110 HR 7305 IH: Responsibly U.S. House of Representatives 2008-11-20 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.

I 110th CONGRESS 2d Session H. R. 7305 IN THE HOUSE OF REPRESENTATIVES November 20, 2008 Mr. Gohmert introduced the following bill; which was referred to the Committee on Financial Services, and in addition to the Committee on Ways and Means, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned A BILL To immediately terminate the authority of the Secretary of the Treasury under the Emergency Economic Stabilization Act of 2008 to purchase troubled assets, to require the Secretary to make insurance of troubled mortgage-backed securities available for purchase, and to provide incentives to reinvest foreign earnings in the United States, and for other purposes.

1.

Short title

This Act may be cited as the Responsibly Ending Authority to Purchase Act of 2008 or the REAP Act of 2008.

2.

Termination of purchase authority

(a)

In general

The authorities provided under section 101(a) of the Emergency Economic Stabilization Act of 2008 (Public Law 110–343), excluding section 101(a)(3) of such Act, shall terminate immediately upon the enactment of this Act. (b)

Rule of construction

The termination under subsection (a) shall apply to any authority of the Secretary of the Treasury under the Emergency Economic Stabilization Act of 2008 to purchase preferred or other stock or equity in any financial institution. (c)

Conforming amendment

The Emergency Economic Stabilization Act of 2008 is amended by striking section 120.

3.

Implementation of program for insurance of troubled mortgage-backed securities

(a)

In general

Section 102 of the Emergency Economic Stabilization Act of 2008 (Public Law 110–343) is amended— (1)in the section heading, by striking assets and inserting mortgage-backed securities; (2)by striking troubled asset and troubled assets each place such terms appear and inserting troubled asset and troubled mortgage-backed securities, respectively; (3)in subsection (a)— (A)in paragraph (1)— (i)by striking If the Secretary established the program authorized under section 101, then the Secretary shall establish and inserting Not later than the expiration of the 60-day period beginning upon the date of the enactment of the Responsibly Ending Authority to Purchase Act of 2008, the Secretary shall establish and implement; and (ii)by striking , including mortgage-backed securities; (B)in the first sentence of paragraph (2), by striking may and inserting shall; and (C)in the first sentence of paragraph (3), by striking may and inserting shall, subject to compliance by such financial institution with any terms and conditions established by the Secretary,; (4)in subsection (c)(4), by striking Troubled Assets and inserting Troubled Mortgage-Backed Securities; (5)in subsection (d)— (A)in the subsection heading, by striking Troubled Assets and inserting Troubled Mortgage-Backed Securities; and (B)in paragraph (1), by striking Troubled Assets and inserting Troubled Mortgage-Backed Securities; and (6)by adding at the end the following new subsection: (e)

Termination

(1)

In general

The authority of the Secretary to issue guarantees and commitments for guarantees under this section shall terminate on December 31, 2009. (2)

Extension upon certification

The Secretary, upon submission of a written certification to Congress, may extend the authority specified in paragraph (1) to expire not later than 2 years from the date of enactment of this Act. Such certification shall include a justification of why the extension is necessary to assist American families and stabilize financial markets, as well as the expected cost to the taxpayers for such an extension. . (b)

Definition

Section 3 of the Emergency Economic Stabilization Act of 2008 (Public Law 110–343) is amended by adding at the end the following new paragraph: (10)

Troubled mortgage-backed security

The term troubled mortgage-backed security means a residential or commercial mortgage or any security, obligation, or other instrument that is based on or related to such mortgages, that in each case was originated or issued on or before March 14, 2008. . (c)

Limitations on guarantee authority

Paragraph (4) of subsection (c) of section 102 of the Emergency Economic Stabilization Act of 2008 (Public Law 110–343) is amended to read as follows: (4)

Limitations on guarantee authority

The difference between the aggregate amount of outstanding obligations guaranteed under this section and the balance in the Troubled Mortgage-Backed Securities Insurance Financing Fund may not at any time exceed the remaining purchase authority limit under section 115 at such time. .

4.

Incentives to reinvest foreign earnings in United States

(a)

In general

Section 965 of the Internal Revenue Code of 1986 is amended to read as follows:

965.

Deduction for dividends received

(a)

Deduction

(1)

In general

In the case of a corporation which is a United States shareholder and for which the election under this section is in effect for the taxable year, there shall be allowed as a deduction an amount equal to the applicable percentage of cash dividends which are received during such taxable year by such shareholder from controlled foreign corporations. (2)

Applicable percentage

For purposes of paragraph (1)— (A)

In general

Except as provided by subparagraph (B), the term applicable percentage means 85 percent. (B)

Distressed debt

In the case of dividends received with respect to which the requirements of subsection (b)(4)(B) are met, such term means 100 percent. (3)

Dividends paid indirectly from controlled foreign corporations

If, within the taxable year for which the election under this section is in effect, a United States shareholder receives a cash distribution from a controlled foreign corporation which is excluded from gross income under section 959(a), such distribution shall be treated for purposes of this section as a cash dividend to the extent of any amount included in income by such United States shareholder under section 951(a)(1)(A) as a result of any cash dividend during such taxable year to— (A)such controlled foreign corporation from another controlled foreign corporation that is in a chain of ownership described in section 958(a), or (B)any other controlled foreign corporation in such chain of ownership, but only to the extent of cash distributions described in section 959(b) which are made during such taxable year to the controlled foreign corporation from which such United States shareholder received such distribution. (b)

Limitations

(1)

In general

The amount of dividends taken into account under subsection (a) shall not exceed the greater of— (A)$500,000,000, (B)the amount shown on the applicable financial statement as earnings permanently reinvested outside the United States, or (C)in the case of an applicable financial statement which fails to show a specific amount of earnings permanently reinvested outside the United States and which shows a specific amount of tax liability attributable to such earnings, the amount equal to the amount of such liability divided by 0.35. The amounts described in subparagraphs (B) and (C) shall be treated as being zero if there is no such statement or such statement fails to show a specific amount of such earnings or liability, as the case may be.(2)

Dividends must be extraordinary

The amount of dividends taken into account under subsection (a) shall not exceed the excess (if any) of— (A)the cash dividends received during the taxable year by such shareholder from controlled foreign corporations, over (B)the sum of— (i)the dividends received during the base period year by such shareholder from controlled foreign corporations, (ii)the amounts includible in such shareholder’s gross income for the base period year under section 951(a)(1)(B) with respect to controlled foreign corporations, and (iii)the amounts that would have been included for the base period year but for section 959(a) with respect to controlled foreign corporations. The amount taken into account under clause (iii) for the base period year shall not include any amount which is not includible in gross income by reason of an amount described in clause (ii) with respect to a prior taxable year. Amounts described in subparagraph (B) for the base period year shall be such amounts as shown on the most recent return filed for such year; except that amended returns filed after June 30, 2007, shall not be taken into account.(3)

Reduction of benefit if increase in related party indebtedness

The amount of dividends which would (but for this paragraph) be taken into account under subsection (a) shall be reduced by the excess (if any) of— (A)the amount of indebtedness of the controlled foreign corporation to any related person (as defined in section 954(d)(3)) as of the close of the taxable year for which the election under this section is in effect, over (B)the amount of indebtedness of the controlled foreign corporation to any related person (as so defined) as of the close of September 26, 2008. All controlled foreign corporations with respect to which the taxpayer is a United States shareholder shall be treated as 1 controlled foreign corporation for purposes of this paragraph. The Secretary may prescribe such regulations as may be necessary or appropriate to prevent the avoidance of the purposes of this paragraph, including regulations which provide that cash dividends shall not be taken into account under subsection (a) to the extent such dividends are attributable to the direct or indirect transfer (including through the use of intervening entities or capital contributions) of cash or other property from a related person (as so defined) to a controlled foreign corporation.(4)

Requirements

(A)

Requirement to invest in United States

Except as provided by subparagraph (B), subsection (a) shall not apply to any dividend received by a United States shareholder unless the amount of the dividend is invested in the United States pursuant to a domestic reinvestment plan which— (i)is approved by the taxpayer’s president, chief executive officer, or comparable official before the payment of such dividend and subsequently approved by the taxpayer’s board of directors, management committee, executive committee, or similar body, and (ii)provides for the reinvestment of such dividend in the United States (other than as payment for executive compensation), including as a source for the funding of worker hiring and training, infrastructure, research and development, capital investments, or the financial stabilization of the corporation for the purposes of job retention or creation. (B)

Distressed debt

The requirements of this subparagraph are met if amounts repatriated are invested in distressed debt (as defined by the Secretary) for at least one year. (c)

Definitions and special rules

For purposes of this section— (1)

Applicable financial statement

The term applicable financial statement means— (A)with respect to a United States shareholder which is required to file a financial statement with the Securities and Exchange Commission (or which is included in such a statement so filed by another person), the most recent audited annual financial statement (including the notes which form an integral part of such statement) of such shareholder (or which includes such shareholder)— (i)which was so filed on or before June 30, 2007, and (ii)which was certified on or before June 30, 2007, as being prepared in accordance with generally accepted accounting principles, and (B)with respect to any other United States shareholder, the most recent audited financial statement (including the notes which form an integral part of such statement) of such shareholder (or which includes such shareholder)— (i)which was certified on or before June 30, 2007, as being prepared in accordance with generally accepted accounting principles, and (ii)which is used for the purposes of a statement or report— (I)to creditors, (II)to shareholders, or (III)for any other substantial nontax purpose. (2)

Base period year

(A)

In general

The base period year is the first taxable year ending in 2007. (B)

Mergers, acquisitions, etc

(i)

In general

Rules similar to the rules of subparagraphs (A) and (B) of section 41(f)(3) shall apply for purposes of this paragraph. (ii)

Spin-offs, etc

If there is a distribution to which section 355 (or so much of section 356 as relates to section 355) applies during the base period year and the controlled corporation (within the meaning of section 355) is a United States shareholder— (I)the controlled corporation shall be treated as being in existence during the period that the distributing corporation (within the meaning of section 355) is in existence, and (II)for purposes of applying subsection (b)(2) to the controlled corporation and the distributing corporation, amounts described in subsection (b)(2)(B) which are received or includible by the distributing corporation or controlled corporation (as the case may be) before the distribution referred to in subclause (I) from a controlled foreign corporation shall be allocated between such corporations in proportion to their respective interests as United States shareholders of such controlled foreign corporation immediately after such distribution. Subclause (II) shall not apply if neither the controlled corporation nor the distributing corporation is a United States shareholder of such controlled foreign corporation immediately after such distribution.(3)

Dividend

The term dividend shall not include amounts includible in gross income as a dividend under section 78, 367, or 1248. In the case of a liquidation under section 332 to which section 367(b) applies, the preceding sentence shall not apply to the extent the United States shareholder actually receives cash as part of the liquidation. (4)

Coordination with dividends received deduction

No deduction shall be allowed under section 243 or 245 for any dividend for which a deduction is allowed under this section. (5)

Controlled groups

(A)

In general

All United States shareholders which are members of an affiliated group filing a consolidated return under section 1501 shall be treated as one United States shareholder. (B)

Application of $500,000,000 limit

All corporations which are treated as a single employer under section 52(a) shall be limited to one $500,000,000 amount in subsection (b)(1)(A), and such amount shall be divided among such corporations under regulations prescribed by the Secretary. (C)

Permanently reinvested earnings

If a financial statement is an applicable financial statement for more than 1 United States shareholder, the amount applicable under subparagraph (B) or (C) of subsection (b)(1) shall be divided among such shareholders under regulations prescribed by the Secretary. (d)

Denial of foreign tax credit; denial of certain expenses

(1)

Foreign tax credit

No credit shall be allowed under section 901 for any taxes paid or accrued (or treated as paid or accrued) with respect to the deductible portion of— (A)any dividend, or (B)any amount described in subsection (a)(2) which is included in income under section 951(a)(1)(A). No deduction shall be allowed under this chapter for any tax for which credit is not allowable by reason of the preceding sentence.(2)

Expenses

No deduction shall be allowed for expenses properly allocated and apportioned to the deductible portion described in paragraph (1). (3)

Deductible portion

For purposes of paragraph (1), unless the taxpayer otherwise specifies, the deductible portion of any dividend or other amount is the amount which bears the same ratio to the amount of such dividend or other amount as the amount allowed as a deduction under subsection (a) for the taxable year bears to the amount described in subsection (b)(2)(A) for such year. (4)

Coordination with section 78

Section 78 shall not apply to any tax which is not allowable as a credit under section 901 by reason of this subsection. (e)

Increase in tax on included amounts not reduced by credits, etc

(1)

In general

Any tax under this chapter by reason of nondeductible CFC dividends shall not be treated as tax imposed by this chapter for purposes of determining— (A)the amount of any credit allowable under this chapter, or (B)the amount of the tax imposed by section 55. Subparagraph (A) shall not apply to the credit under section 53 or to the credit under section 27(a) with respect to taxes which are imposed by foreign countries and possessions of the United States and are attributable to such dividends.(2)

Limitation on reduction in taxable income, etc

(A)

In general

The taxable income of any United States shareholder for any taxable year shall in no event be less than the amount of nondeductible CFC dividends received during such year. (B)

Coordination with section 172

The nondeductible CFC dividends for any taxable year shall not be taken into account— (i)in determining under section 172 the amount of any net operating loss for such taxable year, and (ii)in determining taxable income for such taxable year for purposes of the 2nd sentence of section 172(b)(2). (3)

Nondeductible CFC dividends

For purposes of this subsection, the term nondeductible CFC dividends means the excess of the amount of dividends taken into account under subsection (a) over the deduction allowed under subsection (a) for such dividends. (f)

Election

The taxpayer may elect to apply this section to— (1)the taxpayer’s last taxable year which begins before the date of the enactment of this section, or (2)the taxpayer’s first taxable year which begins during the 1-year period beginning on such date. Such election may be made for a taxable year only if made before the due date (including extensions) for filing the return of tax for such taxable year.

. (b)

Clerical amendment

The item in the table of sections for subpart F of part III of subchapter N of chapter 1 of such Code relating to section 965 is amended to read as follows: Sec. 965. Deduction for dividends received. . (c)

Effective date

The amendments made by this section shall apply to taxable years ending on or after the date of the enactment of this Act.