1.This Act may be cited as the
Minimum Wage Act of
2007
.
<enum>I</enum><header display-inline="yes-display-inline">Minimum wage</header>
<section commented="no" display-inline="no-display-inline" id="H566F438F3BCB4089A7E8C5A1C35400EA" section-type="subsequent-section"><enum>101.</enum><header display-inline="yes-display-inline">Minimum wage</header>
<subsection commented="no" display-inline="no-display-inline" id="HE51C7C01C042421692DD32AEF0DF3594"><enum>(a)</enum><header display-inline="yes-display-inline">In general</header><text display-inline="yes-display-inline">Section 6(a)(1) of the Fair Labor Standards
Act of 1938 (<external-xref legal-doc="usc" parsable-cite="usc/29/206">29
U.S.C. 206(a)(1)</external-xref>) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H890151DF9CEA4C20B729185068E6A8FE" style="OLC">
<paragraph commented="no" display-inline="no-display-inline" id="H41D20B2BDDFA423683D281B00E515A2"><enum>(1)</enum><text display-inline="yes-display-inline">except as otherwise provided in this
section, not less than—</text>
<subparagraph commented="no" display-inline="no-display-inline" id="HF4A243F1A0F04EC29D8739E834912E6F"><enum>(A)</enum><text display-inline="yes-display-inline">$5.85 an hour, beginning on the 60th day
after the date of enactment of the Minimum Wage Act of 2007;</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="H5FBEE9AA9CF74971A892E0A040EF2DA0"><enum>(B)</enum><text display-inline="yes-display-inline">$6.55 an hour, beginning 12 months after
that 60th day; and</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="H0B2484B86349467100DC74722BDDD00"><enum>(C)</enum><text display-inline="yes-display-inline">$7.25 an hour, beginning 24 months after
that 60th
day;</text>
</subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection commented="no" display-inline="no-display-inline" id="H3B29B8ED9AA94C188129F30631002065"><enum>(b)</enum><header display-inline="yes-display-inline">Effective
date</header><text display-inline="yes-display-inline">The amendment made by
subsection (a) shall take effect 60 days after the date of enactment of this
Act.</text>
</subsection></section><enum>II</enum><header display-inline="yes-display-inline">Tax provisions</header>
<section commented="no" display-inline="no-display-inline" id="idA2A5B5E8E76F42AFB844425454BC656A" section-type="subsequent-section"><enum>200.</enum><header display-inline="yes-display-inline">Amendment of Code</header><text display-inline="no-display-inline">Except as otherwise expressly provided,
whenever in this title 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.</text>
</section><subtitle commented="no" id="idA872E52E6C544C61AC6C302387FACF46" level-type="subsequent" style="OLC"><enum>A</enum><header display-inline="yes-display-inline">Small business tax relief</header>
<section changed="added" commented="no" display-inline="no-display-inline" id="HA6001ACE5C084F76BAFFCF1C21F09244" section-type="subsequent-section"><enum>201.</enum><header display-inline="yes-display-inline">Extension of 15-year straight-line cost
recovery for qualified leasehold improvements and qualified restaurant
property</header>
<subsection commented="no" display-inline="no-display-inline" id="idD8829FF78F134F96ACEEBA4DD447CD28"><enum>(a)</enum><header display-inline="yes-display-inline">In general</header><text display-inline="yes-display-inline">Clauses (iv) and (v) of section
168(e)(3)(E) (relating to 15-year property) are each amended by striking
<quote>placed in service before January 1, 2008</quote>.</text>
</subsection><subsection commented="no" display-inline="no-display-inline" id="id6A889C08A585405FB67226CBA4A9545D"><enum>(b)</enum><header display-inline="yes-display-inline">Effective
date</header><text display-inline="yes-display-inline">The amendment made by
this section shall apply to property placed in service after December 31,
2007.</text>
</subsection></section><section commented="no" display-inline="no-display-inline" id="IDA981F4AC08744F7FA9670B8411CE3367" section-type="subsequent-section"><enum>202.</enum><header display-inline="yes-display-inline">Clarification of cash accounting rules for
small business</header>
<subsection commented="no" display-inline="no-display-inline" id="IDF5B3C434366C4856A2C6224AC9DB75E8"><enum>(a)</enum><header display-inline="yes-display-inline">Cash accounting permitted</header>
<paragraph commented="no" display-inline="no-display-inline" id="IDB29D848A4D1949EFA0AA1A5133F4629C"><enum>(1)</enum><header display-inline="yes-display-inline">In general</header><text display-inline="yes-display-inline">Section 446 of the Internal Revenue Code of
1986 (relating to general rule for methods of accounting) is amended by adding
at the end the following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="ID17B4685339A04F76AA6E47A412AEC93F" style="OLC">
<subsection commented="no" display-inline="no-display-inline" id="IDE739CA6E0D7C45159B66FDDE31E2F816"><enum>(g)</enum><header display-inline="yes-display-inline">Certain small business taxpayers permitted
To use cash accounting method without limitation</header>
<paragraph commented="no" display-inline="no-display-inline" id="IDE71B70E4150245448C5D465B199226A6"><enum>(1)</enum><header display-inline="yes-display-inline">In general</header><text display-inline="yes-display-inline">An eligible taxpayer shall not be required
to use an accrual method of accounting for any taxable year.</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="ID806E80F41A8A47B1B23E4113ED4571BA"><enum>(2)</enum><header display-inline="yes-display-inline">Eligible taxpayer</header><text display-inline="yes-display-inline">For purposes of this subsection, a taxpayer
is an eligible taxpayer with respect to any taxable year if—</text>
<subparagraph commented="no" display-inline="no-display-inline" id="ID2C9344CCE7FD4E4AB05761037B2DCDF0"><enum>(A)</enum><text display-inline="yes-display-inline">for all prior taxable years beginning after
December 31, 2006, the taxpayer (or any predecessor) met the gross receipts
test of section 448(c), and</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="IDF2CA403E4D0B4F47BCD5DB20BBD0B606"><enum>(B)</enum><text display-inline="yes-display-inline">the taxpayer is not subject to section 447
or
448.</text>
</subparagraph></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="IDD149772B62CB444B827B93F2975146AA"><enum>(2)</enum><header display-inline="yes-display-inline">Expansion of gross receipts test</header>
<subparagraph commented="no" display-inline="no-display-inline" id="ID47CEAF65C03B4948B7ECAD8C04E272ED"><enum>(A)</enum><header display-inline="yes-display-inline">In general</header><text display-inline="yes-display-inline">Paragraph (3) of section 448(b) of such
Code (relating to entities with gross receipts of not more than $5,000,000) is
amended by striking <quote>$5,000,000</quote> in the text and in the heading
and inserting <quote>$10,000,000</quote>.</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="IDF8AF71E16CA14958A1BFEBD1325FB32E"><enum>(B)</enum><header display-inline="yes-display-inline">Conforming amendments</header><text display-inline="yes-display-inline">Section 448(c) of such Code is
amended—</text>
<clause commented="no" display-inline="no-display-inline" id="ID9FC76D9B622A4812A65532562251381D"><enum>(i)</enum><text display-inline="yes-display-inline">by striking <quote>$5,000,000</quote> each
place it appears in the text and in the heading of paragraph (1) and inserting
<quote>$10,000,000</quote>, and</text>
</clause><clause commented="no" display-inline="no-display-inline" id="IDBEAE268FA3514262A6A8631FED6EB141"><enum>(ii)</enum><text display-inline="yes-display-inline">by adding at the end the following new
paragraph:</text>
<quoted-block display-inline="no-display-inline" id="ID4CFF58EDCBC94A708FCA733496F66520" style="OLC">
<paragraph commented="no" display-inline="no-display-inline" id="IDFA6DB15398C34400A2F5D5B99F7FC29D"><enum>(4)</enum><header display-inline="yes-display-inline">Inflation adjustment</header><text display-inline="yes-display-inline">In the case of any taxable year beginning
in a calendar year after 2007, the dollar amount contained in subsection (b)(3)
and paragraph (1) of this subsection shall be increased by an amount equal
to—</text>
<subparagraph commented="no" display-inline="no-display-inline" id="IDD4F0434AAE8442AC97DF4A1E86744392"><enum>(A)</enum><text display-inline="yes-display-inline">such dollar amount, multiplied by</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="IDEFD0EC958A624343A22C5BC76C34E911"><enum>(B)</enum><text display-inline="yes-display-inline">the cost-of-living adjustment determined
under section 1(f)(3) for the calendar year in which the taxable year begins,
by substituting <quote>calendar year 2006</quote> for <quote>calendar year
1992</quote> in subparagraph (B) thereof.</text>
</subparagraph><continuation-text commented="no" continuation-text-level="paragraph">If any amount as adjusted under this
subparagraph is not a multiple of $100,000, such amount shall be rounded to the
nearest multiple of
$100,000.</continuation-text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</clause></subparagraph></paragraph></subsection><subsection commented="no" display-inline="no-display-inline" id="ID1271D020860346BCA3D821CF3A429591"><enum>(b)</enum><header display-inline="yes-display-inline">Clarification of inventory rules for small
business</header>
<paragraph commented="no" display-inline="no-display-inline" id="IDCFCFD946278844B18227FFE5229DA2F4"><enum>(1)</enum><header display-inline="yes-display-inline">In general</header><text display-inline="yes-display-inline">Section 471 of the Internal Revenue Code of
1986 (relating to general rule for inventories) is amended by redesignating
subsection (c) as subsection (d) and by inserting after subsection (b) the
following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="ID814EC76224184784AA700DC91D51CA2A" style="OLC">
<subsection commented="no" display-inline="no-display-inline" id="IDBA42EAEF4F004B1483F051420B177DDA"><enum>(c)</enum><header display-inline="yes-display-inline">Small business taxpayers not required To
use inventories</header>
<paragraph commented="no" display-inline="no-display-inline" id="ID556E3066E68B4B28BFA62514967F96B7"><enum>(1)</enum><header display-inline="yes-display-inline">In general</header><text display-inline="yes-display-inline">A qualified taxpayer shall not be required
to use inventories under this section for a taxable year.</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="IDF95C054A984F418C893AA9A0334DDE0D"><enum>(2)</enum><header display-inline="yes-display-inline">Treatment of taxpayers not using
inventories</header><text display-inline="yes-display-inline">If a qualified
taxpayer does not use inventories with respect to any property for any taxable
year beginning after December 31, 2006, such property shall be treated as a
material or supply which is not incidental.</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="ID8FCA3BCEC166457F8C451C39F24083AA"><enum>(3)</enum><header display-inline="yes-display-inline">Qualified taxpayer</header><text display-inline="yes-display-inline">For purposes of this subsection, the term
<term>qualified taxpayer</term> means—</text>
<subparagraph commented="no" display-inline="no-display-inline" id="ID57824AC7E6934483A5D26B25F09C56B7"><enum>(A)</enum><text display-inline="yes-display-inline">any eligible taxpayer (as defined in
section 446(g)(2)), and</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="ID1424D7A467D140C38F46A49B242E6C33"><enum>(B)</enum><text display-inline="yes-display-inline">any taxpayer described in section
448(b)(3).</text>
</subparagraph></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="IDE7C90BAAC9094BFCAA4223F3AD19851E"><enum>(2)</enum><header display-inline="yes-display-inline">Conforming amendments</header>
<subparagraph commented="no" display-inline="no-display-inline" id="ID6E1E810C13774CA48859E37ECF724383"><enum>(A)</enum><text display-inline="yes-display-inline">Subpart D of part II of subchapter E of
chapter 1 of such Code is amended by striking section 474.</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="ID272654A6C9E54B6AB321A70365086A3B"><enum>(B)</enum><text display-inline="yes-display-inline">The table of sections for subpart D of part
II of subchapter E of chapter 1 of such Code is amended by striking the item
relating to section 474.</text>
</subparagraph></paragraph></subsection><subsection commented="no" display-inline="no-display-inline" id="IDAFA0F6D4E92B46F5A2C61EA079F16A00"><enum>(c)</enum><header display-inline="yes-display-inline">Effective date and special rules</header>
<paragraph commented="no" display-inline="no-display-inline" id="ID40884D3C0D3140EAB274E76F4927A665"><enum>(1)</enum><header display-inline="yes-display-inline">In general</header><text display-inline="yes-display-inline">The amendments made by this section shall
apply to taxable years beginning after December 31, 2006.</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="ID3345568D664B4B9B8F6B876CA9AC44A0"><enum>(2)</enum><header display-inline="yes-display-inline">Change in method of
accounting</header><text display-inline="yes-display-inline">In the case of any
taxpayer changing the taxpayer’s method of accounting for any taxable year
under the amendments made by this section—</text>
<subparagraph commented="no" display-inline="no-display-inline" id="ID72D7376882F546BD85F6E5231720C554"><enum>(A)</enum><text display-inline="yes-display-inline">such change shall be treated as initiated
by the taxpayer;</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="ID6EF5B7C073C244B3B2CE0B06BB9F1355"><enum>(B)</enum><text display-inline="yes-display-inline">such change shall be treated as made with
the consent of the Secretary of the Treasury; and</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="IDC18AB8B77962495B9427AEE2D3C94EBA"><enum>(C)</enum><text display-inline="yes-display-inline">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 shall be taken into account over a period (not greater
than 4 taxable years) beginning with such taxable year.</text>
</subparagraph></paragraph></subsection></section><section commented="no" display-inline="no-display-inline" id="id0A2B835E15AC4BAB9D94F6AC9A697A0E" section-type="subsequent-section"><enum>203.</enum><header display-inline="yes-display-inline">Extension of work opportunity tax credit to
qualified restaurant employees</header>
<subsection commented="no" display-inline="no-display-inline" id="ID481188a2a1aa4611855616750d764b17"><enum>(a)</enum><header display-inline="yes-display-inline">In general</header><text display-inline="yes-display-inline">Section 51(d)(1) is amended by striking
<quote>or</quote> at the end of subparagraph (H), by striking the period at the
end of subparagraph (I) and inserting <quote>, or</quote>, and by adding at the
end the following new subparagraph:</text>
<quoted-block display-inline="no-display-inline" id="id70E9992B0166491DA974BBCDA46454FF" style="OLC">
<subparagraph commented="no" display-inline="no-display-inline" id="IDfa2c630824b34d00bdd9da039307fb3c"><enum>(J)</enum><text display-inline="yes-display-inline">a qualified restaurant
employee.</text>
</subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection commented="no" display-inline="no-display-inline" id="ID29d4b7342863487fa9de3a0b34b4b7d3"><enum>(b)</enum><header display-inline="yes-display-inline">Qualified restaurant employee</header><text display-inline="yes-display-inline">Section 51(d) is amended by redesignating
paragraphs (11) through (13) as paragraphs (12) through (14), respectively, and
by inserting after paragraph (10) the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="id37E40E2602EA4CFC8B28E65543DE9BB4" style="OLC">
<paragraph commented="no" display-inline="no-display-inline" id="ID569767e2670a4b66b9576892d0a1ecb6"><enum>(11)</enum><header display-inline="yes-display-inline">Qualified restaurant employee</header>
<subparagraph commented="no" display-inline="no-display-inline" id="ID0264bccd5fd24e82a61577230018e255"><enum>(A)</enum><header display-inline="yes-display-inline">In general</header><text display-inline="yes-display-inline">The term <term>qualified restaurant
employee</term> means any individual—</text>
<clause commented="no" display-inline="no-display-inline" id="ID583359d83a0b420f86317aed3e72fa17"><enum>(i)</enum><text display-inline="yes-display-inline">who performs services in a restaurant where
tipping is not customary,</text>
</clause><clause commented="no" display-inline="no-display-inline" id="idCFA1B1F5100A40BAA429FB017C672EEB"><enum>(ii)</enum><text display-inline="yes-display-inline">who is not exempt under the Fair Labor
Standards Act and earns at least the Federal minimum wage, and</text>
</clause><clause commented="no" display-inline="no-display-inline" id="ID3a0605fc2f3040ab8abf1c4d825181dc"><enum>(iii)</enum><text display-inline="yes-display-inline">who is certified by the employer during the
hiring process as having attained age 16 but not 20 on the hiring date.</text>
</clause></subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="IDecbaf3a8933449fa9e9aebce76df542c"><enum>(B)</enum><header display-inline="yes-display-inline">Special rule for determining amount of
credit</header><text display-inline="yes-display-inline">For purposes of
applying this subpart to wages paid or incurred to any qualified restaurant
employee, subsection (b)(3) shall be applied by substituting
<quote>$3,000</quote> for
<quote>$6,000</quote>.</text>
</subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection commented="no" display-inline="no-display-inline" id="ID9cbef7ba72b245ed9d993f50e9d1625e"><enum>(c)</enum><header display-inline="yes-display-inline">Special rule for
certifications</header><text display-inline="yes-display-inline">Subparagraph
(A) of section 51(d)(14), as redesignated by subsection (b), is amended by
inserting <quote>, other than an individual described in paragraph
(11),</quote> after <quote>An individual</quote>.</text>
</subsection><subsection commented="no" display-inline="no-display-inline" id="IDbfc1faf339c448819a9c83e84da1750d"><enum>(d)</enum><header display-inline="yes-display-inline">Nonqualifying rehires</header><text display-inline="yes-display-inline">Paragraph (2) of section 51(i) is amended
to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="id4254AB4C04FE4A7A9060CE809A03D544" style="OLC">
<paragraph commented="no" display-inline="no-display-inline" id="IDea764790b654432c91342e32027e4e0c"><enum>(2)</enum><header display-inline="yes-display-inline">Nonqualifying rehires</header>
<subparagraph commented="no" display-inline="no-display-inline" id="IDc75266bd5fae481baf26fbe8cdbb1079"><enum>(A)</enum><header display-inline="yes-display-inline">In general</header><text display-inline="yes-display-inline">No wages shall be taken into account under
subsection (a) with respect to any individual, other than an individual
described in subsection (d)(11), if, prior to the hiring date of such
individual, such individual had been employed by the employer at any
time.</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="IDad5fcb95e4d6423098b4e47b508a4a1f"><enum>(B)</enum><header display-inline="yes-display-inline">Qualified restaurant
employees</header><text display-inline="yes-display-inline">In the case of an
individual described in subsection (d)(11), no wages shall be taken into
account under subsection (a) if, prior to the hiring date of such individual,
such individual had been employed by the employer within the prior 90 day
period.</text>
</subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection commented="no" display-inline="no-display-inline" id="IDac2b0dc8549a481e9a9740f1920b04f3"><enum>(e)</enum><header display-inline="yes-display-inline">Minimum employment periods</header><text display-inline="yes-display-inline">Section 51(i)(3) is amended by adding at
the end the following new subparagraph:</text>
<quoted-block display-inline="no-display-inline" id="idF3DB81923E7147A99CFA4FF9F3FCBB73" style="OLC">
<subparagraph commented="no" display-inline="no-display-inline" id="ID5ba6e18605df43ba8215a62a646aed38"><enum>(C)</enum><header display-inline="yes-display-inline">Nonapplication to qualified restaurant
employees</header><text display-inline="yes-display-inline">Subparagraphs (A)
and (B) shall not apply to an individual described in subsection
(d)(11).</text>
</subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection commented="no" display-inline="no-display-inline" id="idE55E2E84DB584EFBAD7E5511B8A67202"><enum>(f)</enum><header display-inline="yes-display-inline">Effective
date</header><text display-inline="yes-display-inline">The amendments made by
this section shall apply to individuals who begin work for the employer after
the date of the enactment of this Act.</text>
</subsection></section></subtitle><subtitle commented="no" id="idB26EA1847AA2408B9132460125410875" level-type="subsequent" style="OLC"><enum>B</enum><header display-inline="yes-display-inline">Revenue offset provisions</header>
<section commented="no" display-inline="no-display-inline" id="ID04E7319EFAAD4BA49743B904FC47CD2B" section-type="subsequent-section"><enum>211.</enum><header display-inline="yes-display-inline">Clarification of economic substance
doctrine</header>
<subsection commented="no" display-inline="no-display-inline" id="ID311667A9C834444996B3F05D1CBDF0C5"><enum>(a)</enum><header display-inline="yes-display-inline">In General</header><text display-inline="yes-display-inline">Section 7701 is amended by redesignating
subsection (p) as subsection (q) and by inserting after subsection (o) the
following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="IDA7CD3FAF892C4048850179DEC939741A" style="OLC">
<subsection commented="no" display-inline="no-display-inline" id="IDE407B2D2AD0D46E29CE6C80791457D00"><enum>(p)</enum><header display-inline="yes-display-inline">Clarification of Economic Substance
Doctrine; etc</header>
<paragraph commented="no" display-inline="no-display-inline" id="ID71898F5CF2ED4664A0FEF2F3DF55D79B"><enum>(1)</enum><header display-inline="yes-display-inline">General rules</header>
<subparagraph commented="no" display-inline="no-display-inline" id="ID9B7A1799A9C141E4B8F53ADF84B543DC"><enum>(A)</enum><header display-inline="yes-display-inline">In general</header><text display-inline="yes-display-inline">In any case in which a court determines
that the economic substance doctrine is relevant for purposes of this title to
a transaction (or series of transactions), such transaction (or series of
transactions) shall have economic substance only if the requirements of this
paragraph are met.</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="IDC259FD3ADF91482EB4E859E25F874D62"><enum>(B)</enum><header display-inline="yes-display-inline">Definition of economic
substance</header><text display-inline="yes-display-inline">For purposes of
subparagraph (A)—</text>
<clause commented="no" display-inline="no-display-inline" id="ID19A982A4838D483C8C800A22FCD80D2B"><enum>(i)</enum><header display-inline="yes-display-inline">In general</header><text display-inline="yes-display-inline">A transaction has economic substance only
if—</text>
<subclause commented="no" display-inline="no-display-inline" id="IDE25016AD2F874EF883C1CA8E9EE93A5F"><enum>(I)</enum><text display-inline="yes-display-inline">the transaction changes in a meaningful way
(apart from Federal tax effects) the taxpayer’s economic position, and</text>
</subclause><subclause commented="no" display-inline="no-display-inline" id="ID49470CA43FBC45B88C270B1521D298CC"><enum>(II)</enum><text display-inline="yes-display-inline">the taxpayer has a substantial nontax
purpose for entering into such transaction and the transaction is a reasonable
means of accomplishing such purpose.</text>
</subclause><continuation-text commented="no" continuation-text-level="clause">In applying subclause (II), a purpose of
achieving a financial accounting benefit shall not be taken into account in
determining whether a transaction has a substantial nontax purpose if the
origin of such financial accounting benefit is a reduction of income
tax.</continuation-text></clause><clause commented="no" display-inline="no-display-inline" id="ID34A8F58754784626A22E936CB3EDA3DD"><enum>(ii)</enum><header display-inline="yes-display-inline">Special rule where taxpayer relies on
profit potential</header><text display-inline="yes-display-inline">A
transaction shall not be treated as having economic substance by reason of
having a potential for profit unless—</text>
<subclause commented="no" display-inline="no-display-inline" id="IDAE1D51A590794FEB90BE95552D4E71F8"><enum>(I)</enum><text display-inline="yes-display-inline">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, and</text>
</subclause><subclause commented="no" display-inline="no-display-inline" id="IDB5114B16A26949139B8C703EDE802622"><enum>(II)</enum><text display-inline="yes-display-inline">the reasonably expected pre-tax profit from
the transaction exceeds a risk-free rate of return.</text>
</subclause></clause></subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="ID41C284C0441C413B89A02B2EBFF8E02A"><enum>(C)</enum><header display-inline="yes-display-inline">Treatment of fees and foreign
taxes</header><text display-inline="yes-display-inline">Fees and other
transaction expenses and foreign taxes shall be taken into account as expenses
in determining pre-tax profit under subparagraph (B)(ii).</text>
</subparagraph></paragraph><paragraph commented="no" display-inline="no-display-inline" id="IDD420C6BA1E494D52A447107F024CAA83"><enum>(2)</enum><header display-inline="yes-display-inline">Special rules for transactions with
tax-indifferent parties</header>
<subparagraph commented="no" display-inline="no-display-inline" id="IDD65A40DAEC5A444FA853D78EE85FEA6C"><enum>(A)</enum><header display-inline="yes-display-inline">Special rules for financing
transactions</header><text display-inline="yes-display-inline">The form of a
transaction which is in substance the borrowing of money or the acquisition of
financial capital directly or indirectly from a tax-indifferent party shall not
be respected if the present value of the deductions to be claimed with respect
to the transaction is substantially in excess of the present value of the
anticipated economic returns of the person lending the money or providing the
financial capital. A public offering shall be treated as a borrowing, or an
acquisition of financial capital, from a tax-indifferent party if it is
reasonably expected that at least 50 percent of the offering will be placed
with tax-indifferent parties.</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="ID4B94AC2AFD8D48FBB1D4908AC3E2D8DF"><enum>(B)</enum><header display-inline="yes-display-inline">Artificial income shifting and basis
adjustments</header><text display-inline="yes-display-inline">The form of a
transaction with a tax-indifferent party shall not be respected if—</text>
<clause commented="no" display-inline="no-display-inline" id="ID32570AFFD08043CBB91B99406445C5F1"><enum>(i)</enum><text display-inline="yes-display-inline">it results in an allocation of income or
gain to the tax-indifferent party in excess of such party’s economic income or
gain, or</text>
</clause><clause commented="no" display-inline="no-display-inline" id="ID1D499D22C5F74CB0875C664C39841B73"><enum>(ii)</enum><text display-inline="yes-display-inline">it results in a basis adjustment or
shifting of basis on account of overstating the income or gain of the
tax-indifferent party.</text>
</clause></subparagraph></paragraph><paragraph commented="no" display-inline="no-display-inline" id="ID1E0FF0BF26D0483CA56CE2848DBC225B"><enum>(3)</enum><header display-inline="yes-display-inline">Definitions and special rules</header><text display-inline="yes-display-inline">For purposes of this subsection—</text>
<subparagraph commented="no" display-inline="no-display-inline" id="IDC96DB00F55794B84B44AA3DEF61C93F1"><enum>(A)</enum><header display-inline="yes-display-inline">Economic substance doctrine</header><text display-inline="yes-display-inline">The term <term>economic substance
doctrine</term> means the common law doctrine under which tax benefits under
subtitle A with respect to a transaction are not allowable if the transaction
does not have economic substance or lacks a business purpose.</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="ID7A635F2C658D43668789A04C14698B7D"><enum>(B)</enum><header display-inline="yes-display-inline">Tax-indifferent party</header><text display-inline="yes-display-inline">The term <term>tax-indifferent party</term>
means any person or entity not subject to tax imposed by subtitle A. A person
shall be treated as a tax-indifferent party with respect to a transaction if
the items taken into account with respect to the transaction have no
substantial impact on such person’s liability under subtitle A.</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="IDE6616A077DBA4131AE3D0F33EB3576D2"><enum>(C)</enum><header display-inline="yes-display-inline">Exception for personal transactions of
individuals</header><text display-inline="yes-display-inline">In the case of an
individual, this subsection shall apply only to transactions entered into in
connection with a trade or business or an activity engaged in for the
production of income.</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="IDC9A3FDF1EDA74EF38B30B2A1C8D5E689"><enum>(D)</enum><header display-inline="yes-display-inline">Treatment of lessors</header><text display-inline="yes-display-inline">In applying paragraph (1)(B)(ii) to the
lessor of tangible property subject to a lease—</text>
<clause commented="no" display-inline="no-display-inline" id="ID596898D6BEB643498F821AF2F200C0F5"><enum>(i)</enum><text display-inline="yes-display-inline">the expected net tax benefits with respect
to the leased property shall not include the benefits of—</text>
<subclause commented="no" display-inline="no-display-inline" id="IDD93F31FC6D0645AAA871B7156ECE76AB"><enum>(I)</enum><text display-inline="yes-display-inline">depreciation,</text>
</subclause><subclause commented="no" display-inline="no-display-inline" id="ID075D640439044C6A8FB269534999A6AF"><enum>(II)</enum><text display-inline="yes-display-inline">any tax credit, or</text>
</subclause><subclause commented="no" display-inline="no-display-inline" id="IDE8BF107637A2424FA5567A39CE6C5FCA"><enum>(III)</enum><text display-inline="yes-display-inline">any other deduction as provided in guidance
by the Secretary, and</text>
</subclause></clause><clause commented="no" display-inline="no-display-inline" id="IDF61E8EE648044FAD9A8077154D069D6D"><enum>(ii)</enum><text display-inline="yes-display-inline">subclause (II) of paragraph (1)(B)(ii)
shall be disregarded in determining whether any of such benefits are
allowable.</text>
</clause></subparagraph></paragraph><paragraph commented="no" display-inline="no-display-inline" id="IDA8B93874DB614330BD1A5BD55D5B5A82"><enum>(4)</enum><header display-inline="yes-display-inline">Other common law doctrines not
affected</header><text display-inline="yes-display-inline">Except as
specifically provided in this subsection, the provisions of this subsection
shall not be construed as altering or supplanting any other rule of law, and
the requirements of this subsection shall be construed as being in addition to
any such other rule of law.</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="ID07661859E21C4FA081F98C2744B44F4C"><enum>(5)</enum><header display-inline="yes-display-inline">Regulations</header><text display-inline="yes-display-inline">The Secretary shall prescribe such
regulations as may be necessary or appropriate to carry out the purposes of
this subsection. Such regulations may include exemptions from the application
of this
subsection.</text>
</paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection commented="no" display-inline="no-display-inline" id="ID091FA003CE4649E688962CA87E6EC671"><enum>(b)</enum><header display-inline="yes-display-inline">Effective
Date</header><text display-inline="yes-display-inline">The amendments made by
this section shall apply to transactions entered into after the date of the
enactment of this Act.</text>
</subsection></section><section commented="no" display-inline="no-display-inline" id="ID06ABA0C3E5FF4BE89591F9F283743136" section-type="subsequent-section"><enum>212.</enum><header display-inline="yes-display-inline">Penalty for understatements attributable to
transactions lacking economic substance, etc</header>
<subsection commented="no" display-inline="no-display-inline" id="ID3C3D4E2F1D06420FAB80607D9A381D8F"><enum>(a)</enum><header display-inline="yes-display-inline">In General</header><text display-inline="yes-display-inline">Subchapter A of chapter 68 is amended by
inserting after section 6662A the following new section:</text>
<quoted-block display-inline="no-display-inline" id="ID27E8BB4344AA4642BE7928BD5A0A7AB7" style="OLC">
<section commented="no" display-inline="no-display-inline" id="IDA495CF55506E44FA96AD57E46622C955" section-type="subsequent-section"><enum>6662B.</enum><header display-inline="yes-display-inline">Penalty for understatements attributable to
transactions lacking economic substance, etc</header>
<subsection commented="no" display-inline="no-display-inline" id="IDAF2F3222029F4CA3B1E0D2B06F274521"><enum>(a)</enum><header display-inline="yes-display-inline">Imposition of Penalty</header><text display-inline="yes-display-inline">If a taxpayer has an noneconomic substance
transaction understatement for any taxable year, there shall be added to the
tax an amount equal to 40 percent of the amount of such understatement.</text>
</subsection><subsection commented="no" display-inline="no-display-inline" id="ID69CAAD11CAF04DB68280B1A51561196E"><enum>(b)</enum><header display-inline="yes-display-inline">Reduction of Penalty for Disclosed
Transactions</header><text display-inline="yes-display-inline">Subsection (a)
shall be applied by substituting <quote>20 percent</quote> for <quote>40
percent</quote> with respect to the portion of any noneconomic substance
transaction understatement with respect to which the relevant facts affecting
the tax treatment of the item are adequately disclosed in the return or a
statement attached to the return.</text>
</subsection><subsection commented="no" display-inline="no-display-inline" id="ID3978719A0D2C447B8C744D6D7B085313"><enum>(c)</enum><header display-inline="yes-display-inline">Noneconomic Substance Transaction
Understatement</header><text display-inline="yes-display-inline">For purposes
of this section—</text>
<paragraph commented="no" display-inline="no-display-inline" id="IDD3157C12AFEF43CD945F639DAFBF0EEB"><enum>(1)</enum><header display-inline="yes-display-inline">In general</header><text display-inline="yes-display-inline">The term <term>noneconomic substance
transaction understatement</term> means any amount which would be an
understatement under section 6662A(b)(1) if section 6662A were applied by
taking into account items attributable to noneconomic substance transactions
rather than items to which section 6662A would apply without regard to this
paragraph.</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="IDB6B2380A661041FB8D440546BADD57CC"><enum>(2)</enum><header display-inline="yes-display-inline">Noneconomic substance
transaction</header><text display-inline="yes-display-inline">The term
<term>noneconomic substance transaction</term> means any transaction if—</text>
<subparagraph commented="no" display-inline="no-display-inline" id="ID6A2A32F68FA048E39148E1A3C956449E"><enum>(A)</enum><text display-inline="yes-display-inline">there is a lack of economic substance
(within the meaning of section 7701(p)(1)) for the transaction giving rise to
the claimed benefit or the transaction was not respected under section
7701(p)(2), or</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="IDD98B785B9A564550B4A7FABF9E1B2E2D"><enum>(B)</enum><text display-inline="yes-display-inline">the transaction fails to meet the
requirements of any similar rule of law.</text>
</subparagraph></paragraph></subsection><subsection commented="no" display-inline="no-display-inline" id="ID5156BAEE6E6A42488A649270A1568C0F"><enum>(d)</enum><header display-inline="yes-display-inline">Rules Applicable to Compromise of
Penalty</header>
<paragraph commented="no" display-inline="no-display-inline" id="ID88DF127657DD41838B106F8D69F9616C"><enum>(1)</enum><header display-inline="yes-display-inline">In general</header><text display-inline="yes-display-inline">If the 1st letter of proposed deficiency
which allows the taxpayer an opportunity for administrative review in the
Internal Revenue Service Office of Appeals has been sent with respect to a
penalty to which this section applies, only the Commissioner of Internal
Revenue may compromise all or any portion of such penalty.</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="IDC3635C055DF1411C819A0D6726617ED8"><enum>(2)</enum><header display-inline="yes-display-inline">Applicable rules</header><text display-inline="yes-display-inline">The rules of paragraphs (2) and (3) of
section 6707A(d) shall apply for purposes of paragraph (1).</text>
</paragraph></subsection><subsection commented="no" display-inline="no-display-inline" id="ID12EB186D9D864C158A0353B110063AF7"><enum>(e)</enum><header display-inline="yes-display-inline">Coordination With Other
Penalties</header><text display-inline="yes-display-inline">Except as otherwise
provided in this part, the penalty imposed by this section shall be in addition
to any other penalty imposed by this title.</text>
</subsection><subsection commented="no" display-inline="no-display-inline" id="ID6799F63CAC304D579F0933CAD8430374"><enum>(f)</enum><header display-inline="yes-display-inline">Cross References</header>
<toc regeneration="no-regeneration">
<toc-entry bold="off" level="paragraph">(1) For coordination of
penalty with understatements under section 6662 and other special rules, see
section 6662A(e).</toc-entry>
<toc-entry bold="off" level="paragraph">(2) For reporting of
penalty imposed under this section to the Securities and Exchange Commission,
see section 6707A(e).</toc-entry>
</toc>
</subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection commented="no" display-inline="no-display-inline" id="IDEC9192D947B34D4AB15E02423E90CFB3"><enum>(b)</enum><header display-inline="yes-display-inline">Coordination With Other Understatements and
Penalties</header>
<paragraph commented="no" display-inline="no-display-inline" id="ID573F6DF70A0142C3BDFC5601EAE680DD"><enum>(1)</enum><text display-inline="yes-display-inline">The second sentence of section
6662(d)(2)(A) is amended by inserting <quote>and without regard to items with
respect to which a penalty is imposed by section 6662B</quote> before the
period at the end.</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="IDFF721A90837745B89457E243427F6177"><enum>(2)</enum><text display-inline="yes-display-inline">Subsection (e) of section 6662A is
amended—</text>
<subparagraph commented="no" display-inline="no-display-inline" id="IDBD7812ADA9B4460CA926B393BAF2EF23"><enum>(A)</enum><text display-inline="yes-display-inline">in paragraph (1), by inserting <quote>and
noneconomic substance transaction understatements</quote> after
<quote>reportable transaction understatements</quote> both places it
appears,</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="ID30E3BF2F8FE04206B602C0F30B44CDF4"><enum>(B)</enum><text display-inline="yes-display-inline">in paragraph (2)(A), by inserting
<quote>and a noneconomic substance transaction understatement</quote> after
<quote>reportable transaction understatement</quote>,</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="ID47AF6B47AFBD4139BEA94D37F0304A90"><enum>(C)</enum><text display-inline="yes-display-inline">in paragraph (2)(B), by inserting
<quote>6662B or</quote> before <quote>6663</quote>,</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="ID1CAD044A0CD34713AB68E7E6643ADAF5"><enum>(D)</enum><text display-inline="yes-display-inline">in paragraph (2)(C)(i), by inserting
<quote>or section 6662B</quote> before the period at the end,</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="IDE2A61380A47E440EA76B4D463B02CFA9"><enum>(E)</enum><text display-inline="yes-display-inline">in paragraph (2)(C)(ii), by inserting
<quote>and section 6662B</quote> after <quote>This section</quote>,</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="ID771AD542F72549348975A40A4B0CD352"><enum>(F)</enum><text display-inline="yes-display-inline">in paragraph (3), by inserting <quote>or
noneconomic substance transaction understatement</quote> after
<quote>reportable transaction understatement</quote>, and</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="ID879652552EBC43F9A7E399FCEC00064C"><enum>(G)</enum><text display-inline="yes-display-inline">by adding at the end the following new
paragraph:</text>
<quoted-block display-inline="no-display-inline" id="IDC1F8017059DF46C79137C7E8309E514E" style="OLC">
<paragraph commented="no" display-inline="no-display-inline" id="ID50260C6BF733490A938B819B762617CC"><enum>(4)</enum><header display-inline="yes-display-inline">Noneconomic substance transaction
understatement</header><text display-inline="yes-display-inline">For purposes
of this subsection, the term <term>noneconomic substance transaction
understatement</term> has the meaning given such term by section
6662B(c).</text>
</paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph></paragraph><paragraph commented="no" display-inline="no-display-inline" id="ID573FC454F0D141B99C9F39D8668416C8"><enum>(3)</enum><text display-inline="yes-display-inline">Subsection (e) of section 6707A is
amended—</text>
<subparagraph commented="no" display-inline="no-display-inline" id="IDEB2013C3B06E48C1AF93430D2475A2F0"><enum>(A)</enum><text display-inline="yes-display-inline">by striking <quote>or</quote> at the end of
subparagraph (B), and</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="IDFF9926E374554CE1BD96F0EF5E9AEE78"><enum>(B)</enum><text display-inline="yes-display-inline">by striking subparagraph (C) and inserting
the following new subparagraphs:</text>
<quoted-block display-inline="no-display-inline" id="ID4F1FCFC7DC3A47CC9E5B55E2ED0BB9FE" style="OLC">
<subparagraph commented="no" display-inline="no-display-inline" id="IDECE0DD567CB8413ABD280969E490EB78"><enum>(C)</enum><text display-inline="yes-display-inline">is required to pay a penalty under section
6662B with respect to any noneconomic substance transaction, or</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="IDB82EA0F81B1C4E99A9948DF2BB8A9A8C"><enum>(D)</enum><text display-inline="yes-display-inline">is required to pay a penalty under section
6662(h) with respect to any transaction and would (but for section
6662A(e)(2)(C)) have been subject to penalty under section 6662A at a rate
prescribed under section 6662A(c) or under section
6662B,</text>
</subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph></paragraph></subsection><subsection commented="no" display-inline="no-display-inline" id="ID2CC639B9CA8A4D48B3C36463B9468CBF"><enum>(c)</enum><header display-inline="yes-display-inline">Clerical Amendment</header><text display-inline="yes-display-inline">The table of sections for part II of
subchapter A of chapter 68 is amended by inserting after the item relating to
section 6662A the following new item:</text>
<quoted-block display-inline="no-display-inline" id="IDFAD62FD7637A4DD6A3526C4F89FA3B10" style="OLC">
<toc regeneration="no-regeneration">
<toc-entry bold="off" level="section">Sec. 6662B. Penalty for
understatements attributable to transactions lacking economic substance,
etc.</toc-entry>
</toc>
<after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection commented="no" display-inline="no-display-inline" id="ID8AFEC898A4484EB0B36326D2A829E083"><enum>(d)</enum><header display-inline="yes-display-inline">Effective
Date</header><text display-inline="yes-display-inline">The amendments made by
this section shall apply to transactions entered into after the date of the
enactment of this Act.</text>
</subsection></section><section commented="no" display-inline="no-display-inline" id="id20B1129B37E64FFA9A840502F1AA6EFA" section-type="subsequent-section"><enum>213.</enum><header display-inline="yes-display-inline">Application of rules treating inverted
corporations as domestic corporations to certain transactions occurring after
March 20, 2002</header>
<subsection commented="no" display-inline="no-display-inline" id="id15CBA640847E432BB0A5D6958A7AF17E"><enum>(a)</enum><header display-inline="yes-display-inline">In general</header><text display-inline="yes-display-inline">Section 7874(b) (relating to inverted
corporations treated as domestic corporations) is amended to read as
follows:</text>
<quoted-block display-inline="no-display-inline" id="idB32C13F8A9A44725B0505BA0047A3314" style="OLC">
<subsection commented="no" display-inline="no-display-inline" id="id7859869A231140ADBC207C7EAA12E5A5"><enum>(b)</enum><header display-inline="yes-display-inline">Inverted corporations treated as domestic
corporations</header>
<paragraph commented="no" display-inline="no-display-inline" id="idF3CFDA32A4214083B05C64A338283DF0"><enum>(1)</enum><header display-inline="yes-display-inline">In general</header><text display-inline="yes-display-inline">Notwithstanding section 7701(a)(4), a
foreign corporation shall be treated for purposes of this title as a domestic
corporation if such corporation would be a surrogate foreign corporation if
subsection (a)(2) were applied by substituting <quote>80 percent</quote> for
<quote>60 percent</quote>.</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="idE7852872DC1D42A9966FEDC469FC8372"><enum>(2)</enum><header display-inline="yes-display-inline">Special rule for certain transactions
occurring after March 20, 2002</header>
<subparagraph commented="no" display-inline="no-display-inline" id="id3C3946EC1AB7400F90D30F4C1954A016"><enum>(A)</enum><header display-inline="yes-display-inline">In general</header><text display-inline="yes-display-inline">If—</text>
<clause commented="no" display-inline="no-display-inline" id="id5396046EBF684D40874C6CA37E382912"><enum>(i)</enum><text display-inline="yes-display-inline">paragraph (1) does not apply to a foreign
corporation, but</text>
</clause><clause commented="no" display-inline="no-display-inline" id="idEE3553A0578D46A586D1269160D80723"><enum>(ii)</enum><text display-inline="yes-display-inline">paragraph (1) would apply to such
corporation if, in addition to the substitution under paragraph (1), subsection
(a)(2) were applied by substituting <quote>March 20, 2002</quote> for
<quote>March 4, 2003</quote> each place it appears,</text>
</clause><continuation-text commented="no" continuation-text-level="subparagraph">then paragraph (1) shall apply to
such corporation but only with respect to taxable years of such corporation
beginning after December 31, 2006.</continuation-text></subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="id250B62A8C5B442769D557CF59D712E5A"><enum>(B)</enum><header display-inline="yes-display-inline">Special rules</header><text display-inline="yes-display-inline">Subject to such rules as the Secretary may
prescribe, in the case of a corporation to which paragraph (1) applies by
reason of this paragraph—</text>
<clause commented="no" display-inline="no-display-inline" id="idA848A178A0844056819ADE076217F577"><enum>(i)</enum><text display-inline="yes-display-inline">the corporation shall be treated, as of the
close of its last taxable year beginning before January 1, 2007, as having
transferred all of its assets, liabilities, and earnings and profits to a
domestic corporation in a transaction with respect to which no tax is imposed
under this title,</text>
</clause><clause commented="no" display-inline="no-display-inline" id="idAFD04A9658A34031BD65EC5FBF87FF77"><enum>(ii)</enum><text display-inline="yes-display-inline">the bases of the assets transferred in the
transaction to the domestic corporation shall be the same as the bases of the
assets in the hands of the foreign corporation, subject to any adjustments
under this title for built-in losses,</text>
</clause><clause commented="no" display-inline="no-display-inline" id="id3CD0D255E8DD4098BA543BD22760DF47"><enum>(iii)</enum><text display-inline="yes-display-inline">the basis of the stock of any shareholder
in the domestic corporation shall be the same as the basis of the stock of the
shareholder in the foreign corporation for which it is treated as exchanged,
and</text>
</clause><clause commented="no" display-inline="no-display-inline" id="idDC3156FD8905485B9B16205D7C26DA67"><enum>(iv)</enum><text display-inline="yes-display-inline">the transfer of any earnings and profits by
reason of clause (i) shall be disregarded in determining any deemed dividend or
foreign tax creditable to the domestic corporation with respect to such
transfer.</text>
</clause></subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="id7D637F10CF5F484F853D4CC4B0CE1727"><enum>(C)</enum><header display-inline="yes-display-inline">Regulations</header><text display-inline="yes-display-inline">The Secretary may prescribe such
regulations as may be necessary or appropriate to carry out this paragraph,
including regulations to prevent the avoidance of the purposes of this
paragraph.</text>
</subparagraph></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection commented="no" display-inline="no-display-inline" id="id3FD612093A8745CDA6B94D9BBA96562C"><enum>(b)</enum><header display-inline="yes-display-inline">Effective
date</header><text display-inline="yes-display-inline">The amendment made by
this section shall apply to taxable years beginning after December 31,
2006.</text>
</subsection></section><section changed="not-changed" commented="no" display-inline="no-display-inline" id="id7B6DF7D97B5241369EFE337B459A8B50" section-type="subsequent-section"><enum>214.</enum><header display-inline="yes-display-inline">Modification of collection due process
procedures for employment tax liabilities</header>
<subsection commented="no" display-inline="no-display-inline" id="id4AACC13AAF5D4D8C9E0FB8DB3178FDDC"><enum>(a)</enum><header display-inline="yes-display-inline">In general</header><text display-inline="yes-display-inline">Section 6330(f) (relating to jeopardy and
State refund collection) is amended—</text>
<paragraph commented="no" display-inline="no-display-inline" id="id73D028038BCD4918B7B7D851D494DD4A"><enum>(1)</enum><text display-inline="yes-display-inline">by striking <quote>; or</quote> at the end
of paragraph (1) and inserting a comma,</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="idF823EEFB11F445A7854A9255B0F8BA8C"><enum>(2)</enum><text display-inline="yes-display-inline">by adding <quote>or</quote> at the end of
paragraph (2), and</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="id0D8D1966665C49BD821C3EDABFA59CE1"><enum>(3)</enum><text display-inline="yes-display-inline">by inserting after paragraph (2) the
following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="id5E1CA41F19D84CA096B02D3489F399AC" style="OLC">
<paragraph commented="no" display-inline="no-display-inline" id="id3703296F7A624B54B68B3D5A0BDBD789"><enum>(3)</enum><text display-inline="yes-display-inline">the Secretary has served a levy in
connection with the collection of taxes under chapter 21, 22, 23, or
24,</text>
</paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection commented="no" display-inline="no-display-inline" id="id89602FF8ECA147DB87E3C9C3955AE070"><enum>(b)</enum><header display-inline="yes-display-inline">Effective
date</header><text display-inline="yes-display-inline">The amendments made by
this section shall apply to levies issued after December 31, 2006.</text>
</subsection></section></subtitle>