[Congressional Bills 110th Congress]
[From the U.S. Government Publishing Office]
[S. 3162 Introduced in Senate (IS)]







110th CONGRESS
  2d Session
                                S. 3162

  To amend the Internal Revenue Code of 1986 to provide tax relief to 
  improve the competitiveness of United States corporations and small 
   businesses, to eliminate tax incentives to move jobs and profits 
                   overseas, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             June 19, 2008

 Mr. Voinovich 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 provide tax relief to 
  improve the competitiveness of United States corporations and small 
   businesses, to eliminate tax incentives to move jobs and profits 
                   overseas, and for other purposes.

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

SECTION 1. SHORT TITLE, ETC.

    (a) Short Title.--This Act may be cited as the ``Manufacturing, 
Assembling, Development, and Export in the USA Tax Act'' or the ``MADE 
in the USA Tax Act''.
    (b) Amendment of 1986 Code.--Except as otherwise expressly 
provided, whenever in this Act an amendment or repeal is expressed in 
terms of an amendment to, or repeal of, a section or other provision, 
the reference shall be considered to be made to a section or other 
provision of the Internal Revenue Code of 1986.
    (c) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title, etc.
  TITLE I--TAX RELIEF TO IMPROVE THE COMPETITIVENESS OF UNITED STATES 
                   CORPORATIONS AND SMALL BUSINESSES

Sec. 101. Phased in reduction of maximum corporate income tax rate to 
                            28 percent.
Sec. 102. Modifications of deduction for income attributable to 
                            domestic production activities.
Sec. 103. Small business expensing provisions made permanent.
Sec. 104. Repeal of imposition of withholding on certain payments made 
                            to vendors by government entities.
Sec. 105. Repeal of certain modifications to exclusion for citizens 
                            living abroad.
   TITLE II--ELIMINATION OF TAX INCENTIVES TO MOVE JOBS AND PROFITS 
                                OVERSEAS

              Subtitle A--Foreign Tax Credit Modifications

Sec. 201. Inclusion of all foreign-source royalties in passive category 
                            income in applying foreign tax credit 
                            limitation.
Sec. 202. Separate application of foreign tax credit limitation to 
                            financial services income.
             Subtitle B--Classification of Foreign Entities

Sec. 211. Treatment of foreign corporations managed and controlled in 
                            the United States as domestic corporations.
Sec. 212. Entities with single owner treated as corporations.
  Subtitle C--Proper Treatment and Allocation of Income and Deductions

Sec. 221. Limitation on treaty benefits for certain deductible 
                            payments.
Sec. 222. Repeal of special source rules for inventory property.
Sec. 223. Clarification of determination of foreign oil and gas 
                            extraction income.
Sec. 224. Modifications of limitation on excess interest deductions of 
                            certain corporations.
Sec. 225. Sense of Senate regarding certain reinsurance transactions 
                            with foreign related persons.
Sec. 226. Study on effectiveness of transfer pricing rules with respect 
                            to inbound transactions.
                      Subtitle D--Other Provisions

Sec. 231. Nonqualified deferred compensation from certain tax 
                            indifferent parties.
Sec. 232. Restrictions on refundable child tax credit to taxpayers 
                            outside the United States.
                   TITLE III--OTHER REVENUE MEASURES

                   Subtitle A--Accounting Provisions

Sec. 301. Repeal of lower of cost or market method of inventory.
Sec. 302. Repeal of percentage depletion.
Sec. 303. Amortization of goodwill and other intangibles.
        Subtitle B--Codification of Economic Substance Doctrine

Sec. 311. Codification of economic substance doctrine.
Sec. 312. Penalties for underpayments.
          Subtitle C--Extension of Certain Expiring Provisions

Sec. 321. Extension of FUTA tax.
Sec. 322. Permanent extension of custom user fees.

  TITLE I--TAX RELIEF TO IMPROVE THE COMPETITIVENESS OF UNITED STATES 
                   CORPORATIONS AND SMALL BUSINESSES

SEC. 101. PHASED IN REDUCTION OF MAXIMUM CORPORATE INCOME TAX RATE TO 
              28 PERCENT.

    (a) Phased Reduction.--
            (1) In general.--Paragraph (1) of section 11(b) (relating 
        to amount of tax on corporations) is amended to read as 
        follows:
            ``(1) In general.--The amount of the tax imposed by 
        subsection (a) shall be the sum of--
                    ``(A) 15 percent of so much of the taxable income 
                as does not exceed $50,000,
                    ``(B) 25 percent of so much of the taxable income 
                as exceeds $50,000, but does not exceed $75,000, and
                    ``(C) the applicable percentage of so much of such 
                taxable income as exceeds $75,000.''.
            (2) Applicable percentage.--Section 11(b) is amended by 
        adding at the end the following new paragraph:
            ``(3) Applicable percentage.--For purposes of this 
        subsection, the applicable percentage for any taxable year 
        shall be determined in accordance with the following table:

``In the case of a taxable year           The applicable percentage is:
        beginning in calendar year:
        2009...............................................         33 
        2010...............................................         32 
        2011...............................................         31 
        2012...............................................         30 
        2013 and thereafter................................       28''.
    (b) Personal Service Corporations.--Paragraph (2) of section 11(b) 
is amended by striking ``35 percent'' and inserting ``the applicable 
percentage''.
    (c) Conforming Amendments.--
            (1) Section 904(b)(3)(D)(ii) is amended by striking 
        ``(determined without regard to the last sentence of section 
        11(b)(1))''.
            (2) Section 1201(a) is amended--
                    (A) by striking ``35 percent'' each place it 
                appears and inserting ``the applicable percentage then 
                in effect under section 11(b)(3)'', and
                    (B) by striking ``(determined without regard to the 
                last 2 sentences of section 11(b)(1))''.
            (3) Subparagraphs (A) and (B)(ii) of section 1201(b)(1), as 
        added by the Heartland, Habitat, Harvest, and Horticulture Act 
        of 2008, are each amended by striking ``35 percent'' and 
        inserting ``the applicable percentage then in effect under 
        section 11(b)(3)''.
            (4)(A) Paragraph (1) of section 1445(e) is amended by 
        striking ``35 percent'' and inserting ``the applicable 
        percentage in effect under section 11(b)(3) on the 1st day of 
        the calendar year in which the disposition occurs''.
            (B) Paragraph (2) of section 1445(e) is amended by striking 
        ``35 percent'' and inserting ``the applicable percentage (in 
        effect under section 11(b)(3) on the 1st day of the calendar 
        year in which the distribution occurs)''
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2008; except that 
the amendments made by subsection (c)(4) shall take effect on January 
1, 2009.

SEC. 102. MODIFICATIONS OF DEDUCTION FOR INCOME ATTRIBUTABLE TO 
              DOMESTIC PRODUCTION ACTIVITIES.

    (a) Deduction Limited to Taxpayers Other Than C Corporations.--
Section 199(a)(1) (relating to allowance of deduction for income 
attributable to domestic production activities) is amended by striking 
``There'' and inserting ``In the case of a taxpayer other than a C 
corporation, there''.
    (b) Increase in Amount of Deduction.--Section 199(a) is amended--
            (1) by striking ``9 percent'' in paragraph (1) and 
        inserting ``12 percent'', and
            (2) in paragraph (2)--
                    (A) by striking ``before 2010'' and inserting 
                ``before 2011'', and
                    (B) by striking the table and inserting the 
                following:

``For taxable years beginning in:         The transition percentage is:
    2005 or 2006...................
                                        3
    2007 or 2008...................
                                        6
    2009 or 2010...................
                                        9''.
    (c) Conforming Amendments.--
            (1) Section 199(c)(4) is amended by striking subparagraph 
        (D).
            (2) Section 199(c)(7)(B) is amended to read as follows:
                    ``(B) Related person.--For purposes of subparagraph 
                (A), a person shall be treated as related to another 
                person if such persons are treated as a single employer 
                under section 52(b) or subsection (m) or (o) of section 
                414, except that any determination under section 52(b) 
                shall be made without regard to section 1563(b).''.
            (3) Section 199(d)(4) is repealed.
            (4) Section 199(d)(6) is amended to read as follows:
            ``(6) Coordination with minimum tax.--For purposes of 
        determining alternative minimum taxable income under section 
        55, qualified production activities income shall be determined 
        without regard to any adjustments under sections 56 through 
        59.''.
            (5) Section 163(j)(6)(A)(i) is amended by inserting ``and'' 
        at the end of subclause (II), by striking subclause (III), and 
        by redesignating subclause (IV) as subclause (III).
            (6) Section 170(b)(2)(C) is amended by inserting ``and'' at 
        the end of clause (iii), by striking clause (iv), and by 
        redesignating clause (v) as clause (iv).
            (7) Section 246(b)(1) is amended by striking ``199,''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2008.

SEC. 103. SMALL BUSINESS EXPENSING PROVISIONS MADE PERMANENT.

    (a) Increase in Small Business Expensing Made Permanent.--
Subsection (b) of section 179 is amended--
            (1) by striking ``$25,000 ($125,000 in the case of taxable 
        years beginning after 2006 and before 2011)'' in paragraph (1) 
        and inserting ``$125,000'', and
            (2) by striking ``$200,000 ($500,000 in the case of taxable 
        years beginning after 2006 and before 2011)'' in paragraph (2) 
        and inserting ``$500,000''.
    (b) Expensing for Computer Software Made Permanent.--Clause (ii) of 
section 179(d)(1)(A) is amended--
            (1) by striking ``, to which'' and inserting ``and to 
        which'', and
            (2) by striking ``and which is placed in service in a 
        taxable year beginning after 2002 and before 2011,''.
    (c) Inflation Adjustment.--Subparagraph (A) of section 179(b)(5) is 
amended by striking ``and before 2011''.
    (d) Effective Date.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to taxable years 
        beginning after December 31, 2008.
            (2) Computer software.--The amendment made by subsection 
        (b) shall apply to property placed in service after December 
        31, 2008.

SEC. 104. REPEAL OF IMPOSITION OF WITHHOLDING ON CERTAIN PAYMENTS MADE 
              TO VENDORS BY GOVERNMENT ENTITIES.

    Section 511 of the Tax Increase Prevention and Reconciliation Act 
of 2005, and the amendment made by such section, are repealed, and the 
Internal Revenue Code of 1986 shall be applied and administered as if 
such amendment had never been enacted.

SEC. 105. REPEAL OF CERTAIN MODIFICATIONS TO EXCLUSION FOR CITIZENS 
              LIVING ABROAD.

    (a) Modification of Housing Cost Amount.--
            (1) Housing cost floor.--Clause (i) of section 911(c)(1)(B) 
        (relating to housing cost amount) is amended to read as 
        follows:
                            ``(i) 16 percent of the salary (computed on 
                        a daily basis) of an employee of the United 
                        States who is compensated at a rate equal to 
                        the annual rate for step 1 of grade GS-14, 
                        multiplied by''.
            (2) Maximum amount of exclusion.--
                    (A) In general.--Section 911(c) is amended--
                            (i) in paragraph (1)(A), by striking ``to 
                        the extent such expenses do not exceed the 
                        amount determined under paragraph (2)'', and
                            (ii) by striking paragraph (2) and 
                        redesignating paragraphs (3) and (4) as 
                        paragraphs (2) and (3), respectively.
                    (B) Conforming amendments.--
                            (i) Section 911(d)(4) is amended by 
                        striking ``, (c)(1)(B)(ii), and (c)(2)(A)(ii)'' 
                        and inserting ``and (c)(1)(B)(ii)''.
                            (ii) Section 911(d)(7) is amended by 
                        striking ``subsection (c)(4)'' and inserting 
                        ``subsection (c)(3)''.
    (b) Rates of Tax Applicable to Nonexcluded Income.--Section 911 
(relating to exclusion of earned income of citizens and residents of 
the United States living abroad) is amended by striking subsection (f) 
and by redesignating subsection (g) as subsection (f).
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2008.

   TITLE II--ELIMINATION OF TAX INCENTIVES TO MOVE JOBS AND PROFITS 
                                OVERSEAS

              Subtitle A--Foreign Tax Credit Modifications

SEC. 201. INCLUSION OF ALL FOREIGN-SOURCE ROYALTIES IN PASSIVE CATEGORY 
              INCOME IN APPLYING FOREIGN TAX CREDIT LIMITATION.

    (a) In General.--Clause (i) of section 904(d)(2)(B) (defining 
passive income) is amended to read as follows:
                            ``(i) In general.--Except as otherwise 
                        provided in this subparagraph, the term 
                        `passive income' means--
                                    ``(I) any income received or 
                                accrued by any person which is of a 
                                kind which would be foreign personal 
                                holding company income (as defined in 
                                section 954(c)), and
                                    ``(II) any royalties received or 
                                accrued by any person which are not 
                                described in subclause (I).''.
    (b) Look-Thru Rules Not To Apply to Royalties.--Section 904(d)(3) 
(relating to look-thru in the case of controlled foreign corporations) 
is amended--
            (1) by striking ``rents, and royalties'' in subparagraph 
        (A) and inserting ``and rents'', and
            (2) in subparagraph (C)--
                    (A) by striking ``, rent, or royalty'' and 
                inserting ``or rent'', and
                    (B) by striking ``rents, and royalties'' in the 
                heading and inserting ``and rents''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2008.

SEC. 202. SEPARATE APPLICATION OF FOREIGN TAX CREDIT LIMITATION TO 
              FINANCIAL SERVICES INCOME.

    (a) In General.--Section 904(d)(1) (relating to separate 
application of section with respect to certain categories of income) is 
amended by striking ``and'' at the end of subparagraph (A), by 
redesignating subparagraph (B) as subparagraph (C), and by inserting 
after subparagraph (A) the following new subparagraph:
                    ``(B) financial services category income, and''.
    (b) Financial Services Category Income.--
            (1) In general.--Section 904(d)(2)(A) (relating to 
        categories of income) is amended--
                    (A) by redesignating clause (ii) as clause (iii) 
                and inserting after clause (i) the following new 
                clause:
                            ``(ii) Financial services category 
                        income.--The term `financial services category 
                        income' means income described in subparagraph 
                        (C).'', and
                    (B) by inserting ``or financial services category 
                income'' before the period at the end of clause (iii) 
                (as redesignated by subparagraph (A)).
            (2) Coordination with passive income.--Clause (iii) of 
        section 904(d)(2)(B) (relating to exceptions) is amended by 
        striking ``and'' at the end of subclause (I), by striking the 
        period at the end of subclause (II) and inserting ``, and'', 
        and by adding at the end the following new subclause:
                                    ``(III) any financial services 
                                category income.''.
            (3) Financial services category income defined.--So much of 
        section 904(d)(2)(C) as precedes clause (ii) thereof is amended 
        to read as follows:
                    ``(C) Financial services category income.--
                            ``(i) In general.--Financial services 
                        income shall be treated as financial services 
                        category income in the case of--
                                    ``(I) a member of a financial 
                                services group, or
                                    ``(II) any other person if such 
                                person is predominantly engaged in the 
                                active conduct of a banking, insurance, 
                                financing, or similar business.
                        Notwithstanding the preceding sentence, if any 
                        portion of any financial services income 
                        consists of any royalties received or accrued 
                        by any person, then such portion shall be 
                        treated as passive category income.''.
            (4) Conforming amendments.--
                    (A) Section 904(d)(2)(H)(i) is amended by striking 
                ``paragraph (1)(B)'' and inserting ``paragraph (1)(C), 
                except that in the case of taxable years beginning 
                after December 31, 2008, the taxpayer may elect to 
                treat such tax as tax imposed on income described in 
                subparagraph (B) or (C) of paragraph (1)''.
                    (B) Section 904(d)(3) is amended--
                            (i) in subparagraph (A), by striking 
                        ``passive category income'' and inserting 
                        ``income in a separate category'',
                            (ii) in subparagraph (B)--
                                    (I) by striking ``passive category 
                                income'' the first place it appears and 
                                inserting ``income in a separate 
                                category'', and
                                    (II) by striking ``passive category 
                                income'' the second place it appears 
                                and inserting ``income in such 
                                category'',
                            (iii) in subparagraph (C)--
                                    (I) by striking ``passive category 
                                income'' the first place it appears and 
                                inserting ``income in a separate 
                                category'', and
                                    (II) by striking ``passive category 
                                income of the controlled foreign 
                                corporation'' and inserting ``income of 
                                the controlled foreign corporation in 
                                such category'',
                            (iv) in subparagraph (D)--
                                    (I) by striking ``passive category 
                                income'' the first place it appears and 
                                inserting ``income in a separate 
                                category'', and
                                    (II) by striking ``passive category 
                                income'' the second place it appears 
                                and inserting ``income in such 
                                category'',
                            (v) in subparagraph (E)--
                                    (I) by striking ``passive category 
                                income'' each place it appears and 
                                inserting ``income in a separate 
                                category'', and
                                    (II) by striking ``financial 
                                services income'' and inserting 
                                ``financial services category income'', 
                                and
                            (vi) by striking subparagraph (F) and 
                        inserting the following new subparagraph:
                    ``(F) Separate category; coordination with high-
                taxed income provisions.--For purposes of this 
                paragraph--
                            ``(i) In general.--Except as provided in 
                        clause (ii), the term `separate category' means 
                        any category of income described in 
                        subparagraph (A) or (B) of paragraph (1).
                            ``(ii) Coordination with high-taxed income 
                        provisions.--
                                    ``(I) In determining whether any 
                                income of a controlled foreign 
                                corporation is in a separate category, 
                                subclause (II) of paragraph (2)(B)(iii) 
                                shall not apply.
                                    ``(II) Any income of the taxpayer 
                                which is treated as income in a 
                                separate category under this paragraph 
                                shall be so treated notwithstanding any 
                                provision of paragraph (2); except that 
                                the determination of whether any amount 
                                is high-taxed income shall be made 
                                after the application of this 
                                paragraph.''.
    (c) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to taxable years beginning after December 31, 2008.
            (2) Transition rules.--The Secretary shall prescribe such 
        rules or guidance as may be necessary or appropriate to provide 
        for the proper treatment of items of income, gain, deductions, 
        losses, and taxes arising in taxable years beginning before 
        January 1, 2009, which are properly allocable to a different 
        category of income for taxable years beginning on or after such 
        date by reason of the amendments made by this section.

             Subtitle B--Classification of Foreign Entities

SEC. 211. TREATMENT OF FOREIGN CORPORATIONS MANAGED AND CONTROLLED IN 
              THE UNITED STATES AS DOMESTIC CORPORATIONS.

    (a) In General.--Section 7701 (relating to definitions), as amended 
by section 311, is amended by redesignating subsection (q) as 
subsection (r) and by inserting after subsection (p) the following new 
subsection:
    ``(q) Certain Publicly-Traded Corporations Managed and Controlled 
in the United States Treated as Domestic for Income Tax.--
            ``(1) In general.--Notwithstanding subsection (a)(4), in 
        the case of a corporation the stock of which is regularly 
        traded on an established securities market, if--
                    ``(A) the corporation would not otherwise be 
                treated as a domestic corporation for purposes of this 
                title, but
                    ``(B) the management and control of the corporation 
                occurs primarily within the United States,
        then, solely for purposes of chapter 1 (and any other provision 
        of this title relating to chapter 1), the corporation shall be 
        treated as a domestic corporation.
            ``(2) Management and control.--The Secretary shall 
        prescribe regulations for purposes of determining cases in 
        which the management and control of a corporation is to be 
        treated as primarily occurring within the United States. Such 
        regulations shall provide that--
                    ``(A) the management and control of a corporation 
                shall be treated as primarily occurring within the 
                United States if substantially all of the executive 
                officers and senior management of the corporation who 
                exercise day-to-day responsibility for making decisions 
                involving strategic, financial, and operational 
                policies of the corporation are primarily located 
                within the United States, and
                    ``(B) individuals who are not executive officers 
                and senior management of the corporation (including 
                individuals who are officers or employees of other 
                corporations in the same chain of corporations as the 
                corporation) shall be treated as executive officers and 
                senior management if such individuals exercise the day-
                to day responsibilities of the corporation described in 
                subparagraph (A).''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning on or after the date which is 2 years 
after the date of the enactment of this Act.

SEC. 212. ENTITIES WITH SINGLE OWNER TREATED AS CORPORATIONS.

    (a) In General.--Section 7701 (relating to definitions), as amended 
by sections 211 and 311, is amended by redesignating subsection (r) as 
subsection (s) and by inserting after subsection (q) the following new 
subsection:
    ``(r) Special Rules for Entities With Single Owners.--
            ``(1) In general.--Notwithstanding this section or any 
        regulation issued thereunder, a business entity shall be 
        treated as a corporation if the corporation is created or 
        organized under the laws of any foreign country and has a 
        single owner.
            ``(2) Regulatory authority.--
                    ``(A) Application to domestic entities.--The 
                Secretary may issue regulations which apply the rule of 
                paragraph (1) to a domestic business entity in cases 
                where the single owner is a controlled foreign 
                corporation (as defined in section 957(a)).
                    ``(B) Other authority.--The Secretary may issue 
                such regulations as are necessary or appropriate to 
                carry out the purposes of this section, including 
                regulations which treat a business entity with more 
                than one owner as having a single owner to the extent 
                necessary to prevent the avoidance of the purposes of 
                this section.''.
    (b) Effective Dates.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to taxable years 
        beginning after the date of the enactment of this Act.
            (2) Transition rule for certain existing entities.--In the 
        case of an entity in existence on the date of the enactment of 
        this Act which is not treated as a corporation for purposes of 
        the Internal Revenue Code of 1986 for the taxable year which 
        includes such date, the amendments made by this section shall 
        apply to taxable years of such corporation beginning on or 
        after the date which is 1 year after such date of enactment.

  Subtitle C--Proper Treatment and Allocation of Income and Deductions

SEC. 221. LIMITATION ON TREATY BENEFITS FOR CERTAIN DEDUCTIBLE 
              PAYMENTS.

    (a) In General.--Section 894 (relating to income affected by 
treaty) is amended by adding at the end the following new subsection:
    ``(d) Limitation on Treaty Benefits for Certain Deductible 
Payments.--
            ``(1) In general.--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.
            ``(2) Deductible related-party payment.--For purposes of 
        this subsection, the term `deductible related-party payment' 
        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.
            ``(3) Foreign controlled group of entities.--For purposes 
        of this subsection--
                    ``(A) In general.--The term `foreign controlled 
                group of entities' means a controlled group of entities 
                the common parent of which is a foreign corporation.
                    ``(B) Controlled group of entities.--The term 
                `controlled group of entities' means a controlled group 
                of corporations as defined in section 1563(a)(1), 
                except that--
                            ``(i) `more than 50 percent' shall be 
                        substituted for `at least 80 percent' each 
                        place it appears therein, and
                            ``(ii) the determination shall be made 
                        without regard to subsections (a)(4) and (b)(2) 
                        of section 1563.
                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).
            ``(4) Foreign parent corporation.--For purposes of this 
        subsection, the term `foreign parent corporation' 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).
            ``(5) Regulations.--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--
                    ``(A) 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
                    ``(B) 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.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to payments made after the date of the enactment of this Act.

SEC. 222. REPEAL OF SPECIAL SOURCE RULES FOR INVENTORY PROPERTY.

    (a) In General.--The following provisions are repealed:
            (1) Section 861(a)(6).
            (2) Section 862(a)(6).
            (3) Section 865(b).
    (b) Special Rules for Determining Source.--The last sentence of 
section 863(b) is amended to read as follows: ``Gains, profits, and 
income from services rendered partly within and partly without the 
United States shall be treated as derived partly from sources within 
and partly from sources without the United States.''.
    (c) Conforming Amendments.--
            (1) Section 865 is amended by striking ``(b),'' in 
        subsection (e).
            (2) Section 865(i)(1) is repealed.
            (3) Section 954(d)(4) is amended--
                    (A) by striking subparagraph (A) and inserting the 
                following new subparagraph:
                    ``(A) the sale of any unprocessed timber which is a 
                softwood and was cut from an area in the United States, 
                or'', and
                    (B) by adding at the end the following new 
                sentence: ``For purposes of subparagraph (A), the term 
                `unprocessed timber' means any log, cant, or similar 
                form of timber.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2008.

SEC. 223. CLARIFICATION OF DETERMINATION OF FOREIGN OIL AND GAS 
              EXTRACTION INCOME.

    (a) In General.--Paragraph (1) of section 907(c) is amended by 
redesignating subparagraph (B) as subparagraph (C), by striking ``or'' 
at the end of subparagraph (A), and by inserting after subparagraph (A) 
the following new subparagraph:
                    ``(B) so much of any transportation of such 
                minerals as occurs before the fair market value event, 
                or''.
    (b) Fair Market Value Event.--Subsection (c) of section 907 is 
amended by adding at the end the following new paragraph:
            ``(6) Fair market value event.--For purposes of this 
        section, the term `fair market value event' means, with respect 
        to any mineral, the first point in time at which such mineral--
                    ``(A) has a fair market value which can be 
                determined on the basis of a transfer, which is an 
                arm's length transaction, of such mineral from the 
                taxpayer to a person who is not related (within the 
                meaning of section 482) to such taxpayer, or
                    ``(B) is at a location at which the fair market 
                value is readily ascertainable by reason of 
                transactions among unrelated third parties with respect 
                to the same mineral (taking into account source, 
                location, quality, and chemical composition).''.
    (c) Special Rule for Certain Petroleum Taxes.--Subsection (c) of 
section 907, as amended by subsection (b), is amended by adding at the 
end the following new paragraph:
            ``(7) Oil and gas taxes.--In the case of any tax imposed by 
        a foreign country which is limited in its application to 
        taxpayers engaged in oil or gas activities--
                    ``(A) the term `oil and gas extraction taxes' shall 
                include such tax,
                    ``(B) the term `foreign oil and gas extraction 
                income' shall include any taxable income which is taken 
                into account in determining such tax (or is directly 
                attributable to the activity to which such tax 
                relates), and
                    ``(C) the term `foreign oil related income' shall 
                not include any taxable income which is treated as 
                foreign oil and gas extraction income under 
                subparagraph (B).''.
    (d) Conforming Amendments.--
            (1) Subparagraph (C) of section 907(c)(1), as redesignated 
        by this section, is amended by inserting ``or used by the 
        taxpayer in the activity described in subparagraph (B)'' before 
        the period at the end.
            (2) Subparagraph (B) of section 907(c)(2) is amended to 
        read as follows:
                    ``(B) so much of the transportation of such 
                minerals or primary products as is not taken into 
                account under paragraph (1)(B),''.
    (e) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.

SEC. 224. MODIFICATIONS OF LIMITATION ON EXCESS INTEREST DEDUCTIONS OF 
              CERTAIN CORPORATIONS.

    (a) Corporations to Which Limitation Applies.--Section 163(j)(2) 
(relating to corporations to which subsection applies) is amended to 
read as follows:
            ``(2) Corporations to which subsection applies.--
                    ``(A) In general.--This subsection shall apply to 
                any corporation for any taxable year if such 
                corporation has excess interest expense for the taxable 
                year.
                    ``(B) Excess interest expense.--For purposes of 
                this subsection, the term `excess interest expense' 
                means the excess (if any) of--
                            ``(i) the corporation's net interest 
                        expense, over
                            ``(ii) 25 percent of the adjusted taxable 
                        income of the corporation.''.
    (b) Modification of Carryforward of Disallowed Interest.--
Subparagraph (B) of section 163(j)(1) is amended to read as follows:
                    ``(B) Disallowed amount carried to succeeding 
                taxable year.--
                            ``(i) In general.--Except as provided in 
                        clause (ii), any amount disallowed under 
                        subparagraph (A) for any taxable year shall be 
                        treated as disqualified interest paid or 
                        accrued in the succeeding taxable year.
                            ``(ii) 10-year carryforward limit.--Any 
                        disqualified interest disallowed under 
                        subparagraph (A) shall not be carried forward 
                        under clause (i) to any taxable year beginning 
                        after the 10th taxable year following the 
                        taxable year in which the interest was paid or 
                        accrued (determined without regard to this 
                        subparagraph). For purposes of the preceding 
                        sentence, any deduction under this section with 
                        respect to disqualified interest for which a 
                        deduction was previously disallowed under 
                        subparagraph (A) shall be allocated to such 
                        interest on a first-in, first-out basis.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to interest paid or accrued in taxable years beginning after 
December 31, 2008.

SEC. 225. SENSE OF SENATE REGARDING CERTAIN REINSURANCE TRANSACTIONS 
              WITH FOREIGN RELATED PERSONS.

    It is the sense of the Senate that Congress should enact 
legislation as soon as possible to address the tax treatment of 
reinsurance transactions with related persons (and other similar 
transactions), including the transfer offshore by reinsurance or 
otherwise of assets and earnings related to insurance of United States 
risks. In enacting such legislation, Congress should consider the 
effects of such practices on--
            (1) the tax base of the United States, and
            (2) the competitiveness of insurers and reinsurers based in 
        the United States.

SEC. 226. STUDY ON EFFECTIVENESS OF TRANSFER PRICING RULES WITH RESPECT 
              TO INBOUND TRANSACTIONS.

    (a) In General.--The Secretary of the Treasury or the Secretary's 
delegate shall conduct a study of the effectiveness of the transfer 
pricing rules under section 482 of the Internal Revenue Code of 1986 in 
properly allocating items of income and deduction in cases involving 
foreign persons conducting business within the United States or foreign 
persons selling goods and services into the United States. Such study 
shall include an analysis of the effectiveness of such rules in 
preventing income shifting, preventing the understatement of United 
States business profits, and ensuring taxation of income effectively 
connected with the United States.
    (b) Report.--The Secretary shall, not later than the date which is 
1 year after the date of the enactment of this Act, report the results 
of the study conducted under subsection (a) to the Committee on Finance 
of the Senate and the Committee on Ways and Means of the House of 
Representatives, including any specific recommendations for changes in 
legislation which the Secretary considers appropriate.

                      Subtitle D--Other Provisions

SEC. 231. NONQUALIFIED DEFERRED COMPENSATION FROM CERTAIN TAX 
              INDIFFERENT PARTIES.

    (a) In General.--Subpart B of part II of subchapter E of chapter 1 
is amended by inserting after section 457 the following new section:

``SEC. 457A. NONQUALIFIED DEFERRED COMPENSATION FROM CERTAIN TAX 
              INDIFFERENT PARTIES.

    ``(a) In General.--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.
    ``(b) Nonqualified Entity.--For purposes of this section, the term 
`nonqualified entity' means--
            ``(1) any foreign corporation unless substantially all of 
        its income is--
                    ``(A) effectively connected with the conduct of a 
                trade or business in the United States, or
                    ``(B) subject to a comprehensive foreign income 
                tax, and
            ``(2) any partnership unless substantially all of its 
        income is allocated to persons other than--
                    ``(A) foreign persons with respect to whom such 
                income is not subject to a comprehensive foreign income 
                tax, and
                    ``(B) organizations which are exempt from tax under 
                this title.
    ``(c) Determinability of Amounts of Compensation.--
            ``(1) In general.--If the amount of any compensation is not 
        determinable at the time that such compensation is otherwise 
        includible in gross income under subsection (a)--
                    ``(A) such amount shall be so includible in gross 
                income when determinable, and
                    ``(B) 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--
                            ``(i) the amount of interest determined 
                        under paragraph (2), and
                            ``(ii) an amount equal to 20 percent of the 
                        amount of such compensation.
            ``(2) Interest.--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.
    ``(d) Other Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Substantial risk of forfeiture.--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.
            ``(2) Comprehensive foreign income tax.--The term 
        `comprehensive foreign income tax' means, with respect to any 
        foreign person, the income tax of a foreign country if--
                    ``(A) such person is eligible for the benefits of a 
                comprehensive income tax treaty between such foreign 
                country and the United States, or
                    ``(B) such person demonstrates to the satisfaction 
                of the Secretary that such foreign country has a 
                comprehensive income tax.
            ``(3) Nonqualified deferred compensation plan.--
                    ``(A) In general.--The term `nonqualified deferred 
                compensation plan' 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.
                    ``(B) Exception.--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.
            ``(4) Exception for certain compensation with respect to 
        effectively connected income.--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.
            ``(5) Application of rules.--Rules similar to the rules of 
        paragraphs (5) and (6) of section 409A(d) shall apply.
    ``(e) Regulations.--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.''.
    (b) Conforming Amendment.--Section 26(b)(2) is amended by striking 
``and'' at the end of subparagraph (U), by striking the period at the 
end of subparagraph (V) and inserting ``, and'', and by adding at the 
end the following new subparagraph:
                    ``(W) section 457A(c)(1)(B) (relating to 
                determinability of amounts of compensation).''.
    (c) Clerical Amendment.--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:

``Sec. 457A. Nonqualified deferred compensation from certain tax 
                            indifferent parties.''.
    (d) Effective Date.--
            (1) In general.--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.
            (2) Application to existing deferrals.--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--
                    (A) the last taxable year beginning before 2018, or
                    (B) 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 section 457A of the Internal 
                Revenue Code of 1986, as added by this section).
            (3) Accelerated payments.--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.
            (4) Certain back-to-back arrangements.--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 (3) 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.
            (5) Accelerated payment not treated as material 
        modification.--Any amendment to a nonqualified deferred 
        compensation arrangement made pursuant to paragraph (3) or (4) 
        shall not be treated as a material modification of the 
        arrangement for purposes of section 409A of the Internal 
        Revenue Code of 1986.

SEC. 232. RESTRICTIONS ON REFUNDABLE CHILD TAX CREDIT TO TAXPAYERS 
              OUTSIDE THE UNITED STATES.

    (a) In General.--Section 24(d) is amended by adding at the end the 
following new paragraph:
            ``(4) Application to taxpayers outside of the united 
        states.--This subsection shall not apply to any taxpayer who 
        claims the benefits of section 911 (relating to citizens or 
        residents living abroad) for the taxable year.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2008.
    (c) Application of EGTRRA Sunset.--The amendment made by this 
section shall be subject to title IX of the Economic Growth and Tax 
Relief Reconciliation Act of 2001 in the same manner and to the same 
extent as such title applies to the amendments made by section 201(c) 
of such Act.

                   TITLE III--OTHER REVENUE MEASURES

                   Subtitle A--Accounting Provisions

SEC. 301. REPEAL OF LOWER OF COST OR MARKET METHOD OF INVENTORY.

    (a) In General.--Section 471 is amended by redesignating subsection 
(c) as subsection (d) and by inserting after subsection (b) the 
following new subsection:
    ``(c) Inventories Taken Into Account at Cost.--A method of 
determining inventories shall not be treated as clearly reflecting 
income unless such method provides that inventories shall be taken into 
account at cost.''.
    (b) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to taxable years beginning after the date of the 
        enactment of this Act.
            (2) Change in method of accounting.--In the case of any 
        taxpayer required by the amendments made by this section to 
        change its method of accounting for its first taxable year 
        beginning after the date of the enactment of this Act--
                    (A) such change shall be treated as initiated by 
                the taxpayer,
                    (B) such change shall be treated as made with the 
                consent of the Secretary of the Treasury, and
                    (C) if the net amount of the adjustments required 
                to be taken into account by the taxpayer under section 
                481 of the Internal Revenue Code of 1986 is positive, 
                such amount shall be taken into account over a period 
                of 8 years beginning with such first taxable year.

SEC. 302. REPEAL OF PERCENTAGE DEPLETION.

    (a) In General.--Section 613 (relating to percentage depletion) is 
amended by adding at the end the following new subsection:
    ``(f) Termination.--This section shall not apply to any taxable 
year beginning after December 31, 2008.''.
    (b) Limitations on Percentage Depletion in Case of Oil and Gas 
Wells.--Section 613A (relating to limitations on percentage depletion 
in case of oil and gas wells) is amended by adding at the end the 
following new subsection:
    ``(f) Termination.--This section shall not apply to any taxable 
year beginning after December 31, 2008.''.

SEC. 303. AMORTIZATION OF GOODWILL AND OTHER INTANGIBLES.

    (a) In General.--Subsection (a) of section 197 (relating to general 
rule) is amended by striking ``15-year'' and inserting ``20-year''.
    (b) Certain Interests or Rights Acquired Separately.--Clause (i) of 
section 197(e)(4)(D) is amended by striking ``15 years'' and inserting 
``20 years''.
    (c) Effective Date.--The amendments made by this section shall 
apply to property acquired after the date of the enactment of this Act.

        Subtitle B--Codification of Economic Substance Doctrine

SEC. 311. CODIFICATION OF ECONOMIC SUBSTANCE DOCTRINE.

    (a) In General.--Section 7701 is amended by redesignating 
subsection (p) as subsection (q) and by inserting after subsection (o) 
the following new subsection:
    ``(p) Clarification of Economic Substance Doctrine.--
            ``(1) Application of doctrine.--In the case of any 
        transaction to which the economic substance doctrine is 
        relevant, such transaction shall be treated as having economic 
        substance only if--
                    ``(A) the transaction changes in a meaningful way 
                (apart from Federal income tax effects) the taxpayer's 
                economic position, and
                    ``(B) the taxpayer has a substantial purpose (apart 
                from Federal income tax effects) for entering into such 
                transaction.
            ``(2) Special rule where taxpayer relies on profit 
        potential.--
                    ``(A) In general.--The potential for profit of a 
                transaction shall be taken into account in determining 
                whether the requirements of subparagraphs (A) and (B) 
                of paragraph (1) are met with respect to the 
                transaction only if the present value of the reasonably 
                expected pre-tax profit from the transaction is 
                substantial in relation to the present value of the 
                expected net tax benefits that would be allowed if the 
                transaction were respected.
                    ``(B) Treatment of fees and foreign taxes.--Fees 
                and other transaction expenses and foreign taxes shall 
                be taken into account as expenses in determining pre-
                tax profit under subparagraph (A).
            ``(3) State and local tax benefits.--For purposes of 
        paragraph (1), any State or local income tax effect which is 
        related to a Federal income tax effect shall be treated in the 
        same manner as a Federal income tax effect.
            ``(4) Financial accounting benefits.--For purposes of 
        paragraph (1)(B), achieving a financial accounting benefit 
        shall not be taken into account as a purpose for entering into 
        a transaction if such transaction results in a Federal income 
        tax benefit.
            ``(5) Definitions and special rules.--For purposes of this 
        subsection--
                    ``(A) Economic substance doctrine.--The term 
                `economic substance doctrine' 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.
                    ``(B) Exception for personal transactions of 
                individuals.--In the case of an individual, paragraph 
                (1) shall apply only to transactions entered into in 
                connection with a trade or business or an activity 
                engaged in for the production of income.
                    ``(C) Other common law doctrines not affected.--
                Except as specifically provided in this subsection, the 
                provisions of this subsection shall not be construed as 
                altering or supplanting any other rule of law, and the 
                requirements of this subsection shall be construed as 
                being in addition to any such other rule of law.
                    ``(D) Determination of application of doctrine not 
                affected.--The determination of whether the economic 
                substance doctrine is relevant to a transaction shall 
                be made in the same manner as if this subsection had 
                never been enacted.
            ``(6) Regulations.--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.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to transactions entered into after the date of the enactment of 
this Act.

SEC. 312. PENALTIES FOR UNDERPAYMENTS.

    (a) Penalty for Underpayments Attributable to Transactions Lacking 
Economic Substance.--
            (1) In general.--Subsection (b) of section 6662 is amended 
        by inserting after paragraph (5) the following new paragraph:
            ``(6) 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.''.
            (2) Increased penalty for nondisclosed transactions.--
        Section 6662 is amended by adding at the end the following new 
        subsection:
    ``(i) Increase in Penalty in Case of Nondisclosed Noneconomic 
Substance Transactions.--
            ``(1) In general.--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 `40 percent' for `20 percent'.
            ``(2) Nondisclosed noneconomic substance transactions.--For 
        purposes of this subsection, the term `nondisclosed noneconomic 
        substance transaction' means any portion of a transaction 
        described in subsection (b)(6) 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.
            ``(3) Special rule for amended returns.--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.''.
            (3) Conforming amendment.--Subparagraph (B) of section 
        6662A(e)(2) is amended by striking ``section 6662(h)'' and 
        inserting ``subsection (h) or (i) of section 6662''.
    (b) Reasonable Cause Exception Not Applicable to Noneconomic 
Substance Transactions, Tax Shelters, and Certain Large Corporations.--
Section 6664(c) is amended--
            (1) by redesignating paragraphs (2) and (3) as paragraphs 
        (3) and (4), respectively,
            (2) by striking ``paragraph (2)'' in paragraph (4), as so 
        redesignated, and inserting ``paragraph (3)'', and
            (3) by inserting after paragraph (1) the following new 
        paragraph:
            ``(2) Exception.--Paragraph (1) shall not apply to--
                    ``(A) any portion of an underpayment to which is 
                attributable to one or more transactions described in 
                section 6662(b)(6),
                    ``(B) to any portion of an underpayment which is 
                attributable to one or more tax shelters (as defined in 
                section 6662(d)(2)(C)), or
                    ``(C) to any taxpayer if such taxpayer is a 
                specified large corporation (as defined in section 
                6662(d)(2)(D)(ii)).''.
    (c) Special Understatement Reduction Rule for Certain Large 
Corporations.--
            (1) In general.--Paragraph (2) of section 6662(d) is 
        amended by adding at the end the following new subparagraph:
                    ``(D) Special reduction rule for certain large 
                corporations.--
                            ``(i) In general.--In the case of any 
                        specified large corporation--
                                    ``(I) subparagraph (B) shall not 
                                apply, and
                                    ``(II) 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.
                            ``(ii) Specified large corporation.--
                                    ``(I) In general.--For purposes of 
                                this subparagraph, the term `specified 
                                large corporation' means any 
                                corporation with gross receipts in 
                                excess of $100,000,000 for the taxable 
                                year involved.
                                    ``(II) Aggregation rule.--All 
                                persons treated as a single employer 
                                under section 52(a) shall be treated as 
                                one person for purposes of subclause 
                                (I).''.
            (2) Conforming amendment.--Subparagraph (C) of section 
        6662(d)(2) is amended by striking ``Subparagraph (B)'' and 
        inserting ``Subparagraphs (B) and (D)(i)(II)''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.

          Subtitle C--Extension of Certain Expiring Provisions

SEC. 321. EXTENSION OF FUTA TAX.

    Section 3301 of the Internal Revenue Code of 1986 (relating to rate 
of tax) is amended--
            (1) by striking ``2008'' in paragraph (1) and inserting 
        ``2018'', and
            (2) by striking ``2009'' in paragraph (2) and inserting 
        ``2019''.

SEC. 322. PERMANENT EXTENSION OF CUSTOM USER FEES.

    (a) In General.--Section 13031(j)(3) of the Consolidated Omnibus 
Budget Reconciliation Act of 1985 (19 U.S.C. 58c(j)(3)) is amended to 
read as follows:
            ``(3) In any fiscal year for which fees under paragraphs 
        (1) through (8) of subsection (a) are authorized--
                    ``(A) the Secretary of the Treasury shall charge 
                fees under each such paragraph in amounts that are 
                reasonably related to the costs of providing customs 
                services in connection with the activity or item for 
                which the fee is charged under such paragraph, except 
                that in no case may the fee charged under any such 
                paragraph exceed by more than 10 percent the amount 
                otherwise prescribed by such paragraph;
                    ``(B) the amount of fees collected under such 
                paragraphs may not exceed, in the aggregate, the 
                amounts paid in that fiscal year for the costs 
                described in subsection (f)(3)(A) incurred in providing 
                customs services in connection with the activity or 
                item for which the fees are charged under such 
                paragraphs;
                    ``(C) a fee may not be collected under any such 
                paragraph except to the extent such fee will be 
                expended to pay the costs described in subsection 
                (f)(3)(A) incurred in providing customs services in 
                connection with the activity or item for which the fee 
                is charged under such paragraph; and
                    ``(D) any fee collected under any such paragraph 
                shall be available for expenditure only to pay the 
                costs described in subsection (f)(3)(A) incurred in 
                providing customs services in connection with the 
                activity or item for which the fee is charged under 
                such paragraph.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to fees charged after December 31, 2008.
                                 <all>