[Congressional Bills 110th Congress]
[From the U.S. Government Publishing Office]
[S. 2380 Introduced in Senate (IS)]







110th CONGRESS
  1st Session
                                S. 2380

To amend the Internal Revenue Code of 1986 to modernize the application 
of the subpart F rules to computer software, to expand the subpart F de 
        minimis rule, and to extend certain expiring provisions.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                           November 16, 2007

Mr. Smith (for himself and Ms. Cantwell) introduced the following bill; 
     which was read twice and referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
To amend the Internal Revenue Code of 1986 to modernize the application 
of the subpart F rules to computer software, to expand the subpart F de 
        minimis rule, and to extend certain expiring provisions.

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

SECTION 1. MODERNIZATION OF APPLICATION OF SUBPART F RULES TO RENTS AND 
              ROYALTIES FROM COMPUTER SOFTWARE.

    (a) In General.--Section 954(c)(2) of the Internal Revenue Code of 
1986 (relating to exceptions from definition of foreign personal 
holding income) is amended by adding at the end the following new 
subparagraph:
                    ``(D) Rents and royalties derived in active 
                computer software business.--
                            ``(i) In general.--Foreign personal holding 
                        company income shall not include rents and 
                        royalties which are attributable to computer 
                        software which--
                                    ``(I) is leased or licensed for use 
                                outside the United States, and
                                    ``(II) was developed or marketed by 
                                the controlled foreign corporation or a 
                                related person (within the meaning of 
                                subsection (d)(3)).
                            ``(ii) Development and marketing.--For 
                        purposes of clause (i), a person shall be 
                        treated as--
                                    ``(I) developing computer software 
                                if the person creates, produces, or 
                                adds value to the computer software, 
                                including by adapting, customizing, or 
                                localizing such software or by 
                                integrating such software with other 
                                computer software created or produced 
                                by such person, and
                                    ``(II) marketing computer software 
                                if the person engages in sales, 
                                marketing, promotional, maintenance, or 
                                support activities, or performs other 
                                significant services, with respect to 
                                the leasing or licensing of such 
                                software.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years of controlled foreign corporations beginning after 
December 31, 2007, and to taxable years of United States shareholders 
with or within such taxable years of such foreign corporations end.

SEC. 2. EXPANSION OF DE MINIMIS RULE UNDER SUBPART F.

    (a) In General.--Clause (ii) of section 954(b)(3)(A) of the 
Internal Revenue Code of 1986 (relating to de minimis, etc., rules) is 
amended by striking ``$1,000,000'' and inserting ``$5,000,000''.
    (b) Technical Amendments.--
            (1) Clause (ii) of section 864(d)(5)(A) of the Internal 
        Revenue Code of 1986 is amended by striking ``$1,000,000'' and 
        inserting ``$5,000,000''.
            (2) Clause (i) of section 881(c)(5)(A) of such Code is 
        amended by striking ``$1,000,000'' and inserting 
        ``$5,000,000''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years of controlled foreign corporations beginning 
after December 31, 2007, and to taxable years of United States 
shareholders with or within such taxable years of such foreign 
corporations end.

SEC. 3. PERMANENT EXTENSION OF LOOK-THRU RULE FOR RELATED CONTROLLED 
              FOREIGN CORPORATIONS.

    Section 954(c)(6)(B) of the Internal Revenue Code of 1986 (relating 
to application of look-thru rule for related controlled foreign 
corporations) is amended by striking ``and before January 1, 2009,''.

SEC. 4. PERMANENT EXTENSION OF SUBPART F EXCEPTIONS FOR ACTIVE 
              FINANCING.

    (a) Exempt Insurance Income.--Section 953(e)(10) of the Internal 
Revenue Code of 1986 (relating to application of exception for exempt 
insurance income) is amended--
            (1) by striking ``and before January 1, 2009,'', and
            (2) by striking the last sentence.
    (b) Special Rule for Income Derived in the Active Conduct of 
Banking, Financing, or Similar Businesses.--Section 954(h)(9) of the 
Internal Revenue Code of 1986 (relating to application) is amended by 
striking ``and before January 1, 2009,''.
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