110 HR 6595 IH: Middle Class Tax Fairness Act
U.S. House of Representatives
2008-07-24
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 Middle Class Tax Fairness Act
of 2008
.
(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—Tax Relief Provisions
Sec. 101. Temporary increase in standard deduction.
Sec. 102. Additional standard deduction for real property taxes
for nonitemizers.
Sec. 103. Refundable child credit.
Title II—Revenue Provisions
Sec. 201. Income of partners for performing investment
management services treated as ordinary income received for performance of
services.
Sec. 202. Limitation of deduction for income attributable to
domestic production of oil, gas, or primary products thereof.
Sec. 203. Limitation on treaty benefits for certain deductible
payments.
Sec. 204. Returns relating to payments made in settlement of
payment card and third party network transactions.
Sec. 205. High income individuals subject to overall limitation
on itemized deductions and phaseout of deductions for personal
exemptions.
Sec. 206. Nonqualified deferred compensation from certain tax
indifferent parties.
Sec. 207. Broker reporting of customer’s basis in securities
transactions.
Sec. 208. Repeal of worldwide allocation of
interest.
Sec. 209. Clarification of economic substance
doctrine.
Title III—Deficit Reduction
Sec. 301. Deficit reduction.
<enum>I</enum><header>Tax
Relief Provisions</header>
<section id="H0AE9EFFD58FC4D41BE2543C672DFA8BD"><enum>101.</enum><header>Temporary
increase in standard deduction</header>
<subsection id="H5C4F8F75A1FE46F19672C858751E89EC"><enum>(a)</enum><header>In
general</header><text display-inline="yes-display-inline">Section 63(c) is
amended by adding at the end the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="H95A08CC603B34931A5E3A06DB8E47624" style="OLC">
<paragraph id="H55BCCA675F2D4A3C8CAE64BDE0685DEE"><enum>(7)</enum><header>Increase in
basic standard deduction for 2008 and 2009</header><text display-inline="yes-display-inline">In the case of any taxable year beginning
in 2008 or 2009, for purposes of paragraph (1)(A), the basic standard deduction
for any such taxable year shall, in lieu of the amount determined under
paragraph (2), be 200 percent of the amount in effect under paragraph (2) for
such taxable year, determined after the application of paragraph
(4).</text>
</paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H9C68D74F2EAD4B21AA7400277F5031C9"><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="HB70AA1FC29754A0C9456A49056F87F9" section-type="subsequent-section"><enum>102.</enum><header>Additional standard
deduction for real property taxes for nonitemizers</header>
<subsection id="HE9BBF2D76CF8457F8C7CA4F479434E7"><enum>(a)</enum><header>In
general</header><text>Section 63(c)(1) (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 adding at the end the following new subparagraph:</text>
<quoted-block id="H5F10DA0DBDEC4BB6A2C558764DF8797">
<subparagraph id="H43739219EDC147B0ADAEB69600CB2600"><enum>(C)</enum><text>in the case of any
taxable year beginning in 2008 or 2009, the real property tax
deduction.</text>
</subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="HCBF4B966087A4AD89374008BF4147F27"><enum>(b)</enum><header>Definition</header><text>Section
63(c), as amended, is amended by adding at the end the following new
paragraph:</text>
<quoted-block id="H3D3F8FFC3BC8428AAF3C9536CBCD2CB8">
<paragraph id="H1797FFC59A7F493B85F564F34F60D67E"><enum>(8)</enum><header>Real property
tax deduction</header><text display-inline="yes-display-inline">For purposes of
paragraph (1), the real property tax deduction is the lesser of—</text>
<subparagraph id="H5B77E05E3A574AB2B351A4486143C5F"><enum>(A)</enum><text>the amount
allowable as a deduction under this chapter for State and local taxes described
in section 164(a)(1), or</text>
</subparagraph><subparagraph id="HC4185AF0158340AF00E9B9F7E54DA13"><enum>(B)</enum><text>$350 ($700 in the
case of a joint return).</text>
</subparagraph><continuation-text continuation-text-level="paragraph">Any taxes
taken into account under section 62(a) shall not be taken into account under
this
paragraph.</continuation-text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="HFA314250E01F4CCC9494EA10ED80FF43"><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="H821496C83B1343CEB100E48672474F5B" section-type="subsequent-section"><enum>103.</enum><header>Refundable child
credit</header>
<subsection commented="no" id="HDD14D10E3B39434EAC4E203D69001995"><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 inserting <quote>($8,500 in the case of
taxable years beginning in 2008 or 2009)</quote> after
<quote>$10,000</quote>.</text>
</subsection><subsection id="H7669E7D4FE174BC4BE4BD340FE11C41C"><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><enum>II</enum><header>Revenue
Provisions</header>
<section display-inline="no-display-inline" id="H4CB3E574714943F2A9A6232DAFEFDA9F" section-type="subsequent-section"><enum>201.</enum><header>Income of partners
for performing investment management services treated as ordinary income
received for performance of services</header>
<subsection id="H76240810956B48DAB89100919049A492"><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="H03E5244ED62D48548779DE8C722E0D5" style="OLC">
<section id="HA84F7ADFA99C4F218180E23ED325D706"><enum>710.</enum><header>Special rules
for partners providing investment management services to partnership</header>
<subsection id="H8626CF68161147498F2E5F52CB35A6F5"><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="H8B949FEDACD4469BB4EB45BC2945CA6B"><enum>(1)</enum><header>In
general</header><text>Notwithstanding section 702(b)—</text>
<subparagraph id="HC9AB2D49C83948469BD2E33D43BBD841"><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="HC2E846E45A63472B9F055CFC9002B48B"><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><continuation-text continuation-text-level="paragraph">All items
of income, gain, deduction, and loss which are taken into account in computing
net income or net loss shall be treated as ordinary income or ordinary loss (as
the case may be).</continuation-text></paragraph><paragraph id="H2B53FC33321B43E184D75C61D400D690"><enum>(2)</enum><header>Treatment of
losses</header>
<subparagraph id="H6F06FDCA7220420496ECA637546DF682"><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="HCD471B441B3E4045B91B1EAF9EEF3975"><enum>(i)</enum><text>the aggregate net
income with respect to such interest for all prior partnership taxable years,
over</text>
</clause><clause id="H5459142179B640080000AC6D618FDBC0"><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="H622FEA027BC6486E9FCB6DA37B352330"><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="H8F48B44CA471425C811CECDA5DDE9DD1"><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="HF0F2B0440FAA492C00C1A99E1D2F94D1"><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="H3E29952E95EC48ED9B3EBDDF91A33FCF"><enum>(i)</enum><text>the basis of such
interest immediately after such purchase, over</text>
</clause><clause id="H3DB7F94C7E3646A2A1E7DB6425872EF4"><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="HF0AFBA7EAE3B44FCA424FAE74F2C7167"><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="H400E7C5F90D84098AAFE11633DA2A4FD"><enum>(3)</enum><header>Net income and
loss</header><text>For purposes of this section—</text>
<subparagraph id="HCB1E38C665DE4B3AA30510E09D00E4A5"><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="HBC8CA195696949DEB90093266663AB7B"><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="HE0219700046942D5B5F37EB009CECC4"><enum>(ii)</enum><text>all items of
deduction and loss so taken into account.</text>
</clause></subparagraph><subparagraph id="HF57F697555C546499C835351FFA824BD"><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="HB660A627C0554089AD00A4A92F1286CE"><enum>(b)</enum><header>Dispositions of
partnership interests</header>
<paragraph id="HAB814859BBD44215889B05A9E3EE9DE6"><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="HB63EFED3C25A411A81A52E6B580344B3"><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="H10C98D93EEB94D5AA2B0B837ED1D1836"><enum>(A)</enum><text>the aggregate net
income with respect to such interest for all partnership taxable years,
over</text>
</subparagraph><subparagraph id="HAD997EE8587B4AECA4BE97C49485B41F"><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="H7D1B587E22D94D77A6F21EDD3BB3152"><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 commented="no" display-inline="no-display-inline" id="HF6BFFFE2BBAB4D63B42822DFEEF44B01"><enum>(4)</enum><header>Distributions of
partnership property</header><text>In the case of any distribution of property
by a partnership with respect to any investment services partnership interest
held by a partner—</text>
<subparagraph commented="no" id="H15E555969AC643078392F09F0918682D"><enum>(A)</enum><text>the excess (if
any) of—</text>
<clause commented="no" id="H823FB39794CA41ABB8E46F742C5FD5C2"><enum>(i)</enum><text>the fair market
value of such property at the time of such distribution, over</text>
</clause><clause commented="no" id="H635A146103CA4F73943CDC32DF19DF72"><enum>(ii)</enum><text>the adjusted
basis of such property in the hands of the partnership,</text>
</clause><continuation-text commented="no" continuation-text-level="subparagraph">shall be taken into account as an
increase in such partner’s distributive share of the taxable income of the
partnership (except to the extent such excess is otherwise taken into account
in determining the taxable income of the partnership),</continuation-text></subparagraph><subparagraph commented="no" id="H4EA0971918E94B078100CE3084D92217"><enum>(B)</enum><text>such property
shall be treated for purposes of subpart B of part II as money distributed to
such partner in an amount equal to such fair market value, and</text>
</subparagraph><subparagraph commented="no" id="H8C6FA16671A147DB89BAE6AA88F74B2B"><enum>(C)</enum><text>the basis of such
property in the hands of such partner shall be such fair market value.</text>
</subparagraph><continuation-text continuation-text-level="paragraph">Subsection
(b) of section 734 shall be applied without regard to the preceding
sentence.</continuation-text></paragraph><paragraph id="HE8EC4CF6E2F9483B8424C5F9BE24F05C"><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="H93E5BE1196DC4AF18500E6153F066673"><enum>(c)</enum><header>Investment
services partnership interest</header><text display-inline="yes-display-inline">For purposes of this section—</text>
<paragraph id="HC6038C64AC704B5684B2B47BF143E56B"><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="HD46652165BD04EA688FE38C313086E00"><enum>(A)</enum><text>Advising as to the
advisability of investing in, purchasing, or selling any specified
asset.</text>
</subparagraph><subparagraph id="H5AEEBDF9F58541E1885F607B6D240080"><enum>(B)</enum><text>Managing,
acquiring, or disposing of any specified asset.</text>
</subparagraph><subparagraph id="HB5746C503E0B4F379F00E0037C00E806"><enum>(C)</enum><text>Arranging
financing with respect to acquiring specified assets.</text>
</subparagraph><subparagraph id="HFC2465F592E7493B8B95FDBD676808"><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="H42319D18DD394271B205514754B6DF68"><enum>(2)</enum><header>Exception for
certain capital interests</header>
<subparagraph commented="no" id="H3F4641E7441743B590628BFC4E5041AA"><enum>(A)</enum><header>In
general</header><text>If—</text>
<clause commented="no" id="HB11C3107DBE44E4BA85B997BE2A508D0"><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="HAC8E6BD3F08F4EDFBF5D29E0D0FFC59E"><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="H8CB924A2F5924646B7536648CE20972"><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="H0C3BDF22BCD54B6792CF00D772928E96"><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="HB903C71367A342C09136AF8FB5362CB7"><enum>(D)</enum><header>Treatment of
certain loans</header>
<clause id="H420955B90945439D94B2EBA9BA6D5EB4"><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="H83FF840A4408498F822B940053CDC320"><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="H72ACE6775C974A628CF8696C1B52BC82"><enum>(d)</enum><header>Other income and
gain in connection with investment management services</header>
<paragraph id="HF183D659E925480C9DB7E18BA09E5864"><enum>(1)</enum><header>In
general</header><text display-inline="yes-display-inline">If—</text>
<subparagraph id="H1094DC484251481BAA09035527FA07B2"><enum>(A)</enum><text>a person performs
(directly or indirectly) investment management services for any entity,</text>
</subparagraph><subparagraph id="H90EA3C162238475689259E82D996F5A7"><enum>(B)</enum><text>such person holds
a disqualified interest with respect to such entity, and</text>
</subparagraph><subparagraph id="H63DF459970C24B37A93CF6CA8422E93D"><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="HC5356001E74A44F39560000090D0D1F9"><enum>(2)</enum><header>Definitions</header><text>For
purposes of this subsection—</text>
<subparagraph id="H789CBF0E5E7547549BDB798C14E2F2D0"><enum>(A)</enum><header>Disqualified
interest</header><text>The term <term>disqualified interest</term> means, with
respect to any entity—</text>
<clause id="HADB849FA69CB4882B2BB82313FC8EDA"><enum>(i)</enum><text>any
interest in such entity other than indebtedness,</text>
</clause><clause id="H8ECC7ECE09A849D8948F38EDA405DDD4"><enum>(ii)</enum><text>convertible or
contingent debt of such entity,</text>
</clause><clause id="HF4BA608B3A1C4ACB8D39E2BBDBDA73EA"><enum>(iii)</enum><text>any option or
other right to acquire property described in clause (i) or (ii), and</text>
</clause><clause id="HDEB64D8B5E054EF09794F2DD0D2242C"><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="H8204391FBED64FAA8898C9EEDDB1AA52"><enum>(B)</enum><header>Taxable
corporation</header><text>The term <term>taxable corporation</term>
means—</text>
<clause id="H9589F24EC3CD4966BF11C6999555F096"><enum>(i)</enum><text>a
domestic C corporation, or</text>
</clause><clause id="HCC3DB2F30E78494394CA2DBC92F237F5"><enum>(ii)</enum><text>a
foreign corporation subject to a comprehensive foreign income tax.</text>
</clause></subparagraph><subparagraph id="HF809D0F808534211B0D500205634DB6C"><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><subparagraph display-inline="no-display-inline" id="H43B00E8695524616894755EFDB50301C"><enum>(D)</enum><header>Comprehensive
foreign income tax</header><text>The term <term>comprehensive foreign income
tax</term> means, with respect to any foreign corporation, the income tax of a
foreign country if—</text>
<clause id="H1FE42CF286FB43C68E283CC65BF971FD"><enum>(i)</enum><text>such corporation
is eligible for the benefits of a comprehensive income tax treaty between such
foreign country and the United States, or</text>
</clause><clause id="H78ACFAF147324CD89F3EF06130B59023"><enum>(ii)</enum><text>such corporation
demonstrates to the satisfaction of the Secretary that such foreign country has
a comprehensive income tax.</text>
</clause></subparagraph></paragraph></subsection><subsection commented="no" id="H928058D10DCB4FCEA87F166D8067CCB7"><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="HC7D37500B0F0442BB544BF635047E0B8"><enum>(1)</enum><text>prevent the
avoidance of the purposes of this section, and</text>
</paragraph><paragraph commented="no" id="H7D658948B2544BE4BD8BA7CD2650483F"><enum>(2)</enum><text>coordinate this
section with the other provisions of this subchapter.</text>
</paragraph></subsection><subsection commented="no" id="HD5767134BCC3426500D93E8500A9A200"><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="H23E1214A57E54CD3B5719F352B9583E2"><enum>(b)</enum><header>Application to
real estate investment trusts</header>
<paragraph id="H96ECE4C3C59244460000365F23E3786B"><enum>(1)</enum><header>In
general</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="H57245B110B7A4ECB9171A13141919191" style="OLC">
<paragraph id="H6B6E9925F31C49E58D03139C929DA3C6"><enum>(9)</enum><header>Exception from
recharacterization of income from investment services partnership
interests</header>
<subparagraph id="H718B2E6A638B42D191DC585E1BEC99AF"><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="HA57A1C10826E4AF48862EF0240886F43"><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="H0AD28D05921A4A4FAE91FB5EF5DD87AE"><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="H1B33A67A9CA643FA96584927E1DB7855"><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="H6A4C9593E8E949CBBECEB0F5416E42BB"><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>
</paragraph><paragraph id="H8571278691F54EA281A0022404007617"><enum>(2)</enum><header>Conforming
amendment</header><text>Paragraph (4) of section 7704(d) is amended by
inserting <quote>(determined without regard to section 856(c)(8))</quote> after
<quote>856(c)(2)</quote>.</text>
</paragraph></subsection><subsection id="H2F483DF97E434116AA65B800E7119DDC"><enum>(c)</enum><header>Imposition of
penalty on underpayments</header>
<paragraph id="H848AE06940BF439CA32887C99B31C216"><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="H52EE3EB0A1B940A29DE361E2116BDBAF" style="OLC">
<paragraph id="H7EC99E88725747ECA2B58534005D4222"><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="H1649007DDC064C41B764A23CE858025D"><enum>(2)</enum><header>Amount of
penalty</header>
<subparagraph id="H17697B65BA4B4637BF1137BB75E00EE"><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="H8AC7716E46184EA884AB005FEA3C5848" style="OLC">
<subsection id="H45BEE136EAB44008B1E7ECDA96049CB1"><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="H5F3BAC8A3018406F834F1F32E44B5813"><enum>(B)</enum><header>Conforming
amendments</header><text>Subparagraph (B) of section 6662A(e)(2) is
amended—</text>
<clause id="H1768B6C99CDF45AE90CB909C3096968"><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="H6D711B4A8B244B7FACD101D633BCEF27"><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="H2808F80CF02B44EBAB7ED1A474E18CCE"><enum>(3)</enum><header>Reasonable cause
exception not applicable</header><text>Subsection (c) of section 6664 is
amended—</text>
<subparagraph id="HA9C418C0DF814275A0FE9488408B4EC"><enum>(A)</enum><text>by redesignating
paragraphs (2) and (3) as paragraphs (3) and (4), respectively,</text>
</subparagraph><subparagraph id="H5E7AE8BC29C7449DAAD6D58D37806D9C"><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="HBF3C72D371DF47D5A25C5DDB1277E9B8"><enum>(C)</enum><text>by inserting after
paragraph (1) the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="H262F0AA2B06841628E3557B2E80DB37" style="OLC">
<paragraph id="HC055515A6C0742C388E2C549172CDC1"><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="H5F456429C2D14287A15F4EDE400057E9"><enum>(d)</enum><header>Conforming
amendments</header>
<paragraph id="H0F422459DA6142A3B93600D016D6FF27"><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="HBA8C5823EFF64FC3AEDB681615E9FAF"><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="HC8D6923918574E50B04647B414944E09"><enum>(3)</enum><text>Paragraph (13) of
section 1402(a) is amended—</text>
<subparagraph id="H25EE1BBADA89491A9699AC1444185501"><enum>(A)</enum><text>by striking
<quote>other than guaranteed</quote> and
inserting</text>
<quoted-block display-inline="yes-display-inline" id="HC2444370FC924B87A600E4DA637F2A2" style="OLC">
<text>other
than—</text><subparagraph id="H94E90EBD6B7D461399DF2B09941EA9A"><enum>(A)</enum><text>guaranteed</text>
</subparagraph><after-quoted-block>,</after-quoted-block></quoted-block>
</subparagraph><subparagraph id="H3503472A84B94E97BBBCFFB4BDE153EC"><enum>(B)</enum><text>by striking the
semicolon at the end and inserting <quote>, and</quote>, and</text>
</subparagraph><subparagraph id="H59E8D9A3351345C785A13B57AFF3D9CC"><enum>(C)</enum><text>by adding at the
end the following new subparagraph:</text>
<quoted-block display-inline="no-display-inline" id="H97018A737CC4486691386EFFAB3FABAB" style="OLC">
<subparagraph id="H1EC7C838079E4D0B81005719148C679C"><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="HD87EAAFAB5EA4920B46BA2005138881F"><enum>(4)</enum><text>Paragraph (12) of
section 211(a) of the Social Security Act is amended—</text>
<subparagraph id="HE548FB99E4C3480E88CBE643B9EE7B2F"><enum>(A)</enum><text>by striking
<quote>other than guaranteed</quote> and
inserting</text>
<quoted-block display-inline="yes-display-inline" id="HDDC8D04A8ADF499987D95C05E144E100" style="OLC">
<text>other
than—</text><subparagraph id="HA78743B4D3F7463CA7959E0825628200"><enum>(A)</enum><text>guaranteed</text>
</subparagraph><after-quoted-block>,</after-quoted-block></quoted-block>
</subparagraph><subparagraph id="H957E45863BD1414F86966C00BAFE2186"><enum>(B)</enum><text>by striking the
semicolon at the end and inserting <quote>, and</quote>, and</text>
</subparagraph><subparagraph id="HF36C72E59BED43EC9CA969AAC1E23FE3"><enum>(C)</enum><text>by adding at the
end the following new subparagraph:</text>
<quoted-block display-inline="no-display-inline" id="H7E3ED537B19141B1B417B639AF00E9FB" style="OLC">
<subparagraph id="H0CC7046852C44BF0A4AF9E7BCF041F5"><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="H30776C4E7F8A44A79712E335B1C9E68F"><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="H1DEE552D8AD44105885964CD6422D5F2" style="OLC">
<toc container-level="quoted-block-container" idref="H03E5244ED62D48548779DE8C722E0D5" lowest-bolded-level="division-lowest-bolded" lowest-level="section" quoted-block="no-quoted-block" regeneration="yes-regeneration">
<toc-entry idref="HA84F7ADFA99C4F218180E23ED325D706" 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="H899DE624A65C4FFCAD2810C99B5CC7ED"><enum>(e)</enum><header>Effective
date</header>
<paragraph id="HC4F312D4B7F24141AE46F4E6DB6E921B"><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 June
18, 2008.</text>
</paragraph><paragraph id="H8D887332AB6A44948335A91700F0FDC8"><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 June 18, 2008, 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="HF7510CA3E9F549FA8825F58386335095"><enum>(3)</enum><header>Dispositions of
partnership interests</header><text display-inline="yes-display-inline">Section
710(b) of the Internal Revenue Code of 1986 (as added by this section) shall
apply to dispositions and distributions after June 18, 2008.</text>
</paragraph><paragraph id="HD31A013DFF684DAFAD735E10BB214F86"><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 June 18, 2008.</text>
</paragraph><paragraph id="HCFE40270B9674F15BCD4046991704FE8"><enum>(5)</enum><header>Publicly traded
partnerships</header><text>For purposes of applying section 7704, the
amendments made by this section shall apply to taxable years beginning after
December 31, 2010.</text>
</paragraph></subsection></section><section display-inline="no-display-inline" id="H6EE8608FA7624D2BB0F4637E6278B5D3" section-type="subsequent-section"><enum>202.</enum><header>Limitation of
deduction for income attributable to domestic production of oil, gas, or
primary products thereof</header>
<subsection display-inline="no-display-inline" id="H683ADD28B6574A4F97488C1E5080AED0"><enum>(a)</enum><header>Denial of
deduction for major integrated oil companies for income attributable to
domestic production of oil, gas, or primary products thereof</header>
<paragraph id="HD9A033F77405499AB24B6CBA3ED558A4"><enum>(1)</enum><header>In
general</header><text>Subparagraph (B) of section 199(c)(4) (relating to
exceptions) is amended by striking <quote>or</quote> at the end of clause (ii),
by striking the period at the end of clause (iii) and inserting <quote>,
or</quote>, and by inserting after clause (iii) the following new
clause:</text>
<quoted-block display-inline="no-display-inline" id="HE083524C972E45159CDC0438003112F5" style="OLC">
<clause commented="no" display-inline="no-display-inline" id="HFD4AF263CC96410B97CB713B6F394041"><enum>(iv)</enum><text display-inline="yes-display-inline">in the case of any major integrated oil
company (as defined in section 167(h)(5)(B)), the production, refining,
processing, transportation, or distribution of oil, gas, or any primary product
thereof during any taxable year described in section
167(h)(5)(B).</text>
</clause><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="H26C38C2F4B3A474CBB00E089779E97D"><enum>(2)</enum><header>Primary
product</header><text>Section 199(c)(4)(B) is amended by adding at the end the
following flush sentence:</text>
<quoted-block display-inline="no-display-inline" id="H23DEDD1F9BCD4716BA639988B2484439" style="OLC">
<quoted-block-continuation-text quoted-block-continuation-text-level="subparagraph">For
purposes of clause (iv), the term <term>primary product</term> has the same
meaning as when used in section 927(a)(2)(C), as in effect before its
repeal.</quoted-block-continuation-text><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="H25559152112345EC995B8894A972993D"><enum>(b)</enum><header>Limitation on
oil related qualified production activities income for taxpayers other than
major integrated oil companies</header>
<paragraph id="H35CFFB52AEFB4ADEA256E8772EE993A6"><enum>(1)</enum><header>In
general</header><text>Section 199(d) is amended by redesignating paragraph (9)
as paragraph (10) and by inserting after paragraph (8) the following new
paragraph:</text>
<quoted-block display-inline="no-display-inline" id="H61B263FC05DB4F5EA319A128E1DF7B6E" style="OLC">
<paragraph id="HCE639F334B244E16AFAF2F806FA2A5A2"><enum>(9)</enum><header>Special rule for
taxpayers with oil related qualified production activities income</header>
<subparagraph id="HE547BE1D249040668831BFF5607EE4A3"><enum>(A)</enum><header>In
general</header><text>If a taxpayer (other than a major integrated oil company
(as defined in section 167(h)(5)(B))) has oil related qualified production
activities income for any taxable year beginning after 2009, the amount of the
deduction under subsection (a) shall be reduced by 3 percent of the least
of—</text>
<clause id="HFAF01B5134DD4177A9849F9120EA2DF3"><enum>(i)</enum><text>the oil related
qualified production activities income of the taxpayer for the taxable
year,</text>
</clause><clause id="H898B60A61F8B41C2A3E12706A3E55B9F"><enum>(ii)</enum><text>the qualified
production activities income of the taxpayer for the taxable year, or</text>
</clause><clause id="H7DC954C0DB9C44A0ABD431D922E3D9A6"><enum>(iii)</enum><text>taxable income
(determined without regard to this section).</text>
</clause></subparagraph><subparagraph id="HE37CEF7D9D1A4A5495CE5E61094E0000"><enum>(B)</enum><header>Oil related
qualified production activities income</header><text>The term <term>oil related
qualified production activities income</term> means for any taxable year the
qualified production activities income which is attributable to the production,
refining, processing, transportation, or distribution of oil, gas, or any
primary product thereof during such taxable
year.</text>
</subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="H1BDB12778D304F5EAFFEDB06A26B936B"><enum>(2)</enum><header>Conforming
amendment</header><text>Section 199(d)(2) (relating to application to
individuals) is amended by striking <quote>subsection (a)(1)(B)</quote> and
inserting <quote>subsections (a)(1)(B) and (d)(9)(A)(iii)</quote>.</text>
</paragraph></subsection><subsection commented="no" display-inline="no-display-inline" id="H2645CEB9673845618EB7387358B65DF8"><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><section display-inline="no-display-inline" id="H932386BB4F324271AB6B574BFEBE9E97" section-type="subsequent-section"><enum>203.</enum><header>Limitation on treaty
benefits for certain deductible payments</header>
<subsection id="HCBE4A249D0144223862EF49808814587"><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="HD930263DA11C42BA0027DA77DE31E12D">
<subsection id="H16B93EBCF4BB4CE791553D736EA79E00"><enum>(d)</enum><header>Limitation on
treaty benefits for certain deductible payments</header>
<paragraph id="H2272EB3F6F754CA3B45F1481D818589C"><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="H41DB0E3D0D384FCF9D2C767ED779BC78"><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="H21E8D5385D5C415AA731A0027A971D2"><enum>(3)</enum><header>Foreign
controlled group of entities</header><text display-inline="yes-display-inline">For purposes of this subsection—</text>
<subparagraph id="HF7859004A20C4865AFB91289EA667B14"><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="H2F667078CCFA4B79AFC24B9691F10000"><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="H5781B505CBC14B3594CA57800DAE515"><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="H4A9A0A6FE93742658B75F33EFF99001B"><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="H6328874719C6494F99E6CAF9C03FB55"><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="H4788117BAF204C5C836E4D4D891E7C7B"><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="H0BF2A9A507D4459F8E8143F2F8AD02B9"><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="H62151A0B02964575B7B8645FC81C0022"><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="H837A9174819B4BF59C0985DE9815D1D4"><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><section display-inline="no-display-inline" id="H0A7AD23A9F2C4E60A4F3CE67DDC62C6D" section-type="subsequent-section"><enum>204.</enum><header>Returns relating to
payments made in settlement of payment card and third party network
transactions</header>
<subsection id="H09E4A4C414B64788AE1FBB6FEEC359E"><enum>(a)</enum><header>In
general</header><text>Subpart B of part III of subchapter A of chapter 61 is
amended by adding at the end the following new section:</text>
<quoted-block display-inline="no-display-inline" id="HFF9F134DA244489AAB8EB86CFBC2FC01" style="OLC">
<section id="H89FF8D2A88734E8DAAD712D55B172EB9"><enum>6050W.</enum><header>Returns
relating to payments made in settlement of payment card and third party network
transactions</header>
<subsection id="H95989CCAB6D64C17BECFDBCCD74B57D6"><enum>(a)</enum><header>In
general</header><text>Each payment settlement entity shall make a return for
each calendar year setting forth—</text>
<paragraph id="H502CC4A6913B431693116CD06018E454"><enum>(1)</enum><text>the name, address,
and TIN of each participating payee to whom one or more payments in settlement
of reportable payment transactions are made, and</text>
</paragraph><paragraph id="H8FE0296ED79E44268845BD0600B495A1"><enum>(2)</enum><text>the gross amount
of the reportable payment transactions with respect to each such participating
payee.</text>
</paragraph><continuation-text continuation-text-level="subsection">Such
return shall be made at such time and in such form and manner as the Secretary
may require by regulations.</continuation-text></subsection><subsection id="HCDB8EB89CF2D4CB691BCF9FE67658B6"><enum>(b)</enum><header>Payment
settlement entity</header><text>For purposes of this section—</text>
<paragraph id="HE872DE200B8843DBAAD0525B8984FCC0"><enum>(1)</enum><header>In
general</header><text>The term <term>payment settlement entity</term>
means—</text>
<subparagraph id="H17BCE3E4CD104CA3964BB93842FBD64D"><enum>(A)</enum><text>in the case of a
payment card transaction, the merchant acquiring entity, and</text>
</subparagraph><subparagraph id="HD355A5DBC6A24FEB9CED3700551281B8"><enum>(B)</enum><text>in the case of a
third party network transaction, the third party settlement
organization.</text>
</subparagraph></paragraph><paragraph id="H90011EBA3D064FF58955C529DD63DFC3"><enum>(2)</enum><header>Merchant
acquiring entity</header><text>The term <term>merchant acquiring entity</term>
means the bank or other organization which has the contractual obligation to
make payment to participating payees in settlement of payment card
transactions.</text>
</paragraph><paragraph id="H2C0B020959634DECB7D6C1D9D4C7233C"><enum>(3)</enum><header>Third party
settlement organization</header><text>The term <term>third party settlement
organization</term> means the central organization which has the contractual
obligation to make payment to participating payees of third party network
transactions.</text>
</paragraph><paragraph id="HACC6259C368243CA89131CFA38E007DE"><enum>(4)</enum><header>Special rules
related to intermediaries</header><text display-inline="yes-display-inline">For
purposes of this section—</text>
<subparagraph id="H9B5EF391EE0749E5AAD4785C869240BD"><enum>(A)</enum><header>Aggregated
payees</header><text>In any case where reportable payment transactions of more
than one participating payee are settled through an intermediary—</text>
<clause id="HB1EEFA184A784CB18C481DF9A3FAA7A9"><enum>(i)</enum><text>such intermediary
shall be treated as the participating payee for purposes of determining the
reporting obligations of the payment settlement entity with respect to such
transactions, and</text>
</clause><clause id="HE50583DADDE54C26BE0418D58EB6E4A6"><enum>(ii)</enum><text>such intermediary
shall be treated as the payment settlement entity with respect to the
settlement of such transactions with the participating payees.</text>
</clause></subparagraph><subparagraph id="H89A90A565D9F4D2F9EF127D0DB416842"><enum>(B)</enum><header>Electronic
payment facilitators</header><text>In any case where an electronic payment
facilitator or other third party makes payments in settlement of reportable
payment transactions on behalf of the payment settlement entity, the return
under subsection (a) shall be made by such electronic payment facilitator or
other third party in lieu of the payment settlement entity.</text>
</subparagraph></paragraph></subsection><subsection id="HD0A075D6DFF7496BAB4FEF714EBAF900"><enum>(c)</enum><header>Reportable
payment transaction</header><text>For purposes of this section—</text>
<paragraph id="HF63629823CCE471F8D8367172500D7F"><enum>(1)</enum><header>In
general</header><text>The term <term>reportable payment transaction</term>
means any payment card transaction and any third party network
transaction.</text>
</paragraph><paragraph id="HD80A58E643CF49999C096D76A0AE002F"><enum>(2)</enum><header>Payment card
transaction</header><text display-inline="yes-display-inline">The term
<term>payment card transaction</term> means any transaction in which a payment
card is accepted as payment.</text>
</paragraph><paragraph id="H497D3435AF4A492C89CF8F909EE01145"><enum>(3)</enum><header>Third party
network transaction</header><text>The term <term>third party network
transaction</term> means any transaction which is settled through a third party
payment network.</text>
</paragraph></subsection><subsection id="HA5BFC6DA55C34A288E5E522E2E17AD5B"><enum>(d)</enum><header>Other
definitions</header><text>For purposes of this section—</text>
<paragraph id="HD33367FCCC0543E7B6E927C300B304F2"><enum>(1)</enum><header>Participating
payee</header>
<subparagraph id="H9F20DADF0015400BB1846DD64E5F1911"><enum>(A)</enum><header>In
general</header><text>The term <term>participating payee</term> means—</text>
<clause id="HE5D75444EDFA4728A73BD791FD7C1B3"><enum>(i)</enum><text>in
the case of a payment card transaction, any person who accepts a payment card
as payment, and</text>
</clause><clause id="HC55B5252CCCE4F4883F69F006EE52412"><enum>(ii)</enum><text>in the case of a
third party network transaction, any person who accepts payment from a third
party settlement organization in settlement of such transaction.</text>
</clause></subparagraph><subparagraph id="HB8C4843784DE4F19B4ADA9C3CF8100DC"><enum>(B)</enum><header>Exclusion of
foreign persons</header><text>Except as provided by the Secretary in
regulations or other guidance, such term shall not include any person with a
foreign address.</text>
</subparagraph><subparagraph id="HEA0AE803F122407BBD9C5B522B14C49D"><enum>(C)</enum><header>Inclusion of
governmental units</header><text>The term <term>person</term> includes any
governmental unit (and any agency or instrumentality thereof).</text>
</subparagraph></paragraph><paragraph id="H900CD213E94D46BC8761A4F15BD5A44D"><enum>(2)</enum><header>Payment
card</header><text>The term <term>payment card</term> means any card which is
issued pursuant to an agreement or arrangement which provides for—</text>
<subparagraph id="HC8A65B1D63594FB39956AF2EEC8C939D"><enum>(A)</enum><text>one or more
issuers of such cards,</text>
</subparagraph><subparagraph id="H024F131BEB6B4C0EBCC70020B0B0D300"><enum>(B)</enum><text>a network of
persons unrelated to each other, and to the issuer, who agree to accept such
cards as payment, and</text>
</subparagraph><subparagraph id="H0CD04F60D07C4D7FA3D16D8D4BA7770"><enum>(C)</enum><text>standards and
mechanisms for settling the transactions between the merchant acquiring
entities and the persons who agree to accept such cards as payment.</text>
</subparagraph><continuation-text continuation-text-level="paragraph">The
acceptance as payment of any account number or other indicia associated with a
payment card shall be treated for purposes of this section in the same manner
as accepting such payment card as payment.</continuation-text></paragraph><paragraph id="HEB89931F173D4BE39FFE36D7843579E1"><enum>(3)</enum><header>Third party
payment network</header><text>The term <term>third party payment network</term>
means any agreement or arrangement—</text>
<subparagraph id="HF998614DFDB845FD974E18B2DF5AEBD"><enum>(A)</enum><text>which involves the
establishment of accounts with a central organization by a substantial number
of persons who—</text>
<clause id="H57B507A03E4D4AB0BEEC8F7BBC6F3E7E"><enum>(i)</enum><text>are unrelated to
such organization,</text>
</clause><clause id="H4C9ACF2800E747CEB09B60336989FEAC"><enum>(ii)</enum><text>provide goods or
services, and</text>
</clause><clause id="H43C4A7BFED634E4F82FF7B71E1E93900"><enum>(iii)</enum><text>have agreed to
settle transactions for the provision of such goods or services pursuant to
such agreement or arrangement,</text>
</clause></subparagraph><subparagraph id="HD740464818F7461BA89E3F347EFFE54D"><enum>(B)</enum><text>which provides for
standards and mechanisms for settling such transactions, and</text>
</subparagraph><subparagraph id="H169B1FF9448E43199768F1EA2E5B9408"><enum>(C)</enum><text>which guarantees
persons providing goods or services pursuant to such agreement or arrangement
that such persons will be paid for providing such goods or services.</text>
</subparagraph><continuation-text continuation-text-level="paragraph">Such term
shall not include any agreement or arrangement which provides for the issuance
of payment cards.</continuation-text></paragraph></subsection><subsection id="H7286A8A32EAE42C3B4A9BB44AEBD5CB6"><enum>(e)</enum><header>Exception for de
minimis payments by third party settlement organizations</header><text display-inline="yes-display-inline">A third party settlement organization shall
be required to report any information under subsection (a) with respect to
third party network transactions of any participating payee only if—</text>
<paragraph id="H90CE2B3328C844CEA4FC9FA767A83BB5"><enum>(1)</enum><text>the amount which
would otherwise be reported under subsection (a)(2) with respect to such
transactions exceeds $20,000, and</text>
</paragraph><paragraph id="H6B5C048134304BC9B480B01212EBB55"><enum>(2)</enum><text>the aggregate
number of such transactions exceeds 200.</text>
</paragraph></subsection><subsection id="H99F792AF767341F78223B9AE1CCEB00"><enum>(f)</enum><header>Statements To be
furnished to persons with respect to whom information is
required</header><text>Every person required to make a return under subsection
(a) shall furnish to each person with respect to whom such a return is required
a written statement showing—</text>
<paragraph id="H9A85E5A5237B4A4691B4D2AA8D66757C"><enum>(1)</enum><text>the name, address,
and phone number of the information contact of the person required to make such
return, and</text>
</paragraph><paragraph id="HDA691752ED1A4C458E1F55B2EC49EA30"><enum>(2)</enum><text display-inline="yes-display-inline">the gross amount of the reportable payment
transactions with respect to the person required to be shown on the
return.</text>
</paragraph><continuation-text continuation-text-level="subsection">The
written statement required under the preceding sentence shall be furnished to
the person on or before January 31 of the year following the calendar year for
which the return under subsection (a) was required to be made. Such statement
may be furnished electronically, and if so, the email address of the person
required to make such return may be shown in lieu of the phone number.</continuation-text></subsection><subsection id="HAA493B87B8C743CCB259D4114706B39E"><enum>(g)</enum><header>Regulations</header><text>The
Secretary may prescribe such regulations or other guidance as may be necessary
or appropriate to carry out this section, including rules to prevent the
reporting of the same transaction more than
once.</text>
</subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H3CD1873FC7BF4CF89DFFD17F26058138"><enum>(b)</enum><header>Penalty for
failure To file</header>
<paragraph id="H8F323FF2159B4D97B2F8293B6C06692D"><enum>(1)</enum><header>Return</header><text>Subparagraph
(B) of section 6724(d)(1) is amended—</text>
<subparagraph id="H7E219FEA463D4FAFB2C265C04B8E984"><enum>(A)</enum><text>by striking
<quote>or</quote> at the end of clause (xx),</text>
</subparagraph><subparagraph id="H2916C33CF4E44CFD82AF4682BD9B19F9"><enum>(B)</enum><text>by redesignating
the clause (xix) that follows clause (xx) as clause (xxi),</text>
</subparagraph><subparagraph id="H0D8AEAE298994C538B83B774F98435C"><enum>(C)</enum><text>by striking
<quote>and</quote> at the end of clause (xxi), as redesignated by subparagraph
(B) and inserting <quote>or</quote>, and</text>
</subparagraph><subparagraph id="HA5C0589E71F74C6EAAEF85215CD99B45"><enum>(D)</enum><text>by adding at the
end the following:</text>
<quoted-block id="HC85F6659B8274F209B3D92BADB6C3E12" style="OLC">
<clause id="HF6B9876CC35F4DB08DF83D56008EC57D"><enum>(xxii)</enum><text display-inline="yes-display-inline">section 6050W (relating to returns to
payments made in settlement of payment card transactions),
and</text>
</clause><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph></paragraph><paragraph id="H09F8CEDD156A419AB66E9F7DF472117E"><enum>(2)</enum><header>Statement</header><text>Paragraph
(2) of section 6724(d) is amended by striking <quote>or</quote> at the end of
subparagraph (BB), by striking the period at the end of the subparagraph (CC)
and inserting <quote>, or</quote>, and by inserting after subparagraph (CC) the
following:</text>
<quoted-block id="HFB76F2B989B04C6FAC7802D6BFF1F047" style="OLC">
<subclause id="H3BAB4D5D8EE14AC9B29E22C108E7BF9D" indent="up2"><enum>(DD)</enum><text display-inline="yes-display-inline">section 6050W(c) (relating to returns
relating to payments made in settlement of payment card
transactions).</text>
</subclause><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="HCE0BABC69FA44031AC72EFB4EB01482C"><enum>(c)</enum><header>Application of
backup withholding</header><text>Paragraph (3) of section 3406(b) is amended by
striking <quote>or</quote> at the end of subparagraph (D), by striking the
period at the end of subparagraph (E) and inserting <quote>, or</quote>, and by
adding at the end the following new subparagraph:</text>
<quoted-block display-inline="no-display-inline" id="H2F773C1ACA44493B00EC44292B6291C" style="OLC">
<subparagraph id="HBF6D6BFFD3B541808696A27E8DAB39C0"><enum>(F)</enum><text display-inline="yes-display-inline">section 6050W (relating to returns relating
to payments made in settlement of payment card
transactions).</text>
</subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection display-inline="no-display-inline" id="H71EB837C420D4333AF4D4D08696C53F3"><enum>(d)</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 6050V the following:</text>
<quoted-block display-inline="no-display-inline" id="H9A02CA49F766498F802400373B50A328" style="OLC">
<toc container-level="quoted-block-container" idref="HFF9F134DA244489AAB8EB86CFBC2FC01" lowest-bolded-level="division-lowest-bolded" lowest-level="section" quoted-block="no-quoted-block" regeneration="yes-regeneration">
<toc-entry idref="H89FF8D2A88734E8DAAD712D55B172EB9" level="section">Sec. 6050W. Returns relating to payments made in settlement of
payment card and third party network
transactions.</toc-entry>
</toc>
<after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H0EE173FECFE8401D917CAC92A2ACE5"><enum>(e)</enum><header>Effective
date</header>
<paragraph id="HC1726BCC8EDD49A293AA6491FB1F1DFF"><enum>(1)</enum><header>In
general</header><text>Except as otherwise provided in this subsection, the
amendments made by this section shall apply to returns for calendar years
beginning after December 31, 2010.</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="H98D34D48B03140FEA1D2CCB95BC33E4"><enum>(2)</enum><header>Application of
backup withholding</header>
<subparagraph id="HFFD48C335365494F9273116F41FB7DE"><enum>(A)</enum><header>In
general</header><text>The amendment made by subsection (c) shall apply to
amounts paid after December 31, 2011.</text>
</subparagraph><subparagraph id="H82DADBFAE689480EA46D7B3847D81FC9"><enum>(B)</enum><header>Eligibility for
TIN matching program</header><text display-inline="yes-display-inline">Solely
for purposes of carrying out any TIN matching program established by the
Secretary under <external-xref legal-doc="usc" parsable-cite="usc/26/3406">section 3406(i)</external-xref> of the Internal Revenue Code of 1986—</text>
<clause id="HC56BB0A621E94A9F99325ECB007D5134"><enum>(i)</enum><text>the
amendments made this section shall be treated as taking effect on the date of
the enactment of this Act, and</text>
</clause><clause id="H2332A753E9DA4B8E91BC98C72B1636E2"><enum>(ii)</enum><text display-inline="yes-display-inline">each person responsible for setting the
standards and mechanisms referred to in section 6050W(d)(2)(C) of such Code, as
added by this section, for settling transactions involving payment cards shall
be treated in the same manner as a payment settlement entity.</text>
</clause></subparagraph></paragraph></subsection></section><section display-inline="no-display-inline" id="HD334E3142E334C1692332857B7D57386" section-type="subsequent-section"><enum>205.</enum><header>High income
individuals subject to overall limitation on itemized deductions and phaseout
of deductions for personal exemptions</header>
<subsection id="H5FBB2DF01D46402AABF98E00E37F00D"><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="H9B742B10F3AA4645BFB528F00DF355B" style="OLC">
<subsection id="H2FFCEBBE6EAF4EE38E4583A976C89290"><enum>(f)</enum><header>Phaseout of
limitation</header>
<paragraph id="H9C239F4073F5440B91706E59CB8B04F"><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="H0AA00A17466F49D19D4B8F87B2AF00F2"><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="H01B76D64450A483C97F200CFEAF59D9C"><enum>(B)</enum><text>in the case of any
taxable year beginning after 2009, subsection (a) shall not apply.</text>
</subparagraph></paragraph><paragraph id="H657074C2D4E04FCC842E8349F400CFFC"><enum>(2)</enum><header>Phaseout based
on income</header>
<subparagraph id="HDD9FEFCF1C0D48508781DA3CB65F586D"><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="HFFA9DF941F844373BB1E0998A6406D26"><enum>(B)</enum><header>Applicable
fraction</header><text>For purposes of subparagraph (A), the term
<term>applicable fraction</term> means—</text>
<clause id="HF7261792DC11455DAD002F5485DED033"><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="H2A24FA0A36C240DAB9A1668E008808F4"><enum>(I)</enum><text><fraction>1/3</fraction>,
plus</text>
</subclause><subclause id="H5541DCFC9596425DB16737194318E28E"><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="HDB6A5A2306104DE6B89BD09F81EC09D0"><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="H0D88ECAC953C42E39BA36F9F587F2489"><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="HDCD792CD187743E0009760484836582D" style="OLC">
<subparagraph id="HE902FEBA71D34BDBA84F03000081E6D2"><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="H83DFB8B7B15D41F58B7906358EF4C0A8"><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="HB0BDC4057129466D001335D966C4D00"><enum>(ii)</enum><text>in
the case of any taxable year beginning after 2009, subparagraph (A) shall not
apply.</text>
</clause></subparagraph><subparagraph id="HA9E36E01B84D4F749F64ECAE3656E995"><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="H0F638A7E28D941848D1937DE662BB8FF"><enum>(G)</enum><header>Applicable
fraction</header><text>For purposes of subparagraph (F), the term
<term>applicable fraction</term> means—</text>
<clause id="HF571CD990D3047FE92D97E9990000385"><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="H2C0A18AFE7DC4B7688B8E44CB3062E83"><enum>(I)</enum><text><fraction>1/3</fraction>,
plus</text>
</subclause><subclause id="H1853BEB7E2794F2E00BF93C278CCEAE1"><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="H9CDD61A018144A10BFF7534F5FA8259B"><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="H2A543C7DF8B342DB812500403E57B1DD"><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="HBBC0476C01894285A5BAECDBB469CCDC" section-type="subsequent-section"><enum>206.</enum><header>Nonqualified
deferred compensation from certain tax indifferent parties</header>
<subsection id="H2FF83F08CEDC4F71B4821074271849E5"><enum>(a)</enum><header>In
general</header><text>Subpart B of part II of subchapter E of chapter 1 is
amended by inserting after section 457 the following new section:</text>
<quoted-block display-inline="no-display-inline" id="HD99B2A58C9994F1BA14878B9D9DE5E34" style="OLC">
<section id="HB2DDABA958B84543B03C96BE3B406910"><enum>457A.</enum><header>Nonqualified
deferred compensation from certain tax indifferent parties</header>
<subsection id="HDBD4B3EF2F694139AA89B71077748FA5"><enum>(a)</enum><header>In
general</header><text display-inline="yes-display-inline">Any compensation
which is deferred under a nonqualified deferred compensation plan of a
nonqualified entity shall be includible in gross income when there is no
substantial risk of forfeiture of the rights to such compensation.</text>
</subsection><subsection id="H3BBE5A2E81FF4BA381A819B938DC8B93"><enum>(b)</enum><header>Nonqualified
entity</header><text>For purposes of this section, the term <term>nonqualified
entity</term> means—</text>
<paragraph id="H1256BED9D7BE467AA98FFD4B2C1481C4"><enum>(1)</enum><text display-inline="yes-display-inline">any foreign corporation unless
substantially all of its income is—</text>
<subparagraph id="H272C79E92FA045DFA4A3B9823EDDB904"><enum>(A)</enum><text>effectively
connected with the conduct of a trade or business in the United States,
or</text>
</subparagraph><subparagraph id="H095AFCA0B0364D2790B1BB823DE42CFF"><enum>(B)</enum><text>subject to a
comprehensive foreign income tax, and</text>
</subparagraph></paragraph><paragraph display-inline="no-display-inline" id="HE15AD209165B44FF8000F01BBB25890"><enum>(2)</enum><text display-inline="yes-display-inline">any partnership unless substantially all of
its income is allocated to persons other than—</text>
<subparagraph id="HEA62EE48685141DFABB7EC63CC5CD998"><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="H969434E4A25C47E68C09D6E6800E032"><enum>(B)</enum><text>organizations which
are exempt from tax under this title.</text>
</subparagraph></paragraph></subsection><subsection id="H2E702AF230374A49BAF36238537364B8"><enum>(c)</enum><header>Determinability
of amounts of compensation</header>
<paragraph id="HBE8FF3DF46C9452782D1FCA82CD0DA39"><enum>(1)</enum><header>In
general</header><text>If the amount of any compensation is not determinable at
the time that such compensation is otherwise includible in gross income under
subsection (a)—</text>
<subparagraph id="H7E093C4195AF4E05B25C0036858DC9C4"><enum>(A)</enum><text>such amount shall
be so includible in gross income when determinable, and</text>
</subparagraph><subparagraph id="H2A69EA2E5AF045D088105C8D8059BBB0"><enum>(B)</enum><text>the tax imposed
under this chapter for the taxable year in which such compensation is
includible in gross income shall be increased by the sum of—</text>
<clause id="HC0B5541D153E49D7AD15D457342016FB"><enum>(i)</enum><text>the amount of
interest determined under paragraph (2), and</text>
</clause><clause id="HFDB457D728BC4BC78C6466B613B0A0A4"><enum>(ii)</enum><text>an amount equal
to 20 percent of the amount of such compensation.</text>
</clause></subparagraph></paragraph><paragraph id="HBC8369D7121947389716A7325FBD8345"><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="HEEB328FC2FCE44AA9948D92E9005011E"><enum>(d)</enum><header>Other
definitions and special rules</header><text>For purposes of this
section—</text>
<paragraph display-inline="no-display-inline" id="H6CAEB10E6FA94EAB00C92644322491D3"><enum>(1)</enum><header>Substantial risk
of forfeiture</header>
<subparagraph id="H0BE8AC25590A43BB00E700B222589283"><enum>(A)</enum><header>In
general</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>
</subparagraph><subparagraph id="H3F1A146029EC45A3855CCCD2B944929"><enum>(B)</enum><header>Exception for
compensation based on gain recognized on an investment asset</header>
<clause id="H439B6CFDFFC24051BAE84D605DB599AD"><enum>(i)</enum><header>In
general</header><text>To the extent provided in regulations prescribed by the
Secretary, if compensation is determined solely by reference to the amount of
gain recognized on the disposition of an investment asset, such compensation
shall be treated as subject to a substantial risk of forfeiture until the date
of such disposition.</text>
</clause><clause id="HDDA979968872466B9840D13632AEE417"><enum>(ii)</enum><header>Investment
asset</header><text>For purposes of clause (i), the term <term>investment
asset</term> means any single asset (other than an investment fund or similar
entity)—</text>
<subclause id="H6CEC933D27364CBDB95E76EA38EB1774"><enum>(I)</enum><text>acquired directly
by an investment fund or similar entity,</text>
</subclause><subclause id="H955C9E356022486892C214479D886600"><enum>(II)</enum><text>with respect to
which such entity does not (nor does any person related to such entity)
participate in the active management of such asset (or if such asset is an
interest in an entity, in the active management of the activities of such
entity), and</text>
</subclause><subclause id="HF79146AA6C504A6AB04368CE8E3E43C3"><enum>(III)</enum><text>substantially
all of any gain on the disposition of which (other than such deferred
compensation) is allocated to investors in such entity.</text>
</subclause></clause><clause id="HBEAFC8CC8440440D97C2848817DD0000"><enum>(iii)</enum><header>Coordination
with special rule</header><text>Paragraph (3)(B) shall not apply to any
compensation to which clause (i) applies.</text>
</clause></subparagraph></paragraph><paragraph id="H070EF24D2C854324A208914657077479"><enum>(2)</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="H4AF92002EDBA42EA962C9335343BF886"><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="H768880875BBF4043887F454E21CFA29F"><enum>(B)</enum><text>such person
demonstrates to the satisfaction of the Secretary that such foreign country has
a comprehensive income tax.</text>
</subparagraph></paragraph><paragraph id="H1929402486BB4147B64C96AD7143D14E"><enum>(3)</enum><header>Nonqualified
deferred compensation plan</header>
<subparagraph id="H00A21BBB55A14EDCB600EAAE3EBC0049"><enum>(A)</enum><header>In
general</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>
</subparagraph><subparagraph commented="no" id="H5596D10AF623479C93DAB157EF56D6B"><enum>(B)</enum><header>Exception</header><text display-inline="yes-display-inline">Compensation shall not be treated as
deferred for purposes of this section if the service provider receives payment
of such compensation not later than 12 months after the end of the taxable year
of the service recipient during which the right to the payment of such
compensation is no longer subject to a substantial risk of forfeiture.</text>
</subparagraph></paragraph><paragraph id="H67D72A91D39F495AAE911BCC2BE47E27"><enum>(4)</enum><header>Exception for
certain compensation with respect to effectively connected income</header><text display-inline="yes-display-inline">In the case a foreign corporation with
income which is taxable under section 882, this section shall not apply to
compensation which, had such compensation had been paid in cash on the date
that such compensation ceased to be subject to a substantial risk of
forfeiture, would have been deductible by such foreign corporation against such
income.</text>
</paragraph><paragraph id="H3CAFB8629BA6409E98D64098C0C25B62"><enum>(5)</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="H1DBD141F467E48139C3170EE4968ADFA"><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="H8EE3264B2497405C9F9254BAAF5BF52"><enum>(b)</enum><header>Conforming
amendment</header><text>Section 26(b)(2) is amended by striking
<quote>and</quote> at the end of subparagraph (U), by striking the period at
the end of subparagraph (V) and inserting <quote>, and</quote>, and by adding
at the end the following new subparagraph:</text>
<quoted-block display-inline="no-display-inline" id="H6E3B8C8C3561422EBB1BEA89F96DA4E6" style="OLC">
<subparagraph id="H8E8F7C391E2040B20099DFB2730018B1"><enum>(W)</enum><text display-inline="yes-display-inline">section 457A(c)(1)(B) (relating to
determinability of amounts of
compensation).</text>
</subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H33DE078C68534B5296D8CB909BB798E0"><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="H2181295540E5499E80B47FB9B34A7CF" style="OLC">
<toc container-level="quoted-block-container" idref="HD99B2A58C9994F1BA14878B9D9DE5E34" lowest-bolded-level="division-lowest-bolded" lowest-level="section" quoted-block="no-quoted-block" regeneration="yes-regeneration">
<toc-entry idref="HB2DDABA958B84543B03C96BE3B406910" level="section">Sec. 457A. Nonqualified deferred compensation from certain tax
indifferent
parties.</toc-entry>
</toc>
<after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H77B070AFF81945DB82C56DE1597B00B3"><enum>(d)</enum><header>Effective
date</header>
<paragraph id="HC49722A827EF49AC9EEF415A595B630"><enum>(1)</enum><header>In
general</header><text>Except as otherwise provided in this subsection, the
amendments made by this section shall apply to amounts deferred which are
attributable to services performed after December 31, 2008.</text>
</paragraph><paragraph id="H855D3F78B524423896013D8786881076"><enum>(2)</enum><header>Application to
existing deferrals</header><text>In the case of any amount deferred to which
the amendments made by this section do not apply solely by reason of the fact
that the amount is attributable to services performed before January 1, 2009,
to the extent such amount is not includible in gross income in a taxable year
beginning before 2018, such amounts shall be includible in gross income in the
later of—</text>
<subparagraph id="H6DA6C5F7A13143B9B5F45224D9B4B6BC"><enum>(A)</enum><text>the last taxable
year beginning before 2018, or</text>
</subparagraph><subparagraph id="HB3D20558D9064225847893E4A65D8FEC"><enum>(B)</enum><text>the taxable year
in which there is no substantial risk of forfeiture of the rights to such
compensation (determined in the same manner as determined for purposes of
<external-xref legal-doc="usc" parsable-cite="usc/26/457A">section 457A</external-xref> of the Internal Revenue Code of 1986, as added by this
section).</text>
</subparagraph></paragraph><paragraph display-inline="no-display-inline" id="H3590DF0DF03241FEAA87AB44B9F0EA08"><enum>(3)</enum><header>Charitable
contributions of existing deferrals permitted</header>
<subparagraph id="HE24521AF890F4A7296D9009719A5641E"><enum>(A)</enum><header>In
general</header><text display-inline="yes-display-inline">Subsection (b) of
<external-xref legal-doc="usc" parsable-cite="usc/26/170">section 170</external-xref> of the Internal Revenue Code of 1986 shall not apply to (and
subsections (b) and (d) of such section shall be applied without regard to) so
much of the taxpayer’s qualified contributions made during the taxpayer’s last
taxable year beginning before 2018 as does not exceed the taxpayer’s qualified
inclusion amount. For purposes of subsection (b) of section 170 of such Code,
the taxpayer’s contribution base for such last taxable year shall be reduced by
the amount of the taxpayer’s qualified contributions to which such subsection
does not apply by reason the preceding sentence.</text>
</subparagraph><subparagraph id="HB422515D5603490BB4009F15FA45E490"><enum>(B)</enum><header>Qualified
contributions</header><text display-inline="yes-display-inline">For purposes of
this paragraph, the term <term>qualified contributions</term> means the
aggregate charitable contributions (as defined in section 170(c) of such Code)
paid in cash by the taxpayer to organizations described in section 170(b)(1)(A)
of such Code (other than any organization described in section 509(a)(3) of
such Code or any fund or account described in section 4966(d)(2) of such
Code).</text>
</subparagraph><subparagraph display-inline="no-display-inline" id="H544A5F450B35416086EFAF9477F7A437"><enum>(C)</enum><header>Qualified
inclusion amount</header><text>For purposes of this paragraph, the term
<term>qualified inclusion amount</term> means the amount includible in the
taxpayer’s gross income for the last taxable year beginning before 2018 by
reason of paragraph (2).</text>
</subparagraph></paragraph><paragraph id="HE6794B074AA04F8B9833D2AD00FBCE7F"><enum>(4)</enum><header>Accelerated
payments</header><text display-inline="yes-display-inline">No later than 120
days after the date of the enactment of this Act, the Secretary shall issue
guidance providing a limited period of time during which a nonqualified
deferred compensation arrangement attributable to services performed on or
before December 31, 2008, may, without violating the requirements of section
409A(a) of the Internal Revenue Code of 1986, be amended to conform the date of
distribution to the date the amounts are required to be included in
income.</text>
</paragraph><paragraph id="H2DD88E83268844D8A5CBBEFFD29F0757"><enum>(5)</enum><header>Certain
back-to-back arrangements</header><text>If the taxpayer is also a service
recipient and maintains one or more nonqualified deferred compensation
arrangements for its service providers under which any amount is attributable
to services performed on or before December 31, 2008, the guidance issued under
paragraph (4) shall permit such arrangements to be amended to conform the dates
of distribution under such arrangement to the date amounts are required to be
included in the income of such taxpayer under this subsection.</text>
</paragraph><paragraph id="H7FCCCEDB00264AC1A4C4D00B10022EC"><enum>(6)</enum><header>Accelerated
payment not treated as material modification</header><text>Any amendment to a
nonqualified deferred compensation arrangement made pursuant to paragraph (4)
or (5) shall not be treated as a material modification of the arrangement for
purposes of <external-xref legal-doc="usc" parsable-cite="usc/26/409A">section 409A</external-xref> of the Internal Revenue Code of 1986.</text>
</paragraph></subsection></section><section id="HD1651B8E87A24D53835CCD003ED9437"><enum>207.</enum><header>Broker reporting
of customer’s basis in securities transactions</header>
<subsection id="HCEDEF16B912243A7BAAF96930090BB3E"><enum>(a)</enum><header>In
General</header>
<paragraph id="H567E0C75E90343759E3099D56059B480"><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 id="H6CEF91E5235244108C1B3720ABCD9653" style="OLC">
<subsection id="HF51914867E0047FB004CFBFD992F5905"><enum>(g)</enum><header>Additional
Information Required in the Case of Securities Transactions, etc</header>
<paragraph id="HB769506C7DD54F81AA4FFC7CC1376B00"><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="H1BBD3072EB7E4231BCE7FAECC523BDC1"><enum>(2)</enum><header>Additional
information required</header>
<subparagraph id="HC67DA124365B41EDB086B7F06300F6A1"><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="HD2E732CC0D2D499BA74078A34793732D"><enum>(B)</enum><header>Determination of
adjusted basis</header><text>For purposes of subparagraph (A)—</text>
<clause id="HD7A925EBC83046A6944E0017CE5BF8BB"><enum>(i)</enum><header>In
general</header><text>The customer’s adjusted basis shall be determined—</text>
<subclause id="H50D341AAD99943E5AD00E4E26D857467"><enum>(I)</enum><text>in the case of any
security (other than any stock for which an average basis method is permissible
under section 1012), 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, and</text>
</subclause><subclause id="H2DB158F4571946FAADB3AA325C3B1C81"><enum>(II)</enum><text>in the case of
any stock for which an average basis method is permissible under section 1012,
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 stock is held.</text>
</subclause></clause><clause id="H36F09424E58F40AFB979551C55D0D3F"><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="HDBEA6FEBD1024DBCA7FB4EDB4D11B792"><enum>(3)</enum><header>Covered
security</header><text>For purposes of this subsection—</text>
<subparagraph id="HAD7181AD21F94DBEBB7C01DF49977D1C"><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="HEC3776DEEAA44333A1E56C3C1C461075"><enum>(i)</enum><text>was acquired
through a transaction in the account in which such security is held, or</text>
</clause><clause id="H839F0E48B537436BBC2BE8ED5D0503C"><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="H4A290DAD345446D68DC39077B498C3A3"><enum>(B)</enum><header>Specified
security</header><text>The term <term>specified security</term> means—</text>
<clause id="H4F7C60BF3C7A4A9CBFD955D0FDE4DA66"><enum>(i)</enum><text>any share of stock
in a corporation,</text>
</clause><clause id="H49AD6A8FCC0844BEAAB48E83407B52A1"><enum>(ii)</enum><text>any note, bond,
debenture, or other evidence of indebtedness,</text>
</clause><clause id="H737748E14E8947C58D65E5EE581E02D5"><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="H9F20F05799DB4D5FB2DE99C9562459FE"><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="H584AA5FEF1F24933BFD71D00DDC7C2D6"><enum>(C)</enum><header>Applicable
date</header><text>The term <term>applicable date</term> means—</text>
<clause id="H1FF962C9975545FE88AFCD7F91F239D"><enum>(i)</enum><text>January 1, 2010, in
the case of any specified security which is stock in a corporation (other than
any stock described in clause (ii)),</text>
</clause><clause id="H9CC4B6A2C00A42A0B07F8218A6B679E2"><enum>(ii)</enum><text>January 1, 2011,
in the case of any stock for which an average basis method is permissible under
section 1012, and</text>
</clause><clause id="HA506544FAEBD4B6482344C83F9A345D"><enum>(iii)</enum><text>January 1, 2012,
or such later date determined by the Secretary in the case of any other
specified security.</text>
</clause></subparagraph></paragraph><paragraph id="H17388C2247D04C9D9C39DF0009F7E2C9"><enum>(4)</enum><header>Treatment of s
corporations</header><text>In the case of the sale of a covered security
acquired by an S corporation (other than a financial institution) after
December 31, 2011, such S corporation shall be treated in the same manner as a
partnership for purposes of this section.</text>
</paragraph><paragraph id="H84C8961E373D43B1A25DF6CBEB64AD2B"><enum>(5)</enum><header>Special rules
for short sales</header><text>In the case of a short sale, reporting under this
section shall be made for the year in which such sale is
closed.</text>
</paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="H2E03F1632BC642B5B9816B00D2ECEC1"><enum>(2)</enum><header>Broker
information required with respect to options</header><text>Section 6045, as
amended by subsection (a), is amended by adding at the end the following new
subsection:</text>
<quoted-block id="HA15A233C54F549D5BACF91ABB933056E" style="OLC">
<subsection id="H20A49E4473114365A9AD10879766CFF0"><enum>(h)</enum><header>Application to
Options on Securities</header>
<paragraph id="H34F13729822540BD8BBA2156F0366E8"><enum>(1)</enum><header>Exercise of
option</header><text>For purposes of this section, if a covered security is
acquired or disposed of pursuant to the exercise of an option that was granted
or acquired in the same account as the covered security, the amount received
with respect to the grant or paid with respect to the acquisition of such
option shall be treated as an adjustment to gross proceeds or as an adjustment
to basis, as the case may be.</text>
</paragraph><paragraph id="HFC4472783DF44FEAB8714DF523DB3D02"><enum>(2)</enum><header>Lapse or closing
transaction</header><text>In the case of the lapse (or closing transaction (as
defined in section 1234(b)(2)(A))) of an option on a specified security or the
exercise of a cash-settled option on a specified security, reporting under
subsections (a) and (g) with respect to such option shall be made for the
calendar year which includes the date of such lapse, closing transaction, or
exercise.</text>
</paragraph><paragraph id="H07D6556D897144C5AD096848BCAB5412"><enum>(3)</enum><header>Prospective
application</header><text>Paragraphs (1) and (2) shall not apply to any option
which is granted or acquired before January 1, 2012.</text>
</paragraph><paragraph id="H346AB9805CEC424D86CDDE1C331BE75"><enum>(4)</enum><header>Definitions</header><text>For
purposes of this subsection, the terms <term>covered security</term> and
<term>specified security</term> shall have the meanings given such terms in
subsection
(g)(3).</text>
</paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="H2BC09222A65F4AE1BB3379A8D1B12819"><enum>(3)</enum><header>Extension of
period for statements sent to customers</header>
<subparagraph id="HDEFC9FBA62044CE99279C4671BA278C3"><enum>(A)</enum><header>In
general</header><text>Subsection (b) of section 6045 is amended by striking
<quote>January 31</quote> and inserting <quote>February 15</quote>.</text>
</subparagraph><subparagraph id="H7257FE53D69E488A9BA60070A120E8B4"><enum>(B)</enum><header>Statements
related to substitute payments</header><text>Subsection (d) of section 6045 is
amended—</text>
<clause id="HA12E8308398D4B26813B7781863CAD1F"><enum>(i)</enum><text>by
striking <quote>at such time and</quote>, and</text>
</clause><clause id="H3E7A9D5EDF2A4BC2BC28AAEE4BE3E9"><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 in
which the payment was made.</quote>.</text>
</clause></subparagraph><subparagraph id="HF931FB48B5F246B68396F722250294EF"><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 of a consolidated reporting statement
(as defined in regulations) with respect to any account, any statement which
would otherwise be required to be furnished on or before January 31 of a
calendar year with respect to any item reportable to the taxpayer shall instead
be required to be furnished on or before February 15 of such calendar year if
furnished with such consolidated reporting statement.</quote>.</text>
</subparagraph></paragraph></subsection><subsection id="H30150B238D4240129997F9A00176E00"><enum>(b)</enum><header>Determination of
Basis of Certain Securities on Account by Account or Average Basis
Method</header><text>Section 1012 (relating to basis of property-cost) is
amended—</text>
<paragraph id="HAC0474B72AC144D6B9090605D52C1969"><enum>(1)</enum><text>by striking
<quote>The basis of property</quote> and inserting the following:</text>
<quoted-block id="H3FBBEB2403AE46149DE7D23E88A5F9FA" style="OLC">
<subsection id="H17023C9A019348EF96B5805710C0B067"><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="H9923A268E001490B86A72FA7DC2B1481"><enum>(2)</enum><text>by striking
<quote>The cost of real property</quote> and inserting the following:</text>
<quoted-block id="H5BED7CDE2E554261A376E87E94B829F2" style="OLC">
<subsection id="H79EC30BEB87D47F7A09D003315F11963"><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="H0E6A92818E67418FAD3BC0D7148520D1"><enum>(3)</enum><text>by adding at the
end the following new subsections:</text>
<quoted-block id="H16102676F70848F0902D31C3AB889340" style="OLC">
<subsection id="HBA47756979184756999006BDAAB9CEA8"><enum>(c)</enum><header>Determinations
by Account</header>
<paragraph id="H7B2E898365124060001936EDADB0D547"><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="H944E84BE4DD84B98BFD0753341054C37"><enum>(2)</enum><header>Application to
open-end funds</header>
<subparagraph id="HFA5178E0F98C44F5ACD7DCB61770536"><enum>(A)</enum><header>In
general</header><text>Except as provided in subparagraph (B), any stock in an
open-end fund acquired before January 1, 2011, shall be treated as a separate
account from any such stock acquired on or after such date.</text>
</subparagraph><subparagraph id="H96CB09DF24AD4C1DBFB75F3CAEE44EF8"><enum>(B)</enum><header>Election by
open-end fund for treatment as single account</header><text>If an open-end fund
elects to have this subparagraph apply with respect to one or more of its
stockholders—</text>
<clause id="H133988D3355B4155A0A3060817F562E0"><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="H088CC84C93304E8AA2008F371F9D7810"><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><continuation-text continuation-text-level="subparagraph">A rule
similar to the rule of the preceding sentence shall apply with respect to a
broker holding stock in an open-end fund as a nominee.</continuation-text></subparagraph></paragraph><paragraph id="HD8FA381AB65D45749C47C8FAE96CF47E"><enum>(3)</enum><header>Definitions</header><text>For
purposes of this section—</text>
<subparagraph id="HC4CE7C0525B546B4958FF44CF347D66"><enum>(A)</enum><header>Open-end
fund</header><text>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. Any stock
which is traded on an established securities exchange shall not be treated as
stock in an open-end fund.</text>
</subparagraph><subparagraph id="HB17CC623C06844A09C484237F1243558"><enum>(B)</enum><header>Specified
security; applicable date</header><text>The terms <term>specified
security</term> and <term>applicable date</term> shall have the meaning given
such terms in section 6045(g).</text>
</subparagraph></paragraph></subsection><subsection id="HBF4244159D6E4F49B8E4C420D2DFB46E"><enum>(d)</enum><header>Average Basis
for Stock Acquired Pursuant to a Dividend Reinvestment Plan</header>
<paragraph id="HD2A3698BC5924C34AEEF25A446368500"><enum>(1)</enum><header>In
general</header><text>In the case of any stock acquired after December 31,
2010, in connection with a dividend reinvestment plan, the basis of such stock
while held as part of such plan shall be determined using one of the methods
which may be used for determining the basis of stock in an open-end
fund.</text>
</paragraph><paragraph id="HAC0C17617DC942FCA72D8D56D0071E"><enum>(2)</enum><header>Treatment after
transfer</header><text>In the case of the transfer to another account of stock
to which paragraph (1) applies, such stock shall have a cost basis in such
other account equal to its basis in the dividend reinvestment plan immediately
before such transfer (properly adjusted for any fees or other charges taken
into account in connection with such transfer).</text>
</paragraph><paragraph id="H3698600A82ED4E1E86C44954271BA9EC"><enum>(3)</enum><header>Separate
accounts; election for treatment as single account</header><text>Rules similar
to the rules of subsection (c)(2) shall apply for purposes of this
subsection.</text>
</paragraph><paragraph id="H8C64100FC064494585C88F13CADD956F"><enum>(4)</enum><header>Dividend
reinvestment plan</header><text>For purposes of this subsection—</text>
<subparagraph id="HF4798DAC7188482FB53ED4DD35E0017"><enum>(A)</enum><header>In
general</header><text>The term <term>dividend reinvestment plan</term> means
any arrangement under which dividends on any stock are reinvested in stock
identical to the stock with respect to which the dividends are paid.</text>
</subparagraph><subparagraph id="H2A5230F89AD04FB3992E4E7DF451D850"><enum>(B)</enum><header>Initial stock
acquisition treated as acquired in connection with plan</header><text>Stock
shall be treated as acquired in connection with a dividend reinvestment plan if
such stock is acquired pursuant to such plan or if the dividends paid on such
stock are subject to such
plan.</text>
</subparagraph></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="HEC673096CDEA4CA0AC5400247467CE25"><enum>(c)</enum><header>Information by
Transferors To Aid Brokers</header>
<paragraph id="H97D21BBE414E44A2BD6246ECEE8EA257"><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="H2633C3F0AF6B4869BC3BD4D9280071D0" style="OLC">
<section id="H6FD8EF0BE9DD42D6806301271CBDF7F9"><enum>6045A.</enum><header>Information
required in connection with transfers of covered securities to brokers</header>
<subsection id="HB9C7BF0C95DA40929F40108272340006"><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="HC90DC2A8A73D46C0AC7F080086B479BD"><enum>(b)</enum><header>Applicable
Person</header><text>For purposes of subsection (a), the term <term>applicable
person</term> means—</text>
<paragraph id="HB104F10E55254DBAA6BC4DF7CE6CE0E9"><enum>(1)</enum><text>any broker (as
defined in section 6045(c)(1)), and</text>
</paragraph><paragraph id="H28B9F9AEBC4F4E40BEFBF1BC75DC1824"><enum>(2)</enum><text>any other person
as provided by the Secretary in regulations.</text>
</paragraph></subsection><subsection id="HC261333F3BD345079B2FAD1E43D651F7"><enum>(c)</enum><header>Time for
Furnishing Statement</header><text>Except as otherwise provided by the
Secretary, any statement required by subsection (a) shall be furnished not
later than 15 days after the date of the transfer described in such
subsection.</text>
</subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="HEE05B7D01D56467189275014D6CD3928"><enum>(2)</enum><header>Assessable
penalties</header><text>Paragraph (2) of section 6724(d) (defining payee
statement) is amended by redesignating subparagraphs (I) through (DD) as
subparagraphs (J) through (EE), respectively, and by inserting after
subparagraph (H) the following new subparagraph:</text>
<quoted-block id="H56BE5D0D990D47F09C65280095000010" style="OLC">
<subparagraph id="H552BEA478319420B8B8C011575944698"><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="H3A6DB7C599D6424B934466B8932DBA43"><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 display-inline="no-display-inline" id="HCE384B6E3E7046A0AEDF0BC33F1C4B8" 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 id="H9749D44729154AE0B8F52FC712409105"><enum>(d)</enum><header>Additional
Issuer Information To Aid Brokers</header>
<paragraph id="H04D1B70D06834167ACFC5592C68008B"><enum>(1)</enum><header>In
general</header><text>Subpart B of part III of subchapter A of chapter 61, as
amended by subsection (b), is amended by inserting after section 6045A the
following new section:</text>
<quoted-block id="HCCF06EA534B44DCC9F47E6927B9E5ECB" style="OLC">
<section id="H275285636FB745E38FC280F1144866F"><enum>6045B.</enum><header>Returns
relating to actions affecting basis of specified securities</header>
<subsection id="HD4CA8A15A5DB4D9EBE775CDA8D50FF42"><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="H3C4465C5906B429FB75FED9D744243E2"><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="HF24EF0BA990E43E58B09864251007433"><enum>(2)</enum><text>the quantitative
effect on the basis of such specified security resulting from such action,
and</text>
</paragraph><paragraph id="HCD5A0C0ADF014DD4AB654193F4523954"><enum>(3)</enum><text>such other
information as the Secretary may prescribe.</text>
</paragraph></subsection><subsection id="H1902A48784614C21903649FB82ADEB1"><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="H897D96C32B6541C6A971A242B13F5571"><enum>(1)</enum><text>45 days after the
date of the action described in subsection (a), or</text>
</paragraph><paragraph id="H529F87D2293C4F548900B86CE58513B0"><enum>(2)</enum><text>January 15 of the
year following the calendar year during which such action occurred.</text>
</paragraph></subsection><subsection id="H597AAAC7D3B846B0AB7C6739EF007D6B"><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="H21DCC91243A24B1FA953FFD26409738B"><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="HC18FB81633CF4BFAA74456F1956285F6"><enum>(2)</enum><text>the information
required to be shown on such return with respect to such security, and</text>
</paragraph><paragraph id="H1A9A7604A2FE415AAC17F939729CBDDB"><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 15 of the year following the calendar year
during which the action described in subsection (a) occurred.</continuation-text></subsection><subsection id="H5F82B48B89864F3EA5D5CC5F969597E"><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="HC9B773680CAB4F0F821B7772C6872922"><enum>(e)</enum><header>Public Reporting
in Lieu of Return</header><text>The Secretary may waive the requirements under
subsections (a) and (c) with respect to a specified security, if the person
required to make the return under subsection (a) makes publicly available, in
such form and manner as the Secretary determines necessary to carry out the
purposes of this section—</text>
<paragraph id="H3D6AF6D187BC4A7FBFC3EE49B1883156"><enum>(1)</enum><text>the name, address,
phone number, and email address of the information contact of such person,
and</text>
</paragraph><paragraph id="H260F99B6DE7C414DAF935261AA1CC6A"><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="H8E6E6C1455DB4F99B432D70029FA045D"><enum>(2)</enum><header>Assessable
penalties</header>
<subparagraph id="H88A0DE077FC24ABD98F40396B6981F9D"><enum>(A)</enum><text>Subparagraph (B)
of section 6724(d)(1) (defining information return) is amended by redesignating
clause (iv) and each of the clauses which follow as clauses (v) through
(xxiii), respectively, and by inserting after clause (iii) the following new
clause:</text>
<quoted-block id="HF9355B04643C482DB26997DD06EF715" style="OLC">
<clause id="H802965C0A26B466590173FBDC295FE68"><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="H17D934B0131A45E3AABFE1D77C24159"><enum>(B)</enum><text>Paragraph (2) of
section 6724(d) (defining payee statement), as amended by subsection (c)(2), is
amended by redesignating subparagraphs (J) through (EE) as subparagraphs (K)
through (FF), respectively, and by inserting after subparagraph (I) the
following new subparagraph:</text>
<quoted-block id="HB33913DD12434C73B19024D582F78600" style="OLC">
<subparagraph id="HFF984FF6CDB2410D963E00AF7E7280AB"><enum>(J)</enum><text>subsections (c)
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="H13717D9BBABF4C3BB6E979877C2E3301"><enum>(3)</enum><header>Clerical
amendment</header><text>The table of sections for subpart B of part III of
subchapter A of chapter 61, as amended by subsection (b)(3), is amended by
inserting after the item relating to section 6045A the following new
item:</text>
<quoted-block display-inline="no-display-inline" id="H8DC42C48B2FB4804A8A63DD84DF587AD" 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 id="H5ED73518697549B1864C4B80A0BD3FA0"><enum>(e)</enum><header>Effective
Date</header>
<paragraph id="H1AE42DC45F7347B9994056387C990058"><enum>(1)</enum><header>In
general</header><text>Except as otherwise provided in this subsection, the
amendments made by this section shall take effect on January 1, 2010.</text>
</paragraph><paragraph id="H49C94F2A495B4ABE8EC2E69BC011A540"><enum>(2)</enum><header>Extension of
period for statements sent to customers</header><text>The amendments made by
subsection (a)(3) shall apply to statements required to be furnished after
December 31, 2008.</text>
</paragraph></subsection></section><section id="H4D3CA141CA01470FB0D54E04339246CE"><enum>208.</enum><header>Repeal of
worldwide allocation of interest</header>
<subsection id="HF1DAF97FD5B84F84A3193B61E4D25ECF"><enum>(a)</enum><header>In
General</header><text>Section 864 is amended by striking subsection (f) and by
redesignating subsection (g) as subsection (f).</text>
</subsection><subsection id="HA360E869B4C848C09B9B135D4BF8A2CA"><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="HD7862C2E422B44A7A2A222D6E551BE5" section-type="subsequent-section"><enum>209.</enum><header>Clarification of
economic substance doctrine</header>
<subsection id="H0FE6F3E27CA842679132FE2900B6CA2"><enum>(a)</enum><header>In
General</header><text>Section 7701 is amended by redesignating subsection (p)
as subsection (q) and by inserting after subsection (o) the following new
subsection:</text>
<quoted-block id="H629734A4DA8C434FA73E66D346B4415D" style="OLC">
<subsection id="H17E958391BA3423BB7E3D02539C38396"><enum>(p)</enum><header>Clarification of
Economic Substance Doctrine; etc</header>
<paragraph id="HAEE54B1F6B8D4AECA9D378D808D6B08B"><enum>(1)</enum><header>General
rules</header>
<subparagraph id="H70658A63A2334387845BDDA7FB55209"><enum>(A)</enum><header>In
general</header><text>In any case in which a court determines that the economic
substance doctrine is relevant for purposes of this title to a transaction (or
series of transactions), such transaction (or series of transactions) shall
have economic substance only if the requirements of this paragraph are
met.</text>
</subparagraph><subparagraph id="HDFD91891F3784C518D20D269952395F9"><enum>(B)</enum><header>Definition of
economic substance</header><text>For purposes of subparagraph (A)—</text>
<clause id="H31C619A293C241CD8FEEE53B21D911E"><enum>(i)</enum><header>In
general</header><text>A transaction has economic substance only if—</text>
<subclause id="HF610B39A515B4E80952E1B56283400AE"><enum>(I)</enum><text>the transaction
changes in a meaningful way (apart from Federal tax effects) the taxpayer’s
economic position, and</text>
</subclause><subclause id="HAEDA17826FF247A4A1AF229FFDC9C9A5"><enum>(II)</enum><text>subject to clause
(iii), the taxpayer has a substantial purpose (other than a Federal tax
purpose) for entering into such transaction.</text>
</subclause></clause><clause id="HDFB284DB0F104639A1317D271D55193D"><enum>(ii)</enum><header>Special rule
where taxpayer relies on profit potential</header><text>A transaction shall not
be treated as having economic substance solely by reason of having a potential
for profit unless the present value of the reasonably expected pre-Federal tax
profit from the transaction is substantial in relation to the present value of
the expected net Federal tax benefits that would be allowed if the transaction
were respected. In determining pre-Federal tax profit, there shall be taken
into account fees and other transaction expenses and to the extent provided by
the Secretary, foreign taxes.</text>
</clause><clause id="H5B1A5476D4B64E8D9E6C94C740A55704"><enum>(iii)</enum><header>Special rules
for determining whether non-Federal tax purpose</header><text>For purposes of
clause (i)(II)—</text>
<subclause id="H9FA90624094C4F5FBE2669177DE46972"><enum>(I)</enum><text>a purpose of
achieving a financial accounting benefit shall not be taken into account in
determining whether a transaction has a substantial purpose (other than a
Federal tax purpose) if the origin of such financial accounting benefit is a
reduction of Federal tax, and</text>
</subclause><subclause id="H0384202F9EBA4789A962771124955DDF"><enum>(II)</enum><text>the taxpayer
shall not be treated as having a substantial purpose (other than a Federal tax
purpose) with respect to a transaction if the only such purpose is the
reduction of non-Federal taxes and the transaction will result in a reduction
of Federal taxes substantially equal to, or greater than, the reduction in
non-Federal taxes because of similarities between the laws imposing the
taxes.</text>
</subclause></clause></subparagraph></paragraph><paragraph id="H2A3414938BA24485A0DB305F23B04667"><enum>(2)</enum><header>Definitions and
special rules</header><text>For purposes of this subsection—</text>
<subparagraph id="H45095E4E20A34B6F92A5B8CAAF176CEF"><enum>(A)</enum><header>Economic
substance doctrine</header><text>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 id="HC90C0D1ACC294B0D91ECC7F48FF91EB7"><enum>(B)</enum><header>Exception for
personal transactions of individuals</header><text>In the case of an
individual, this subsection 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></paragraph><paragraph id="H95429C9FF7AF4D09B381B7F76959897"><enum>(3)</enum><header>Other provisions
not affected</header><text>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 or provision of this title, and the
requirements of this subsection shall be construed as being in addition to any
such other rule of law or provision of this title.</text>
</paragraph><paragraph id="H42A9AC537D3D48EDBF2E91B6539700D"><enum>(4)</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. Such regulations may include
exemptions from the application of this
subsection.</text>
</paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection display-inline="no-display-inline" id="H083461B9A83A421CA0CA1CD9C718BFD1"><enum>(b)</enum><header>Penalty for
understatements attributable to transactions lacking economic substance,
etc</header>
<paragraph id="HAAE989E06E58422D8E268FB3EF4714B4"><enum>(1)</enum><header>In
general</header><text>Subchapter A of chapter 68 is amended by inserting after
section 6662A the following new section:</text>
<quoted-block id="H0A80F291968F4107A635E7142EEF9621" style="OLC">
<section id="H1B22E0FAE4D94358B1FB37E710CDAC3E"><enum>6662B.</enum><header>Penalty for
understatements attributable to transactions lacking economic substance,
etc</header>
<subsection id="H0BCC7582963F48B08FA64B7E7E7DF6C0"><enum>(a)</enum><header>Imposition of
Penalty</header><text>If a taxpayer has an noneconomic substance transaction
understatement for any taxable year, there shall be added to the tax an amount
equal to 30 percent of the amount of such understatement.</text>
</subsection><subsection id="H3F250845D71A49F9A87F4355FBA4808"><enum>(b)</enum><header>Reduction of
Penalty for Disclosed Transactions</header><text>Subsection (a) shall be
applied by substituting <quote>20 percent</quote> for <quote>30 percent</quote>
with respect to the portion of any noneconomic substance transaction
understatement with respect to which the relevant facts affecting the tax
treatment of the item are adequately disclosed in the return or a statement
attached to the return.</text>
</subsection><subsection id="H56803C438A7949279949389ECD2200A5"><enum>(c)</enum><header>Noneconomic
Substance Transaction Understatement</header><text>For purposes of this
section—</text>
<paragraph id="H31BB9D05E4D54CC3893E7CA32B0809EF"><enum>(1)</enum><header>In
general</header><text>The term <term>noneconomic substance transaction
understatement</term> means any amount which would be an understatement under
section 6662A(b)(1) if section 6662A were applied by taking into account items
attributable to noneconomic substance transactions rather than items to which
section 6662A would apply without regard to this paragraph.</text>
</paragraph><paragraph id="H9649AF82D4FB4BF2BCBF7EC1D7397C3B"><enum>(2)</enum><header>Noneconomic
substance transaction</header><text>The term <term>noneconomic substance
transaction</term> means any transaction if there is a lack of economic
substance (within the meaning of section 7701(p)(1)(B)) for the transaction
giving rise to the claimed benefit.</text>
</paragraph></subsection><subsection id="H8E901BE220094F329052348DBB2C5F5B"><enum>(d)</enum><header>Rules Applicable
to Assertion, Compromise, and Collection of Penalty</header>
<paragraph id="H32344034671F4C2A8CA891F897DB5194"><enum>(1)</enum><header>In
general</header><text>Only the Chief Counsel for the Internal Revenue Service
may assert a penalty imposed under this section or may compromise all or any
portion of such penalty. The Chief Counsel may delegate the authority under
this paragraph only to an individual holding the position of chief of a branch
within the Office of the Chief Counsel for the Internal Revenue Service.</text>
</paragraph><paragraph id="HC031BAC6F1024667B2A9B40521F731C8"><enum>(2)</enum><header>Specific
requirements</header>
<subparagraph id="H7B930529DE464AAA99D6DCDFBC514CA"><enum>(A)</enum><header>Assertion of
penalty</header><text>The Chief Counsel for the Internal Revenue Service (or
the Chief Counsel's delegate under paragraph (1)) shall not assert a penalty
imposed under this section unless, before the assertion of the penalty, the
taxpayer is provided—</text>
<clause id="H3F1D84D2FEF6444BB2DBF8B7C98BAC05"><enum>(i)</enum><text>a
notice of intent to assert the penalty, and</text>
</clause><clause id="H4B2C6595AD334C10A9255307E3E500B1"><enum>(ii)</enum><text>an opportunity to
provide to the Commissioner (or the Chief Counsel's delegate under paragraph
(1)) a written response to the proposed penalty within a reasonable period of
time after such notice.</text>
</clause></subparagraph><subparagraph id="H7643F68A00254E38B0F3A06714E9B05C"><enum>(B)</enum><header>Compromise of
penalty</header><text>A compromise shall not result in a reduction in the
penalty imposed by this section in an amount greater than the amount which
bears the same ratio to the amount of the penalty determined without regard to
the compromise as—</text>
<clause id="H86C57E0085E94E4B84C70065362FE05D"><enum>(i)</enum><text>the reduction
under the compromise in the noneconomic substance transaction understatement to
which the penalty relates, bears to</text>
</clause><clause id="HA3346ED7FE7D4CEA87F422BB469C88D7"><enum>(ii)</enum><text>the amount of the
noneconomic substance transaction understatement determined without regard to
the compromise.</text>
</clause></subparagraph></paragraph><paragraph id="H4A85DEE341474C6692C9D7492BF65D56"><enum>(3)</enum><header>Rules relating
to relevancy requirement</header>
<subparagraph id="H1555BA21383041FE8BBE75CE223D17E1"><enum>(A)</enum><header>Determination of
relevance by Chief Counsel</header><text>The Chief Counsel for the Internal
Revenue Service (or the Chief Counsel's delegate under paragraph (1)) may
assert, compromise, or collect a penalty imposed by this section with respect
to a noneconomic substance transaction even if there has not been a court
determination that the economic substance doctrine was relevant for purposes of
this title to the transaction if the Chief Counsel (or delegate) determines
that either was so relevant.</text>
</subparagraph><subparagraph id="HFD89D5C6B07E467991E24C22CB941DA8"><enum>(B)</enum><header>Final order of
court</header><text>If there is a final order of a court that determines that
the economic substance doctrine was not relevant for purposes of this title to
a transaction (or series of transactions), any penalty imposed under this
section with respect to the transaction (or series of transactions) shall be
rescinded.</text>
</subparagraph></paragraph><paragraph id="H2F18854D48FE471D83190075AEC73355"><enum>(4)</enum><header>Applicable
rules</header><text>The rules of paragraphs (2) and (3) of section 6707A(d)
shall apply to a compromise under paragraph (1).</text>
</paragraph></subsection><subsection id="HF98C0CBC816448B295760046B8F69EDA"><enum>(e)</enum><header>Coordination
With Other Penalties</header><text>Except as otherwise provided in this part,
the penalty imposed by this section shall be in addition to any other penalty
imposed by this title.</text>
</subsection><subsection id="H5AF08637A28541E5A1E4275256E066CC"><enum>(f)</enum><header>Cross
References</header>
<toc regeneration="no-regeneration">
<toc-entry level="paragraph">(1) For coordination of penalty with
understatements under section 6662 and other special rules, see section
6662A(e).</toc-entry>
<toc-entry level="paragraph">(2) For reporting of penalty imposed
under this section to the Securities and Exchange Commission, see section
6707A(e).</toc-entry>
</toc>
</subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="H875408D81DAC485B990087E27BF041EB"><enum>(2)</enum><header>Coordination
with other understatements and penalties</header>
<subparagraph id="H2FE8C6A47CB3473DB07C7489AE97C4BB"><enum>(A)</enum><text>The second
sentence of section 6662(d)(2)(A) is amended by inserting <quote>and without
regard to items with respect to which a penalty is imposed by section
6662B</quote> before the period at the end.</text>
</subparagraph><subparagraph id="HEB5CA54993FE44DDABAECC8360FB5C"><enum>(B)</enum><text>Subsection (e) of
section 6662A is amended—</text>
<clause id="H0B3C158D87E34B0E0034D007B6C92436"><enum>(i)</enum><text>in
paragraph (1), by inserting <quote>and noneconomic substance transaction
understatements</quote> after <quote>reportable transaction
understatements</quote> both places it appears,</text>
</clause><clause id="H997AF139B61846F3923CBFBC3C582C51"><enum>(ii)</enum><text>in
paragraph (2)(A)—</text>
<subclause id="HC9D40FB475254E1288E6E1A4B9A715B6"><enum>(I)</enum><text>by inserting
<quote>6662B or</quote> before <quote>6663</quote> in the text, and</text>
</subclause><subclause id="H0BDABD0C333F47B8996DE8B4A44DF271"><enum>(II)</enum><text>by striking
<quote><header-in-text level="subparagraph" style="OLC">penalty</header-in-text></quote> in the heading and inserting
<quote><header-in-text level="subparagraph" style="OLC">and economic substance
penalties</header-in-text></quote>,</text>
</subclause></clause><clause id="H61A5C3D562E244F5A8749CB985D6002F"><enum>(iii)</enum><text>in
paragraph (2)(B)—</text>
<subclause id="HA39A02FEA1C24FCF8D6F7319B2C8854F"><enum>(I)</enum><text>by inserting
<quote>and section 6662B</quote> after <quote>This section</quote>, and</text>
</subclause><subclause id="H81B08B1385DF4CEF98FE558CA42F63A9"><enum>(II)</enum><text>by striking
<quote><header-in-text level="subparagraph" style="OLC">penalty</header-in-text></quote> in the heading and inserting
<quote><header-in-text level="subparagraph" style="OLC">and economic substance
penalties</header-in-text></quote>,</text>
</subclause></clause><clause id="HA89C37B2A4EE4E1BACD69EBAAC35A92F"><enum>(iv)</enum><text>in
paragraph (3), by inserting <quote>or noneconomic substance transaction
understatement</quote> after <quote>reportable transaction
understatement</quote>, and</text>
</clause><clause id="H3A9586664ECC4BDC814E4D346B217F00"><enum>(v)</enum><text>by
adding at the end the following new paragraph:</text>
<quoted-block id="H2B3AC02FAA27431785C3BEBDC9243140" style="OLC">
<paragraph id="H8578842F34CB484C95A46D81D0A40904"><enum>(4)</enum><header>Noneconomic
substance transaction understatement</header><text>For purposes of this
subsection, the term <term>noneconomic substance transaction
understatement</term> has the meaning given such term by section
6662B(c).</text>
</paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</clause></subparagraph><subparagraph id="HA6E4876D97D34D9286AF98AA5D7667B8"><enum>(C)</enum><text>Subsection (e) of
section 6707A is amended—</text>
<clause id="H5BDDD771A56142979D128D0761A16412"><enum>(i)</enum><text>by
striking <quote>or</quote> at the end of subparagraph (B), and</text>
</clause><clause id="H8AC33B1285644C9AAC21D950F5A1D6F"><enum>(ii)</enum><text>by
striking subparagraph (C) and inserting the following new subparagraphs:</text>
<quoted-block id="HDD05860483BD42BEB30487DB95CF3F00" style="OLC">
<subparagraph id="H0539F76ECC9C424B007F0350A89846E6"><enum>(C)</enum><text>is required to pay
a penalty under section 6662B with respect to any noneconomic substance
transaction, or</text>
</subparagraph><subparagraph id="HD7422CD423B24744AAFDEC25D9C6E381"><enum>(D)</enum><text>is required to pay
a penalty under section 6662(h) with respect to any transaction and would (but
for section 6662A(e)(2)(B)) have been subject to penalty under section 6662A at
a rate prescribed under section 6662A(c) or to penalty under section
6662B,</text>
</subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</clause></subparagraph></paragraph><paragraph id="H64DE1B0221B2447B92437F907311FDFC"><enum>(3)</enum><header>Clerical
Amendment</header><text>The table of sections for part II of subchapter A of
chapter 68 is amended by inserting after the item relating to section 6662A the
following new item:</text>
<quoted-block id="H2B3BEE86DF9D4E8BA3A96ED531208310" style="OLC">
<toc regeneration="no-regeneration">
<toc-entry level="section">Sec. 6662B. Penalty for understatements
attributable to transactions lacking economic substance,
etc.</toc-entry>
</toc>
<after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection display-inline="no-display-inline" id="H60A8C127668745E8842BD96DF8ACBE1E"><enum>(c)</enum><header>Denial of
deduction for interest on underpayments attributable to noneconomic substance
transactions</header><text display-inline="yes-display-inline">Section 163(m)
(relating to interest on unpaid taxes attributable to nondisclosed reportable
transactions) is amended—</text>
<paragraph id="H66C51916042C464B005F47F8CEFF333C"><enum>(1)</enum><text>by striking
“attributable” and all that follows and inserting the following: “attributable
to—</text>
<quoted-block id="HFF9B2DA58C2A45B38B99526DCB75C5CB" style="OLC">
<paragraph id="H0368A331314F4E1682163EE2A8A247D"><enum>(1)</enum><text>the portion of any
reportable transaction understatement (as defined in section 6662A(b)) with
respect to which the requirement of section 6664(d)(2)(A) is not met, or</text>
</paragraph><paragraph id="H9033BD3D7ACD4083ACC298CB5E21FD8B"><enum>(2)</enum><text>any noneconomic
substance transaction understatement (as defined in section
6662B(c)).</text>
</paragraph><after-quoted-block>,
and</after-quoted-block></quoted-block>
</paragraph><paragraph id="H12F83651977C4B9D93DAD018AE99DF41"><enum>(2)</enum><text>by inserting
<quote><header-in-text level="subsection" style="OLC">and Noneconomic Substance
Transactions</header-in-text></quote> in the heading thereof after
<quote><header-in-text level="subsection" style="OLC">Transactions</header-in-text></quote>.</text>
</paragraph></subsection><subsection display-inline="no-display-inline" id="HCCFAEA3B614A41F1B3E2FB0928B6B5AE"><enum>(d)</enum><header>Penalties for
underpayments</header>
<paragraph commented="no" display-inline="no-display-inline" id="H03B0F95AC8084B6696F400BA3033B384"><enum>(1)</enum><header display-inline="yes-display-inline">Penalty for underpayments attributable to
transactions lacking economic substance</header>
<subparagraph commented="no" display-inline="no-display-inline" id="HEFF3D95735924413BEF8D717B3BE597E"><enum>(A)</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="HF5CFF64F4D634BA59286E8B560ECB1D0" style="OLC">
<paragraph id="HB3ACCADEBD0C4DA5ADE74B8414E73BBC"><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>
</subparagraph><subparagraph id="H9C4D89A12620486291D58C4BDAFA14BD"><enum>(B)</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="H6B1A1AA1C1B74AFE85F9E8F2F8CE9976" style="OLC">
<subsection id="H74E84A8AE5AA457FA26E17391CDDDBD6"><enum>(j)</enum><header>Increase in
penalty in case of nondisclosed noneconomic substance transactions</header>
<paragraph id="H3023C129C15B43A1B400021164880071"><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="H5D6CA25F536C4747B3CA1BF27B682617"><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="H55A128807D58406092C3DD7E09585E"><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>
</subparagraph><subparagraph id="H85837B1AA744459DBB368EFBD4D53EE6"><enum>(C)</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>
</subparagraph></paragraph><paragraph id="H5737A687441C4B40B5FECA916321100"><enum>(2)</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>
<subparagraph id="HD5E026F87E664A83AD49ABB77BE09F1"><enum>(A)</enum><text>by striking
<quote>shall not apply to any portion</quote> and
inserting</text>
<quoted-block display-inline="yes-display-inline" id="HD7D710B6C3C9424085B42EE5F9543163" style="OLC">
<text>shall not
apply—</text><subparagraph id="H62129E16F676472B9E7D53F892124229"><enum>(A)</enum><text display-inline="yes-display-inline">to any
portion</text>
</subparagraph><after-quoted-block>,</after-quoted-block></quoted-block>
</subparagraph><subparagraph id="H7679DC8B7112405099E0C33EC5B57193"><enum>(B)</enum><text>by striking the
period at the end and inserting a comma, and</text>
</subparagraph><subparagraph id="H8BB853C2FA4742B4A286658641C0A6AD"><enum>(C)</enum><text>by adding at the
end the following new subparagraphs:</text>
<quoted-block display-inline="no-display-inline" id="HD6E7C4B59C6B45B1811CB70044BD8E1D" style="OLC">
<subparagraph id="H79DED7B30AA341F2BEE16509911E7028"><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="H3D90519316874ED69421EBF8894E767"><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>
</subparagraph></paragraph><paragraph id="HC10EBC9C139B4916A0D8530798F9681"><enum>(3)</enum><header>Special
understatement reduction rule for certain large corporations</header>
<subparagraph id="H7DB2F28A31224201A4CC902849C845B7"><enum>(A)</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="HAD7503C565F74739A4063932736613E7" style="OLC">
<subparagraph id="H6A068427E4EF4527B586132621906393"><enum>(D)</enum><header>Special
reduction rule for certain large corporations</header>
<clause id="H1BF693CB2A0443618083FF51EAE01905"><enum>(i)</enum><header>In
general</header><text>In the case of any specified large corporation—</text>
<subclause id="HC1DB9CC1A83B4E5FB2600067EA868FD0"><enum>(I)</enum><text>subparagraph (B)
shall not apply, and</text>
</subclause><subclause id="HFDABAFCE39C84A12A8043B167FAF6B01"><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="HB28BA7B4657C4E95AC5553FC1714F486"><enum>(ii)</enum><header>Specified large
corporation</header>
<subclause id="H181003C81656488DB344009242C292D0"><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="HC9CA28EB02EE4C4BB514BBD3B288D4B"><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>
</subparagraph><subparagraph id="H86A4549E8A5A4312B8DDAD6B60BDEF95"><enum>(B)</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>
</subparagraph></paragraph></subsection><subsection id="H78E3AC369A7C41168B51EEFEA960053"><enum>(e)</enum><header>Effective
Dates</header>
<paragraph id="HE3197A62D0464649BF762B7FADD048F2"><enum>(1)</enum><text>Except as provided
in paragraphs (2) and (3), the amendments made by this section shall apply to
transactions entered into after the date of the enactment of this Act.</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="HF81FFDABCAC648D6A5CDEBC8C41E300"><enum>(2)</enum><text>The amendments made
by this subsection (c) shall apply to transactions after the date of the
enactment of this Act in taxable years ending after such date.</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="HBFC54379B7294CD886F1C630C97D3FDF"><enum>(3)</enum><text display-inline="yes-display-inline">The amendments made by subsection (d) shall
apply to taxable years beginning after the date of the enactment of this
Act.</text>
</paragraph></subsection></section><enum>III</enum><header>Deficit
Reduction</header>
<section id="HAD0D8F1C22494B2E9B219DBC0090BF55"><enum>301.</enum><header>Deficit
reduction</header><text display-inline="no-display-inline">The net increase in
receipts to the Treasury by reason of this Act shall be used for deficit
reduction purposes.</text>
</section>