enum><text>by striking
<quote>adjusted net minimum tax</quote> in subsection (b)(1) and inserting
<quote>tax imposed by section 55</quote>,</text>
</subparagraph><subparagraph id="H89D2BA651BA7490193F2C03600B19C6C"><enum>(B)</enum><text>by striking
subsection (d), and</text>
</subparagraph><subparagraph id="HF76F8FD112E243A2813CE1D5A400F4CD"><enum>(C)</enum><text>by inserting at
the end of subsection (b) the following flush sentence:</text>
<quoted-block display-inline="no-display-inline" id="H3AD4855BF9734D0DAA69C51085265328" style="OLC">
<quoted-block-continuation-text quoted-block-continuation-text-level="subsection">For
purposes of paragraph (1), the tax imposed by section 55 for taxable years
beginning before January 1, 2008, shall be the adjusted net minimum tax (as
defined in section 53(d), as in effect before its
repeal).</quoted-block-continuation-text><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph></paragraph><paragraph id="H54251DA06CFB4795B457E800BDEB616D"><enum>(14)</enum><subparagraph commented="no" display-inline="yes-display-inline" id="HDC0EA06DCF23491493C659B3F5B9906E"><enum>(A)</enum><text>Subsection (b) of
section 55 (relating to alternative minimum tax imposed) is amended to read as
follows:</text>
<quoted-block display-inline="no-display-inline" id="H07D2DA91F79145BE93B138B344F405F7" style="OLC">
<subsection id="H769B8922FB24471A9E09663574B1DD17"><enum>(b)</enum><header>Tentative
minimum tax</header><text>For purposes of this part—</text>
<paragraph id="H93B0F826CEE74DDCBBD3A281EBEC3FB1"><enum>(1)</enum><header>Amount of
tentative tax</header><text>The tentative minimum tax for the taxable year
is—</text>
<subparagraph id="H244723FB3C204211A728D69D1789DB98"><enum>(A)</enum><text>20 percent of so
much of the alternative minimum taxable income for the taxable year as exceeds
the exemption amount, reduced by</text>
</subparagraph><subparagraph id="H1662758412A440E48757955CD94B2CA5"><enum>(B)</enum><text>the alternative
minimum tax foreign tax credit for the taxable year.</text>
</subparagraph></paragraph><paragraph id="HD3D4B345CF7148C5800479521D016CC3"><enum>(2)</enum><header>Alternative
minimum taxable income</header><text>The term <term>alternative minimum taxable
income</term> means the taxable income of the taxpayer for the taxable
year—</text>
<subparagraph id="H9DE1D5C5A62E4F16A768000018CE57F6"><enum>(A)</enum><text>determined with
the adjustments provided in section 56, and</text>
</subparagraph><subparagraph id="H51FCD3F96BEA410584BFE8BA35C87CCA"><enum>(B)</enum><text>increased by the
amount of the items of tax preference described in section 57.</text>
</subparagraph><continuation-text continuation-text-level="paragraph">If a
taxpayer is subject to the regular tax, such taxpayer shall be subject to the
tax imposed by this section (and, if the regular tax is determined by reference
to an amount other than taxable income, such amount shall be treated as the
taxable income of such taxpayer for purposes of the preceding
sentence).</continuation-text></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph><subparagraph id="H9E8015A6C0EA4C15AD9E70DBD23D48D" indent="up1"><enum>(B)</enum><text>Subsection (c) of section 55 is
amended by striking all that follows paragraph (1) and inserting the
following:</text>
<quoted-block display-inline="no-display-inline" id="H73EFE02709A0425DAC13DAB3317D3D00" style="OLC">
<paragraph id="HC6C00ED821374E53B8538DA77079C333"><enum>(2)</enum><header>Cross
reference</header><text>For provision providing that portions of the general
business credit are not allowable against the tax imposed by this section, see
section
38(c).</text>
</paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph><subparagraph id="H1E922002E116461A007820FF1D869909" indent="up1"><enum>(C)</enum><text>Subsection (d) of section 55 is
amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H90E15788AB8A44C983E4A2EAE8370061" style="OLC">
<subsection id="H44FA63BDD28C48C3BF00634B4F3ECF91"><enum>(d)</enum><header>Exemption
amount</header><text>For purposes of this section, the term <term>exemption
amount</term> means $40,000 reduced (but not below zero) by an amount equal to
25 percent of the amount by which the alternative minimum taxable income of the
taxpayer exceeds
$150,000.</text>
</subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph></paragraph><paragraph id="H90D52861BFE945F08CCAD7612A267CD"><enum>(15)</enum><subparagraph commented="no" display-inline="yes-display-inline" id="HBBA8893F57C64092ACBD98B0595E4800"><enum>(A)</enum><text>Paragraph (6) of section
56(a) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H6713D79EAED640A79612F38BBE56A36D" style="OLC">
<paragraph id="H263C757B7F5E4FE58E796D3D08EB3C6"><enum>(6)</enum><header>Adjusted
basis</header><text>The adjusted basis of any property to which paragraph (1)
or (5) applies (or with respect to which there are any expenditures to which
paragraph (2) applies) shall be determined on the basis of the treatment
prescribed in paragraph (1), (2), or (5), whichever
applies.</text>
</paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph><subparagraph id="H787A81C93B394456B7D146DE0016BEC1" indent="up1"><enum>(B)</enum><text>Section 56 is amended by striking
subsection (b).</text>
</subparagraph><subparagraph id="HA705062E0BC2429E00B3116555792BCC" indent="up1"><enum>(C)</enum><text>Subsection (c) of section 56 is
amended by striking so much of the subsection as precedes paragraph (1), by
redesignating paragraphs (1), (2), and (3) as paragraphs (8), (9), and (10),
respectively, and moving them to the end of subsection (a).</text>
</subparagraph><subparagraph id="H53517BA4DBB148CB9357F1BBCBE56360" indent="up1"><enum>(D)</enum><text>Paragraph (8) of section 56(a), as
redesignated by subparagraph (C), is amended by striking <quote>subsection
(g)</quote> and inserting <quote>subsection (c)</quote>.</text>
</subparagraph><subparagraph id="H4D2BDA693835439C99CE5CA65075F58C" indent="up1"><enum>(E)</enum><text>Section 56 is amended by striking
subsection (e) and by redesignating subsections (d) and (g) as subsections (b)
and (c), respectively.</text>
</subparagraph></paragraph><paragraph id="H8E16772CB56B4D12A1CC0176C18ED50"><enum>(16)</enum><subparagraph commented="no" display-inline="yes-display-inline" id="H53AE0FD27269448EAEF663973394B770"><enum>(A)</enum><text>Section 58 is hereby
repealed.</text>
</subparagraph><subparagraph id="H4F08378DDB104741B6C1BAC6004700C1" indent="up1"><enum>(B)</enum><text>Clause (i) of section 56(b)(2)(A) is
amended by striking <quote>and section 58</quote>.</text>
</subparagraph><subparagraph id="HD4360E73E728459C8B6EED99B179EFAD" indent="up1"><enum>(C)</enum><text>Subsection (h) of section 59 is
amended—</text>
<clause id="H375E7633C3E849ABBC008662E64F99E3"><enum>(i)</enum><text>by striking <quote>, 465, and
1366(d)</quote> and inserting <quote>and 465</quote>, and</text>
</clause><clause id="HE4982858A7BF486D82007402D247DBD"><enum>(ii)</enum><text>by striking <quote>56, 57, and
58</quote> and inserting <quote>56 and 57</quote>.</text>
</clause></subparagraph></paragraph><paragraph id="HBE309F169CC94241A292FE16A073401F"><enum>(17)</enum><subparagraph commented="no" display-inline="yes-display-inline" id="H94A23F302DE0495AB8192739C65CE688"><enum>(A)</enum><text>Subparagraph (C) of
section 59(a)(1) is amended—</text>
<clause id="HF9D0E9DEAD584F66BD61EA45F66451C2" indent="up1"><enum>(i)</enum><text>by striking <quote>subparagraph
(A)(i) or (B)(i) of section 55(b)(1) (whichever applies)</quote> and inserting
<quote>section 55(b)(1)(A)</quote>, and</text>
</clause><clause id="H8D33A2046706438BA34003FAB7FBEB7B" indent="up1"><enum>(ii)</enum><text>by striking <quote>section 1 or 11
(whichever applies)</quote> and inserting <quote>section 11</quote>.</text>
</clause></subparagraph><subparagraph id="HD3E68E6963F941F188C625A0160D89D" indent="up1"><enum>(B)</enum><text>Paragraph (2) of section 59(a) is
amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="HF16764835E844DFA92F216103F1B9227" style="OLC">
<paragraph id="H70A6919FA29F4691BE4C2705CC840091"><enum>(2)</enum><header>Pre-credit
tentative minimum tax</header><text>For purposes of this subsection, the term
<term>pre-credit tentative minimum tax</term> means the amount determined under
section
55(b)(1)(A).</text>
</paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph><subparagraph id="H76853965133A44F6B1D9C1066C018805" indent="up1"><enum>(C)</enum><text>Section 59 is amended by striking
subsection (c).</text>
</subparagraph><subparagraph id="H7171AD514E764ADCB91895F30080AB71" indent="up1"><enum>(D)</enum><text>Section 59 is amended by striking
subsection (j).</text>
</subparagraph></paragraph><paragraph id="H0592E6A07C3C45529F7B8585A734B02D"><enum>(18)</enum><text>Paragraph (1) of
section 59A(b) and paragraph (7) of section 382(l) are each amended by striking
<quote>section 56(d)</quote> and inserting <quote>section 56(b)</quote>.</text>
</paragraph><paragraph id="HEDF779DE025B4C06A9E8F418BD21F989"><enum>(19)</enum><text>Paragraph (2) of
section 641(c) is amended by striking subparagraph (B) and by redesignating
subparagraphs (C) and (D) as subparagraphs (B) and (C), respectively.</text>
</paragraph><paragraph id="HBDF97C703D504C278FE11B41E7F957DD"><enum>(20)</enum><text>Subsections (b)
and (c) of section 666 are each amended by striking <quote>(other than the tax
imposed by section 55)</quote>.</text>
</paragraph><paragraph id="H53940BC7DA1B463D80C4302E166FB564"><enum>(21)</enum><text>Subsections
(c)(5) and (d)(3)(B) of section 772 are each amended by striking <quote>56, 57,
and 58</quote> and inserting <quote>56 and 57</quote>.</text>
</paragraph><paragraph id="H3449FE679B0A4DCB882C7684E3AF4350"><enum>(22)</enum><text>Sections 847 and
848(l) are each amended by striking <quote>section 56(g)</quote> and inserting
<quote>section 56(c)</quote>.</text>
</paragraph><paragraph id="H6B0FBF1096D644D3BCFB99706D13FCBF"><enum>(23)</enum><text>Sections
871(b)(1) and 877(b) are each amended by striking <quote>or 55</quote>.</text>
</paragraph><paragraph id="H97AB6233EF85456594F44856EB92015F"><enum>(24)</enum><text>Subsection (a) of
section 897 is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H0E4B418C35F04639A17C91949803722E" style="OLC">
<subsection id="HB4F3C48364E848E3A8A537003C4C74BD"><enum>(a)</enum><header>General
rule</header><text>For purposes of this title, gain or loss of a nonresident
alien individual or a foreign corporation from the disposition of a United
States real property interest shall be taken into account—</text>
<paragraph id="H04046259D2A34A429EACFAFE450059FC"><enum>(1)</enum><text>in the case of a
nonresident alien individual, under section 871(b)(1), or</text>
</paragraph><paragraph id="H9A4F9D9F558D4F15BF42E0F0EAD05925"><enum>(2)</enum><text>in the case of a
foreign corporation, under section 882(a)(1),</text>
</paragraph><continuation-text continuation-text-level="subsection">as if the
taxpayer were engaged in a trade or business within the United States during
the taxable year and as if such gain or loss were effectively connected with
such trade or
business.</continuation-text></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="HB10A646DB30C4687BFC141CD5FDF4468"><enum>(25)</enum><text>Section 904 is
amended by striking subsection (i).</text>
</paragraph><paragraph id="H56C0A31A3BC448EA9D00CFABCBB37279"><enum>(26)</enum><text>The first
sentence of section 911(f) is amended to read as follows:</text>
<quoted-block display-inline="yes-display-inline" id="H67F308B588194D70BCF7A23CF6056F8C" style="OLC">
<text>For purposes of this chapter, if any amount is
excluded from the gross income of a taxpayer under subsection (a) for any
taxable year, then, notwithstanding section 1, the tax imposed by such section
on the taxpayer for such taxable year shall be equal to the excess (if any)
of—</text><paragraph id="H928413A2C71143A9A74BDABEC59187E9"><enum>(1)</enum><text>the tax which
would be imposed by such section for the taxable year if the taxpayer’s taxable
income were increased by the amount excluded under subsection (a) for the
taxable year, over</text>
</paragraph><paragraph id="H07D245E75D5047D9B1F4AFECE63AFCC"><enum>(2)</enum><text>the tax which would
be imposed by such section for the taxable year if the taxpayer’s taxable
income were equal to the amount excluded under subsection (a) for the taxable
year.</text>
</paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="HB96801E1B469465CB1C876FB23BD493"><enum>(27)</enum><text>Paragraph (1) of
section 962(a) is amended by striking <quote>sections 1 and 55</quote> and
inserting <quote>section 1</quote>.</text>
</paragraph><paragraph id="H4430DFCF6B914E8398CB702174D7801"><enum>(28)</enum><text>Section 1400C(d)
is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H309806E4A2E843AF81971E5E3110239F" style="OLC">
<subsection id="H4C170F0694B4421EA636F465586F48CA"><enum>(d)</enum><header>Carryforward of
unused credit</header><text>If the credit allowable under subsection (a) for
any taxable year exceeds the limitation imposed by section 26(a) for such
taxable year reduced by the sum of the credits allowable under this subpart
(other than this section and section 25D), such excess shall be carried to the
next succeeding taxable year and added to the credit allowable under subsection
(a) for such succeeding taxable
year.</text>
</subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="H9027615073B043348EB08974A32497FB"><enum>(29)</enum><text>The last sentence
of section 1563(a) is amended by striking <quote>section 55(d)(3)</quote> and
inserting <quote>section 55(d)</quote>.</text>
</paragraph><paragraph id="HD3F9C613BC614B97944C14187322A2CF"><enum>(30)</enum><text>Subparagraph (B)
of section 6015(d)(2) is amended by striking <quote>or 55</quote>.</text>
</paragraph><paragraph id="H16533397B40343439EF207EF30C1DFDA"><enum>(31)</enum><text>Clause (i) of
section 6654(d)(2)(C) is amended by striking <quote>, alternative minimum
taxable income,</quote>.</text>
</paragraph></subsection><subsection id="H48362D67995C43D68E3195B66E5B711C"><enum>(b)</enum><header>Application of
EGTRRA sunset</header>
<paragraph id="H8469F4101D4F476EB894C9B21831FAEC"><enum>(1)</enum><text>Section 901 of the
Economic Growth and Tax Relief Reconciliation Act of 2001 shall not apply to
sections 201(d) and 303(c) of such Act.</text>
</paragraph><paragraph id="H2820F398B7CB4DAAA6DE1DD10076A078"><enum>(2)</enum><text>Section 901 of the
Economic Growth and Tax Relief Reconciliation Act of 2001 shall apply
to—</text>
<subparagraph id="H945E5D8EEC9B47D7A542DFB7FC795E97"><enum>(A)</enum><text>the amendments
made by section 1023(a) to the same extent and in the same manner as section
901 of such Act applies to the amendments made by section 103 of such Act,
and</text>
</subparagraph><subparagraph id="H73F1A09932FA45538E906F03DB57CEED"><enum>(B)</enum><text display-inline="yes-display-inline">the amendments made by section 1023(b) to
the same extent and in the same manner as section 901 of such Act applies to
the amendments made by section 102 of such Act.</text>
</subparagraph></paragraph></subsection><subsection id="H4E71329B59D242FF8CCA08F100E0E66E"><enum>(c)</enum><header>Effective
date</header><text>The amendments made by subsection (a) shall apply to taxable
years beginning after December 31, 2007.</text>
</subsection></section></subpart></part></subtitle><subtitle id="H2AF47C85751449738FA6C674FD8DC3E8"><enum>B</enum><header>Other
reforms</header>
<part id="H451807B6A4E84FD583C65D09E470D76E"><enum>1</enum><header>Provisions related
to certain investment partnerships</header>
<section display-inline="no-display-inline" id="H1A75E02BDA894C8CAF4EAE0675139800" section-type="subsequent-section"><enum>1201.</enum><header>Income of partners
for performing investment management services treated as ordinary income
received for performance of services</header>
<subsection id="H882B41390C63439994109070D15D56DC"><enum>(a)</enum><header>In
general</header><text>Part I of subchapter K of chapter 1 is amended by adding
at the end the following new section:</text>
<quoted-block display-inline="no-display-inline" id="H19E035F8A2E543C98EFCF1A13BD8B688" style="OLC">
<section id="H1967F754381E433C8449F0F97579F100"><enum>710.</enum><header>Special rules
for partners providing investment management services to partnership</header>
<subsection id="H28FD09923D07452A89E1F951468D0029"><enum>(a)</enum><header>Treatment of
distributive share of partnership items</header><text display-inline="yes-display-inline">For purposes of this title, in the case of
an investment services partnership interest—</text>
<paragraph id="H7C25654BFB714360865189B888B8F165"><enum>(1)</enum><header>In
general</header><text>Notwithstanding section 702(b)—</text>
<subparagraph id="HC20A79526D6545930011811B57CCA9D7"><enum>(A)</enum><text>any net income
with respect to such interest for any partnership taxable year shall be treated
as ordinary income for the performance of services, and</text>
</subparagraph><subparagraph id="H207BB138D6114414B401C92BF4FEC716"><enum>(B)</enum><text>any net loss with
respect to such interest for such year, to the extent not disallowed under
paragraph (2) for such year, shall be treated as an ordinary loss.</text>
</subparagraph></paragraph><paragraph id="H243ADCCA2EA1490B94A0B72697868910"><enum>(2)</enum><header>Treatment of
losses</header>
<subparagraph id="H8535B7F8F9624F97B644C272FA4883A4"><enum>(A)</enum><header>Limitation</header><text>Any
net loss with respect to such interest shall be allowed for any partnership
taxable year only to the extent that such loss does not exceed the excess (if
any) of—</text>
<clause id="HB70422A87A9A4160907E91FCC50584C"><enum>(i)</enum><text>the
aggregate net income with respect to such interest for all prior partnership
taxable years, over</text>
</clause><clause id="H5EF7995FC21E49F8BDE6C38525733042"><enum>(ii)</enum><text>the aggregate net
loss with respect to such interest not disallowed under this subparagraph for
all prior partnership taxable years.</text>
</clause></subparagraph><subparagraph id="HCB275BED882D4B0984D06065324FAF6B"><enum>(B)</enum><header>Carryforward</header><text>Any
net loss for any partnership taxable year which is not allowed by reason of
subparagraph (A) shall be treated as an item of loss with respect to such
partnership interest for the succeeding partnership taxable year.</text>
</subparagraph><subparagraph id="HB2F60EEE814341889138AEC3762D744"><enum>(C)</enum><header>Basis
adjustment</header><text>No adjustment to the basis of a partnership interest
shall be made on account of any net loss which is not allowed by reason of
subparagraph (A).</text>
</subparagraph><subparagraph id="H74FD42C9A3CC4AB8BFFC92BA94606BF"><enum>(D)</enum><header>Exception for
basis attributable to purchase of a partnership interest</header><text>In the
case of an investment services partnership interest acquired by purchase,
paragraph (1)(B) shall not apply to so much of any net loss with respect to
such interest for any taxable year as does not exceed the excess of—</text>
<clause id="H7E46D2209EA8472BBE1CB96D271D41FA"><enum>(i)</enum><text>the basis of such
interest immediately after such purchase, over</text>
</clause><clause id="H7E8438DBBCA447628B5FB2C280335621"><enum>(ii)</enum><text>the aggregate net
loss with respect to such interest to which paragraph (1)(B) did not apply by
reason of this subparagraph for all prior taxable years.</text>
</clause><continuation-text continuation-text-level="subparagraph">Any net
loss to which paragraph (1)(B) does not apply by reason of this subparagraph
shall not be taken into account under subparagraph (A).</continuation-text></subparagraph><subparagraph id="H66F0B33FA8AB4B11B8924F115F175611"><enum>(E)</enum><header>Prior
partnership years</header><text>Any reference in this paragraph to prior
partnership taxable years shall only include prior partnership taxable years to
which this section applies.</text>
</subparagraph></paragraph><paragraph id="H437C5820A4AC46318FD2FCE8716925C8"><enum>(3)</enum><header>Net income and
loss</header><text>For purposes of this section—</text>
<subparagraph id="HED9B8BEAA4D74675B9162E24BBD57E5E"><enum>(A)</enum><header>Net
income</header><text>The term <term>net income</term> means, with respect to
any investment services partnership interest, for any partnership taxable year,
the excess (if any) of—</text>
<clause id="H11A7C3AE512A41728E059C84762FFB4B"><enum>(i)</enum><text>all items of
income and gain taken into account by the holder of such interest under section
702 with respect to such interest for such year, over</text>
</clause><clause id="H3B0955B3325647159B9800BADE308167"><enum>(ii)</enum><text>all items of
deduction and loss so taken into account.</text>
</clause></subparagraph><subparagraph id="H97FEA746B6ED42409939F2698027ACD0"><enum>(B)</enum><header>Net
loss</header><text>The term <term>net loss</term> means with respect to such
interest for such year, the excess (if any) of the amount described in
subparagraph (A)(ii) over the amount described in subparagraph (A)(i).</text>
</subparagraph></paragraph></subsection><subsection id="H0588C9F39FF94A12BC00452F46E59EED"><enum>(b)</enum><header>Dispositions of
partnership interests</header>
<paragraph id="H55D9523033C94AF1819B44AE7B804B63"><enum>(1)</enum><header>Gain</header><text>Any
gain on the disposition of an investment services partnership interest shall be
treated as ordinary income for the performance of services.</text>
</paragraph><paragraph id="H51039CFA17D44C1EAD84162F468500E0"><enum>(2)</enum><header>Loss</header><text>Any
loss on the disposition of an investment services partnership interest shall be
treated as an ordinary loss to the extent of the excess (if any) of—</text>
<subparagraph id="H88255466692E42C48FC24F869F3EF53E"><enum>(A)</enum><text>the aggregate net
income with respect to such interest for all partnership taxable years,
over</text>
</subparagraph><subparagraph id="H52FE92DBBE5142B1937E9B00EEDBFCD1"><enum>(B)</enum><text>the aggregate net
loss with respect to such interest allowed under subsection (a)(2) for all
partnership taxable years.</text>
</subparagraph></paragraph><paragraph id="H5F17B771A0B4458EAFBE87EA8F7423AD"><enum>(3)</enum><header>Disposition of
portion of interest</header><text>In the case of any disposition of an
investment services partnership interest, the amount of net loss which
otherwise would have (but for subsection (a)(2)(C)) applied to reduce the basis
of such interest shall be disregarded for purposes of this section for all
succeeding partnership taxable years.</text>
</paragraph><paragraph id="HF0D6A7AAB1884F290045399443D95AA"><enum>(4)</enum><header>Distributions of
partnership property</header><text>In the case of any distribution of
appreciated property by a partnership with respect to any investment services
partnership interest, gain shall be recognized by the partnership in the same
manner as if the partnership sold such property at fair market value at the
time of the distribution. For purposes of this paragraph, the term
<term>appreciated property</term> means any property with respect to which gain
would be determined if sold as described in the preceding sentence.</text>
</paragraph><paragraph id="HE660DC9C29B646FD9B639DDCFE8BA72E"><enum>(5)</enum><header>Application of
section 751</header><text>In applying section 751(a), an investment services
partnership interest shall be treated as an inventory item.</text>
</paragraph></subsection><subsection id="H371C2A98E7534AF88CE0AD49CE406C17"><enum>(c)</enum><header>Investment
services partnership interest</header><text display-inline="yes-display-inline">For purposes of this section—</text>
<paragraph id="H3AB7987977A2462EB4D458F603088BBE"><enum>(1)</enum><header>In
general</header><text display-inline="yes-display-inline">The term
<term>investment services partnership interest</term> means any interest in a
partnership which is held by any person if such person provides (directly or
indirectly) a substantial quantity of any of the following services with
respect to the assets of the partnership in the conduct of the trade or
business of providing such services:</text>
<subparagraph id="H53FF007EB25243A5BD72C6AB9E4038CA"><enum>(A)</enum><text>Advising as to the
advisability of investing in, purchasing, or selling any specified
asset.</text>
</subparagraph><subparagraph id="HE850BE775DDA459900B2262B77C7BE36"><enum>(B)</enum><text>Managing,
acquiring, or disposing of any specified asset.</text>
</subparagraph><subparagraph id="HF0F41EB3D8E04618AF5C908FC0BD3AD"><enum>(C)</enum><text>Arranging financing
with respect to acquiring specified assets.</text>
</subparagraph><subparagraph id="H2753696A2C834A2F98BBDA77DCC6CB52"><enum>(D)</enum><text>Any activity in
support of any service described in subparagraphs (A) through (C).</text>
</subparagraph><continuation-text continuation-text-level="paragraph">For
purposes of this paragraph, the term <term>specified asset</term> means
securities (as defined in section 475(c)(2) without regard to the last sentence
thereof), real estate, commodities (as defined in section 475(e)(2))), or
options or derivative contracts with respect to securities (as so defined),
real estate, or commodities (as so defined).</continuation-text></paragraph><paragraph id="HDE5AE8A8ECF340FD88C82BD012508455"><enum>(2)</enum><header>Exception for
certain capital interests</header>
<subparagraph commented="no" id="HD189D9EA3AA74AD3910008BE82E3483C"><enum>(A)</enum><header>In
general</header><text>If—</text>
<clause commented="no" id="HAA38930728824AC1BB07ECBEBEE0584"><enum>(i)</enum><text>a portion of an
investment services partnership interest is acquired on account of a
contribution of invested capital, and</text>
</clause><clause commented="no" id="HDD7B50CC9C4A4220AD9230CF2D7C0243"><enum>(ii)</enum><text>the partnership
makes a reasonable allocation of partnership items between the portion of the
distributive share that is with respect to invested capital and the portion of
such distributive share that is not with respect to invested capital,</text>
</clause><continuation-text continuation-text-level="subparagraph">then
subsection (a) shall not apply to the portion of the distributive share that is
with respect to invested capital. An allocation will not be treated as
reasonable for purposes of this subparagraph if such allocation would result in
the partnership allocating a greater portion of income to invested capital than
any other partner not providing services would have been allocated with respect
to the same amount of invested capital.</continuation-text></subparagraph><subparagraph id="H17AA55274FAF466181DB246E4CA3455"><enum>(B)</enum><header>Special rule for
dispositions</header><text display-inline="yes-display-inline">In any case to
which subparagraph (A) applies, subsection (b) shall not apply to any gain or
loss allocable to invested capital. The portion of any gain or loss
attributable to invested capital is the proportion of such gain or loss which
is based on the distributive share of gain or loss that would have been
allocable to invested capital under subparagraph (A) if the partnership sold
all of its assets immediately before the disposition.</text>
</subparagraph><subparagraph id="H45AAE6C2C0334352970080F3F6B6CE2"><enum>(C)</enum><header>Invested
capital</header><text>For purposes of this paragraph, the term <term>invested
capital</term> means, the fair market value at the time of contribution of any
money or other property contributed to the partnership.</text>
</subparagraph><subparagraph id="HCCAA887D5BCA4C58000040B576853600"><enum>(D)</enum><header>Treatment of
certain loans</header>
<clause id="HD4A681135E254DDAB1CF315113316177"><enum>(i)</enum><header>Proceeds of
partnership loans not treated as invested capital of service providing
partners</header><text>For purposes of this paragraph, an investment services
partnership interest shall not be treated as acquired on account of a
contribution of invested capital to the extent that such capital is
attributable to the proceeds of any loan or other advance made or guaranteed,
directly or indirectly, by any partner or the partnership.</text>
</clause><clause id="H3C0E8719AE0349BC82DA784C016E6017"><enum>(ii)</enum><header>Loans from
nonservice providing partners to the partnership treated as invested
capital</header><text>For purposes of this paragraph, any loan or other advance
to the partnership made or guaranteed, directly or indirectly, by a partner not
providing services to the partnership shall be treated as invested capital of
such partner and amounts of income and loss treated as allocable to invested
capital shall be adjusted accordingly.</text>
</clause></subparagraph></paragraph></subsection><subsection id="HD2479CB936F54D5D9C6E733C973BBB29"><enum>(d)</enum><header>Other income and
gain in connection with investment management services</header>
<paragraph id="H3E33082DE9784DB0BEB91C8B0947BAF1"><enum>(1)</enum><header>In
general</header><text display-inline="yes-display-inline">If—</text>
<subparagraph id="HD5BE414368FF4169913533049643C0D3"><enum>(A)</enum><text>a person performs
(directly or indirectly) investment management services for any entity,</text>
</subparagraph><subparagraph id="HB2C52DA7E7E64682AB3F269145DD20AC"><enum>(B)</enum><text>such person holds
a disqualified interest with respect to such entity, and</text>
</subparagraph><subparagraph id="H1DEC2EFB053C45859BF6D93ED101BC12"><enum>(C)</enum><text display-inline="yes-display-inline">the value of such interest (or payments
thereunder) is substantially related to the amount of income or gain (whether
or not realized) from the assets with respect to which the investment
management services are performed,</text>
</subparagraph><continuation-text continuation-text-level="paragraph">any income
or gain with respect to such interest shall be treated as ordinary income for
the performance of services. Rules similar to the rules of subsection (c)(2)
shall apply where such interest was acquired on account of invested capital in
such entity.</continuation-text></paragraph><paragraph id="HC1D6812496B74DABAB2CDAC129EAE3D4"><enum>(2)</enum><header>Definitions</header><text>For
purposes of this subsection—</text>
<subparagraph id="H5C63B27C2C004FA38994B2C28073EA1C"><enum>(A)</enum><header>Disqualified
interest</header><text>The term <term>disqualified interest</term> means, with
respect to any entity—</text>
<clause id="H3AEC0ACE78D8451F9CA9CF2BCCC600B5"><enum>(i)</enum><text>any interest in
such entity other than indebtedness,</text>
</clause><clause id="H73A081250DEB4010925F4C65E1273F13"><enum>(ii)</enum><text>convertible or
contingent debt of such entity,</text>
</clause><clause id="H8F33648769934E78ABF3CDC42477D313"><enum>(iii)</enum><text>any option or
other right to acquire property described in clause (i) or (ii), and</text>
</clause><clause id="H664C2843D3514719B6E43E1117BDC88B"><enum>(iv)</enum><text>any derivative
instrument entered into (directly or indirectly) with such entity or any
investor in such entity.</text>
</clause><continuation-text continuation-text-level="subparagraph">Such
term shall not include a partnership interest and shall not include stock in a
taxable corporation.</continuation-text></subparagraph><subparagraph id="H4A57128B8029450894D8F37426F62655"><enum>(B)</enum><header>Taxable
corporation</header><text>The term <term>taxable corporation</term>
means—</text>
<clause id="HF59CD6514BAB411F851D098C18E33CFC"><enum>(i)</enum><text>a
domestic C corporation, or</text>
</clause><clause id="HA26D6CA58C5D400397F5B1B893DD3FC0"><enum>(ii)</enum><text>a
foreign corporation subject to a comprehensive foreign income tax (as defined
in section 457A(d)(4)).</text>
</clause></subparagraph><subparagraph id="H1F6BF77C84C049D88BB6F5500004BAA"><enum>(C)</enum><header>Investment
management services</header><text>The term <term>investment management
services</term> means a substantial quantity of any of the services described
in subsection (c)(1) which are provided in the conduct of the trade or business
of providing such services.</text>
</subparagraph></paragraph></subsection><subsection commented="no" id="H4484CA9A3DDD4C37ABDA628ECAE41B35"><enum>(e)</enum><header>Regulations</header><text>The
Secretary shall prescribe such regulations as are necessary or appropriate to
carry out the purposes of this section, including regulations to—</text>
<paragraph commented="no" id="HBB1B7ED950E64B328DC3DCEFCCBBBABB"><enum>(1)</enum><text>prevent the
avoidance of the purposes of this section, and</text>
</paragraph><paragraph commented="no" id="H10B9669623584407BEC3D6DF0053272D"><enum>(2)</enum><text>coordinate this
section with the other provisions of this subchapter.</text>
</paragraph></subsection><subsection commented="no" id="HDE58F10A894C4DBDB68C83CF9FE10334"><enum>(f)</enum><header>Cross
reference</header><text>For 40 percent no fault penalty on certain
underpayments due to the avoidance of this section, see section
6662.</text>
</subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H59D14ACFC2784ADB98DF238CB6445161"><enum>(b)</enum><header>Application to
real estate investment trusts</header><text>Subsection (c) of section 856 is
amended by adding at the end the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="H68B3E7829808495D8B20A04B99BB3E" style="OLC">
<paragraph id="H27D64F09423941A6AF8FE23D25C188E6"><enum>(8)</enum><header>Exception from
recharacterization of income from investment services partnership
interests</header>
<subparagraph id="HF5C4C3BE8F5A43B284662CB45E10D5E8"><enum>(A)</enum><header>In
general</header><text>Paragraphs (2), (3), and (4) shall be applied without
regard to section 710 (relating to special rules for partners providing
investment management services to partnership).</text>
</subparagraph><subparagraph id="H40574A73930640CA8808AAADB7CA2A4"><enum>(B)</enum><header>Special rule for
partnerships owned by REITs</header><text>Section 7704 shall be applied without
regard to section 710 in the case of a partnership which meets each of the
following requirements:</text>
<clause id="H38FD683AF7ED4A4CB45F98F3F822EB00"><enum>(i)</enum><text>Such partnership
is treated as publicly traded under section 7704 solely by reason of interests
in such partnership being convertible into interests in a real estate
investment trust which is publicly traded.</text>
</clause><clause id="HB2A40F5658DF41088096D89C0830FFC0"><enum>(ii)</enum><text display-inline="yes-display-inline">50 percent or more of the capital and
profits interests of such partnership are owned, directly or indirectly, at all
times during the taxable year by such real estate investment trust (determined
with the application of section 267(c)).</text>
</clause><clause id="H7D3092175B8E449F85E339007BB9C171"><enum>(iii)</enum><text>Such partnership
meets the requirements of paragraphs (2), (3), and (4) (applied without regard
to section
710).</text>
</clause></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H099FF698828C46D29511DB0061F02D4D"><enum>(c)</enum><header>Imposition of
penalty on underpayments</header>
<paragraph id="HEA6A652A31494A5FAC069F55C5C816FE"><enum>(1)</enum><header>In
general</header><text>Subsection (b) of section 6662 is amended by inserting
after paragraph (5) the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="HBBDA788C85A2464D00C8113BD7598B4E" style="OLC">
<paragraph id="H4BBC4622C7F44A278421AD4E4989C1C"><enum>(6)</enum><text>The application of
subsection (d) of section 710 or the regulations prescribed under section
710(e) to prevent the avoidance of the purposes of section
710.</text>
</paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="H9A7C619BB3B447CB98DF731B57F7D61C"><enum>(2)</enum><header>Amount of
penalty</header>
<subparagraph id="H15C78DFE0C194D769E00247F225000F3"><enum>(A)</enum><header>In
general</header><text>Section 6662 is amended by adding at the end the
following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="HBB72C1A45C91494AB2474CF71B4000E7" style="OLC">
<subsection id="HB9A4EDEA35684001ACD4CA4593681155"><enum>(i)</enum><header>Increase in
penalty in case of property transferred for investment management
services</header><text>In the case of any portion of an underpayment to which
this section applies by reason of subsection (b)(6), subsection (a) shall be
applied with respect to such portion by substituting <quote>40 percent</quote>
for <quote>20
percent</quote>.</text>
</subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph><subparagraph display-inline="no-display-inline" id="H17F916A2842A430A8C9E73DC078114AA"><enum>(B)</enum><header>Conforming
amendments</header><text>Subparagraph (B) of section 6662A(e)(2) is
amended—</text>
<clause id="H93E0D2B5B5DA4B7C9415F05901BDB29"><enum>(i)</enum><text>by
striking <quote>section 6662(h)</quote> and inserting <quote>subsection (h) or
(i) of section 6662</quote>, and</text>
</clause><clause id="H6DA121CCDF0B48E4AFC15F2ED1B55D9"><enum>(ii)</enum><text>by
striking <quote><header-in-text level="subparagraph" style="OLC">gross
valuation misstatement penalty</header-in-text></quote> in the heading and
inserting <quote><header-in-text level="subparagraph" style="OLC">certain
increased underpayment penalties</header-in-text></quote>.</text>
</clause></subparagraph></paragraph><paragraph display-inline="no-display-inline" id="H3592D40FE0864C9FA600A5E36F1B9BE"><enum>(3)</enum><header>Reasonable cause
exception not applicable</header><text>Subsection (c) of section 6664 is
amended—</text>
<subparagraph id="HFE64BB30A91A4359AAA67C8E560093F6"><enum>(A)</enum><text>by redesignating
paragraphs (2) and (3) as paragraphs (3) and (4), respectively,</text>
</subparagraph><subparagraph id="H3753FDD0AC6F49A99B90D4A2EA006000"><enum>(B)</enum><text>by striking
<quote>paragraph (2)</quote> in paragraph (4), as so redesignated, and
inserting <quote>paragraph (3)</quote>, and</text>
</subparagraph><subparagraph id="HE03C940FBD0C4AA78E00E530D8248338"><enum>(C)</enum><text>by inserting after
paragraph (1) the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="H79D494CF17CD457F93C28FBCE34D3F6" style="OLC">
<paragraph id="HAC576A8800DC450F9C7DAA10359DBE62"><enum>(2)</enum><header>Exception</header><text>Paragraph
(1) shall not apply to any portion of an underpayment to which this section
applies by reason of subsection
(b)(6).</text>
</paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph></paragraph></subsection><subsection id="H1EC3A2D9DFB94F86ABC016004539C37D"><enum>(d)</enum><header>Conforming
amendments</header>
<paragraph id="H57EE8C17841E4EFCA933D82400315D00"><enum>(1)</enum><text>Subsection (d) of
section 731 is amended by inserting <quote>section 710(b)(4) (relating to
distributions of partnership property),</quote> before <quote>section
736</quote>.</text>
</paragraph><paragraph id="H105CD30F00AE4EDDA01B7F0486EA6E3F"><enum>(2)</enum><text>Section 741 is
amended by inserting <quote>or section 710 (relating to special rules for
partners providing investment management services to partnership)</quote>
before the period at the end.</text>
</paragraph><paragraph id="HCEC95BD8C0B841BE84B8E943FE4BDFE"><enum>(3)</enum><text>Paragraph (13) of
section 1402(a) is amended—</text>
<subparagraph id="HC1B1150E6F4D4166BD00AEBF35E32C2"><enum>(A)</enum><text>by striking
<quote>other than guaranteed</quote> and
inserting</text>
<quoted-block display-inline="yes-display-inline" id="HE4C1D6348272441DAB2FB23CD8408346" style="OLC">
<text>other
than—</text><subparagraph id="H8714CE91157E4D55B0C6DEB5EE933086"><enum>(A)</enum><text>guaranteed</text>
</subparagraph><after-quoted-block>,</after-quoted-block></quoted-block>
</subparagraph><subparagraph id="H4BF2B5F003A745C8B539582C0803DED7"><enum>(B)</enum><text>by striking the
semi-colon at the end and inserting <quote>, and</quote>, and</text>
</subparagraph><subparagraph id="H63BBD7896254435DA3AA7BEE693C83"><enum>(C)</enum><text>by adding at the end
the following new subparagraph:</text>
<quoted-block display-inline="no-display-inline" id="H339597DB65024A469C61B4829C3E63AF" style="OLC">
<subparagraph id="H757E734171E2450B9EC32901B7FB4421"><enum>(B)</enum><text>any income treated
as ordinary income under section 710 received by an individual who provides
investment management services (as defined in section
710(d)(2));</text>
</subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph></paragraph><paragraph display-inline="no-display-inline" id="HC529A16D11974B0D90D14B97FF4E5461"><enum>(4)</enum><text>Paragraph (12) of
section 211(a) of the Social Security Act is amended—</text>
<subparagraph id="H90F165E6E0A8473BBDF98136024B684E"><enum>(A)</enum><text>by striking
<quote>other than guaranteed</quote> and
inserting</text>
<quoted-block display-inline="yes-display-inline" id="HBF8B643036B64FC1AD30A1A1B3483BE0" style="OLC">
<text>other
than—</text><subparagraph id="H37851320B48B4E160000E9FB5CF289F6"><enum>(A)</enum><text>guaranteed</text>
</subparagraph><after-quoted-block>,</after-quoted-block></quoted-block>
</subparagraph><subparagraph id="H78BA14C8BBFE4A3C89DFDE61007D76EB"><enum>(B)</enum><text>by striking the
semi-colon at the end and inserting <quote>, and</quote>, and</text>
</subparagraph><subparagraph id="HE2BDC6D472114920BFFB8EA93ECFE6E6"><enum>(C)</enum><text>by adding at the
end the following new subparagraph:</text>
<quoted-block display-inline="no-display-inline" id="H687FE995348945CB98C7664C6EA2BED7" style="OLC">
<subparagraph id="H936853340C2040CBADE09DE88185635C"><enum>(B)</enum><text>any income treated
as ordinary income under <external-xref legal-doc="usc" parsable-cite="usc/26/710">section 710</external-xref> of the Internal Revenue Code of 1986
received by an individual who provides investment management services (as
defined in section 710(d)(2) of such
Code);</text>
</subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph></paragraph><paragraph id="HF567D1B8FDBB42138D03E4A8733457AC"><enum>(5)</enum><text display-inline="yes-display-inline">The table of sections for part I of
subchapter K of chapter 1 is amended by adding at the end the following new
item:</text>
<quoted-block display-inline="no-display-inline" id="H49864AC4E15940748990AAD0A369BD89" style="OLC">
<toc container-level="quoted-block-container" idref="H19E035F8A2E543C98EFCF1A13BD8B688" lowest-bolded-level="division-lowest-bolded" lowest-level="section" quoted-block="no-quoted-block" regeneration="yes-regeneration">
<toc-entry idref="H1967F754381E433C8449F0F97579F100" level="section">Sec. 710. Special rules for partners providing investment
management services to
partnership.</toc-entry>
</toc>
<after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="H279A17DFC61A4277997163BA5F88A0A6"><enum>(e)</enum><header>Effective
date</header>
<paragraph id="H31EC9DA9D7574668947E25F400447B00"><enum>(1)</enum><header>In
general</header><text>Except as otherwise provided in this subsection, the
amendments made by this section shall apply to taxable years ending after
____.</text>
</paragraph><paragraph id="H6104CC4035E54EE88D86642639DD5251"><enum>(2)</enum><header>Partnership
taxable years which include effective date</header><text>In applying section
710(a) of the Internal Revenue Code of 1986 (as added by this section) in the
case of any partnership taxable year which includes ____, the amount of the net
income referred to in such section shall be treated as being the lesser of the
net income for the entire partnership taxable year or the net income determined
by only taking into account items attributable to the portion of the
partnership taxable year which is after such date.</text>
</paragraph><paragraph id="H7263AA75E32F4ED1915B6454A766D8CB"><enum>(3)</enum><header>Dispositions of
partnership interests</header><text display-inline="yes-display-inline">Except
as provided in paragraph (3), section 710(b) of the Internal Revenue Code of
1986 (as added by this section) shall apply to dispositions and distributions
after ____.</text>
</paragraph><paragraph id="H175929CADDE24CB184C300BF837772FA"><enum>(4)</enum><header>Other income and
gain in connection with investment management services</header><text display-inline="yes-display-inline">Section 710(d) of such Code (as added by
this section) shall take effect on ____.</text>
</paragraph></subsection></section><section display-inline="no-display-inline" id="H840E66DD01A84594BD7B30123EC9AC45" section-type="subsequent-section"><enum>1202.</enum><header>Nonqualified
deferred compensation for investment services</header>
<subsection id="H95840C37225847BE8200F4B2D4775292"><enum>(a)</enum><header>In
general</header><text>Subpart B of part II of subchapter E of chapter 1
(relating to taxable year for which items of gross income included) is amended
by inserting after section 457 the following new section:</text>
<quoted-block display-inline="no-display-inline" id="H56C4CEDD26BE41B093112B0601C006CA" style="OLC">
<section id="HB6A6DDCA98714F9BB994BD29BCE8155F"><enum>457A.</enum><header>Nonqualified
deferred compensation for investment services</header>
<subsection id="H6853C264170140D9BA1345A40919C362"><enum>(a)</enum><header>In
general</header><text display-inline="yes-display-inline">Any compensation for
investment services which is deferred under a nonqualified deferred
compensation plan of a nonqualified entity shall be taken into account for
purposes of this chapter when there is no substantial risk of forfeiture of the
rights to such compensation.</text>
</subsection><subsection id="HC7FC3B04752940C0ADCF4909B9D6800"><enum>(b)</enum><header>Nonqualified
entity</header><text>For purposes of this section, the term <term>nonqualified
entity</term> means—</text>
<paragraph id="H8A19264B61F54676A8F881A43F69E600"><enum>(1)</enum><text display-inline="yes-display-inline">any foreign corporation which has
investment related income unless substantially all of such income is—</text>
<subparagraph id="H11089BB4EA76449ABBC300AAF5CDF460"><enum>(A)</enum><text>effectively
connected with the conduct of a trade or business in the United States,
or</text>
</subparagraph><subparagraph id="H1038AA3DC9E74CC400001167E1BB832E"><enum>(B)</enum><text>subject to a
comprehensive foreign income tax, and</text>
</subparagraph></paragraph><paragraph display-inline="no-display-inline" id="HC1B8CE3199BC49898F09741606DA8510"><enum>(2)</enum><text display-inline="yes-display-inline">any partnership which has investment
related income unless substantially all of such income is allocated to persons
other than—</text>
<subparagraph id="HCF9931335C264D52BBBA38F56833A9B6"><enum>(A)</enum><text>foreign persons
with respect to whom such income is not subject to a comprehensive foreign
income tax, and</text>
</subparagraph><subparagraph id="H22FD087668F4451D941941822C1D19EC"><enum>(B)</enum><text>organizations
which are exempt from tax under this title.</text>
</subparagraph></paragraph></subsection><subsection id="HA6CC3ACDA80B4FC5A031D71F55177D00"><enum>(c)</enum><header>Ascertainability
of amounts of compensation</header>
<paragraph id="HC70231E4D0A14966A65021B0339164AA"><enum>(1)</enum><header>In
general</header><text>If the amount of any compensation is not ascertainable at
the time that such compensation is otherwise to be taken into account under
subsection (a)—</text>
<subparagraph id="H8B748ABBA7464CD4AEA5EE0015F0F4E3"><enum>(A)</enum><text>such amount shall
be so taken into account when ascertainable, and</text>
</subparagraph><subparagraph id="H16781C316CD8415BAB88F26F14EE32F"><enum>(B)</enum><text>the tax imposed
under this chapter for the taxable year in which such compensation is taken
into account under subparagraph (A) shall be increased by the sum of—</text>
<clause id="H3C060CD57B2B4DB7AF52864509111243"><enum>(i)</enum><text>the amount of
interest determined under paragraph (2), and</text>
</clause><clause id="H034D3F78D26048C59806203DAEEBFEAA"><enum>(ii)</enum><text>an amount equal
to 20 percent of the amount of such compensation.</text>
</clause></subparagraph></paragraph><paragraph id="HE3CADBB00C5B4373A95590CA6C12B23"><enum>(2)</enum><header>Interest</header><text display-inline="yes-display-inline">For purposes of paragraph (1)(B)(i), the
interest determined under this paragraph for any taxable year is the amount of
interest at the underpayment rate under section 6621 plus 1 percentage point on
the underpayments that would have occurred had the deferred compensation been
includible in gross income for the taxable year in which first deferred or, if
later, the first taxable year in which such deferred compensation is not
subject to a substantial risk of forfeiture.</text>
</paragraph></subsection><subsection id="H94B8BC3217294F1F883805352050DCFF"><enum>(d)</enum><header>Other
definitions and special rules</header><text>For purposes of this
section—</text>
<paragraph id="H72F856466E9641628665D56CF4D6792B"><enum>(1)</enum><header>Investment
services</header><text>The term <term>investment services</term> means all
services provided during any taxable year if a substantial quantity of such
services are services described in section 710(c)(1).</text>
</paragraph><paragraph id="H6FFF48F0C1154DEAB6F1B5E94CD8284B"><enum>(2)</enum><header>Investment
related income</header><text display-inline="yes-display-inline">The term
<term>investment related income</term> means any income attributable (directly
or indirectly) to—</text>
<subparagraph id="H0C4602BFACED433E9195A7B1E500779C"><enum>(A)</enum><text>the assets with
respect to which the investment services referred in subsection (a) were
performed, or</text>
</subparagraph><subparagraph id="HFE7B07E84EBF4CC8ACB0EBAFAE108E17"><enum>(B)</enum><text>the investment
services referred to in subsection (a).</text>
</subparagraph></paragraph><paragraph display-inline="no-display-inline" id="HA09CF08FCF304A49003368E3D2793A6"><enum>(3)</enum><header>Substantial risk
of forfeiture</header><text>The rights of a person to compensation shall be
treated as subject to a substantial risk of forfeiture only if such person’s
rights to such compensation are conditioned upon the future performance of
substantial services by any individual.</text>
</paragraph><paragraph id="HEB006474D5E74428A3662F8F7BC109C"><enum>(4)</enum><header>Comprehensive
foreign income tax</header><text>The term <term>comprehensive foreign income
tax</term> means, with respect to any foreign person, the income tax of a
foreign country if—</text>
<subparagraph id="HE34220AE6904479200A343E700AB9600"><enum>(A)</enum><text>such person is
eligible for the benefits of a comprehensive income tax treaty between such
foreign country and the United States, or</text>
</subparagraph><subparagraph id="H53F113A2D9904813924FA6EA85AFD52F"><enum>(B)</enum><text>such person
demonstrates to the satisfaction of the Secretary that such foreign country has
a comprehensive income tax.</text>
</subparagraph><continuation-text continuation-text-level="paragraph">Such term
shall not include any tax unless such tax includes rules for the deductibility
of deferred compensation which are similar to the rules of this title.</continuation-text></paragraph><paragraph id="H8308AD09EBDD4160B45D554F002052E6"><enum>(5)</enum><header>Nonqualified
deferred compensation plan</header><text>The term <term>nonqualified deferred
compensation plan</term> has the meaning given such term under section 409A(d),
except that such term shall include any plan that provides a right to
compensation based on the appreciation in value of a specified number of equity
units of the service recipient.</text>
</paragraph><paragraph id="H396550424D644092A208E334DEF333E5"><enum>(6)</enum><header>Application of
rules</header><text display-inline="yes-display-inline">Rules similar to the
rules of paragraphs (5) and (6) of section 409A(d) shall apply.</text>
</paragraph></subsection><subsection id="HF2C77173463C4ECD8FBA147E04BBBCDD"><enum>(e)</enum><header>Regulations</header><text display-inline="yes-display-inline">The Secretary shall prescribe such
regulations as may be necessary or appropriate to carry out the purposes of
this section, including regulations disregarding a substantial risk of
forfeiture in cases where necessary to carry out the purposes of this section.</text>
</subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H0FB1A48A497448F6B6E7B6C3E7D6006F"><enum>(b)</enum><header>Conforming
amendment</header><text>Section 26(b)(2) is amended by striking
<quote>and</quote> at the end of subparagraph (S), by striking the period at
the end of subparagraph (T) and inserting <quote>, and</quote>, and by adding
at the end the following new subparagraph:</text>
<quoted-block display-inline="no-display-inline" id="H924A896E9D934E3C97A1AC77EE58DE70" style="OLC">
<subparagraph id="HEEF343B1AC3342099557B6B02F99007F"><enum>(U)</enum><text display-inline="yes-display-inline">section 457A(c)(1)(B) (relating to
ascertainability of amounts of
compensation).</text>
</subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H7B1313C1B0044EC387C1DEB6ABB03420"><enum>(c)</enum><header>Clerical
amendment</header><text display-inline="yes-display-inline">The table of
sections of subpart B of part II of subchapter E of chapter 1 is amended by
inserting after the item relating to section 457 the following new item:</text>
<quoted-block display-inline="no-display-inline" id="H10737C75615C4CCCB77174FF0075B026" style="OLC">
<toc container-level="quoted-block-container" idref="H56C4CEDD26BE41B093112B0601C006CA" lowest-bolded-level="division-lowest-bolded" lowest-level="section" quoted-block="no-quoted-block" regeneration="yes-regeneration">
<toc-entry idref="HB6A6DDCA98714F9BB994BD29BCE8155F" level="section">Sec. 457A. Nonqualified deferred compensation for investment
services.</toc-entry>
</toc>
<after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="HB01C631A2B5D430F97A1A499FC9D38C1"><enum>(d)</enum><header>Effective
date</header>
<paragraph id="HC03E52C27B8046039907EA59AE563937"><enum>(1)</enum><header>In
general</header><text>The amendments made by this section shall apply to
taxable years beginning after December 31, 2007.</text>
</paragraph><paragraph id="H6692802AEE1D48F40049961FBC3EC63"><enum>(2)</enum><header>Treatment as
change in method of accounting</header><text>For purposes of section 481 of the
Internal Revenue Code of 1986—</text>
<subparagraph id="HAA9EF82ABBAF4A9D8325C5779372B965"><enum>(A)</enum><text>the amendments
made by this section shall be treated as a change in method of accounting which
is initiated by the taxpayer and made with the consent of the Secretary of the
Treasury, and</text>
</subparagraph><subparagraph id="H56117B7E34DD4DB795BA2759D56176FF"><enum>(B)</enum><text>the period for
taking into account the adjustments under such section by reason of such change
shall be 4 years.</text>
</subparagraph></paragraph></subsection></section><section display-inline="no-display-inline" id="HBAA637782F4E4567BC2724F7C6261B76" section-type="subsequent-section"><enum>1203.</enum><header>Indebtedness
incurred by a partnership in acquiring securities and commodities not treated
as acquisition indebtedness for organizations which are partners with limited
liability</header>
<subsection id="HCD9C2F89A63B4FBA8E572495F6331E03"><enum>(a)</enum><header>In
general</header><text>Subsection (c) of section 514 (relating to acquisition
indebtedness) is amended by adding at the end the following new
paragraph:</text>
<quoted-block display-inline="no-display-inline" id="H183611CA229A416E86CEB17580027E4" style="OLC">
<paragraph id="H8E7B1A769B5D4071ADA578C9F5AAEA00"><enum>(10)</enum><header>Securities and
commodities acquired by partnerships in which an organization is a partner with
limited liability</header>
<subparagraph id="H6EEC1464A5154EC4A7FCF713CF531EA4"><enum>(A)</enum><header>In
general</header><text display-inline="yes-display-inline">In the case of any
organization which is a partner with limited liability in a partnership, the
term <term>acquisition indebtedness</term> does not, for purposes of this
section, include indebtedness incurred or continued by such partnership in
purchasing or carrying any qualified security or commodity.</text>
</subparagraph><subparagraph id="H85CD8CA40469452C86124D48EE4CD9F2"><enum>(B)</enum><header>Qualified
security or commodity</header><text display-inline="yes-display-inline">For
purposes of this paragraph, the term <term>qualified security or
commodity</term> means any security (as defined in section 475(c)(2) without
regard to the last sentence thereof), any commodity (as defined in section
475(e)(2)), or any option or derivative contract with respect to such a
security or commodity.</text>
</subparagraph><subparagraph id="HB6280CD01815477B88EA00BBAADDAB80"><enum>(C)</enum><header>Application to
tiered partnerships and other pass-thru entities</header><text display-inline="yes-display-inline">Rules similar to the rules of subparagraph
(A) shall apply in the case of tiered partnerships and other pass-thru
entities.</text>
</subparagraph><subparagraph id="H5187E4F64FDB4F3EA66E71003F7FF28B"><enum>(D)</enum><header>Regulations</header><text>The
Secretary may prescribe such regulations as may be necessary or appropriate to
carry out the purposes of this paragraph, including regulations to prevent the
abuse of this
paragraph.</text>
</subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H9CC387AA12434E51A18902D0F0D78106"><enum>(b)</enum><header>Effective
date</header><text>The amendment made by this section shall apply to taxable
years beginning after the date of the enactment of this Act.</text>
</subsection></section><section display-inline="no-display-inline" id="H059E3B56043A492F872457927F824599" section-type="subsequent-section"><enum>1204.</enum><header>Application to
partnership interests and tax sharing agreements of rule treating certain gain
on sales between related persons as ordinary income</header>
<subsection id="H0D82579D40514196A2FDAF1A98FA98F"><enum>(a)</enum><header>Partnership
interests</header><text>Subsection (a) of section 1239 is amended to read as
follows:</text>
<quoted-block display-inline="no-display-inline" id="H6C31855B729B498C86C66E82AD1B80" style="OLC">
<subsection id="H327D7F2B99244BC5AF2929E11194341E"><enum>(a)</enum><header>Treatment of
gain as ordinary income</header><text display-inline="yes-display-inline">In
the case of a sale or exchange of property, directly or indirectly, between
related persons, any gain recognized to the transferor shall be treated as
ordinary income if—</text>
<paragraph id="HD45A26592EF242E7A967FB80192FD99C"><enum>(1)</enum><text>such property is,
in the hands of the transferee, of a character which is subject to the
allowance for depreciation provided in section 167, or</text>
</paragraph><paragraph id="HBE934E4554EE4A66ACAC7E6127D56244"><enum>(2)</enum><text display-inline="yes-display-inline">such property is an interest in a
partnership, but only to the extent of gain attributable to unrealized
appreciation in property which is of a character subject to the allowance for
depreciation provided in section 167.</text>
</paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="HA43FF183ABAE498EACEC91C80048788B"><enum>(b)</enum><header>Tax sharing
agreements</header><text display-inline="yes-display-inline">Section 1239
(relating to gain from sale of depreciable property between certain related
taxpayers) is amended by adding at the end the following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="H623F3607484F45FBA0699D6124C1E00" style="OLC">
<subsection id="HD3C5FFF2C4D549D39E0600FBA0027B37"><enum>(f)</enum><header>Application to
tax sharing agreements</header>
<paragraph id="HFEF092D415404371931E3702087437F1"><enum>(1)</enum><header>In
general</header><text>If there is a tax sharing agreement with respect to any
sale or exchange, the transferee and the transferor shall be treated as related
persons for purposes of this section.</text>
</paragraph><paragraph id="H44F1CEA9A82343B7B14DB8D954E97903"><enum>(2)</enum><header>Tax sharing
agreement</header><text display-inline="yes-display-inline">For purposes of
this subsection, the term <term>tax sharing agreement</term> means any
agreement which provides for the payment to the transferor of any amount which
is determined by reference to any portion of the tax benefit realized by the
transferee with respect to the depreciation (or amortization) of the property
transferred.</text>
</paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H5F0DD448F2834B5CB0B4DD768D8CCD2"><enum>(c)</enum><header>Effective
date</header><text>The amendment made by this section shall apply to sales and
exchanges after the date of the enactment of this Act.</text>
</subsection></section></part><part id="H032F520027854E84BE1778BE6401B104"><enum>2</enum><header>Self-employment
tax treatment of certain interest holders in service providing entities
</header>
<section display-inline="no-display-inline" id="H1B1985F0AD84456BAA232F00B595B24C" section-type="subsequent-section"><enum>1211.</enum><header>Certain service
providing S corporation shareholders and partners subject to self-employment
taxes</header>
<subsection id="H028FD00B6D2C4C339DA42B643E96D3B7"><enum>(a)</enum><header>In
general</header><text display-inline="yes-display-inline">Section 1402 is
amended by adding at the end the following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="H7EB10E6DD98F4B1989E182F07B4C67F" style="OLC">
<subsection id="H619A09A7FC7F41CFA9535850CE3FB958"><enum>(l)</enum><header>Special rules
for service providing S corporation shareholders and partners</header>
<paragraph id="H82BE6A434DBF4B67AFF8E1A8BF33D517"><enum>(1)</enum><header>S corporation
shareholders</header><text display-inline="yes-display-inline">In the case of
any S corporation which is engaged in a trade or business consisting primarily
of the performance of services, any shareholder of such S corporation who
provides substantial services with respect to such trade or business shall take
into account such shareholder’s pro rata share of all items of income or loss
described in section 1366 which are attributable to such trade or business in
determining the shareholder’s net earnings from self-employment.</text>
</paragraph><paragraph id="HA48D68F139B64743BCB060F4BD000000"><enum>(2)</enum><header>Partners</header><text>In
the case of any partnership which is engaged in a trade or business consisting
primarily of the performance of services, subsection (a)(13) shall not apply to
any partner who provides substantial services with respect to such trade or
business.</text>
</paragraph><paragraph id="H2F58FB28C730466B907975114505C69B"><enum>(3)</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="H90C31B29C4684EB2B7395528013C1F45"><enum>(4)</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="HB5AB0CE5BC5C4EF6AAE50D97CB0DDDB"><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>
<quoted-block display-inline="no-display-inline" id="H71D5B889AB284DC2B279D45DD840952" style="OLC">
<subsection display-inline="no-display-inline" id="HD3AEFC4EC31F452C8EA6DB6F4ED9D03E"><enum>(k)</enum><header>Special rules
for service providing S corporation shareholders and partners</header>
<paragraph id="HEF43AB1261FC4BC58CB3AEF54C8517CA"><enum>(1)</enum><header>S corporation
shareholders</header><text display-inline="yes-display-inline">In the case of
any S corporation which is engaged in a trade or business consisting primarily
of the performance of services, any shareholder of such S corporation who
provides substantial services with respect to such trade or business shall take
into account such shareholder’s pro rata share of all items of income and 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 trade or business in determining the shareholder’s net
earnings from self-employment.</text>
</paragraph><paragraph id="H95A19575D8704733BABF5514B7C2671B"><enum>(2)</enum><header>Partners</header><text>In
the case of any partnership which is engaged in a trade or business consisting
primarily of the performance of services, subsection (a)(12) shall not apply to
any partner who provides substantial services with respect to such trade or
business.</text>
</paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H4EAF0DF87711462795B69C61671E0027"><enum>(c)</enum><header>Effective
date</header><text>The amendments made by this section shall apply to taxable
years beginning after December 31, 2007.</text>
</subsection></section></part><part id="H6A89838230264AAEAB54E7A7D7C08847"><enum>3</enum><header>Broker
reporting of customer’s basis in securities transactions</header>
<section display-inline="no-display-inline" id="H5E68B80D6F024531A8FDFA28E00E6F7" section-type="subsequent-section"><enum>1221.</enum><header>Broker reporting of
customer’s basis in securities transactions</header>
<subsection id="HCC5508D8C6834607A96F452512BC9285"><enum>(a)</enum><header>In
general</header>
<paragraph id="H181A3DA9996C407383DDD8F1D2AA1811"><enum>(1)</enum><header>Broker reporting
for securities transactions</header><text>Section 6045 (relating to returns of
brokers) is amended by adding at the end the following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="H914A522EB17246A18000F8FF069195D" style="OLC">
<subsection id="H4944251C22C24D79AE6FE6F49C5219A"><enum>(g)</enum><header>Additional
information required in the case of securities transactions</header>
<paragraph id="HBC75B79C31904E2587B93E77BCA075C4"><enum>(1)</enum><header>In
general</header><text>If a broker is otherwise required to make a return under
subsection (a) with respect to the gross proceeds of the sale of a covered
security, the broker shall include in such return the information described in
paragraph (2).</text>
</paragraph><paragraph id="H26B37A35C2C2421E8E30DBE832443C1D"><enum>(2)</enum><header>Additional
information required</header>
<subparagraph id="HA39F394E1EEC4B30AF2E56095900B367"><enum>(A)</enum><header>In
general</header><text>The information required under paragraph (1) to be shown
on a return with respect to a covered security of a customer shall include the
customer’s adjusted basis in such security and whether any gain or loss with
respect to such security is long-term or short-term (within the meaning of
section 1222).</text>
</subparagraph><subparagraph id="H9DFD5102F6184AB500F714847FB5F7B5"><enum>(B)</enum><header>Determination of
adjusted basis</header><text>For purposes of subparagraph (A)—</text>
<clause id="H84C9E00FF8814A58851E41775FBA8642"><enum>(i)</enum><header>In
general</header><text>The customer’s adjusted basis shall be determined—</text>
<subclause id="HDADF537A394E43729CA7809D63ED4C00"><enum>(I)</enum><text>in the case of any
stock (other than any stock in an open-end fund), in accordance with the
first-in first-out method unless the customer notifies the broker by means of
making an adequate identification of the stock sold or transferred,</text>
</subclause><subclause display-inline="no-display-inline" id="H60017A5A57E948E0957BABB969B30615"><enum>(II)</enum><text display-inline="yes-display-inline">in the case of any interest in an open-end
fund acquired before January 1, 2011, in accordance with any acceptable method
under section 1012 with respect to the account in which such interest is
held,</text>
</subclause><subclause id="HE881D02A965846CAB9007FECAF255707"><enum>(III)</enum><text display-inline="yes-display-inline">in the case of any interest in an open-end
fund acquired after December 31, 2010, in accordance with the broker’s default
method unless the customer notifies the broker that he elects another
acceptable method under section 1012 with respect to the account in which such
interest is held, and</text>
</subclause><subclause id="HB5FB319A714C4244924D6EFEBE8F12BB"><enum>(IV)</enum><text>in any other
case, under the method for making such determination under section 1012.</text>
</subclause></clause><clause id="HDAAED6CF5B9C4D49B30650CE5C6F0082"><enum>(ii)</enum><header>Exception for
wash sales</header><text>Except as otherwise provided by the Secretary, the
customer’s adjusted basis shall be determined without regard to section 1091
(relating to loss from wash sales of stock or securities) unless the
transactions occur in the same account with respect to identical
securities.</text>
</clause></subparagraph></paragraph><paragraph id="HD3B753D5A28E4DF8A5F5E548ACE5F4B"><enum>(3)</enum><header>Covered
security</header><text>For purposes of this subsection—</text>
<subparagraph id="HB7F886025DFE445A8567234174410072"><enum>(A)</enum><header>In
general</header><text>The term <term>covered security</term> means any
specified security acquired on or after the applicable date if such
security—</text>
<clause id="H2B44E9F2549E4DC6A2122D00B735A1E"><enum>(i)</enum><text>was
acquired through a transaction in the account in which such security is held,
or</text>
</clause><clause id="HCE4A26DECC0F42D289B28FCD619CE1F1"><enum>(ii)</enum><text>was transferred
to such account from an account in which such security was a covered security,
but only if the broker received a statement under section 6045A with respect to
the transfer.</text>
</clause></subparagraph><subparagraph id="H48EE066279554B8C885DCB484EADEDD1"><enum>(B)</enum><header>Specified
security</header><text>The term <term>specified security</term> means—</text>
<clause id="HA867D58A2C5C4A85926ECA1300726B7E"><enum>(i)</enum><text display-inline="yes-display-inline">any share of stock in a corporation,</text>
</clause><clause id="H86A2ADE423E5441EBAC8F14744C902DA"><enum>(ii)</enum><text>any note, bond,
debenture, or other evidence of indebtedness,</text>
</clause><clause id="H8148782E7D6F4A9AA726C1618D76F081"><enum>(iii)</enum><text>any commodity,
or contract or derivative with respect to such commodity, if the Secretary
determines that adjusted basis reporting is appropriate for purposes of this
subsection, and</text>
</clause><clause id="HF68EFEBB23904021B8BAFDEA5FFA887F"><enum>(iv)</enum><text>any other
financial instrument with respect to which the Secretary determines that
adjusted basis reporting is appropriate for purposes of this subsection.</text>
</clause></subparagraph><subparagraph id="H6350AF0665F04A4B82D1582DF485DAAE"><enum>(C)</enum><header>Applicable
date</header><text>The term <term>applicable date</term> means—</text>
<clause id="H20599FBBE35C4C68BBF198DC4DB5D5B5"><enum>(i)</enum><text>January 1, 2009, in the case of any specified security which is stock in a
corporation, and</text>
</clause><clause id="H8DA1F0A40EBD45CDA2669208C3FA3588"><enum>(ii)</enum><text>January 1, 2011,
or such later date determined by the Secretary in the case of any other
specified security.</text>
</clause></subparagraph></paragraph><paragraph id="H6959E66E26924F3BAA9CE74DE4B8CBFE"><enum>(4)</enum><header>Open-end
fund</header><text display-inline="yes-display-inline">For purposes of this
subsection, the term <term>open-end fund</term> means a regulated investment
company (as defined in section 851) which is offering for sale or has
outstanding any redeemable security of which it is the issuer and the shares of
which are not traded on an established securities exchange.</text>
</paragraph><paragraph id="HE2E9B51485EC4E37A49E5487117BA2BB"><enum>(5)</enum><header>Treatment of S
corporations</header><text>For purposes of this section, a S corporation (other
than a financial institution) shall be treated in the same manner as a
partnership.</text>
</paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph commented="no" id="H9276513795FA4524A663AC00FD05B53E"><enum>(2)</enum><header>Broker
information required with respect to publicly traded
options</header><text>Section 6045, as amended by subsection (a), is amended by
adding at the end the following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="HAD7DC1E385054993B92DD79FBC55BB56" style="OLC">
<subsection commented="no" id="H87B2B7080A9C48D194CE8F732CC10350"><enum>(h)</enum><header>Application to
options on covered securities</header>
<paragraph id="H76CB534CE8B0482E00C7F47F9C163D8B"><enum>(1)</enum><header>Exercise of
option</header><text display-inline="yes-display-inline">For purposes of this
section, in the case of any exercise of an option on a covered security where
the taxpayer is the grantor of the option and the option was acquired in the
same account as the covered security, the amount received for the grant of an
option on a covered security shall be treated as an adjustment to gross
proceeds or as an adjustment to basis, as the case may be. A similar rule shall
apply in the case of the exercise of an option where the taxpayer is not the
grantor of the option.</text>
</paragraph><paragraph id="HB1654B68E2284D51B36899000300208B"><enum>(2)</enum><header>Lapse or closing
transaction</header><text>For purposes of this section, in the case of the
lapse (or closing transaction (as defined in section 1234(b)(2)(A))) of an
option on a covered security where the taxpayer is the grantor of the option,
this section shall apply as if the premium received for such option were gross
proceeds received on the date of the lapse or closing transaction, and the cost
(if any) of the closing transaction shall be taken into account as adjusted
basis. A similar rule shall apply in the case of a lapse or closing transaction
where the taxpayer is not the grantor of the option.</text>
</paragraph><paragraph id="H45AB9FA14A9C40EC824F49D2D6747F9C"><enum>(3)</enum><header>Application
limited to options granted on or after applicable date</header><text>Paragraphs
(1) and (2) shall not apply to any option on a covered security which is
granted or acquired before the applicable date with respect to such covered
security.</text>
</paragraph><paragraph id="H7AF41BAB94144E5CA1C3D075030050A5"><enum>(4)</enum><header>Definitions</header><text display-inline="yes-display-inline">For purposes of this subsection, the terms
<term>covered security</term> and <term>applicable date</term> shall have the
meaning given such terms in subsection (g)(3).</text>
</paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="H2234DC915B194E3FABD55D1EAF5211AF"><enum>(3)</enum><header>Extension of
period for statements sent to customers</header>
<subparagraph id="H3038EE4555114EFB9C0000BB259C5288"><enum>(A)</enum><header>In
general</header><text display-inline="yes-display-inline">Subsection (b) of
section 6045 is amended by striking <quote>January 31</quote> and inserting
<quote>February 15</quote>.</text>
</subparagraph><subparagraph commented="no" id="H040B0CDCCBA64C3AB5132466AAA96A2"><enum>(B)</enum><header>Statements
related to substitute payments</header><text>Subsection (d) of section 6045 is
amended—</text>
<clause commented="no" id="H51F4AA83C09D405A93EB4F3E83089DC3"><enum>(i)</enum><text>by striking
<quote>at such time and</quote>, and</text>
</clause><clause commented="no" id="H464ED33E04584A4FB7062B935DFA92F1"><enum>(ii)</enum><text>by inserting
after <quote>other item.</quote> the following new sentence: <quote>The written
statement required under the preceding sentence shall be furnished on or before
February 15 of the year following the calendar year during which such payment
was made.</quote>.</text>
</clause></subparagraph><subparagraph display-inline="no-display-inline" id="H815640385A15435AACF14344FA61B6EF"><enum>(C)</enum><header>Other
statements</header><text>Subsection (b) of section 6045 is amended by adding at
the end the following: <quote>In the case that a substantial portion of the
assets in the account of a customer gives rise to the requirement to furnish a
statement under this subsection, section 6042(c), 6049(c)(2)(A), or 6050N(b),
any statement otherwise required to be furnished to the customer with respect
to any item in such account on or before January 31 shall instead be required
to be furnished to such customer on or before February 15.</quote>.</text>
</subparagraph></paragraph></subsection><subsection id="H66D1DAE530A44AB78E24B300AD744049"><enum>(b)</enum><header>Determination of
basis of certain securities on account by account method</header><text>Section
1012 (relating to basis of property–cost) is amended—</text>
<paragraph id="H198FBB1BACC3499AB69EAFA600298E98"><enum>(1)</enum><text>by striking
<quote>The basis of property</quote> and inserting the following:</text>
<quoted-block display-inline="no-display-inline" id="H17000A26FAD145D69C87294B93008821" style="OLC">
<subsection id="H61F1890A882F43E4A6380573575ED259"><enum>(a)</enum><header>In
general</header><text>The basis of
property</text>
</subsection><after-quoted-block>,</after-quoted-block></quoted-block>
</paragraph><paragraph id="H8AED06B31F4D42DABD4CD97B9D76AAE4"><enum>(2)</enum><text>by striking
<quote>The cost of real property</quote> and inserting the following:</text>
<quoted-block display-inline="no-display-inline" id="H00B65AE15223412CB1A71180A980A39D" style="OLC">
<subsection id="HE539DF381C8F433888EBFFE600F0494C"><enum>(b)</enum><header>Special rule for
apportioned real estate taxes</header><text>The cost of real
property</text>
</subsection><after-quoted-block>,
and</after-quoted-block></quoted-block>
</paragraph><paragraph id="H3228797A90464EDD8B1E4DB601D6ED16"><enum>(3)</enum><text>by adding at the
end the following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="HE34A4FDF9E634C9D94E3CD2D5584A0B2" style="OLC">
<subsection id="H77F5DC502ADB4A6397181C4D1F9F19E3"><enum>(c)</enum><header>Determinations
by account</header>
<paragraph id="HF34FDC4DC90D45648529B3900973513"><enum>(1)</enum><header>In
general</header><text>In the case of the sale, exchange, or other disposition
of a specified security on or after the applicable date, the conventions
prescribed by regulations under this section shall be applied on an account by
account basis.</text>
</paragraph><paragraph id="HEA130E681FA149EA98D6A4D504B3B86"><enum>(2)</enum><header>Application to
open-end funds</header>
<subparagraph id="HE22C68F9F9534FDF842C7779C718BD53"><enum>(A)</enum><header>In
general</header><text display-inline="yes-display-inline">Except as provided in
subparagraph (B), any stock in an open-end fund acquired before January 1,
2009, shall be treated as a separate account from any such stock acquired on or
after such date.</text>
</subparagraph><subparagraph id="H00538FA2677B4DC4985B4F1598C4D167"><enum>(B)</enum><header>Election by
open-end fund for treatment as single account</header><text>If an open-end fund
elects (at such time and in such form and manner as the Secretary may
prescribe) to have this subparagraph apply with respect to one or more of its
stockholders—</text>
<clause id="HBBEE0673CFE945B2B083BA12C9AC5FE4"><enum>(i)</enum><text>subparagraph (A)
shall not apply with respect to any stock in such fund held by such
stockholders, and</text>
</clause><clause id="H875FD6CFA9B248F09BEF6E41F8D1AF8F"><enum>(ii)</enum><text>all stock in such
fund which is held by such stockholders shall be treated as covered securities
described in section 6045(g)(3) without regard to the date of the acquisition
of such stock.</text>
</clause></subparagraph></paragraph><paragraph id="H941C7F7839534BC7A6FB4BF9B0CBD"><enum>(3)</enum><header>Definitions</header><text>For
purposes of this section, the terms <term>specified security</term>,
<term>applicable date</term>, and <term>open-end fund</term> shall have the
meaning given such terms in section
6045(g).</text>
</paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="HE424FD7822164E58955F48146CCB0022"><enum>(c)</enum><header>Information by
transferors To aid brokers</header>
<paragraph id="H485246BAAFD044BA886BA3C3CD88F7E"><enum>(1)</enum><header>In
general</header><text>Subpart B of part III of subchapter A of chapter 61 is
amended by inserting after section 6045 the following new section:</text>
<quoted-block id="H86F21EC1895F4AD2B5A13D9B2B54B8BD" style="OLC">
<section id="H8995575470AA43099044B50800F0BADE"><enum>6045A.</enum><header>Information
required in connection with transfers of covered securities to brokers</header>
<subsection id="H292DFCD1015A47E9BCBE1FC5E394C1B3"><enum>(a)</enum><header>Furnishing of
information</header><text>Every applicable person which transfers to a broker
(as defined in section 6045(c)(1)) a security which is a covered security (as
defined in section 6045(g)(3)) in the hands of such applicable person shall
furnish to such broker a written statement in such manner and setting forth
such information as the Secretary may by regulations prescribe for purposes of
enabling such broker to meet the requirements of section 6045(g).</text>
</subsection><subsection id="H0A09790C8C5047EF9547CEE7ADC14227"><enum>(b)</enum><header>Applicable
person</header><text>For purposes of subsection (a), the term <term>applicable
person</term> means—</text>
<paragraph id="H9B64A5A7A0DB4DD3B1B3C808EC6862B"><enum>(1)</enum><text>any broker (as
defined in section 6045(c)(1)), and</text>
</paragraph><paragraph id="H4CFA807CDA96404D00A8DC6D209504ED"><enum>(2)</enum><text>any other person
as provided by the Secretary in regulations.</text>
</paragraph></subsection><subsection id="H8C0718EE85FB401BB7C640D8F8ED101B"><enum>(c)</enum><header>Time for
furnishing statement</header><text>Any statement required by subsection (a)
shall be furnished not later than the earlier of—</text>
<paragraph id="H20A41673C43C4F2993A4734833633149"><enum>(1)</enum><text>45 days after the
date of the transfer described in subsection (a), or</text>
</paragraph><paragraph commented="no" id="HC87447BD91F44E2600B9007F3DDC6F9C"><enum>(2)</enum><text>January 15 of the
year following the calendar year during which such transfer
occurred.</text>
</paragraph></subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="HC74D1E83E8EA460CB1AA00705F532736"><enum>(2)</enum><header>Assessable
penalties</header><text>Paragraph (2) of section 6724(d) (defining payee
statement) is amended by redesignating subparagraphs (I) through (CC) as
subparagraphs (J) through (DD), respectively, and by inserting after
subparagraph (H) the following new subparagraph:</text>
<quoted-block id="H166765D595FC40D68C5B78DE0839F40" style="OLC">
<subparagraph id="H8DAAB3AF2CFA42FD80D3E567764200E6"><enum>(I)</enum><text>section 6045A
(relating to information required in connection with transfers of covered
securities to
brokers).</text>
</subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="HC566BC3D70E5483295FAF86304628C9B"><enum>(3)</enum><header>Clerical
amendment</header><text>The table of sections for subpart B of part III of
subchapter A of chapter 61 is amended by inserting after the item relating to
section 6045 the following new item:</text>
<quoted-block id="H005565B97FC1471AA2E5CB9509896974" style="OLC">
<toc regeneration="no-regeneration">
<toc-entry level="section">Sec. 6045A. Information required in
connection with transfers of covered securities to
brokers.</toc-entry>
</toc>
<after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection display-inline="no-display-inline" id="H5D217DE5BF854B28A9B1F13E72E02E5"><enum>(d)</enum><header>Additional issuer
information To aid brokers</header>
<paragraph id="H7A7EEF7A56994EE9B345CF4CECDDAC45"><enum>(1)</enum><header>In
general</header><text>Subpart B of part III of subchapter A of chapter 61 of
the Internal Revenue Code of 1986, as amended by subsection (b), is amended by
inserting after section 6045A the following new section:</text>
<quoted-block id="HC45829B4BF294F8E9153FCA2AA436F35" style="OLC">
<section id="H7ECEE23961B14E50BB993528098FAE8D"><enum>6045B.</enum><header>Returns
relating to actions affecting basis of specified securities</header>
<subsection id="H8C86ED5F1CE6466898F6C12E1E8FA932"><enum>(a)</enum><header>In
general</header><text>According to the forms or regulations prescribed by the
Secretary, any issuer of a specified security shall make a return setting
forth—</text>
<paragraph id="H57F32D76E39C43C1A052026F52E995EA"><enum>(1)</enum><text>a description of
any organizational action which affects the basis of such specified security of
such issuer,</text>
</paragraph><paragraph id="H17624830CC7F4ED0B9F612EBC98D7319"><enum>(2)</enum><text>the quantitative
effect on the basis of such specified security resulting from such action,
and</text>
</paragraph><paragraph id="HD45DFF49B48149B69348F0385D66EDE"><enum>(3)</enum><text>such other
information as the Secretary may prescribe.</text>
</paragraph></subsection><subsection id="H06A1CDC66BEB47B9A05561F150E20526"><enum>(b)</enum><header>Time for filing
return</header><text>Any return required by subsection (a) shall be filed not
later than the earlier of—</text>
<paragraph id="H8B4A15F1C260452394E40416E03100B0"><enum>(1)</enum><text>45 days after the
date of the action described in subsection (a), or</text>
</paragraph><paragraph commented="no" id="H205027DD45C546C6AD42051C59952931"><enum>(2)</enum><text>January 31 of the
year following the calendar year during which such action occurred.</text>
</paragraph></subsection><subsection id="H3502C489D9294AAD925B00973C7D0003"><enum>(c)</enum><header>Statements To be
furnished to holders of specified securities or their
nominees</header><text>According to the forms or regulations prescribed by the
Secretary, every person required to make a return under subsection (a) with
respect to a specified security shall furnish to the nominee with respect to
the specified security (or certificate holder if there is no nominee) a written
statement showing—</text>
<paragraph id="H5908C6C1EA324D0FB130882376157B28"><enum>(1)</enum><text>the name, address,
and phone number of the information contact of the person required to make such
return,</text>
</paragraph><paragraph id="HA91CECDB8EFB421680417969550255F4"><enum>(2)</enum><text>the information
required to be shown on such return with respect to such security, and</text>
</paragraph><paragraph id="H1B62A00D51A74E7DA6824888A19600A5"><enum>(3)</enum><text>such other
information as the Secretary may prescribe.</text>
</paragraph><continuation-text continuation-text-level="subsection">The
written statement required under the preceding sentence shall be furnished to
the holder on or before January 31 of the year following the calendar year
during which the action described in subsection (a) occurred.</continuation-text></subsection><subsection commented="no" id="HA96C47B3649241ABA37F185CCD003B5B"><enum>(d)</enum><header>Specified
security</header><text>For purposes of this section, the term <term>specified
security</term> has the meaning given such term by section 6045(g)(3)(B). No
return shall be required under this section with respect to actions described
in subsection (a) with respect to a specified security which occur before the
applicable date (as defined in section 6045(g)(3)(C) with respect to such
security.</text>
</subsection><subsection id="HF5F5CCAC9FE241AE9144A52CB785CBD"><enum>(e)</enum><header>Public reporting
in lieu of return</header><text display-inline="yes-display-inline">The
Secretary may waive the requirement to file a return under subsections (a) and
(c) with respect to a specified security, if the person required to make the
return under subsections (a) and (c) makes publicly available, in such form and
manner as the Secretary determines necessary to carry out the purposes of this
section—</text>
<paragraph id="HADE5BF505356460F92C62FE939A6AF35"><enum>(1)</enum><text>the name, address,
phone number, and email address of the information contact of such person,
and</text>
</paragraph><paragraph id="HD336335A76EF44A6A62DACC6FA003C40"><enum>(2)</enum><text>the information
described in paragraphs (1), (2), and (3) of subsection
(a).</text>
</paragraph></subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="HCE6FCEC1859747919B1C4F93AE30262F"><enum>(2)</enum><header>Assessable
penalties</header>
<subparagraph id="H7C06BBEE7F284EE98986DE577392C116"><enum>(A)</enum><text>Subparagraph (B)
of section 6724(d)(1) of such Code (defining information return) is amended by
redesignating clauses (iv) through (xix) as clauses (v) through (xx),
respectively, and by inserting after clause (iii) the following new
clause:</text>
<quoted-block id="H5227DC33B22B4613B9A3321D5C157D24" style="OLC">
<clause id="HE0B0899D4AF042B5A300DDBEA97E9D7D"><enum>(iv)</enum><text>section 6045B(a)
(relating to returns relating to actions affecting basis of specified
securities),</text>
</clause><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph><subparagraph id="H72079E597A8E432AA118C2C53DC42182"><enum>(B)</enum><text>Paragraph (2) of
section 6724(d) of such Code (defining payee statement), as amended by
subsection (c)(2), is amended by redesignating subparagraphs (J) through (DD)
as subparagraphs (K) through (EE), respectively, and by inserting after
subparagraph (I) the following new subparagraph:</text>
<quoted-block id="H4D3B49E5569444B000CB3DE210150706" style="OLC">
<subparagraph id="HDCDC7307EFA64BEFA2F2808EC2CA5EA5"><enum>(J)</enum><text>subsections (d)
and (e) of section 6045B (relating to returns relating to actions affecting
basis of specified
securities).</text>
</subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph></paragraph><paragraph id="HC00F79ADC7F34899B73C0003A7B85CD1"><enum>(3)</enum><header>Clerical
amendment</header><text>The table of sections for subpart B of part III of
subchapter A of chapter 61 of such Code, as amended by subsection (b)(3), is
amended by inserting after the item relating to section 6045A the following new
item:</text>
<quoted-block id="H22FB6D6892B2406FB3AFE369C0FA6C33" style="OLC">
<toc regeneration="no-regeneration">
<toc-entry level="section">Sec. 6045B. Returns relating to actions
affecting basis of specified
securities.</toc-entry>
</toc>
<after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection commented="no" display-inline="no-display-inline" id="HEEB93A816A8145BF895635476D4E00CB"><enum>(e)</enum><header>Effective
date</header><text>The amendments made by this section shall take effect on
January 1, 2009.</text>
</subsection></section></part></subtitle><enum>II</enum><header>One-year
extenders</header>
<section id="H615CDF8E79B6450984FA6CD697E0B737"><enum>2001.</enum><header>Research
credit</header>
<subsection id="H4A555A85695D45E699F3C38208AFABF"><enum>(a)</enum><header>In
general</header><text>Subparagraph (B) of section 41(h)(1) (relating to
termination) is amended by striking <quote>December 31, 2007</quote> and
inserting <quote>December 31, 2008</quote>.</text>
</subsection><subsection id="HBC97142990E64C5BB2140875B0AC3907"><enum>(b)</enum><header>Conforming
amendment</header><text>Subparagraph (D) of section 45C(b)(1) (relating to
qualified clinical testing expenses) is amended by striking <quote>December 31,
2007</quote> and inserting <quote>December 31, 2008</quote>.</text>
</subsection><subsection id="H14BA4FAE08FD46E787376DAFA98A98F"><enum>(c)</enum><header>Effective
date</header><text>The amendments made by this section shall apply to amounts
paid or incurred after December 31, 2007.</text>
</subsection></section><section display-inline="no-display-inline" id="H12FD917F96A543E9BB365817C735F7B2" section-type="subsequent-section"><enum>2002.</enum><header>Indian employment
credit</header>
<subsection id="H994638FE5C754634BC764CB115865760"><enum>(a)</enum><header>In
general</header><text>Subsection (f) of section 45A (relating to termination)
is amended by striking <quote>December 31, 2007</quote> and inserting
<quote>December 31, 2008</quote>.</text>
</subsection><subsection id="H568E60AD31CE4728B6FDD9342CF1B308"><enum>(b)</enum><header>Effective
date</header><text>The amendment made by this section shall apply to taxable
years beginning after December 31, 2007.</text>
</subsection></section><section id="H760774BC72734740A85E010060018121"><enum>2003.</enum><header>New markets
tax credit</header><text display-inline="no-display-inline">Subparagraph (D) of
section 45D(f)(1) (relating to national limitation on amount of investments
designated) is amended by striking <quote>and 2008</quote> and inserting
<quote>2008, and 2009</quote>.</text>
</section><section id="H6D79774ABDC744C6A9D7EDB1059FB800"><enum>2004.</enum><header>Railroad track
maintenance</header>
<subsection id="H3D96A57D6C9C47819DBEA44CE3B56B3F"><enum>(a)</enum><header>In
general</header><text>Subsection (f) of section 45G (relating to application of
section) is amended by striking <quote>January 1, 2008</quote> and inserting
<quote>January 1, 2009</quote>.</text>
</subsection><subsection id="HBE74707E380349799E47543E5815769C"><enum>(b)</enum><header>Effective
date</header><text>The amendment made by this section shall apply to
expenditures paid or incurred during taxable years beginning after December 31,
2007.</text>
</subsection></section><section id="HF15206ED9709473D8E562DEDBF44B13E"><enum>2005.</enum><header>Mortgage
insurance premiums treated as interest</header>
<subsection id="HCEA38B7C319148C2A27ED9D57BC2CE8C"><enum>(a)</enum><header>In
general</header><text>Subclause (I) of section 163(h)(3)(E)(iv) (relating to
termination) is amended by striking <quote>December 31, 2007</quote> and
inserting <quote>December 31, 2008</quote>.</text>
</subsection><subsection id="HC9540C8ECBB94BF9BDA44746A71ECB40"><enum>(b)</enum><header>Effective
date</header><text>The amendment made by this section shall apply to amounts
paid or accrued after December 31, 2007.</text>
</subsection></section><section commented="no" display-inline="no-display-inline" id="HB2FDAE35D5044852BC6056D5A46AF7B" section-type="subsequent-section"><enum>2006.</enum><header>Deduction for State
and local sales taxes</header>
<subsection commented="no" id="H6384FC8E37794408B468F9AB11C56904"><enum>(a)</enum><header>In
general</header><text>Subparagraph (I) of section 164(b)(5) is amended by
striking <quote>January 1, 2008</quote> and inserting <quote>January 1,
2009</quote>.</text>
</subsection><subsection commented="no" id="H6A642AB987A944DB90DBA4F73200002B"><enum>(b)</enum><header>Effective
date</header><text>The amendment made by this section shall apply to taxable
years beginning after December 31, 2007.</text>
</subsection></section><section id="H109978772E2C4081B03799ECAADAEA66"><enum>2007.</enum><header>Fifteen-year
straight-line cost recovery for qualified leasehold improvements and qualified
restaurant property</header>
<subsection id="HA2BE50F780714A2E8DD1CCD08EA456B1"><enum>(a)</enum><header>In
general</header><text>Clauses (iv) and (v) of section 168(e)(3)(E) (relating to
15-year property) are each amended by striking <quote>January 1, 2008</quote>
and inserting <quote>January 1, 2009</quote>.</text>
</subsection><subsection id="H835ADAE7D67F41729416F32FEB839F43"><enum>(b)</enum><header>Effective
date</header><text>The amendments made by this section shall apply to property
placed in service after December 31, 2007.</text>
</subsection></section><section id="H36151EC261674D1384679DC37E19BF42"><enum>2008.</enum><header>Seven-year
cost recovery period for motorsports racing track facility</header>
<subsection id="HFEF5F94D2F47497F98191FCC9F4FA56C"><enum>(a)</enum><header>In
general</header><text>Subparagraph (D) of section 168(i)(15) (relating to
termination) is amended by striking <quote>December 31, 2007</quote> and
inserting <quote>December 31, 2008</quote>.</text>
</subsection><subsection id="HA6113B6DB1824AF4A386C4A6BF4600E6"><enum>(b)</enum><header>Effective
date</header><text>The amendment made by this section shall apply to property
placed in service after December 31, 2007.</text>
</subsection></section><section id="HD8C3242227FB4F8B8F6CC20030D526B9"><enum>2009.</enum><header>Accelerated
depreciation for business property on Indian reservation</header>
<subsection id="H87875697DC884C50853507FAF2B8317"><enum>(a)</enum><header>In
general</header><text>Paragraph (8) of section 168(j) (relating to termination)
is amended by striking <quote>December 31, 2007</quote> and inserting
<quote>December 31, 2008</quote>.</text>
</subsection><subsection id="H98DAA23691AA490EBF97F825963050D3"><enum>(b)</enum><header>Effective
date</header><text>The amendment made by this section shall apply to property
placed in service after December 31, 2007.</text>
</subsection></section><section id="HEC76B72602774C84A753D2B2776F06F5"><enum>2010.</enum><header>Expensing of
environmental remediation costs</header>
<subsection id="H0E9EEEC28B964C67994C473DD10100A9"><enum>(a)</enum><header>In
general</header><text>Subsection (h) of section 198 (relating to termination)
is amended by striking <quote>December 31, 2007</quote> and inserting
<quote>December 31, 2008</quote>.</text>
</subsection><subsection id="H99FAC0C4A8A446E087D99F8BCF8BD096"><enum>(b)</enum><header>Effective
date</header><text>The amendment made by this section shall apply to
expenditures paid or incurred after December 31, 2007.</text>
</subsection></section><section id="H196DFA13D86C459AA893216D975B87F4"><enum>2011.</enum><header>Deduction
allowable with respect to income attributable to domestic production activities
in Puerto Rico</header>
<subsection id="HE09C9686EF2C442EB14956002F43FCBA"><enum>(a)</enum><header>In
general</header><text>Subparagraph (C) of section 199(d)(8) (relating to
termination) is amended—</text>
<paragraph id="H50D41DBFCF594766B519FCA78DA26100"><enum>(1)</enum><text>by striking
<quote>first 2 taxable years</quote> and inserting <quote>first 3 taxable
years</quote>, and</text>
</paragraph><paragraph id="H55C685EBB5B1427091F12BDF969800AD"><enum>(2)</enum><text>by striking
<quote>January 1, 2008</quote> and inserting <quote>January 1,
2009</quote>.</text>
</paragraph></subsection><subsection id="H077806D4C0F34341A673DB7682B36B82"><enum>(b)</enum><header>Effective
date</header><text>The amendments made by this section shall apply to taxable
years beginning after December 31, 2007.</text>
</subsection></section><section display-inline="no-display-inline" id="H0911F6083497447BADAC09E0B98D67E8" section-type="subsequent-section"><enum>2012.</enum><header>Deduction of
qualified tuition and related expenses</header>
<subsection id="H368783DD7DA3431393444914D220F212"><enum>(a)</enum><header>In
general</header><text>Subsection (e) of section 222 (relating to termination)
is amended by striking <quote>December 31, 2007</quote> and inserting
<quote>December 31, 2008</quote>.</text>
</subsection><subsection id="H2C328B0E0ABA43FB811DB19FDF3E023D"><enum>(b)</enum><header>Effective
date</header><text>The amendment made by this section shall apply to taxable
years beginning after December 31, 2007.</text>
</subsection></section><section id="HC327A6861A0B41EF86E595C6F5047808"><enum>2013.</enum><header>Modification
of tax treatment of certain payments to controlling exempt
organizations</header>
<subsection id="H64C925302C9846479F17DB89EB395E16"><enum>(a)</enum><header>In
general</header><text>Clause (iv) of section 512(b)(13)(E) (relating to
termination) is amended by striking <quote>December 31, 2007</quote> and
inserting <quote>December 31, 2008</quote>.</text>
</subsection><subsection id="H0F5CA84F487C4A4DBF01AC98A6076140"><enum>(b)</enum><header>Effective
date</header><text>The amendment made by this section shall apply to payments
received or accrued after December 31, 2007.</text>
</subsection></section><section id="HE92E18ACDC924C128B2591CFFBAD3318"><enum>2014.</enum><header>Treatment of
certain dividends of regulated investment companies</header>
<subsection id="H6571314F159F40F2AF74F07F9B99553B"><enum>(a)</enum><header>Interest-related
dividends</header><text>Subparagraph (C) of section 871(k)(1) (defining
interest-related dividend) is amended by striking <quote>December 31,
2007</quote> and inserting <quote>December 31, 2008</quote>.</text>
</subsection><subsection display-inline="no-display-inline" id="H37A2A5EE703D42430031C9048FD3EA06"><enum>(b)</enum><header>Short-term
capital gain dividends</header><text display-inline="yes-display-inline">Subparagraph (C) of section 871(k)(2)
(defining short-term capital gain dividend) is amended by striking
<quote>December 31, 2007</quote> and inserting <quote>December 31,
2008</quote>.</text>
</subsection><subsection id="HE71CC284151A4FF28F36E3AB773626F3"><enum>(c)</enum><header>Effective
date</header><text>The amendments made by this section shall apply to dividends
with respect to taxable years of regulated investment companies beginning after
December 31, 2007.</text>
</subsection></section><section commented="no" display-inline="no-display-inline" id="H13AE07DA7B2543FA990116A94DDFC818" section-type="subsequent-section"><enum>2015.</enum><header>Extension and
modification of credit to holders of qualified zone academy bonds</header>
<subsection commented="no" id="H5DDD9190EF154C30A9D76D27AAFCAA13"><enum>(a)</enum><header>In
general</header><text>Subsection (e) of section 1397E (relating to limitation
on amount of bonds designated) is amended by striking <quote>1998, 1999, 2000,
2001, 2002, 2003, 2004, 2005, 2006, and 2007</quote> and inserting <quote>each
of calendar years 1998 through 2008</quote>.</text>
</subsection><subsection id="H2CB7FF17DE3E426399FC65686BE8002B"><enum>(b)</enum><header>Modification of
arbitrage rules</header>
<paragraph id="H756EF2EF0A1F4435BB76FA321118CC72"><enum>(1)</enum><header>In
general</header><text>Subsection (g) of section 1397E (relating to special
rules relating to arbitrage) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H9BB4A9490DA149C0B79C9B2960E7CB9" style="OLC">
<subsection id="HCB969D299292443FBDD57FA91BC75703"><enum>(g)</enum><header>Special rules
relating to arbitrage</header>
<paragraph id="H0F29545002E34FE7B442D57B9F80A6F8"><enum>(1)</enum><header>In
general</header><text>An issue shall be treated as meeting the requirements of
this subsection if the issuer satisfies the requirements of section 148 with
respect to the proceeds of the issue.</text>
</paragraph><paragraph id="H8E9A56B126DF4C2389CCD4DBA5F5682"><enum>(2)</enum><header>Special rule for
investments during expenditure period</header><text>An issue shall not be
treated as failing to meet the requirements of paragraph (1) by reason of any
investment of available project proceeds during the 5-year period described in
subsection (f)(1)(A) (including any extension of such period under subsection
(f)(2)).</text>
</paragraph><paragraph id="H45DA94997AAF48B9B78CA86F389155FF"><enum>(3)</enum><header>Special rule for
reserve funds</header><text>An issue shall not be treated as failing to meet
the requirements of paragraph (1) by reason of any fund which is expected to be
used to repay such issue if—</text>
<subparagraph id="H9CD5E6DD1D9049889028FB2BBBE0C7F5"><enum>(A)</enum><text>such fund is
funded at a rate not more rapid than equal annual installments,</text>
</subparagraph><subparagraph id="H397E2D87F4824644A8A5E4E5776444FA"><enum>(B)</enum><text>such fund is
funded in a manner that such fund will not exceed the amount necessary to repay
the issue if invested at the maximum rate permitted under subparagraph (C),
and</text>
</subparagraph><subparagraph id="HDFD2CDBD0CE24875885DEA142677D874"><enum>(C)</enum><text>the yield on such
fund is not greater than the discount rate determined under subsection (d)(3)
with respect to the
issue.</text>
</subparagraph></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="HEA02E0659E094B5F8B5B86CA87839B47"><enum>(2)</enum><header>Application of
available project proceeds to other requirements</header><text>Subsections
(d)(1)(A), (d)(2)(A), (f)(1)(A), (f)(1)(B), (f)(1)(C), and (f)(3) of section
1397E are each amended by striking <quote>proceeds</quote> and inserting
<quote>available project proceeds</quote></text>
</paragraph><paragraph id="H05C0F9564D0E4B4B90324BC0BAED700"><enum>(3)</enum><header>Available project
proceeds defined</header><text>Subsection (i) of section 1397E (relating to
definitions) is amended by adding at the end the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="HECC6B74A28B94525A7F87BC02B88B4C5" style="OLC">
<paragraph id="H51A4FE856F704E11A717B568FC24DD30"><enum>(4)</enum><header>Available
project proceeds</header><text>The term <term>available project proceeds</term>
means—</text>
<subparagraph id="H294769AB3A5D475D98BB6EC400D5C1CB"><enum>(A)</enum><text display-inline="yes-display-inline">the excess of—</text>
<clause id="H4F7B3A8C2081454AA89BA25CF3AA1D22"><enum>(i)</enum><text>the proceeds from
the sale of an issue, over</text>
</clause><clause id="H3CCF893963B24BDB86286651D0C3308F"><enum>(ii)</enum><text>the issuance
costs financed by the issue (to the extent that such costs do not exceed 2
percent of such proceeds), and</text>
</clause></subparagraph><subparagraph id="HBEA74F025FCF452592D5929D981B0077"><enum>(B)</enum><text>the proceeds from
any investment of the excess described in subparagraph
(A).</text>
</subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection commented="no" id="H726822EF43794076BC552E70DFB40074"><enum>(c)</enum><header>Effective
date</header>
<paragraph id="HD3CBEDE14121415597F31FB6A634C1F2"><enum>(1)</enum><header>Extension</header><text>The
amendment made by subsection (a) shall apply to obligations issued after
December 31, 2007.</text>
</paragraph><paragraph id="H99540C7F45A04144B83100C6FFB2EEEE"><enum>(2)</enum><header>Modification of
arbitrage rules</header><text>The amendments made by subsection (b) shall apply
to obligations issued after the date of the enactment of this Act.</text>
</paragraph></subsection></section><section id="H4317FAEBCB8342CC8C993BD1D9DF7FA3"><enum>2016.</enum><header>Tax incentives
for investment in the District of Columbia</header>
<subsection id="H6CA9CB8230E54CB2831DD3E043F26C7"><enum>(a)</enum><header>Designation of
Zone</header>
<paragraph id="H1AAF6856CEB0421B9F619528D8E9F03"><enum>(1)</enum><header>In
general</header><text>Subsection (f) of section 1400 is amended by striking
<quote>2007</quote> both places it appears and inserting
<quote>2008</quote>.</text>
</paragraph><paragraph id="H1260185AEFAB4891905E71F302FC00A5"><enum>(2)</enum><header>Effective
date</header><text>The amendments made by this subsection shall apply to
periods beginning after December 31, 2007.</text>
</paragraph></subsection><subsection id="H477C9716FFB942B9837BDBF587CD0D5"><enum>(b)</enum><header>Tax-Exempt
Economic Development Bonds</header>
<paragraph id="H7FC24CE25FF947C688F975B66375FAB1"><enum>(1)</enum><header>In
general</header><text>Subsection (b) of section 1400A is amended by striking
<quote>2007</quote> and inserting <quote>2008</quote>.</text>
</paragraph><paragraph id="HDA1F6770033B4350A324E274ECD05B13"><enum>(2)</enum><header>Effective
date</header><text>The amendment made by this subsection shall apply to bonds
issued after December 31, 2007.</text>
</paragraph></subsection><subsection id="H21ABF760437E476A961E7BE257C9022D"><enum>(c)</enum><header>Zero Percent
Capital Gains Rate</header>
<paragraph id="H06B946466E11473B85D913C30512E26"><enum>(1)</enum><header>In
general</header><text>Subsection (b) of section 1400B is amended by striking
<quote>2008</quote> each place it appears and inserting
<quote>2009</quote>.</text>
</paragraph><paragraph id="H6C8C6FD31C184013A482F04F85D9364D"><enum>(2)</enum><header>Conforming
amendments</header>
<subparagraph commented="no" id="H2E2E713D95044709B8E0D8B50EDFB15"><enum>(A)</enum><text>Section 1400B(e)(2)
is amended—</text>
<clause commented="no" id="HA7BD18DB79B34E7DAF1BBB1C6C891FAE"><enum>(i)</enum><text>by striking
<quote>2012</quote> and inserting <quote>2013</quote>, and</text>
</clause><clause commented="no" id="HDEBAD1F1BC5148C98C7CD3702BDD8DE"><enum>(ii)</enum><text>by striking
<quote><header-in-text level="paragraph" style="OLC">2012</header-in-text></quote> in the heading thereof and inserting
<quote><header-in-text level="paragraph" style="OLC">2013</header-in-text></quote>.</text>
</clause></subparagraph><subparagraph commented="no" id="HC82F64EAECE8429584AC83EA00F301A4"><enum>(B)</enum><text>Section
1400B(g)(2) is amended by striking <quote>2012</quote> and inserting
<quote>2013</quote>.</text>
</subparagraph><subparagraph commented="no" id="HD95F1B747B784430962F2FA05E8BDCF1"><enum>(C)</enum><text>Section 1400F(d)
is amended by striking <quote>2012</quote> and inserting
<quote>2013</quote>.</text>
</subparagraph></paragraph><paragraph id="H8AA32A6CAFC043118D4B02D97C01B7"><enum>(3)</enum><header>Effective
dates</header>
<subparagraph id="H5C950415B1B240EC921C7300A2A52FD0"><enum>(A)</enum><header>Extension</header><text>The
amendments made by paragraph (1) shall apply to acquisitions after December 31,
2007.</text>
</subparagraph><subparagraph id="H332638DC40E5400B00F2285794842038"><enum>(B)</enum><header>Conforming
amendments</header><text>The amendments made by paragraph (2) shall take effect
on the date of the enactment of this Act.</text>
</subparagraph></paragraph></subsection><subsection id="H991FB2D6A88D4650896D00E98D74614C"><enum>(d)</enum><header>First-Time
Homebuyer Credit</header>
<paragraph id="H757C6D62AD0840B9B3565E8E76E116F5"><enum>(1)</enum><header>In
general</header><text>Subsection (i) of section 1400C is amended by striking
<quote>2008</quote> and inserting <quote>2009</quote>.</text>
</paragraph><paragraph id="H39DEE748EDAD4E94B75529F9434E2CB0"><enum>(2)</enum><header>Effective
date</header><text>The amendment made by this subsection shall apply to
property purchased after December 31, 2007.</text>
</paragraph></subsection></section><section id="HF81E84C7BCA3416BAE9E924EEF971300"><enum>2017.</enum><header>Disclosure for
combined employment tax reporting</header>
<subsection id="HF27C5015B6224A4AA056D6FB88C9E9C"><enum>(a)</enum><header>In
general</header><text>Subparagraph (B) of section 6103(d)(5) (relating to
termination) is amended by striking <quote>December 31, 2007</quote> and
inserting <quote>December 31, 2008</quote>.</text>
</subsection><subsection id="H6724776BE56D41C4979FCE84967933C8"><enum>(b)</enum><header>Effective
date</header><text>The amendment made by this section shall apply to
disclosures after December 31, 2007.</text>
</subsection></section><section id="HCCBC84DF674B459D987009A68BBADAB3"><enum>2018.</enum><header>Disclosure of
return information to apprise appropriate officials of terrorist
activities</header>
<subsection id="H123956A07B1046B39DAAA25317865832"><enum>(a)</enum><header>In
general</header><text>Clause (iv) of section 6103(i)(3)(C) (relating to
termination) is amended by striking <quote>December 31, 2007</quote> and
inserting <quote>December 31, 2008</quote>.</text>
</subsection><subsection id="H044A0C74042A4F159900886EC6872CF7"><enum>(b)</enum><header>Effective
date</header><text>The amendment made by this section shall apply to
disclosures after December 31, 2007.</text>
</subsection></section><section id="H861F113D5C6847F300E85DE3251E0251"><enum>2019.</enum><header>Disclosure
upon request of information relating to terrorist activities</header>
<subsection id="H33D43C21EEDA4BD6938F8301A33D991B"><enum>(a)</enum><header>In
general</header><text>Subparagraph (E) of section 6103(i)(7) (relating to
termination) is amended by striking <quote>December 31, 2007</quote> and
inserting <quote>December 31, 2008</quote>.</text>
</subsection><subsection id="HD5A4373760014A61B3256D4C810056EF"><enum>(b)</enum><header>Effective
date</header><text>The amendment made by this section shall apply to
disclosures after December 31, 2007.</text>
</subsection></section><section id="H450DA64E386849C298FA55AFC33BD100"><enum>2020.</enum><header>Disclosure of
return information to carry out income contingent repayment of student
loans</header>
<subsection id="HB12EFAE9C4E64E3184D361D33D25F76F"><enum>(a)</enum><header>In
general</header><text>Subparagraph (D) of section 6103(l)(13) (relating to
termination) is amended by striking <quote>December 31, 2007</quote> and
inserting <quote>December 31, 2008</quote>.</text>
</subsection><subsection id="HC67EE57B0ACF4F829B044F36E2F18700"><enum>(b)</enum><header>Effective
date</header><text>The amendment made by this section shall apply to requests
made after December 31, 2007.</text>
</subsection></section><section id="HEA8382525DD3413492DDAE862DA1CE2"><enum>2021.</enum><header>Authority for
undercover operations</header>
<subsection id="H2A24DC1770394244934859717FB657C9"><enum>(a)</enum><header>In
general</header><text>Paragraph (6) of section 7608(c) (relating to application
of section) is amended by striking <quote>January 1, 2008</quote> each place it
appears and inserting <quote>January 1, 2009</quote>.</text>
</subsection><subsection id="HC6078D06119649689F22BD15CE90ACB6"><enum>(b)</enum><header>Effective
date</header><text>The amendment made by this section shall take effect on
January 1, 2008.</text>
</subsection></section><section id="HD360BDD1E3094BE08E67FBD8EA22E8D7"><enum>2022.</enum><header>Increase in
limit on cover over of rum excise tax to Puerto Rico and the Virgin
Islands</header>
<subsection id="HF82D70E407FE4F499C2157E93B304E00"><enum>(a)</enum><header>In
general</header><text>Paragraph (1) of section 7652(f) is amended by striking
<quote>January 1, 2008</quote> and inserting <quote>January 1,
2009</quote>.</text>
</subsection><subsection id="H3BAC33E3A1714815A033A998ECFF683F"><enum>(b)</enum><header>Effective
date</header><text>The amendment made by this section shall apply to distilled
spirits brought into the United States after December 31, 2007.</text>
</subsection></section><section id="H59F20A817A804EDD9B790388F6DC60D8"><enum>2023.</enum><header>Parity in the
application of certain limits to mental health benefits</header>
<subsection id="HF64935DC2C43466290FFF65F69F9873E"><enum>(a)</enum><header>In
general</header><text>Paragraph (3) of section 9812(f) (relating to application
of section) is amended by striking <quote>December 31, 2007</quote> and
inserting <quote>December 31, 2008</quote>.</text>
</subsection><subsection id="HE2A6539D60CC40AE9CC3CFAB9CF8BABF"><enum>(b)</enum><header>Effective
date</header><text>The amendment made by this section shall apply to benefits
for services furnished after December 31, 2007.</text>
</subsection></section><section id="H95EED196C3BB40E59CAC7D5E65FA788C"><enum>2024.</enum><header>Extension of
economic development credit for American Samoa</header>
<subsection id="HD72B97E896114B98914481F315A69111"><enum>(a)</enum><header>In
general</header><text display-inline="yes-display-inline">Subsection (d) of
section 119 of division A of the Tax Relief and Health Care Act of 2006 is
amended—</text>
<paragraph id="H450099B466294B98A8E0D94F79DEEC8"><enum>(1)</enum><text>by
striking <quote>first two taxable years</quote> and inserting <quote>first 3
taxable years</quote>, and</text>
</paragraph><paragraph id="HC294B4BACE7C46C6AD6E8C02C869734B"><enum>(2)</enum><text>by striking
<quote>January 1, 2008</quote> and inserting <quote>January 1,
2009</quote>.</text>
</paragraph></subsection><subsection id="HF3ED8E784D594A4700D9A7021D03D431"><enum>(b)</enum><header>Effective
date</header><text>The amendment made by this section shall apply to taxable
years beginning after December 31, 2007.</text>
</subsection></section><section display-inline="no-display-inline" id="HFC8D5C6402A649419887DCAB5F95D19" section-type="subsequent-section"><enum>2025.</enum><header>Qualified
conservation contributions</header>
<subsection id="HBFB0759BCA3C4734A8B467FA2DD90623"><enum>(a)</enum><header>In
general</header><text>Clause (vi) of section 170(b)(1)(E) (relating to
termination) is amended by striking <quote>December 31, 2007</quote> and
inserting <quote>December 31, 2008</quote>.</text>
</subsection><subsection id="H9A9A6C8A59AD4B04BBAEE223356F78D"><enum>(b)</enum><header>Effective
date</header><text>The amendment made by this section shall apply to
contributions made in taxable years beginning after December 31, 2007.</text>
</subsection></section><section id="H8E64E530DB4B4DC2A96B6F6DBE17CB06"><enum>2026.</enum><header>Enhanced
charitable deduction for contributions of food inventory</header>
<subsection id="HFFE3C000BB0746A5BB3F3DE3404AF7"><enum>(a)</enum><header>In
general</header><text>Clause (iv) of section 170(e)(3)(C) (relating to
termination) is amended by striking <quote>December 31, 2007</quote> and
inserting <quote>December 31, 2008</quote>.</text>
</subsection><subsection id="H6837DE957F334372BD51B2EBFE545C43"><enum>(b)</enum><header>Effective
date</header><text>The amendment made by this section shall apply to
contributions made after December 31, 2007.</text>
</subsection></section><section display-inline="no-display-inline" id="H247684B491DD43A683EBDCC47CC35B9" section-type="subsequent-section"><enum>2027.</enum><header>Enhanced charitable
deduction for contributions of book inventory to public schools</header>
<subsection id="H6F12994689974B6C8E45209734603661"><enum>(a)</enum><header>In
general</header><text>Clause (iv) of section 170(e)(3)(D) (relating to
termination) is amended by striking <quote>December 31, 2007</quote> and
inserting <quote>December 31, 2008</quote>.</text>
</subsection><subsection id="HE5F37AFBB20E48C396CCC723701F9625"><enum>(b)</enum><header>Effective
date</header><text>The amendment made by this section shall apply to
contributions made after December 31, 2007.</text>
</subsection></section><section id="H4EAA50EF74AB4EECB4AFC0EAC46ECB92"><enum>2028.</enum><header>Enhanced
deduction for qualified computer contributions</header>
<subsection id="HD9BF0B759D044BF18ECDAA3F58B2688"><enum>(a)</enum><header>In
general</header><text>Subparagraph (G) of section 170(e)(6) (relating to
termination) is amended by striking <quote>December 31, 2007</quote> and
inserting <quote>December 31, 2008</quote>.</text>
</subsection><subsection id="H82BADF45C55A4EE2B784109D7FC4E1DC"><enum>(b)</enum><header>Effective
date</header><text>The amendment made by this section shall apply to
contributions made during taxable years beginning after December 31,
2007.</text>
</subsection></section><section display-inline="no-display-inline" id="HBE1ED2DFA39F4B72B75D702DCC851F82" section-type="subsequent-section"><enum>2029.</enum><header>Tax-free
distributions from individual retirement plans for charitable purposes</header>
<subsection id="H043D149B7F98453BBE7D2EC237A200F0"><enum>(a)</enum><header>In
general</header><text>Subparagraph (F) of section 408(d)(8) (relating to
termination) is amended by striking <quote>December 31, 2007</quote> and
inserting <quote>December 31, 2008</quote>.</text>
</subsection><subsection id="HA3FD08413557463DB818980057E367BD"><enum>(b)</enum><header>Effective
date</header><text>The amendment made by this section shall apply to
distributions made in taxable years beginning after December 31, 2007.</text>
</subsection></section><section display-inline="no-display-inline" id="H192138D5F89C49E6B630D32E9900037E" section-type="subsequent-section"><enum>2030.</enum><header>Basis adjustment to
stock of S corporations making charitable contributions of property</header>
<subsection id="H98037D14367D40DB838FBE8C6F5E6B9C"><enum>(a)</enum><header>In
general</header><text>The last sentence of section 1367(a)(2) (relating to
decreases in basis) is amended by striking <quote>December 31, 2007</quote> and
inserting <quote>December 31, 2008</quote>.</text>
</subsection><subsection display-inline="no-display-inline" id="HF54430467BB14DA886C1009C4D05C3AA"><enum>(b)</enum><header>Technical
amendment related to section 1203 of the Pension Protection Act of
2006</header><text>Subsection (d) of section 1366 is amended by adding at the
end the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="H2A490A3FBB7E467987002549124B3F96" style="OLC">
<paragraph commented="no" id="HDE3C9EEFB4014D83803FC9846C2C2882"><enum>(4)</enum><header>Application of
limitation on charitable contributions</header><text>In the case of any
charitable contribution of property to which the second sentence of section
1367(a)(2) applies, paragraph (1) shall not apply to the extent of the excess
(if any) of—</text>
<subparagraph commented="no" id="HECB0D3A5E35247BD98D8012F9754597C"><enum>(A)</enum><text>the shareholder’s
pro rata share of such contribution, over</text>
</subparagraph><subparagraph commented="no" id="H7DB4D9AF150E4F708DD546CE4834B43D"><enum>(B)</enum><text>the shareholder’s
pro rata share of the adjusted basis of such
property.</text>
</subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="HD726C94443224E01A7E8C4373591AE4C"><enum>(c)</enum><header>Effective
date</header>
<paragraph id="HBE8684B1EC044F94BD244866B8BDA7C"><enum>(1)</enum><header>In
general</header><text>Except as provided in paragraph (2), the amendments made
by this section shall apply to contributions made in taxable years beginning
after December 31, 2007.</text>
</paragraph><paragraph id="H881DF163F44348D0865C0092C83DBDF2"><enum>(2)</enum><header>Technical
amendment</header><text>The amendment made by subsection (b)shall take effect
as if included in the provision of the Pension Protection Act of 2006 to which
it relates.</text>
</paragraph></subsection></section><section id="H406032AA87AC43E6932DE34D0265E7CB"><enum>2031.</enum><header>Deduction for
certain expenses of elementary and secondary school teachers</header>
<subsection id="HF5EEB86D797845D9A215450007B3CB46"><enum>(a)</enum><header>In
general</header><text display-inline="yes-display-inline">Subparagraph (D) of
section 62(a)(2) (relating to certain expenses of elementary and secondary
school teachers) is amended by striking <quote>or 2007</quote> and inserting
<quote>2007, or 2008</quote>.</text>
</subsection><subsection id="HBC8B0662C20F442982D3CAD00DDB64"><enum>(b)</enum><header>Effective
date</header><text>The amendment made by subsection (a) shall apply to taxable
years beginning after December 31, 2007.</text>
</subsection></section><section display-inline="no-display-inline" id="H1C73672CC7D0436BB3F4E2C72F39455" section-type="subsequent-section"><enum>2032.</enum><header>Election to include
combat pay as earned income for purposes of earned income tax credit</header>
<subsection id="H066A328B8B564EAD947EA2C3A76F608E"><enum>(a)</enum><header>In
general</header><text>Subclause (II) of section 32(c)(2)(B)(vi) (defining
earned income) is amended by striking <quote>January 1, 2008</quote> and
inserting <quote>January 1, 2009</quote>.</text>
</subsection><subsection id="H541BA52C6B384E559F558018BA6372A2"><enum>(b)</enum><header>Effective
date</header><text>The amendment made by this section shall apply to taxable
years ending after December 31, 2007.</text>
</subsection></section><section display-inline="no-display-inline" id="H7AF1D5BB128B43F1B562C73637A731F" section-type="subsequent-section"><enum>2033.</enum><header>Modification of
mortgage revenue bonds for veterans</header>
<subsection id="HE8B0B9FE85B44D7D92884CEB22CAB8F"><enum>(a)</enum><header>Qualified
mortgage bonds used To finance residences for veterans without regard to
first-time homebuyer requirement</header><text>Subparagraph (D) of section
143(d)(2) (relating to exceptions) is amended by striking <quote>January 1,
2008</quote> and inserting <quote>January 1, 2009</quote>.</text>
</subsection><subsection id="HA480E0E92CA74D5DA5C93B2523C3C303"><enum>(b)</enum><header>Effective
date</header><text>The amendment made by this section shall apply to bonds
issued after December 31, 2007.</text>
</subsection></section><section display-inline="no-display-inline" id="H60B794101A6C47BA9DBB3FFFCE6ABD8" section-type="subsequent-section"><enum>2034.</enum><header>Distributions from
retirement plans to individuals called to active duty</header>
<subsection id="H57069AAF202C4B5486271CEEC8B4DF5E"><enum>(a)</enum><header>In
general</header><text>Clause (iv) of section 72(t)(2)(G) is amended by striking
<quote>December 31, 2007</quote> and inserting <quote>December 31,
2008</quote>.</text>
</subsection><subsection id="H318331569F864443A0E836FC33FE0826"><enum>(b)</enum><header>Effective
date</header><text>The amendment made by this section shall apply to
individuals ordered or called to active duty on or after December 31,
2007.</text>
</subsection></section><section id="H6D2636AA9D994D53B0EDA94C39DF49CF"><enum>2035.</enum><header>Stock in RIC
for purposes of determining estates of nonresidents not citizens</header>
<subsection id="HAFFAB50AD02340BD911C1300B87E27E4"><enum>(a)</enum><header>In
general</header><text display-inline="yes-display-inline">Paragraph (3) of
section 2105(d) (relating to stock in a RIC) is amended by striking
<quote>December 31, 2007</quote> and inserting <quote>December 31,
2008</quote>.</text>
</subsection><subsection id="H0F50791A1D2A4C9F964C247BB1B6BF16"><enum>(b)</enum><header>Effective
date</header><text>The amendment made by this section shall apply to decedents
dying after December 31, 2007.</text>
</subsection></section><section id="H5DF67FCF22544DBEB81983D8E36E778E"><enum>2036.</enum><header>Qualified
investment entities</header>
<subsection id="H64506A0A8F7C46F58B814B68D82018A3"><enum>(a)</enum><header>In
general</header><text display-inline="yes-display-inline">Clause (ii) of
section 897(h)(4)(A) (relating to termination) is amended by striking
<quote>December 31, 2007</quote> and inserting <quote>December 31,
2008</quote>.</text>
</subsection><subsection id="H8104FBEAD0BD49C593C2C56C545E515D"><enum>(b)</enum><header>Effective
date</header><text>The amendment made by subsection (a) shall take effect on
January 1, 2008.</text>
</subsection></section><section id="H1152F5A3EA8B47EF985F4D06396B2FAD"><enum>2037.</enum><header>Disclosure of
return information for certain veterans programs</header>
<subsection id="H213C23351E994554BC2E807F09B68E8E"><enum>(a)</enum><header>In
general</header><text display-inline="yes-display-inline">The last sentence of
paragraph (7) of section 6103(l) is amended by striking <quote>September 30,
2008</quote> and inserting <quote>December 31, 2008</quote>.</text>
</subsection><subsection id="H0F91F3A8D9F945F7AB09E58274B73FB"><enum>(b)</enum><header>Effective
date</header><text>The amendment made by subsection (a) shall apply to requests
made after September 30, 2008.</text>
</subsection></section><enum>III</enum><header>Corporate tax
reform</header>
<subtitle id="HAD035F0D0F9A4AA8BDEF978F96B09C79"><enum>A</enum><header>Corporate rate
reduction</header>
<section id="HCAE8193906A149CB8DFA62B3B3426B00"><enum>3001.</enum><header>Reduction in
top corporate marginal rate</header>
<subsection id="H5A083C2772DA4EF18ED050D24EC58F4D"><enum>(a)</enum><header>General
rule</header><text display-inline="yes-display-inline">Paragraph (1) of section
11(b) (relating to amount of tax) is amended—</text>
<paragraph id="H2B8406563B34413D00417B57D8FAFBFF"><enum>(1)</enum><text>by inserting “and”
at the end of subparagraph (B),</text>
</paragraph><paragraph id="H271841ED22DC4979A475B3B6BCAC1AD"><enum>(2)</enum><text>by
striking subparagraphs (C) and (D) and inserting the following:</text>
<quoted-block display-inline="no-display-inline" id="H4385C8F9518646DC9706A81E99136E73" style="OLC">
<subparagraph id="H9A5CD8B4E01C4F6DABD6BC819BAC1632"><enum>(C)</enum><text>30.5 percent of so
much of the taxable income as exceeds
$75,000.</text>
</subparagraph><after-quoted-block>,
and</after-quoted-block></quoted-block>
</paragraph><paragraph id="H8CD7EB4F78DF49DD84FCAA81EEF7421F"><enum>(3)</enum><text>by striking
“$11,750” and all that follows and inserting <quote>$9,125.</quote>.</text>
</paragraph></subsection><subsection id="H02CF0237412C4055BAA94CD065D3727"><enum>(b)</enum><header>Personal service
corporations</header><text>Paragraph (2) of section 11(b) is amended by
striking <quote>35 percent</quote> and inserting <quote>30.5 percent</quote>.</text>
</subsection><subsection id="H9F4E2B4818BF4FCDB9B982E5B8BFCEE5"><enum>(c)</enum><header>Conforming
amendments</header><text>Paragraphs (1) and (2) of section 1445(e) are each
amended by striking <quote>35 percent</quote> and inserting <quote>30.5
percent</quote>.</text>
</subsection><subsection id="H2EC463012A234B41BF3F6665FCF8F73B"><enum>(d)</enum><header>Effective
date</header><text>The amendments made by this section shall apply to taxable
years beginning after December 31, 2008, except that the amendments made by
subsection (c) shall take effect on January 1, 2009.</text>
</subsection></section></subtitle><subtitle id="HBAF70216A843457AA92168F7671BB3D9"><enum>B</enum><header>Repeal of
deduction for income attributable to domestic production activities</header>
<section id="H4FBEEBAB724B489380CD0392FDAB082D"><enum>3101.</enum><header>Repeal of
deduction for income attributable to domestic production activities</header>
<subsection id="HC29C719036E24D15AAAA89F9E8E3EC5F"><enum>(a)</enum><header>In
general</header><text>Section 199 is repealed.</text>
</subsection><subsection id="H034DC77A942541D2B700BAD597E3C7A7"><enum>(b)</enum><header>Conforming
amendments</header>
<paragraph id="HD25FB8186E9C4BFABBAB17C4A399BD1"><enum>(1)</enum><text>Sections
86(b)(2)(A), 135(c)(4)(A), 137(b)(3)(A), 219(g)(3)(A)(ii), 221(b)(2)(C),
222(b)(2)(C), 246(b)(1), and 469(i)(3)(F) are each amended by striking
<quote>199,</quote>.</text>
</paragraph><paragraph id="H8D9D67CFF031454DB1D05518347BA05E"><enum>(2)</enum><text>Clauses (i)(II)
and (ii)(II) of section 56(d)(1)(A) are each amended by striking <quote>and the
deduction under section 199</quote>.</text>
</paragraph><paragraph id="H60F320E2B32845F9B589A483B4124917"><enum>(3)</enum><text>Clause (i) of
section 163(j)(6)(A) is amended by inserting <quote>and</quote> at the end of
subclause (II), by striking subclause (III) and by redesignating subclause (IV)
as subclause (III).</text>
</paragraph><paragraph id="H1F4BDD10772E4FBF84417982835073B7"><enum>(4)</enum><text>Subparagraph (C)
of section 170(b)(2) is amended by striking clause (iv), by redesignating
clause (v) as clause (iv), and by inserting <quote>and</quote> at the end of
clause (iii).</text>
</paragraph><paragraph id="H789199B346BA4C3BAA2600A0F49112D8"><enum>(5)</enum><text>Subsection (d) of
section 172 is amended by striking paragraph (7).</text>
</paragraph><paragraph id="HD008A8AD95AB4CE5B46E52EDB856EE5"><enum>(6)</enum><text>Subsection (a) of
section 613 is amended by striking <quote>and without the deduction under
section 199</quote>.</text>
</paragraph><paragraph id="HD5E4C5D711C848C8A386D1756BFBCA46"><enum>(7)</enum><text>Paragraph (1) of
section 613A(d) is amended by redesignating subparagraphs (C), (D), and (E) as
subparagraphs (B), (C), and (D), respectively, and by striking subparagraph
(B).</text>
</paragraph><paragraph id="HECB8C1C134B943E597F372008BA08EFD"><enum>(8)</enum><text>Subsection (a) of
section 1402 is amended by inserting <quote>and</quote> at the end of paragraph
(15), by striking paragraph (16), and by redesignating paragraph (17) as
paragraph (16).</text>
</paragraph><paragraph id="H4FADA1963B87471A85D832504EA7A928"><enum>(9)</enum><text>The table of
sections for part VI of subchapter B of chapter 1 is amended by striking the
item relating to section 199.</text>
</paragraph></subsection><subsection id="HE8F72A4D6D3548D9BFB239EC553B3518"><enum>(c)</enum><header>Effective
date</header><text>The amendments made by this section shall apply to taxable
years beginning after December 31, 2008.</text>
</subsection></section></subtitle><subtitle id="H67F60175C5944DC2991F63543D928663"><enum>C</enum><header>Provisions related
to foreign source income</header>
<section display-inline="no-display-inline" id="H2E9F6CC15B284B3D91F7B5E5044DA200" section-type="subsequent-section"><enum>3201.</enum><header>Allocation of
expenses and taxes on basis of repatriation of foreign income</header>
<subsection id="H43EF7191267E403DB37900BD3893E4B7"><enum>(a)</enum><header>In
general</header><text>Part III of subchapter N of chapter 1 is amended by
inserting after subpart G the following new subpart:</text>
<quoted-block display-inline="no-display-inline" id="HD52A43474A684C5BBFFF8CD500D88694" style="OLC">
<subpart id="H379C5A4DBB9B4D0CB2A0AB45FFF2A822"><enum>H</enum><header>Special Rules for
Allocation of Foreign-Related Deductions and Foreign Tax Credits</header>
<toc container-level="subpart-container" idref="H379C5A4DBB9B4D0CB2A0AB45FFF2A822" lowest-bolded-level="division-lowest-bolded" lowest-level="section" quoted-block="no-quoted-block" regeneration="yes-regeneration">
<toc-entry idref="H7AE93E10584D4685B195E2E37CE49BA4" level="section">Sec. 975. Deductions allocated to deferred foreign income may
not offset United States source income.</toc-entry>
<toc-entry idref="H72FAB5B02F094996A8936C84B561B7AC" level="section">Sec. 976. Amount of foreign taxes computed on overall
basis.</toc-entry>
<toc-entry idref="H3C198D1DE8E5436391F18F65A192533C" level="section">Sec. 977. Application of subpart.</toc-entry>
</toc>
<section id="H7AE93E10584D4685B195E2E37CE49BA4"><enum>975.</enum><header>Deductions
allocated to deferred foreign income may not offset United States source
income</header>
<subsection id="H558D4E2E71564782AF80ED7BE28D77AE"><enum>(a)</enum><header>Current year
deductions</header><text display-inline="yes-display-inline">For purposes of
this chapter, foreign-related deductions for any taxable year—</text>
<paragraph id="H3D4516BCB89B44BFA222A3EAC2E800E8"><enum>(1)</enum><text>shall be taken
into account for such taxable year only to the extent that such deductions are
allocable to currently-taxed foreign income, and</text>
</paragraph><paragraph id="H28B891782CD740DA8699D3006DAE383C"><enum>(2)</enum><text>to the extent not
so allowed, shall be taken into account in subsequent taxable years as provided
in subsection (b).</text>
</paragraph><continuation-text continuation-text-level="subsection">Foreign-related deductions shall be
allocated to currently-taxed foreign income in the same proportion which
currently-taxed foreign income bears to the sum of currently-taxed foreign
income and deferred foreign income.</continuation-text></subsection><subsection id="HC7F23126B1A44ABC977F7FEB92F63C9B"><enum>(b)</enum><header>Deductions
related to repatriated deferred foreign income</header>
<paragraph id="HE2A9287405DA41C7A943725EA92F3FE"><enum>(1)</enum><header>In
general</header><text>If there is repatriated foreign income for a taxable
year, the portion of the previously deferred deductions allocated to the
repatriated foreign income shall be taken into account for the taxable year as
a deduction allocated to income from sources outside the United States. Any
such amount shall not be included in foreign-related deductions for purposes of
applying subsection (a) to such taxable year.</text>
</paragraph><paragraph id="H4716D1C410B64466AD1FFC5C23F9DBA8"><enum>(2)</enum><header>Portion of
previously deferred deductions</header><text>For purposes of paragraph (1), the
portion of the previously deferred deductions allocated to repatriated foreign
income is—</text>
<subparagraph id="H551707681223474AB2108E064631E00"><enum>(A)</enum><text>the amount which
bears the same proportion to such deductions, as</text>
</subparagraph><subparagraph id="H55EBAF4B3CFE43E9977E628D42E3A0CB"><enum>(B)</enum><text>the repatriated
income bears to the previously deferred foreign income.</text>
</subparagraph></paragraph></subsection><subsection id="HFFED56E6BE3D40E2841DA0899314E470"><enum>(c)</enum><header>Definitions and
special rule</header><text display-inline="yes-display-inline">For purposes of
this section—</text>
<paragraph id="HD8A1B4AD82EE4FC78635BA44EF4517E2"><enum>(1)</enum><header>Foreign-related
deductions</header><text>The term <term>foreign-related deductions</term> means
the total amount of deductions and expenses which would be allocated or
apportioned to gross income from sources without the United States for the
taxable year if both the currently-taxed foreign income and deferred foreign
income were taken into account.</text>
</paragraph><paragraph display-inline="no-display-inline" id="HCD70A802166C4C82A83200DC4EF19B8D"><enum>(2)</enum><header>Currently-taxed
foreign income</header><text>The term <term>currently-taxed foreign
income</term> means the amount of gross income from sources without the United
States for the taxable year (determined without regard to repatriated foreign
income for such year).</text>
</paragraph><paragraph display-inline="no-display-inline" id="H97033661171740CAB35B4364E4B9CD57"><enum>(3)</enum><header>Deferred foreign
income</header><text>The term <term>deferred foreign income</term> means the
excess of—</text>
<subparagraph id="H79626A01C131458E961626248E3499FE"><enum>(A)</enum><text display-inline="yes-display-inline">the amount that would be includible in
gross income under subpart F of this part for the taxable year if—</text>
<clause id="HE5FDDEF44D4945928DAEDC1F782C51ED"><enum>(i)</enum><text>all controlled
foreign corporations were treated as one controlled foreign corporation,
and</text>
</clause><clause id="HBB8BF3A0A12149B296AE83FB48049E71"><enum>(ii)</enum><text>all earnings and
profits of all controlled foreign corporations were subpart F income (as
defined in section 952), over</text>
</clause></subparagraph><subparagraph id="H0485DC431041498A9350ADEFE3E6A012"><enum>(B)</enum><text>the sum of—</text>
<clause id="H23CFAAB66A814FF68EBA6608F7E98725"><enum>(i)</enum><text>all dividends
received during the taxable year from controlled foreign corporations,
plus</text>
</clause><clause id="H704E50F236BE41AC9421A54BACCCED5"><enum>(ii)</enum><text>amounts includible
in gross income under section 951(a).</text>
</clause></subparagraph></paragraph><paragraph id="H584938FDA0224A21A507768466FE0121"><enum>(4)</enum><header>Previously
deferred foreign income</header><text display-inline="yes-display-inline">The
term <term>previously deferred foreign income</term> means the aggregate amount
of deferred foreign income for all prior taxable years to which this part
applies, determined as of the beginning of the taxable year, reduced by the
repatriated foreign income for all such prior taxable years.</text>
</paragraph><paragraph id="HBC687988A56142B39213934B758832BC"><enum>(5)</enum><header>Repatriated
foreign income</header><text>The term <term>repatriated foreign income</term>
means the amount included in gross income on account of distributions out of
previously deferred foreign income.</text>
</paragraph><paragraph id="H2F202257ABB64BC0BF5B247CF0E7471C"><enum>(6)</enum><header>Previously
deferred deductions</header><text display-inline="yes-display-inline">The term
<term>previously deferred deductions</term> means the aggregate amount of
foreign-related deductions not taken into account under subsection (a) for all
prior taxable years (determined as of the beginning of the taxable year),
reduced by any amounts taken into account under subsection (b) for such prior
taxable years.</text>
</paragraph><paragraph id="H4C5FBB0E1F4B4BA396CD3D4D73007FFC"><enum>(7)</enum><header>Treatment of
certain foreign taxes</header>
<subparagraph id="H242E7E3B86844475BF3E725E1F386DD7"><enum>(A)</enum><header>Paid by
controlled foreign corporation</header><text display-inline="yes-display-inline">Section 78 shall not apply for purposes of
determining currently-taxed foreign income and deferred foreign income.</text>
</subparagraph><subparagraph id="H047053A21E294F6C94600063633D9703"><enum>(B)</enum><header>Paid by
taxpayer</header><text>For purposes of determining currently-taxed foreign
income, gross income from sources without the United States shall be reduced by
the aggregate amount of taxes described in the applicable paragraph of section
901(b) which are paid by the taxpayer (without regard to sections 902 and 960)
during the taxable year.</text>
</subparagraph></paragraph><paragraph id="HCB48493BE32A4A5CA500DB53A71EDE06"><enum>(8)</enum><header>Coordination
with section 976</header><text>In determining currently-taxed foreign income
and deferred foreign income, the amount of deemed foreign tax credits shall be
determined with regard to section 976.</text>
</paragraph></subsection></section><section id="H72FAB5B02F094996A8936C84B561B7AC"><enum>976.</enum><header>Amount of
foreign taxes computed on overall basis</header>
<subsection id="H055BDFFE1FF44810A6D76C36652D8790"><enum>(a)</enum><header>Current year
allowance</header><text display-inline="yes-display-inline">For purposes of
this chapter, the amount taken into account as foreign income taxes for any
taxable year shall be an amount which bears the same ratio to the total foreign
income taxes for that taxable year as—</text>
<paragraph id="HBD351B120AEF48B186DF2D20C0314F4E"><enum>(1)</enum><text>the
currently-taxed foreign income for such taxable year, bears to</text>
</paragraph><paragraph id="H141B124864E649C296851E00002FF91D"><enum>(2)</enum><text>the sum of the
currently-taxed foreign income and deferred foreign income for such
year.</text>
</paragraph><continuation-text continuation-text-level="subsection">The
portion of the total foreign income taxes for any taxable year not taken into
account under the preceding sentence for a taxable year shall only be taken
into account as provided in subsection (b) (and shall not be taken into account
for purposes of applying sections 902 and 960).</continuation-text></subsection><subsection display-inline="no-display-inline" id="HE59C0DB4729E4338B46F632039EDFEBC"><enum>(b)</enum><header>Allowance
related to repatriated deferred foreign income</header>
<paragraph id="HB18D79F8C96E41918C29D54585BE224D"><enum>(1)</enum><header>In
general</header><text display-inline="yes-display-inline">If there is
repatriated foreign income for any taxable year, the portion of the previously
deferred foreign income taxes paid or accrued during such taxable year shall be
taken into account for the taxable year as foreign taxes paid or accrued. Any
such taxes so taken into account shall not be included in foreign income taxes
for purposes of applying subsection (a) to such taxable year.</text>
</paragraph><paragraph id="HA8EE892845CE4DF79F54152BA2D21DFF"><enum>(2)</enum><header>Portion of
previously deferred foreign income taxes</header><text>For purposes of
paragraph (1), the portion of the previously deferred foreign income taxes
allocated to repatriated deferred foreign income is—</text>
<subparagraph id="HD5C846BB74614C518129AAB7E4640086"><enum>(A)</enum><text>the amount which
bears the same proportion to such taxes, as</text>
</subparagraph><subparagraph id="H9E8C200714044E71BC304C49528C94F3"><enum>(B)</enum><text>the repatriated
deferred income bears to the previously deferred foreign income.</text>
</subparagraph></paragraph></subsection><subsection id="H0A0F0DF4F54546EC00F327A8886516F8"><enum>(c)</enum><header>Definitions and
special rule</header><text display-inline="yes-display-inline">For purposes of
this section—</text>
<paragraph id="H762F03EB740D4865B7BB3F9ED8AC1110"><enum>(1)</enum><header>Previously
deferred foreign income taxes</header><text display-inline="yes-display-inline">The term <term>previously deferred foreign
income taxes</term> means the aggregate amount of total foreign income taxes
not taken into account under subsection (a) for all prior taxable years
(determined as of the beginning of the taxable year), reduced by any amounts
taken into account under subsection (b) for such prior taxable years.</text>
</paragraph><paragraph id="H7C989BA37B7B4CDAABAA907CD116FB14"><enum>(2)</enum><header>Total foreign
income taxes</header><text display-inline="yes-display-inline">The term
<term>total foreign income taxes</term> means the sum of foreign income taxes
paid or accrued during the taxable year (determined without regard to section
904(c)) plus the increase in foreign income taxes that would be paid or accrued
during the taxable year under sections 902 and 960 if—</text>
<subparagraph id="HA105F74CCE6B4884864D89194E19CDE8"><enum>(A)</enum><text>all controlled
foreign corporations were treated as one controlled foreign corporation,
and</text>
</subparagraph><subparagraph id="H7C90AE2052B04A65A3B954EB67EAE042"><enum>(B)</enum><text>all earnings and
profits of all controlled foreign corporations were subpart F income (as
defined in section 952).</text>
</subparagraph></paragraph><paragraph id="HACC5F78C308B45EB8BA32400DBAB1362"><enum>(3)</enum><header>Foreign income
taxes</header><text display-inline="yes-display-inline">The term <term>foreign
income taxes</term> means any income, war profits, or excess profits taxes paid
by the taxpayer to any foreign country or possession of the United States.</text>
</paragraph><paragraph id="H9388A62A5A98481AB711B77B0FCA56B"><enum>(4)</enum><header>Currently-taxed
foreign income and deferred foreign income</header><text display-inline="yes-display-inline">The terms <term>currently-taxed foreign
income</term> and <term>deferred foreign income</term> have the meanings given
such terms by section 975(c)).</text>
</paragraph></subsection></section><section id="H3C198D1DE8E5436391F18F65A192533C"><enum>977.</enum><header>Application of
subpart</header><text display-inline="no-display-inline">This subpart—</text>
<paragraph id="H278B262C823B431BB6E1FF00B1441C4"><enum>(1)</enum><text>shall be applied
before subpart A, and</text>
</paragraph><paragraph id="HDF333812472943F2A07CC7B697DBB61E"><enum>(2)</enum><text>shall be applied
separately with respect to the categories of income specified in section
904(d)(1).</text>
</paragraph></section></subpart><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="HA73E30222EEC40A7B91D60C64C17D5E"><enum>(b)</enum><header>Clerical
amendment</header><text>The table of subparts for part III of subpart N of
chapter 1 is amended by inserting after the item relating to subpart G the
following new item:</text>
<quoted-block display-inline="no-display-inline" id="HB28BF2482CD94943AF5D591BFD88EC8F" style="OLC">
<toc container-level="quoted-block-container" idref="HD52A43474A684C5BBFFF8CD500D88694" lowest-bolded-level="division-lowest-bolded" lowest-level="section" quoted-block="no-quoted-block" regeneration="yes-regeneration">
<toc-entry idref="H379C5A4DBB9B4D0CB2A0AB45FFF2A822" level="subpart">Subpart H. Special Rules for Allocation of Foreign-Related
Deductions and Foreign Tax
Credits.</toc-entry>
</toc>
<after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H9125BD1C6DE742C1A41C1C44F13D57C8"><enum>(c)</enum><header>Effective
date</header><text display-inline="yes-display-inline">The amendments made by
this section shall apply to taxable years beginning after December 31,
2007.</text>
</subsection></section><section id="HA5CB8DDB6144456F86CAB91F55046482"><enum>3202.</enum><header>Foreign
currency conversion for determination of foreign taxes and foreign
corporation’s earnings and profits</header>
<subsection id="HEE2C74DBA47A434D8BA36FD8BBE754FB"><enum>(a)</enum><header>Earnings and
profits and distributions</header><text display-inline="yes-display-inline">Paragraph (2) of section 986(b) is amended
to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="HA1E43D197D4B420FB983CBD06E130059" style="OLC">
<paragraph id="HE0CAD7F5D0564BCD97F094BBD6FFECD7"><enum>(2)</enum><text display-inline="yes-display-inline">in the case of any United States person,
the earnings and profits determined under paragraph (1) shall (if necessary) be
translated into dollars using the average exchange rate for the taxable year in
which
earned.</text>
</paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H2A7C417E41454887A9CFCC1FB43C15C0"><enum>(b)</enum><header>Previously taxed
earnings and profits</header><text>Paragraph (1) of section 986(c) is amended
by striking <quote>movements in exchange rates between the times of deemed and
actual distribution</quote> and inserting <quote>the difference between the
exchange rate applicable to such earnings and profits under subsection (b)(2)
and the exchange rate at the time of the actual distribution</quote>.</text>
</subsection><subsection id="H5F2730B63F74476F9BBFF44C0773A600"><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 December 31, 2007.</text>
</subsection></section><section display-inline="no-display-inline" id="H2AB0DC0CF9384760A726F30461CD3C7C"><enum>3203.</enum><header>Repeal of
worldwide allocation of interest</header>
<subsection id="HA9548515A3584271BD89984C5BBA6BE"><enum>(a)</enum><header>In
general</header><text display-inline="yes-display-inline">Section 864 is
amended by striking subsection (f) and by redesignating subsection (g) as
subsection (f).</text>
</subsection><subsection id="H7FA7A00EC98F4CF4A5B4BE90F1DCCCF2"><enum>(b)</enum><header>Effective
date</header><text>The amendments made by this section shall apply to taxable
years beginning after December 31, 2008.</text>
</subsection></section><section display-inline="no-display-inline" id="H6A9A22752E1D42520038FBAB9811E384" section-type="subsequent-section"><enum>3204.</enum><header>Limitation on
treaty benefits for certain deductible payments</header>
<subsection id="HCEB9F555F90741E482A7204E3718E7A8"><enum>(a)</enum><header>In
general</header><text>Section 894 (relating to income affected by treaty) is
amended by adding at the end the following new subsection:</text>
<quoted-block id="HC2C7EF425B974063BC641EE3AEADD5C">
<subsection id="HCB63AD8B3BAF4ACEAC5FF89095D14063"><enum>(d)</enum><header>Limitation on
treaty benefits for certain deductible payments</header>
<paragraph id="HDC5B1BE8582044A6A507AE9394B67494"><enum>(1)</enum><header>In
general</header><text display-inline="yes-display-inline">In the case of any
deductible related-party payment, any withholding tax imposed under chapter 3
(and any tax imposed under subpart A or B of this part) with respect to such
payment may not be reduced under any treaty of the United States unless any
such withholding tax would be reduced under a treaty of the United States if
such payment were made directly to the foreign parent corporation.</text>
</paragraph><paragraph id="HF59FD9AE08424B0DBA63BBEE9FDAA200"><enum>(2)</enum><header>Deductible
related-party payment</header><text>For purposes of this subsection, the term
<term>deductible related-party payment</term> means any payment made, directly
or indirectly, by any person to any other person if the payment is allowable as
a deduction under this chapter and both persons are members of the same foreign
controlled group of entities.</text>
</paragraph><paragraph id="H4DAE9EA1DA654902ACE68600278F6005"><enum>(3)</enum><header>Foreign
controlled group of entities</header><text display-inline="yes-display-inline">For purposes of this subsection—</text>
<subparagraph id="HFE981AEC19414E43AA07F077243F0061"><enum>(A)</enum><header>In
general</header><text display-inline="yes-display-inline">The term
<term>foreign controlled group of entities</term> means a controlled group of
entities the common parent of which is a foreign corporation.</text>
</subparagraph><subparagraph id="HF11A444D638841EA9499B826073971BD"><enum>(B)</enum><header>Controlled group
of entities</header><text display-inline="yes-display-inline">The term
<term>controlled group of entities</term> means a controlled group of
corporations as defined in section 1563(a)(1), except that—</text>
<clause id="HD25C89AA29D648C18CA4EEA4B0F72F73"><enum>(i)</enum><text><quote>more than
50 percent</quote> shall be substituted for <quote>at least 80 percent</quote>
each place it appears therein, and</text>
</clause><clause id="HC5B293C730D4451FB0CA897800CC3BF1"><enum>(ii)</enum><text>the determination
shall be made without regard to subsections (a)(4) and (b)(2) of section
1563.</text>
</clause><continuation-text continuation-text-level="subparagraph">A
partnership or any other entity (other than a corporation) shall be treated as
a member of a controlled group of entities if such entity is controlled (within
the meaning of section 954(d)(3)) by members of such group (including any
entity treated as a member of such group by reason of this sentence).</continuation-text></subparagraph></paragraph><paragraph id="H8B88333021B34CF09B50C7EE6253E3DE"><enum>(4)</enum><header>Foreign parent
corporation</header><text>For purposes of this subsection, the term
<term>foreign parent corporation</term> means, with respect to any deductible
related-party payment, the common parent of the foreign controlled group of
entities referred to in paragraph (3)(A).</text>
</paragraph><paragraph id="H7623CD001C5243639FCD87CA9C892D7B"><enum>(5)</enum><header>Regulations</header><text>The
Secretary may prescribe such regulations or other guidance as are necessary or
appropriate to carry out the purposes of this subsection, including regulations
or other guidance which provide for—</text>
<subparagraph id="HAEF3511597AC48CFACA38F59AF9683AB"><enum>(A)</enum><text>the treatment of
two or more persons as members of a foreign controlled group of entities if
such persons would be the common parent of such group if treated as one
corporation, and</text>
</subparagraph><subparagraph id="H606E0DAE57254267AAEE61D11200D1D5"><enum>(B)</enum><text>the treatment of
any member of a foreign controlled group of entities as the common parent of
such group if such treatment is appropriate taking into account the economic
relationships among such
entities.</text>
</subparagraph></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H9C0CEE88B5594C1D85C7FE608E65E00"><enum>(b)</enum><header>Effective
date</header><text>The amendment made by this section shall apply to payments
made after the date of the enactment of this Act.</text>
</subsection></section></subtitle><subtitle id="H73DE4F27E46842E98117737C0415E318"><enum>D</enum><header>Modification of
accounting rules</header>
<section display-inline="no-display-inline" id="HC1EFA213F120413BA38D2D2449C21891" section-type="subsequent-section"><enum>3301.</enum><header>Repeal of last-in,
first-out method of inventory</header>
<subsection id="HB192B66479EC4B7FAFD35F10863471FA"><enum>(a)</enum><header>In
general</header><text display-inline="yes-display-inline">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="H4E0938B3C36045C6B3D623B82000B576"><enum>(b)</enum><header>Conforming
amendments</header>
<paragraph id="H3CB75FBFE6DC4D4E848851DA9B4736B"><enum>(1)</enum><subparagraph commented="no" display-inline="yes-display-inline" id="H96B4C713A7AE47C482110078A2CB661F"><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="H2D39CAAF15AD4D2A9BD963415C1815E9" indent="up1"><enum>(B)</enum><text>Section 312(n)(7), as redesignated by
subparagraph (A), is amended—</text>
<clause id="HF9629CC686714CD0AA786700EC7E0074"><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="HD6673786FD024D6589C66203009B85B1"><enum>(ii)</enum><text>by striking <quote>paragraph
(5)</quote> in subparagraph (B) and inserting <quote>paragraph (4)</quote>.</text>
</clause></subparagraph><subparagraph id="H6547B83686064894888098F6DB91ACB3" 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="H5CA656FB0BEB4839B87984DED564AFE4"><enum>(2)</enum><text>Section 1363 is
amended by striking subsection (d).</text>
</paragraph></subsection><subsection id="H1B074C0C1C7F4A27BD1FB6C65BC562EB"><enum>(c)</enum><header>Effective
date</header>
<paragraph id="HF99825C357164B379F08964EAF79A5EC"><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="H35093F1407FB4A2F97318B6C11DFC5D"><enum>(2)</enum><header>Change in method
of accounting</header><text display-inline="yes-display-inline">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="H8F375125E72D40C5A60300105710A7D6"><enum>(A)</enum><text>such change shall
be treated as initiated by the taxpayer,</text>
</subparagraph><subparagraph id="H2F282C856B614266B0E1E942290234DD"><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="H204C68995D4C43518F906180E0BF68CD"><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="H5779E63BDDE346529D5DDAECA0A3DD2C"><enum>3302.</enum><header>Repeal of
lower of cost or market method of inventory</header>
<subsection id="H7FA9C8C491234826A094001FD148FE99"><enum>(a)</enum><header>In
general</header><text display-inline="yes-display-inline">Section 471 is
amended by redesignating subsection (c) as subsection (d) and by inserting
after subsection (b) the following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="H079C2E7560F44955B7AF1CA5EBF4B77" style="OLC">
<subsection id="HBFEB5B7C590D4901873970BD175D32F0"><enum>(c)</enum><header>Inventories
taken into account at cost</header><text display-inline="yes-display-inline">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 display-inline="no-display-inline" id="H5D7A497DB0F54F128EC59164669662F0"><enum>(b)</enum><header>Effective
date</header>
<paragraph id="HCC1EB12779C644F29E457E5F00ECB200"><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="HD48494D5CA5B420B98A11B5781DEB41E"><enum>(2)</enum><header>Change in method
of accounting</header><text display-inline="yes-display-inline">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="H306B7BFAE11B461783CFB0F4F4DD59F9"><enum>(A)</enum><text>such change shall
be treated as initiated by the taxpayer,</text>
</subparagraph><subparagraph id="HFA30166C6F664D47A3F76C4197B7588"><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="H86B7AD90B1264DF9B810920000926403"><enum>(C)</enum><text display-inline="yes-display-inline">if the net amount of the adjustments
required to be taken into account by the taxpayer under section 481 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 display-inline="no-display-inline" id="HBFD986D85D014ED385F85548B0D286B4" section-type="subsequent-section"><enum>3303.</enum><header>Special rule for
service providers on accrual method not applicable to C corporations</header>
<subsection id="HC4A4FB6D0C9343429B77580095059921"><enum>(a)</enum><header>In
general</header><text display-inline="yes-display-inline">Subparagraph (A) of
section 448(d)(5) is amended by inserting <quote>(other than a C
corporation)</quote> after <quote>any person</quote>.</text>
</subsection><subsection display-inline="no-display-inline" id="H2200EA834B5C4AA8B6877D33DB5EBA3F"><enum>(b)</enum><header>Effective
date</header>
<paragraph id="H88C5F1E9FA804DE3AB1FFDF55B641B9C"><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="H13406A2EAFCC45D987002769F512F600"><enum>(2)</enum><header>Change in method
of accounting</header><text display-inline="yes-display-inline">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="H6A40A19368644867ABD8142604EB1403"><enum>(A)</enum><text>such change shall
be treated as initiated by the taxpayer,</text>
</subparagraph><subparagraph id="HE5608FDF27CF4C6E9D516330F4B3F438"><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="H5AD0A2BB8D6A43998E1B10EC1049581E"><enum>(C)</enum><text display-inline="yes-display-inline">if the net amount of the adjustments
required to be taken into account by the taxpayer under section 481 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></subtitle><subtitle id="H3896194125444B77845CF3F1BF72B084"><enum>E</enum><header>Modification to
expensing and depreciation rules</header>
<section id="HD8698CB2EFF344C4BC28F2BDFB911968"><enum>3401.</enum><header>Small business
expensing provisions made permanent</header>
<subsection id="H45B1BA7F8F6940B890F9C86C20D11F13"><enum>(a)</enum><header>Increase in
small business expensing made permanent</header><text display-inline="yes-display-inline">Subsection (b) of section 179 is
amended—</text>
<paragraph id="HC35C8BA8A2E345F5AFF3B4FF00DBD5A7"><enum>(1)</enum><text>by striking
<quote>$25,000 ($125,000 in the case of taxable years beginning after 2006 and
before 2011)</quote> in paragraph (1) and inserting <quote>$125,000</quote>,
and</text>
</paragraph><paragraph id="HF2F8E620368148C0B1D594CC4E347DA"><enum>(2)</enum><text>by
striking <quote>$200,000 ($500,000 in the case of taxable years beginning after
2006 and before 2011)</quote> in paragraph (2) and inserting
<quote>$500,000</quote>.</text>
</paragraph></subsection><subsection id="H7644B1449BAB47D3B3A3E7BA644B3DF3"><enum>(b)</enum><header>Expensing for
computer software made permanent</header><text>Clause (ii) of section
179(d)(1)(A) is amended by striking <quote>and which is placed in service in a
taxable year beginning after 2002 and before 2011,</quote>.</text>
</subsection><subsection id="H88FED76DAFCF4F389BD2FB520956CD8D"><enum>(c)</enum><header>Inflation
adjustment</header><text>Subparagraph (A) of section 179(b)(5) is amended by
striking <quote>In the case of any taxable year beginning in a calendar year
after 2007 and before 2011, the</quote> and inserting
<quote>The</quote>.</text>
</subsection><subsection id="H626B147AF93D46658B37EADA628BF62E"><enum>(d)</enum><header>Effective
date</header>
<paragraph id="H99FD333A51DF4E59AB009FDCF59E12B8"><enum>(1)</enum><header>In
general</header><text>Except as provided in paragraph (2), the amendments made
by this section shall apply to taxable years beginning after the date of the
enactment of this Act.</text>
</paragraph><paragraph id="H2FD410C0EEB2420AA5B5B9D2D3C321CC"><enum>(2)</enum><header>Computer
software</header><text>The amendment made by subsection (b) shall apply to
property placed in service after the date of the enactment of this Act.</text>
</paragraph></subsection></section><section id="H0209279E3DBE4AAB9F814DACBA00E470" section-type="subsequent-section"><enum>3402.</enum><header>Amortization of
goodwill and other intangibles</header>
<subsection id="H74532CC30C4942C68BD5C7987812A9AF"><enum>(a)</enum><header>In
general</header><text display-inline="yes-display-inline">Subsection (a) of
section 197 (relating to general rule) is amended by striking
<quote>15-year</quote> and inserting <quote>20-year</quote>.</text>
</subsection><subsection id="H5C583879D46E415597FAA78641ED807D"><enum>(b)</enum><header>Certain
interests or rights acquired separately</header><text>Clause (i) of section
197(e)(4)(D) is amended by striking <quote>15 years</quote> and inserting
<quote>20 years</quote>.</text>
</subsection><subsection id="H34757A1AEC654D97AD91129D00C43BE6"><enum>(c)</enum><header>Effective
date</header><text>The amendments made by this section shall apply to property
acquired after the date of the enactment of this Act.</text>
</subsection></section></subtitle><subtitle id="H4809C5F3AD804321AB4B9C96AFA881EE"><enum>F</enum><header>Codification of
economic substance doctrine</header>
<section display-inline="no-display-inline" id="HB6457469E496464AAAF04C00E97D9158" section-type="subsequent-section"><enum>3501.</enum><header>Codification of
economic substance doctrine</header>
<subsection commented="no" display-inline="no-display-inline" id="HDC8754A4D769446D9817EA862D813BB9"><enum>(a)</enum><header>In
general</header><text display-inline="yes-display-inline">Section 7701 is
amended by redesignating subsection (p) as subsection (q) and by inserting
after subsection (o) the following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="H43DF34E2FF174E168F00D1DE17E5CD05" style="OLC">
<subsection commented="no" display-inline="no-display-inline" id="HB3EEDBD88A194F089FC36638BA92003C"><enum>(p)</enum><header display-inline="yes-display-inline">Clarification of economic substance
doctrine</header>
<paragraph commented="no" display-inline="no-display-inline" id="HD6B6D8AC739E41E7A4AC11F2E8339845"><enum>(1)</enum><header display-inline="yes-display-inline">Application of doctrine</header><text>In
the case of any transaction to which the economic substance doctrine is
relevant, such transaction shall be treated as having economic substance only
if—</text>
<subparagraph commented="no" display-inline="no-display-inline" id="HB806182D71D94BAAA800F655243C6180"><enum>(A)</enum><text display-inline="yes-display-inline">the transaction changes in a meaningful way
(apart from Federal income tax effects) the taxpayer’s economic position,
and</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="H8FCA207892604160969161F074D11517"><enum>(B)</enum><text display-inline="yes-display-inline">the taxpayer has a substantial purpose
(apart from Federal income tax effects) for entering into such
transaction.</text>
</subparagraph></paragraph><paragraph commented="no" display-inline="no-display-inline" id="H96AD94FF2A6C4FB3BE8173896DBC2339"><enum>(2)</enum><header display-inline="yes-display-inline">Special rule where taxpayer relies on
profit potential</header>
<subparagraph id="H2D06224129104C4881094407BB27634E"><enum>(A)</enum><header>In
general</header><text>The potential for profit of a transaction shall be taken
into account in determining whether the requirements of subparagraphs (A) and
(B) of paragraph (1) are met with respect to the transaction only if the
present value of the reasonably expected pre-tax profit from the transaction is
substantial in relation to the present value of the expected net tax benefits
that would be allowed if the transaction were respected.</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="H0341F600F88646659F653619DB451399"><enum>(B)</enum><header display-inline="yes-display-inline">Treatment of fees and foreign
taxes</header><text display-inline="yes-display-inline">Fees and other
transaction expenses and foreign taxes shall be taken into account as expenses
in determining pre-tax profit under subparagraph (A).</text>
</subparagraph></paragraph><paragraph id="H473B625A34B549C6A6AADEB85BE51BAB"><enum>(3)</enum><header>State and local
tax benefits</header><text>For purposes of paragraph (1), any State or local
income tax effect which is related to a Federal income tax effect shall be
treated in the same manner as a Federal income tax effect.</text>
</paragraph><paragraph id="HF7B612BE2FD04775BD8700F8161000F7"><enum>(4)</enum><header>Financial
accounting benefits</header><text>For purposes of paragraph (1)(B), achieving a
financial accounting benefit shall not be taken into account as a purpose for
entering into a transaction if such transaction results in a Federal income tax
benefit.</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="H4501CD9DFFC64B9F888376B80022C14F"><enum>(5)</enum><header display-inline="yes-display-inline">Definitions and special rules</header><text display-inline="yes-display-inline">For purposes of this subsection—</text>
<subparagraph commented="no" display-inline="no-display-inline" id="H87ABD866CC414ADDAE02B89C28FE5211"><enum>(A)</enum><header display-inline="yes-display-inline">Economic substance doctrine</header><text display-inline="yes-display-inline">The term <term>economic substance
doctrine</term> means the common law doctrine under which tax benefits under
subtitle A with respect to a transaction are not allowable if the transaction
does not have economic substance or lacks a business purpose.</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="HC861DBA39C814140B81FF95CC4A8D55"><enum>(B)</enum><header display-inline="yes-display-inline">Exception for personal transactions of
individuals</header><text display-inline="yes-display-inline">In the case of an
individual, paragraph (1) shall apply only to transactions entered into in
connection with a trade or business or an activity engaged in for the
production of income.</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="H0397BED6B8ED4D67A990653B6565E8FE"><enum>(C)</enum><header display-inline="yes-display-inline">Other common law doctrines not
affected</header><text display-inline="yes-display-inline">Except as
specifically provided in this subsection, the provisions of this subsection
shall not be construed as altering or supplanting any other rule of law, and
the requirements of this subsection shall be construed as being in addition to
any such other rule of law.</text>
</subparagraph><subparagraph id="HFE625766A3BA482F005CB7DDB5BC517"><enum>(D)</enum><header>Determination of
application of doctrine not affected</header><text display-inline="yes-display-inline">The determination of whether the economic
substance doctrine is relevant to a transaction shall be made in the same
manner as if this subsection had never been enacted.</text>
</subparagraph></paragraph><paragraph commented="no" display-inline="no-display-inline" id="H9C635AF4115742328720B8F48611B5B1"><enum>(6)</enum><header display-inline="yes-display-inline">Regulations</header><text display-inline="yes-display-inline">The Secretary shall prescribe such
regulations as may be necessary or appropriate to carry out the purposes of
this subsection. Such regulations may include exemptions from the application
of this
subsection.</text>
</paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection commented="no" display-inline="no-display-inline" id="HB36AF9D93B8749B19C1815446DA943E4"><enum>(b)</enum><header display-inline="yes-display-inline">Effective
Date</header><text display-inline="yes-display-inline">The amendments made by
this section shall apply to transactions entered into after the date of the
enactment of this Act.</text>
</subsection></section><section display-inline="no-display-inline" id="HF2D5F0983F8745E3BD35869DAE74215B" section-type="subsequent-section"><enum>3502.</enum><header>Penalties for
underpayments</header>
<subsection commented="no" display-inline="no-display-inline" id="HD111D3B72AD845C792B4153671830027"><enum>(a)</enum><header display-inline="yes-display-inline">Penalty for underpayments attributable to
transactions lacking economic substance</header>
<paragraph commented="no" display-inline="no-display-inline" id="H2E4B1AFB7B974F98AF6779C18034367E"><enum>(1)</enum><header display-inline="yes-display-inline">In general</header><text>Subsection (b) of
section 6662, as amended by this Act, is amended by inserting after paragraph
(6) the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="HB3C13BFA4B9044C2B4C192FB24B6003F" style="OLC">
<paragraph id="HB3D9D2E005114025BB75A99C551FAC7B"><enum>(7)</enum><text>Any disallowance
of claimed tax benefits by reason of a transaction lacking economic substance
(within the meaning of section 7701(p)) or failing to meet the requirements of
any similar rule of
law.</text>
</paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="H28C381A5F6D94CBCA62427BEAA7DF433"><enum>(2)</enum><header>Increased
penalty for nondisclosed transactions</header><text>Section 6662, as amended by
this Act, is amended by adding at the end the following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="H2343D0CD33D2491296CE7DE566DA3663" style="OLC">
<subsection id="H5028830554D842C6AA8076A3AE5EBF6B"><enum>(j)</enum><header>Increase in
penalty in case of nondisclosed noneconomic substance transactions</header>
<paragraph id="HBF23BD5CC8E641FA89D71679EFE50224"><enum>(1)</enum><header>In
general</header><text>To the extent that a portion of the underpayment to which
this section applies is attributable to one or more nondisclosed noneconomic
substance transactions, subsection (a) shall be applied with respect to such
portion by substituting <quote>40 percent</quote> for <quote>20
percent</quote>.</text>
</paragraph><paragraph display-inline="no-display-inline" id="HFD5BE76575C142F68B9D2078D42BF33"><enum>(2)</enum><header>Nondisclosed
noneconomic substance transactions</header><text>For purposes of this
subsection, the term <term>nondisclosed noneconomic substance
transaction</term> means any portion of a transaction described in subsection
(b)(7) with respect to which the relevant facts affecting the tax treatment are
not adequately disclosed in the return nor in a statement attached to the
return.</text>
</paragraph><paragraph id="H4D2E9D3BA240466FB0DB715225609B99"><enum>(3)</enum><header>Special rule for
amended returns</header><text display-inline="yes-display-inline">Except as
provided in regulations, in no event shall any amendment or supplement to a
return of tax be taken into account for purposes of this subsection if the
amendment or supplement is filed after the earlier of the date the taxpayer is
first contacted by the Secretary regarding the examination of the return or
such other date as is specified by the
Secretary.</text>
</paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="H75B3F2C3395243BAA9C6C9895B0F6FB"><enum>(3)</enum><header>Conforming
amendment</header><text>Subparagraph (B) of section 6662A(e)(2), as amended by
this Act, is amended by striking <quote>subsection (h) or (i)</quote> and
inserting <quote>subsections (h), (i), or (j)</quote>.</text>
</paragraph></subsection><subsection id="H876F1EF9782042AD971065D65D70958"><enum>(b)</enum><header>Reasonable cause
exception not applicable to noneconomic substance transactions, tax shelters,
and certain large corporations</header><text>Paragraph (2) of section 6664(c),
as amended by this Act, is amended—</text>
<paragraph id="HB8DE1A80342B4446BD4C6E4B46FC458F"><enum>(1)</enum><text>by striking
<quote>shall not apply to any portion</quote> and inserting</text>
<quoted-block display-inline="yes-display-inline" id="H00A5A3D112BB42C597D4D41DF7C04767" style="OLC">
<text>shall not apply—</text><subparagraph id="HEAC3B2BBF0D346828DFC7E44F0799400"><enum>(A)</enum><text display-inline="yes-display-inline">to any
portion</text>
</subparagraph><after-quoted-block>,</after-quoted-block></quoted-block>
</paragraph><paragraph id="HD300606A26874C25965345A700B17210"><enum>(2)</enum><text>by striking the
period at the end and inserting a comma, and</text>
</paragraph><paragraph id="H11989422E7814A939FEA96C9F11716C"><enum>(3)</enum><text>by
adding at the end the following new subparagraphs:</text>
<quoted-block display-inline="no-display-inline" id="H8DE6C8C1058A4CE896EDE4ABB1C500C9" style="OLC">
<subparagraph id="H44A3EC49AC6B4F0A990011D864BCA512"><enum>(B)</enum><text>to any portion of
an underpayment which is attributable to one or more tax shelters (as defined
in section 6662(d)(2)(C)) or transactions described in section 6662(b)(7),
and</text>
</subparagraph><subparagraph id="H752987FED85B44F89327C2C145CD08B6"><enum>(C)</enum><text>to any taxpayer if
such taxpayer is a specified large corporation (as defined in section
6662(d)(2)(D)(ii)).</text>
</subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="H1E04F60FB66445948111F3976106FB9F"><enum>(c)</enum><header>Special
understatement reduction rule for certain large corporations</header>
<paragraph id="HBB848E77117A4F2E8DB334120572AA00"><enum>(1)</enum><header>In
general</header><text>Paragraph (2) of section 6662(d) is amended by adding at
the end the following new subparagraph:</text>
<quoted-block display-inline="no-display-inline" id="HD44183AC98F340698FB25F10BB4EDDE4" style="OLC">
<subparagraph id="H4432C54F6C584D8BA35EE7A01EA8594"><enum>(D)</enum><header>Special reduction
rule for certain large corporations</header>
<clause id="HFFF7C56F11EC4ACF9D32A236CD9F6F5E"><enum>(i)</enum><header>In
general</header><text>In the case of any specified large corporation—</text>
<subclause id="HE3BC928166D549DDA99B963379F2DE46"><enum>(I)</enum><text>subparagraph (B)
shall not apply, and</text>
</subclause><subclause id="H0D4ECE6957E44C37A85DB2937223001B"><enum>(II)</enum><text>the amount of the
understatement under subparagraph (A) shall be reduced by that portion of the
understatement which is attributable to any item with respect to which the
taxpayer has a reasonable belief that the tax treatment of such item by the
taxpayer is more likely than not the proper tax treatment of such item.</text>
</subclause></clause><clause id="H310582A08B2E40B59046E33E9F34102E"><enum>(ii)</enum><header>Specified large
corporation</header>
<subclause id="H6ADC952EB65F4B6884A6CB3D667E7939"><enum>(I)</enum><header>In
general</header><text display-inline="yes-display-inline">For purposes of this
subparagraph, the term <term>specified large corporation</term> means any
corporation with gross receipts in excess of $100,000,000 for the taxable year
involved.</text>
</subclause><subclause id="HDCFE069E16F342D68246AB82647C17A7"><enum>(II)</enum><header>Aggregation
rule</header><text display-inline="yes-display-inline">All persons treated as a
single employer under section 52(a) shall be treated as one person for purposes
of subclause
(I).</text>
</subclause></clause></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="HDA377098A5F04B8C80F88481A7DA225"><enum>(2)</enum><header>Conforming
amendment</header><text>Subparagraph (C) of section 6662(d)(2) is amended by
striking <quote>Subparagraph (B)</quote> and inserting <quote>Subparagraphs (B)
and (D)(i)(II)</quote>.</text>
</paragraph></subsection><subsection commented="no" display-inline="no-display-inline" id="HD1B960FA24254D7200FA00051EA1ED84"><enum>(d)</enum><header display-inline="yes-display-inline">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></subtitle><subtitle id="H77640D47555940BCA9008123D111DD00"><enum>G</enum><header>Modifications to
deductions for dividends received</header>
<section id="H506BF64B108B4FD9931DE8E24200B3A1"><enum>3601.</enum><header>Modifications
to deductions for dividends received</header>
<subsection id="HB989CA412D814D30A263A98FB287259"><enum>(a)</enum><header>General reduction
in percentage of deduction</header>
<paragraph id="HF50035F8759F4EC88F41356B663DC917"><enum>(1)</enum><header>In
general</header><text>Sections 243(a)(1), 243(c)(1), 244(a)(3), 244(b)(2),
245(c)(1)(B), 246(b)(3)(B), and 246A(a)(1), before amendment by subsection (c),
are each amended by striking <quote>70 percent</quote> and inserting <quote>60
percent</quote>.</text>
</paragraph><paragraph id="H34C765916C4A4242B056003D7B2D4EAB"><enum>(2)</enum><header>Conforming
amendments</header><text>Paragraph (2) of section 861(a), before amendment by
subsection (c), is amended by striking <quote>100/70th</quote> both places it
appears and inserting <quote>100/60th</quote>.</text>
</paragraph></subsection><subsection id="HC04CDC3489704396A9255C9556E69CA"><enum>(b)</enum><header>Reduction in
percentage for 20-percent owned corporations</header>
<paragraph id="H611C26EF9621421797CA848FCAE37AB"><enum>(1)</enum><header>In
general</header><text>Sections 243(c)(1), 245(c)(1)(B), 246(b)(3)(A),
246A(a)(1) is amended by striking <quote>80 percent</quote> and inserting
<quote>70 percent</quote>.</text>
</paragraph><paragraph id="H49F31325AB8445CE8EF6B871EFB7007E"><enum>(2)</enum><header>Conforming
amendment</header><text display-inline="yes-display-inline">Paragraph (2) of
section 861(a) is amended by striking <quote>100/80th</quote> and inserting
<quote>100/70th</quote>.</text>
</paragraph></subsection><subsection id="HEEF34E1A60BA4B37BDBF4C8FB3AF552F"><enum>(c)</enum><header>Repeal of NOL
exception to limitation on aggregate deductions; establishment of
carryforward</header>
<paragraph id="H6A011B67EA844544BF4E51756C18EF98"><enum>(1)</enum><header>In
general</header><text>Paragraph (2) of section 246(b) is amended to read as
follows:</text>
<quoted-block display-inline="no-display-inline" id="HF42D9050F124480288EF7B6532EF7065" style="OLC">
<paragraph id="HC4973AF980044EB49D37EE11CCE1004B"><enum>(2)</enum><header>Carryforward</header><text display-inline="yes-display-inline">The aggregate amount of deductions
disallowed under paragraph (1) for any taxable year shall be treated as an
increase in the amount allowable as a deduction under section 243(a)(1) for the
following taxable year (subject to the application of paragraph (1) to such
following taxable
year).</text>
</paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="HAEB1C0D11B2E4920BA3691AA5EBB93EF"><enum>(2)</enum><header>Conforming
amendments</header>
<subparagraph id="H46471BCF980C4278A4627C3634E5EB40"><enum>(A)</enum><text>Subsection (d) of
section 172 is amended by striking paragraph (5) and by redesignating paragraph
(6) as paragraph (5).</text>
</subparagraph><subparagraph id="H081197FED4C24E96AC00CEBAE651F67"><enum>(B)</enum><text>Subparagraph (A) of
section 172(b)(2) is amended by striking <quote>paragraphs (1), (4), and
(5)</quote> and inserting <quote>paragraphs (1) and (4)</quote>.</text>
</subparagraph><subparagraph id="H4E6E1220A9F14AF397748979419BAFD5"><enum>(C)</enum><text>Paragraph (1) of
section 246(b) is amended by striking <quote>Except as provided in paragraph
(2), the</quote> and inserting <quote>The</quote>.</text>
</subparagraph><subparagraph id="H02F23C70ED3B449CBAF8D4602126CE8C"><enum>(D)</enum><text>Paragraph (3) of
section 246(b) is amended by striking <quote>paragraph (1)</quote>and inserting
<quote>paragraphs (1) and (2)</quote>.</text>
</subparagraph><subparagraph id="H4C41203CAC954BBE89DB3183DD77A123"><enum>(E)</enum><text>Subparagraph (B)
of section 805(a)(4) is amended by striking <quote>section 1212(a)(1),</quote>
and all that follows and inserting <quote>section 1212(a)(1).</quote>.</text>
</subparagraph></paragraph></subsection><subsection id="H35B80BDD7E284173AD30A336EC3594F4"><enum>(d)</enum><header>Effective
date</header><text>The amendments made by this section shall apply to taxable
years beginning after December 31, 2008.</text>
</subsection></section></subtitle><subtitle id="H77F6BA75B0FE4E4CABBB7EAAFAC187EF"><enum>H</enum><header>Other
provisions</header>
<section commented="no" display-inline="no-display-inline" id="H274CC8DA1C45454A87D615C8B95286ED" section-type="subsequent-section"><enum>3701.</enum><header>Recognition of
ordinary income on sale or exercise of stock option in S corporation with an
ESOP</header>
<subsection commented="no" id="H69350A25733D4463A01050326C368F46"><enum>(a)</enum><header>In
general</header><text>Subpart A of part I of subchapter D of chapter 1 is
amended by adding at the end the following new section:</text>
<quoted-block display-inline="no-display-inline" id="H51F80C9AD28F46C38166BF99CF28B622" style="OLC">
<section commented="no" id="HB6D1816F792E4A59AA60DD56256B28EC"><enum>409B.</enum><header>Recognition of
ordinary income on sale or exercise of stock option in S corporation with an
ESOP</header>
<subsection commented="no" id="H58C4457A29664EA69E7BB9BEDECA8B0"><enum>(a)</enum><header>In
general</header><text display-inline="yes-display-inline">If an S corporation
in which an employee stock ownership plan is a stockholder grants an option
with respect to its stock and such option is sold or exercised, there shall be
included in the gross income of the holder of such option (determined
immediately before such sale or exercise) as ordinary income an amount equal to
the income inclusion amount.</text>
</subsection><subsection commented="no" id="H3DF840BACF9E4E60005FEE384C21A02C"><enum>(b)</enum><header>Income inclusion
amount</header><text>For purposes of this section, the term <term>income
inclusion amount</term> means, with respect to the holder of any option, the
excess (if any) of—</text>
<paragraph id="H649292528AE04F4F88D239CD5BB723FA"><enum>(1)</enum><text>the sum of the net
income amounts with respect to such option for all taxable years of the S
corporation ending during the taxpayer’s holding period, over</text>
</paragraph><paragraph id="HD7AAF1842E2C4D788C0302A34FAA8698"><enum>(2)</enum><text>the sum of the net
loss amounts with respect to such option for all such taxable years.</text>
</paragraph></subsection><subsection id="HE0A2F2FB0C7246E1B14F471D70EBD499"><enum>(c)</enum><header>Net income and
loss amounts</header><text>For purposes of this section, with respect to any
taxable year of the S corporation—</text>
<paragraph id="HB6A665D08600480E80CF692150351897"><enum>(1)</enum><header>Net income
amount</header><text>The term <term>net income amount</term> means the excess
(if any) of—</text>
<subparagraph id="HB6D00546F1FC48D8A2B888F9D07E03AF"><enum>(A)</enum><text display-inline="yes-display-inline">the pass-thru income share for such taxable
year, over</text>
</subparagraph><subparagraph id="HBEC34F3F7A43427B9DA7E4B7C8CDB4D0"><enum>(B)</enum><text>the pass-thru loss
share for such taxable year.</text>
</subparagraph></paragraph><paragraph id="H219729AAC7CC468B8BCB25C27490E500"><enum>(2)</enum><header>Net loss
amount</header><text>The term <term>net loss amount</term> means the excess (if
any) of the amount described in paragraph (1)(B) over the amount described in
paragraph (1)(A).</text>
</paragraph></subsection><subsection commented="no" id="H95BCF8A311CB4AB1B19FBA7C5200C55C"><enum>(d)</enum><header>Pass-thru income
and loss shares</header><text>For purposes of this section, with respect to any
taxable year of the S corporation—</text>
<paragraph commented="no" id="H1A4F072A63E840EEAFEEC13182F37E"><enum>(1)</enum><header>Pass-thru income
share</header><text>The term <term>pass-thru income share</term> means the
excess (if any) of—</text>
<subparagraph commented="no" id="H223E5EB0CB574E97A57900893B7F2C07"><enum>(A)</enum><text>the aggregate
items of income taken into account under section 1366 by the employee stock
ownership plan for such taxable year, over</text>
</subparagraph><subparagraph commented="no" id="H2D5B632F472E48E68ED7B6959B8441F2"><enum>(B)</enum><text>the aggregate
items of income which would have been so taken into account if such option had
been exercised upon being granted.</text>
</subparagraph></paragraph><paragraph id="H7981E1D336AC41B489A0AB98CA9B17D5"><enum>(2)</enum><header>Pass-thru loss
share</header><text>The term <term>pass-thru loss share</term> means the excess
(if any) of—</text>
<subparagraph commented="no" id="HF76A514A85DC4140A74CEFBAF8FF7E9"><enum>(A)</enum><text>the aggregate items
of deduction and loss taken into account under section 1366 by the employee
stock ownership plan for such taxable year, over</text>
</subparagraph><subparagraph commented="no" id="HBEB08B3D3E00402BB060F19290B21713"><enum>(B)</enum><text>the aggregate
items of deduction and loss which would have been so taken into account if such
option had been exercised upon being granted.</text>
</subparagraph></paragraph></subsection><subsection commented="no" id="HEFA4D529DBC1405F92ECF280000841CD"><enum>(e)</enum><header>Interest at
underpayment rate</header>
<paragraph id="H196B4133997941C193F8F8114C52FB88"><enum>(1)</enum><header>In
general</header><text>In the case of any taxpayer who includes any amount in
gross income for any taxable year under subsection (a), the tax imposed by this
chapter on such taxpayer for such taxable year shall be increased by interest
at the underpayment rate determined under section 6621 on the underpayments
that would have occurred had the net income amounts with respect to each
taxable year taken into account under subsection (c) been includible in the
taxpayer’s gross income for each of taxable year of the taxpayer in or with
which the taxable year so taken into account ends.</text>
</paragraph><paragraph id="HBD4C9D07D89A495CAD5D23FF4272D733"><enum>(2)</enum><header>Reduction for
previous net loss amounts</header><text>For purposes of paragraph (1), the net
income amount for any taxable year shall be reduced by the excess of—</text>
<subparagraph id="H6005518378734768AD77E8284D18D2E"><enum>(A)</enum><text>the aggregate net
loss amounts for taxable years taken into account under subsection (c) with
respect to the taxpayer, over</text>
</subparagraph><subparagraph id="H9382DF9287A24AFAB12F4963006BC7F3"><enum>(B)</enum><text>the amount of such
aggregate previously taken into account under this paragraph to reduce any net
income amount.</text>
</subparagraph></paragraph></subsection><subsection commented="no" id="H07A62A15E64845DAB8EC5DD0A9DFEB3C"><enum>(f)</enum><header>Other
definitions and special rules</header><text>For purposes of this
section—</text>
<paragraph commented="no" id="HCD6644DBF5E442D6A7217DC1D676CB"><enum>(1)</enum><header>Option</header><text>The
term <term>option</term> includes any synthetic equity described in section
409(p)(6)(C).</text>
</paragraph><paragraph commented="no" id="H878A9ED6EF4E490F8F0077A8671EEC94"><enum>(2)</enum><header>Effect of
starting or terminating an S corporation election</header><text>With respect to
any option, a corporation which is an S corporation for any taxable year which
ends while such option is outstanding shall be treated for purposes of this
section (other than subsection (d)) as an S corporation for all taxable years
which end while such option is outstanding.</text>
</paragraph><paragraph id="HD24C3293692D4586AFF4E56EF11F46C1"><enum>(3)</enum><header>Adjustments to
basis</header>
<subparagraph commented="no" id="H2DF741B25FA54985B8452F4B00D21F01"><enum>(A)</enum><header>Increase in
basis of acquired stock</header><text display-inline="yes-display-inline">The
taxpayer’s basis in any stock acquired pursuant to the exercise of an option to
which subsection (a) applies shall be increased by the amount included in gross
income by the taxpayer under subsection (a) with respect to such option.</text>
</subparagraph><subparagraph id="H33B50F36E02A469FBF9C61CABD8D05EC"><enum>(B)</enum><header>Increase in
basis of option on sale</header><text display-inline="yes-display-inline">The
taxpayer’s basis in any option shall be increased by the amount included in
gross income by the taxpayer under subsection (a) with respect to such
option.</text>
</subparagraph></paragraph></subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection commented="no" id="H7B6122B7A1964C70BC6DEA9F8C919ED5"><enum>(b)</enum><header>Conforming
amendments</header>
<paragraph commented="no" id="HD5635F6406B146378F63B0F13737E5AF"><enum>(1)</enum><text>Section 26(b)(2),
as amended by this Act, is amended by striking <quote>and</quote> at the end of
subparagraph (T), by striking the period at the end of subparagraph (U) and
inserting <quote>, and</quote>, and by adding at the end the following new
subparagraph:</text>
<quoted-block display-inline="no-display-inline" id="H18E1ADFFDF7E4B38A830C8E51DA0AF38" style="OLC">
<subparagraph commented="no" id="HA937895230404905A03500B02529728"><enum>(V)</enum><text display-inline="yes-display-inline">subsection (e) of section 409B (relating to
interest on income recognized upon exercise of a stock option in an S
corporation with an ESOP).</text>
</subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph commented="no" id="H177489DA1F0745C4BA6FB41ECA5142EB"><enum>(2)</enum><text>Section 1016(a) is
amended by striking <quote>and</quote> at the end of paragraph (36), by
striking the period at the end of paragraph (37) and inserting <quote>,
and</quote>, and by adding at the end the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="H3FAEB7792D6F4376AD3149355C14D077" style="OLC">
<paragraph commented="no" id="H605A44FF218F4E8199BEA66EAE85C9D3"><enum>(38)</enum><text>to the extent
provided in section
409B(f)(3).</text>
</paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph commented="no" id="H1D0BC26D8EED4C8994801787AEA7A5CF"><enum>(3)</enum><text display-inline="yes-display-inline">The table of sections for subpart A of part
I of subchapter D of chapter 1 is amended by adding at the end the following
new item:</text>
<quoted-block display-inline="no-display-inline" id="HE8AF943A3353416D858B0049B0540082" style="OLC">
<toc container-level="quoted-block-container" idref="H51F80C9AD28F46C38166BF99CF28B622" lowest-bolded-level="division-lowest-bolded" lowest-level="section" quoted-block="no-quoted-block" regeneration="yes-regeneration">
<toc-entry idref="HB6D1816F792E4A59AA60DD56256B28EC" level="section">Sec. 409B. Recognition of ordinary income on sale or exercise
of stock option in S corporation with an
ESOP.</toc-entry>
</toc>
<after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection commented="no" id="H31D5AF6119084284896CAC67874D32A3"><enum>(c)</enum><header>Effective
date</header><text>The amendments made by this section shall apply to options
granted after the date of the enactment of this Act.</text>
</subsection></section><section display-inline="no-display-inline" id="H894A98836A434A7F9982146085E14262" section-type="subsequent-section"><enum>3702.</enum><header>Termination of
special rules for domestic international sales corporations</header>
<subsection id="HF83548F43152484DA36D166D29649C59"><enum>(a)</enum><header>In
general</header><text>Part IV of subchapter N of chapter 1 (relating to
domestic international sales corporations) is amended by adding at the end the
following new subpart:</text>
<quoted-block display-inline="no-display-inline" id="H1EDCC950F47E47D3BD28636E72DDF6F0" style="OLC">
<subpart id="H18B8C2D74BA74A49B041778B6E822F54"><enum>C</enum><header>Termination</header>
<toc container-level="subpart-container" idref="H18B8C2D74BA74A49B041778B6E822F54" lowest-bolded-level="division-lowest-bolded" lowest-level="section" quoted-block="no-quoted-block" regeneration="yes-regeneration">
<toc-entry idref="H821075989388435288A4B1F8DAC3D180" level="section">Sec. 998. Termination of domestic international sales
corporation provisions.</toc-entry>
</toc>
<section id="H821075989388435288A4B1F8DAC3D180"><enum>998.</enum><header>Termination of
domestic international sales corporation provisions</header>
<subsection id="HD8B7C29B6E4A4B22A559C073016782A0"><enum>(a)</enum><header>Termination of
election</header><text>Any election under section 992(b) in effect for a
corporation’s last taxable year beginning in 2007 shall be terminated effective
for such corporation’s next succeeding taxable year.</text>
</subsection><subsection id="HB207080BC25C4456A2F0C08DF029D393"><enum>(b)</enum><header>No new
election</header><text>No election may be made under section 992(b) for any
taxable year beginning after December 31, 2007.</text>
</subsection><subsection id="H0A2908ED30634C9887FD35BFE3FD40"><enum>(c)</enum><header>Effect of
termination</header><text display-inline="yes-display-inline">A shareholder of
a corporation whose election is terminated by reason of subsection (a) shall be
deemed to have received a distribution to which section 995(b)(2) applies. Such
distribution (or any actual distribution after termination to the extent paid
out of the corporation’s accumulated DISC income) shall not be treated as
qualified dividend income (within the meaning of section
1(h)(11)(B)).</text>
</subsection></section></subpart><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H2CCE38ED46CA4B298C2EE65047B0BEB3"><enum>(b)</enum><header>Conforming
amendment</header><text>The table of contents for part IV of subchapter N of
chapter 1 is amended by adding at the end the following new item:</text>
<quoted-block display-inline="no-display-inline" id="HA501F9E3AF2C436884FDEED2AB7711A1" style="OLC">
<toc container-level="quoted-block-container" idref="H1EDCC950F47E47D3BD28636E72DDF6F0" lowest-bolded-level="division-lowest-bolded" lowest-level="section" quoted-block="no-quoted-block" regeneration="yes-regeneration">
<toc-entry idref="H18B8C2D74BA74A49B041778B6E822F54" level="subpart">Subpart
C—Termination</toc-entry>
</toc>
<after-quoted-block>.</after-quoted-block></quoted-block>
</subsection></section><section id="H961F9334730741ABB8A8392EEDCF2CD8" section-type="subsequent-section"><enum>3703.</enum><header>Treatment of
securities of a controlled corporation exchanged for assets in certain
reorganizations</header>
<subsection id="H6B287E24CE594C1FAF313333B35D1BC5"><enum>(a)</enum><header>In
general</header><text display-inline="yes-display-inline">Section 361 (relating
to nonrecognition of gain or loss to corporations; treatment of distributions)
is amended by adding at the end the following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="HBD6AF2F191934D6B97E84F53D0402FF6" style="OLC">
<subsection id="H3042D9C2C97548B188B9009CDBBE41B5"><enum>(d)</enum><header>Receipt of
securities, etc., in exchange for assets in certain
reorganizations</header><text display-inline="yes-display-inline">If—</text>
<paragraph id="HDA15A163234C4BBEAB9B55FA024589D3"><enum>(1)</enum><text>property is
transferred to a corporation (hereinafter in this subsection referred to as the
<quote>controlled corporation</quote>) pursuant to a plan of reorganization
described in section 368(a)(1)(D), and</text>
</paragraph><paragraph id="H55446A5D89234B6F8E10154DF82B344D"><enum>(2)</enum><text>pursuant to such
plan of reorganization, stock or securities in the controlled corporation are
distributed in a transaction which qualifies under section 355,</text>
</paragraph><continuation-text continuation-text-level="subsection">then any
securities and nonqualified preferred stock (as defined in section 351(g)(2))
of the controlled corporation shall be treated as other property for purposes
of subsections (a) and
(b).</continuation-text></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H691CC21C2AB045E29848627E9FA1552B"><enum>(b)</enum><header>Effective
date</header><text>The amendment made by subsection (a) shall apply to
distributions after the date of the enactment of this Act.</text>
</subsection></section></subtitle>