1.Short title; amendment of
Code; table of contents
(a)This Act may be cited as the Small Business and Work Opportunity Act of 2007
.
(b)Except as otherwise
expressly provided, whenever in this Act an amendment or repeal is expressed in
terms of an amendment to, or repeal of, a section or other provision, the
reference shall be considered to be made to a section or other provision of the
Internal Revenue Code of 1986.
(c)The table of contents for this Act is as follows:
Sec. 1. Short title; amendment of Code; table of
contents.
TITLE I—Small business tax relief provisions
Subtitle A—General provisions
Sec. 101. Extension of increased expensing for small
businesses.
Sec. 102. Extension and modification of 15-year straight-line
cost recovery for qualified leasehold improvements and qualified restaurant
improvements; 15-year straight-line cost recovery for certain improvements to
retail space.
Sec. 103. Clarification of cash accounting rules for small
business.
Sec. 104. Extension and modification of combined work
opportunity tax credit and welfare-to-work credit.
Sec. 105. Certified professional employer
organizations.
Subtitle B—Subchapter S provisions
Sec. 111. Capital gain of S corporation not treated as passive
investment income.
Sec. 112. Treatment of bank director shares.
Sec. 113. Special rule for bank required to change from the
reserve method of accounting on becoming S corporation.
Sec. 114. Treatment of the sale of interest in a qualified
subchapter S subsidiary.
Sec. 115. Elimination of all earnings and profits attributable
to pre-1983 years for certain corporations.
Sec. 116. Expansion of qualifying beneficiaries of an electing
small business trust.
TITLE II—Revenue provisions
Sec. 201. Modification of effective date of leasing provisions
of the American Jobs Creation Act of 2004.
Sec. 202. Application of rules treating inverted corporations
as domestic corporations to certain transactions occurring after March 20,
2002.
Sec. 203. Denial of deduction for punitive damages.
Sec. 204. Denial of deduction for certain fines, penalties, and
other amounts.
Sec. 205. Revision of tax rules on expatriation of
individuals.
Sec. 206. Limitation on annual amounts
which may be deferred under nonqualified deferred compensation
arrangements.
Sec. 207. Increase in criminal monetary penalty limitation for
the underpayment or overpayment of tax due to fraud.
Sec. 208. Doubling of certain penalties, fines, and interest on
underpayments related to certain offshore financial arrangements.
Sec. 209. Increase in penalty for bad checks and money
orders.
Sec. 210. Treatment of contingent payment convertible debt
instruments.
Sec. 211. Extension of IRS user fees.
Sec. 212. Modification of collection due process procedures for
employment tax liabilities.
Sec. 213. Modifications to whistleblower reforms.
Sec. 214. Modifications of definition of employees covered by
denial of deduction for excessive employee remuneration.
<enum>I</enum><header>Small business
tax relief provisions</header>
<subtitle id="id7E053DBAF6604CBFA0B44760CA71CD1A"><enum>A</enum><header>General
provisions</header>
<section id="id9B0AEC7B17654D3D938592F8630116FD"><enum>101.</enum><header>Extension of
increased expensing for small businesses</header><text display-inline="no-display-inline">Section 179 (relating to election to expense
certain depreciable business assets) is amended by striking <quote>2010</quote>
each place it appears and inserting <quote>2011</quote>.</text>
</section><section changed="added" id="HA6001ACE5C084F76BAFFCF1C21F09244"><enum>102.</enum><header>Extension and
modification of 15-year straight-line cost recovery for qualified leasehold
improvements and qualified restaurant improvements; 15-year straight-line cost
recovery for certain improvements to retail space</header>
<subsection id="H89C2E52F1176401CBD649C835E542EB3"><enum>(a)</enum><header>Extension of
leasehold and restaurant improvements</header>
<paragraph id="id2D6B24C65F8943FAA6ECBDB7F34F8695"><enum>(1)</enum><header>In
general</header><text>Clauses (iv) and (v) of section 168(e)(3)(E) (relating to
15-year property) are each amended by striking <quote>January 1, 2008</quote>
and inserting <quote>April 1, 2008</quote>.</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="HE310FDBAA6814C3E9CCE16C337EBF922"><enum>(2)</enum><header>Effective
date</header><text>The amendment made by this subsection shall apply to
property placed in service after December 31, 2007.</text>
</paragraph></subsection><subsection commented="no" id="ID8AD75AA06A5644C68B8629947B9A8862"><enum>(b)</enum><header>Modification of
treatment of qualified restaurant property as 15-year property for purposes of
depreciation deduction</header>
<paragraph commented="no" id="ID6B06FCD94CEB4EB2801F01482F485A53"><enum>(1)</enum><header>Treatment to
include new construction</header><text>Paragraph (7) of section 168(e)
(relating to classification of property) is amended to read as follows:</text>
<quoted-block changed="added" id="ID5A0D26F1A0684B8EB732D4E1A38FBAAE" style="OLC">
<paragraph commented="no" id="ID4B8743BA109B4302B7D7DCEE3EFC0979"><enum>(7)</enum><header>Qualified
restaurant property</header><text>The term <term>qualified restaurant
property</term> means any section 1250 property which is a building (or its
structural components) or an improvement to such building if more than 50
percent of such building's square footage is devoted to preparation of, and
seating for on-premises consumption of, prepared
meals.</text>
</paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph commented="no" id="ID5E6C897F445D46BD8BEB462423AD6E20"><enum>(2)</enum><header>Effective
Date</header><text>The amendment made by this subsection shall apply to any
property placed in service after the date of the enactment of this Act, the
original use of which begins with the taxpayer after such date.</text>
</paragraph></subsection><subsection display-inline="no-display-inline" id="H466EAB4002C94B338D145867801600AC"><enum>(c)</enum><header>Recovery period
for depreciation of certain improvements to retail space</header>
<paragraph id="H24FCD64435334F598ED02748F6B47CFB"><enum>(1)</enum><header>15-year recovery
period</header><text>Section 168(e)(3)(E) (relating to 15-year property) is
amended by striking <quote>and</quote> at the end of clause (vii), by striking
the period at the end of clause (viii) and inserting <quote>, and</quote>, and
by adding at the end the following new clause:</text>
<quoted-block changed="added" id="H8AE5F078FA5B4B32B9AAB8E83900C78F">
<clause id="HC5C8E8C8D41347A89F2710ABBC7DAA5"><enum>(ix)</enum><text>any qualified
retail improvement property placed in service before April 1,
2008.</text>
</clause><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="HCAB3181477EB4D9CA8D69DA2C7967120"><enum>(2)</enum><header>Qualified retail
improvement property</header><text>Section 168(e) is amended by adding at the
end the following new paragraph:</text>
<quoted-block changed="added" id="H2D54F22342FE42F2A08BED57ACDE2418">
<paragraph id="H687242DAA660462F83E69D60238D3FEE"><enum>(8)</enum><header>Qualified retail
improvement property</header>
<subparagraph id="H021C081355BF45D280C4E5B8F8343134"><enum>(A)</enum><header>In
general</header><text>The term <term>qualified retail improvement
property</term> means any improvement to an interior portion of a building
which is nonresidential real property if—</text>
<clause id="H3D70C6E69BF248899848DDE1894F51D9"><enum>(i)</enum><text>such portion is
open to the general public and is used in the retail trade or business of
selling tangible personal property to the general public, and</text>
</clause><clause id="HE803BDA0E38241F9BE9428D13538DF04"><enum>(ii)</enum><text>such improvement
is placed in service more than 3 years after the date the building was first
placed in service.</text>
</clause></subparagraph><subparagraph id="id522470B94E564DE39A0803D0835D770C"><enum>(B)</enum><header>Improvements
made by owner</header><text>In the case of an improvement made by the owner of
such improvement, such improvement shall be qualified retail improvement
property (if at all) only so long as such improvement is held by such owner.
Rules similar to the rules under paragraph (6)(B) shall apply for purposes of
the preceding sentence.</text>
</subparagraph><subparagraph id="H1237D49912FA4833891171CCC1C13F3"><enum>(C)</enum><header>Certain
improvements not included</header><text>Such term shall not include any
improvement for which the expenditure is attributable to—</text>
<clause id="HF118D0F1F0FF476F9101C6FD5BCA0192"><enum>(i)</enum><text>the enlargement of
the building,</text>
</clause><clause id="H2E2DC4D531EB4E0784456C7F2EDD6FB"><enum>(ii)</enum><text>any elevator or
escalator,</text>
</clause><clause id="idE11F6DA5501749489AFC687B63E2B5A3"><enum>(iii)</enum><text>any structural
component benefitting a common area, or</text>
</clause><clause id="H375D3140D76A400B96F3FE3D11C7BB42"><enum>(iv)</enum><text>the internal
structural framework of the
building.</text>
</clause></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="H7DDAE3D255AC46C284F4DE3C57880092"><enum>(3)</enum><header>Requirement to
use straight line method</header><text>Section 168(b)(3) is amended by adding
at the end the following new subparagraph:</text>
<quoted-block changed="added" id="H016EDA5CA47A4C0688F488433184B6E">
<subparagraph id="H0FD81A7148AF4642BD287F08A38837B0"><enum>(I)</enum><text>Qualified retail
improvement property described in subsection
(e)(8).</text>
</subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="HC278F2C67DF147968987C50088008DE3"><enum>(4)</enum><header>Alternative
system</header><text>The table contained in section 168(g)(3)(B) is amended by
inserting after the item relating to subparagraph (E)(viii) the following new
item:</text>
<quoted-block changed="added" display-inline="no-display-inline" id="id3FDCA40C34034C078040E0C4C45DA754" style="OLC">
<table align-to-level="section" blank-lines-before="1" frame="none" line-rules="no-gen" rule-weights="4.4.4.4.0.0" subformat="S6211" table-type="2-Generic:-1-text,-1-num">
<tgroup cols="2" grid-typeface="1.1" thead-tbody-ldg-size="10.10.12" ttitle-size="0"><colspec align="left" coldef="txt" colname="col1" colsep="1" colwidth="310" min-data-value="200" rowsep="0"></colspec><colspec align="right" coldef="fig" colname="col2" colsep="1" colwidth="93" min-data-value="10" rowsep="0"></colspec>
<tbody>
<row><entry align="left" colname="col1" leader-modify="force-ldr" rowsep="0" stub-definition="txt-ldr" stub-hierarchy="1">(E)(ix)</entry><entry align="right" colname="col2" leader-modify="force-ldr" rowsep="0">39</entry>
</row>
</tbody>
</tgroup></table>
<after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="HCBD67A09C15E42E2B5D38B4133D57B9"><enum>(5)</enum><header>Effective
date</header><text>The amendments made by this section shall apply to property
placed in service after the date of the enactment of this Act.</text>
</paragraph></subsection></section><section commented="no" display-inline="no-display-inline" id="IDA981F4AC08744F7FA9670B8411CE3367" section-type="subsequent-section"><enum>103.</enum><header>Clarification of
cash accounting rules for small business</header>
<subsection commented="no" display-inline="no-display-inline" id="IDF5B3C434366C4856A2C6224AC9DB75E8"><enum>(a)</enum><header>Cash accounting
permitted</header>
<paragraph commented="no" display-inline="no-display-inline" id="IDB29D848A4D1949EFA0AA1A5133F4629C"><enum>(1)</enum><header>In
general</header><text display-inline="yes-display-inline">Section 446 (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>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>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>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 each of the prior taxable years ending
on or after the date of the enactment of this subsection, the taxpayer (or any
predecessor) met the gross receipts test in effect under section 448(c) for
such taxable year, 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>Expansion of
gross receipts test</header>
<subparagraph commented="no" display-inline="no-display-inline" id="ID47CEAF65C03B4948B7ECAD8C04E272ED"><enum>(A)</enum><header>In
general</header><text display-inline="yes-display-inline">Paragraph (3) of
section 448(b) (relating to entities with gross receipts of not more than
$5,000,000) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="id6958704D69234316B2CEA9510AE59189" style="OLC">
<paragraph commented="no" display-inline="no-display-inline" id="id2720411BB4084EE3A242E06214C53F10"><enum>(3)</enum><header>Entities
meeting gross receipts test</header><text display-inline="yes-display-inline">Paragraphs (1) and (2) of subsection (a)
shall not apply to any corporation or partnership for any taxable year if, for
each of the prior taxable years ending on or after the date of the enactment of
the <short-title>Small Business and Work Opportunity Act
of 2007</short-title>, the entity (or any predecessor) met the gross receipts
test in effect under subsection (c) for such prior taxable
year.</text>
</paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="IDF8AF71E16CA14958A1BFEBD1325FB32E"><enum>(B)</enum><header>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="id96E01F423E4F4921B734D952CBD4052E"><enum>(i)</enum><text>by striking
<quote>$5,000,000</quote> in the heading thereof,</text>
</clause><clause commented="no" display-inline="no-display-inline" id="ID9FC76D9B622A4812A65532562251381D"><enum>(ii)</enum><text display-inline="yes-display-inline">by striking <quote>$5,000,000</quote> each
place it appears in paragraph (1) and inserting <quote>$10,000,000</quote>,
and</text>
</clause><clause commented="no" display-inline="no-display-inline" id="IDBEAE268FA3514262A6A8631FED6EB141"><enum>(iii)</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>Inflation
adjustment</header><text display-inline="yes-display-inline">In the case of any
taxable year beginning in a calendar year after 2008, the dollar amount
contained in paragraph (1) 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 2007</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>Clarification
of inventory rules for small business</header>
<paragraph commented="no" display-inline="no-display-inline" id="IDCFCFD946278844B18227FFE5229DA2F4"><enum>(1)</enum><header>In
general</header><text display-inline="yes-display-inline">Section 471 (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>Small business
taxpayers not required To use inventories</header>
<paragraph commented="no" display-inline="no-display-inline" id="ID556E3066E68B4B28BFA62514967F96B7"><enum>(1)</enum><header>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>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
the date of the enactment of this subsection, 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>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>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 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 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>Effective date
and special rules</header>
<paragraph commented="no" display-inline="no-display-inline" id="ID40884D3C0D3140EAB274E76F4927A665"><enum>(1)</enum><header>In
general</header><text display-inline="yes-display-inline">The amendments made
by this section shall apply to taxable years beginning after the date of the
enactment of this Act.</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="ID3345568D664B4B9B8F6B876CA9AC44A0"><enum>(2)</enum><header>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 id="H995546E125094831B8662FB4C5EB1401"><enum>104.</enum><header>Extension and
modification of combined work opportunity tax credit and welfare-to-work
credit</header>
<subsection id="H9047434B1E354E319F6650D39F24FF77"><enum>(a)</enum><header>Extension</header><text>Section
51(c)(4)(B) (relating to termination) is amended by striking
<quote>2007</quote> and inserting <quote>2012</quote>.</text>
</subsection><subsection id="ID7BA44987B350467298425DCEC4D722DD"><enum>(b)</enum><header>Increase in
maximum age for designated community residents</header>
<paragraph id="IDDEDF96F6ED4549CAB3E2C700FB1F4DB5"><enum>(1)</enum><header>In
general</header><text>Paragraph (5) of section 51(d) is amended to read as
follows:</text>
<quoted-block id="ID66356B3F18624A80A44F933815A0A0BB">
<paragraph id="IDE390A6242BF7453E92C4DE9E1777803D"><enum>(5)</enum><header>Designated
community residents</header>
<subparagraph id="IDF234EBD2865A4FE28097C200A69F8FFE"><enum>(A)</enum><header>In
general</header><text>The term <term>designated community resident</term> means
any individual who is certified by the designated local agency—</text>
<clause id="ID8A23890AB623490E99BEA5E0E8E9C8CC"><enum>(i)</enum><text>as having
attained age 18 but not age 40 on the hiring date, and</text>
</clause><clause id="ID696F54AE763E41580072F7B36237F154"><enum>(ii)</enum><text>as having his
principal place of abode within an empowerment zone, enterprise community, or
renewal community.</text>
</clause></subparagraph><subparagraph id="ID5CE466A80EF548289395E1007BD28551"><enum>(B)</enum><header>Individual must
continue to reside in zone or community</header><text>In the case of a
designated community resident, the term <term>qualified wages</term> shall not
include wages paid or incurred for services performed while the individual’s
principal place of abode is outside an empowerment zone, enterprise community,
or renewal
community.</text>
</subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="ID8EE91A652AA14CFC8086703BB5AEC8D9"><enum>(2)</enum><header>Conforming
amendment</header><text>Subparagraph (D) of section 51(d)(1) is amended to read
as follows:</text>
<quoted-block id="IDE9C421ACB00142F3B8A752D3E2C287FD">
<subparagraph id="ID87E735A0AACA40EEB020A7DBC38D0052"><enum>(D)</enum><text>a designated
community
resident,</text>
</subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="ID39186F0E22B94DAC9D2B87A6163DC4E1"><enum>(c)</enum><header>Clarification
of treatment of individuals under individual work
plans</header><text>Subparagraph (B) of section 51(d)(6) (relating to
vocational rehabilitation referral) is amended by striking <quote>or</quote> at
the end of clause (i), by striking the period at the end of clause (ii) and
inserting <quote>, or</quote>, and by adding at the end the following new
clause:</text>
<quoted-block id="ID29C83DA6358643689145CEE4611700C7">
<clause id="IDF3FB6C38C73C40339FF21656B080DC71"><enum>(iii)</enum><text>an individual
work plan developed and implemented by an employment network pursuant to
subsection (g) of section 1148 of the <act-name parsable-cite="SSA">Social
Security Act</act-name> with respect to which the requirements of such
subsection are
met.</text>
</clause><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="id339FED668929473E98BF9438B347B25D"><enum>(d)</enum><header>Treatment of
disabled veterans under the work opportunity tax credit</header>
<paragraph id="id67A2165D396A42458BF67FF5D85CCB11"><enum>(1)</enum><header>Disabled
veterans treated as members of targeted group</header>
<subparagraph id="id146CC74307864F638FFE99A35BB5F753"><enum>(A)</enum><header>In
general</header><text>Subparagraph (A) of section 51(d)(3) (relating to
qualified veteran) is amended by striking <quote>agency as being a member of a
family</quote> and all that follows and
inserting</text>
<quoted-block display-inline="yes-display-inline" id="id1BACBD7BD5444050984230CE4725F282" style="OLC">
<text>agency as—</text><clause id="id7C89C9D4EA1E4DB8A897F82DE2A1BDFB"><enum>(i)</enum><text>being a member of
a family receiving assistance under a food stamp program under the Food Stamp
Act of 1977 for at least a 3-month period ending during the 12-month period
ending on the hiring date, or</text>
</clause><clause id="idED61EF290B67449AB129D1CE6D494138"><enum>(ii)</enum><text>entitled to
compensation for a service-connected disability incurred after September 10,
2001.</text>
</clause><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph><subparagraph id="idC55DEBD0A4C243FB97160C3D655C28B6"><enum>(B)</enum><header>Definitions</header><text>Paragraph
(3) of section 51(d) is amended by adding at the end the following new
subparagraph:</text>
<quoted-block display-inline="no-display-inline" id="idEFF57FED88FB498F88ADA1087DEAD62C" style="OLC">
<subparagraph id="id7CD6FDFD7BAE4CF397106D2CFC43CB20"><enum>(C)</enum><header>Other
definitions</header><text>For purposes of subparagraph (A), the terms
<term>compensation</term> and <term>service-connected</term> have the meanings
given such terms under section 101 of title 38, United States
Code.</text>
</subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph></paragraph><paragraph id="id6D68AB45C07243CAA2CA554BFD259AD8"><enum>(2)</enum><header>Increase in
amount of wages taken into account for disabled
veterans</header><text>Paragraph (3) of section 51(b) is amended—</text>
<subparagraph id="idDCC712EE1E914F608B93387466C02505"><enum>(A)</enum><text>by inserting
<quote>($12,000 per year in the case of any individual who is a qualified
veteran by reason of subsection (d)(3)(A)(ii))</quote> before the period at the
end, and</text>
</subparagraph><subparagraph id="id9AAA506519C943FC8F900E3742A66E54"><enum>(B)</enum><text>by striking
<quote><header-in-text level="paragraph" style="OLC">Only first
<enum-in-header> $6,000 </enum-in-header>of</header-in-text></quote> in the
heading and inserting <quote><header-in-text level="paragraph" style="OLC">Limitation on</header-in-text></quote>.</text>
</subparagraph></paragraph></subsection><subsection commented="no" display-inline="no-display-inline" id="ID50D4E98C90364532BA5B3300D95B42F6"><enum>(e)</enum><header>Effective
date</header><text>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, in taxable years ending after such date.</text>
</subsection></section><section commented="no" display-inline="no-display-inline" id="H661D84CAB27B4DBD806EF6F9C8423ED8" section-type="subsequent-section"><enum>105.</enum><header>Certified
professional employer organizations</header>
<subsection commented="no" display-inline="no-display-inline" id="H820B89FD4B444305B2B613A6B3D4A984"><enum>(a)</enum><header>Employment
taxes</header><text display-inline="yes-display-inline">Chapter 25 (relating to
general provisions relating to employment taxes) is amended by adding at the
end the following new section:</text>
<quoted-block display-inline="no-display-inline" id="H788489DCB8354781A93C58D6CDDC0B9" style="OLC">
<section commented="no" display-inline="no-display-inline" id="H78D1998A3B9F4D7FA971CE34061BE306" section-type="subsequent-section"><enum>3511.</enum><header>Certified
professional employer organizations</header>
<subsection commented="no" display-inline="no-display-inline" id="H021E0204C34E4947B9E6436EBDF2C2E0"><enum>(a)</enum><header>General
rules</header><text display-inline="yes-display-inline">For purposes of the
taxes, and other obligations, imposed by this subtitle—</text>
<paragraph commented="no" display-inline="no-display-inline" id="HFC18B15D13384B1FBD144787CC7E09FF"><enum>(1)</enum><text display-inline="yes-display-inline">a certified professional employer
organization shall be treated as the employer (and no other person shall be
treated as the employer) of any work site employee performing services for any
customer of such organization, but only with respect to remuneration remitted
by such organization to such work site employee, and</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="H23435DAF66144AB29E572D63F906EE83"><enum>(2)</enum><text display-inline="yes-display-inline">exclusions, definitions, and other rules
which are based on the type of employer and which would (but for paragraph (1))
apply shall apply with respect to such taxes imposed on such
remuneration.</text>
</paragraph></subsection><subsection commented="no" display-inline="no-display-inline" id="HAD0D04890FAA424DA8DCF25715D5F2B0"><enum>(b)</enum><header>Successor
employer status</header><text display-inline="yes-display-inline">For purposes
of sections 3121(a)(1), 3231(e)(2)(C), and 3306(b)(1)—</text>
<paragraph commented="no" display-inline="no-display-inline" id="HC31B93A1D2624C2887003518E2F9D100"><enum>(1)</enum><text display-inline="yes-display-inline">a certified professional employer
organization entering into a service contract with a customer with respect to a
work site employee shall be treated as a successor employer and the customer
shall be treated as a predecessor employer during the term of such service
contract, and</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="H84BF989BD7714BFA9B7DE98F53EA7050"><enum>(2)</enum><text display-inline="yes-display-inline">a customer whose service contract with a
certified professional employer organization is terminated with respect to a
work site employee shall be treated as a successor employer and the certified
professional employer organization shall be treated as a predecessor
employer.</text>
</paragraph></subsection><subsection commented="no" display-inline="no-display-inline" id="H6D276BC6207544F28EF8E0FA720088C2"><enum>(c)</enum><header>Liability of
certified professional employer organization</header><text display-inline="yes-display-inline">Solely for purposes of its liability for
the taxes, and other obligations, imposed by this subtitle—</text>
<paragraph commented="no" display-inline="no-display-inline" id="HE4F26BB413E8436FA204D23F4F59933E"><enum>(1)</enum><text display-inline="yes-display-inline">a certified professional employer
organization shall be treated as the employer of any individual (other than a
work site employee or a person described in subsection (f)) who is performing
services covered by a contract meeting the requirements of section 7705(e)(2),
but only with respect to remuneration remitted by such organization to such
individual, and</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="id0157482B844A49BBA459AD4A0E8F74EC"><enum>(2)</enum><text display-inline="yes-display-inline">exclusions, definitions, and other rules
which are based on the type of employer and which would (but for paragraph (1))
apply shall apply with respect to such taxes imposed on such
remuneration.</text>
</paragraph></subsection><subsection commented="no" display-inline="no-display-inline" id="id2B89FEC1B35D4C69889775EE74B50888"><enum>(d)</enum><header>Treatment of
credits</header>
<paragraph commented="no" display-inline="no-display-inline" id="id1F7AAE19DD0D4139B5A052C54C2BA1EC"><enum>(1)</enum><header>In
general</header><text display-inline="yes-display-inline">For purposes of any
credit specified in paragraph (2)—</text>
<subparagraph commented="no" display-inline="no-display-inline" id="idFA4C45AA62F345FDBDAAE9249742EF63"><enum>(A)</enum><text display-inline="yes-display-inline">such credit with respect to a work site
employee performing services for the customer applies to the customer, not the
certified professional employer organization,</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="id6CDD14CC3A4F49D5BE37EB2487312B66"><enum>(B)</enum><text display-inline="yes-display-inline">the customer, and not the certified
professional employer organization, shall take into account wages and
employment taxes—</text>
<clause commented="no" display-inline="no-display-inline" id="idF35130EB8537470B86D2C203B4B74305"><enum>(i)</enum><text display-inline="yes-display-inline">paid by the certified professional employer
organization with respect to the work site employee, and</text>
</clause><clause commented="no" display-inline="no-display-inline" id="id5A93E2D5437B43039B1371C02D61F83B"><enum>(ii)</enum><text>for which the
certified professional employer organization receives payment from the
customer, and</text>
</clause></subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="idE4B002D52B0749C2AE6BAD45B7C7348D"><enum>(C)</enum><text display-inline="yes-display-inline">the certified professional employer
organization shall furnish the customer with any information necessary for the
customer to claim such credit.</text>
</subparagraph></paragraph><paragraph commented="no" display-inline="no-display-inline" id="id4811F60D8F1E469794EA742EA65AA24B"><enum>(2)</enum><header>Credits
specified</header><text display-inline="yes-display-inline">A credit is
specified in this paragraph if such credit is allowed under—</text>
<subparagraph commented="no" display-inline="no-display-inline" id="idB77F3E31890B4D07AD8DFC66A06B1976"><enum>(A)</enum><text display-inline="yes-display-inline">section 41 (credit for increasing research
activity),</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="id071623500F384BD39A9C7503826B388E"><enum>(B)</enum><text>section 45A
(Indian employment credit),</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="id86D74E475B4A4364B9F64B94A1D0EE6D"><enum>(C)</enum><text>section 45B
(credit for portion of employer social security taxes paid with respect to
employee cash tips),</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="id427EB4F9B38C4736BBB2C354CC69B213"><enum>(D)</enum><text>section 45C
(clinical testing expenses for certain drugs for rare diseases or
conditions),</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="id928A7ECBD06246479FFFEB634BBA094C"><enum>(E)</enum><text>section 51 (work
opportunity credit),</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="id583EC390F40144CEAB7502A9FC78C10A"><enum>(F)</enum><text>section 51A
(temporary incentives for employing long-term family assistance
recipients),</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="id6E551E1490D14BD1B74FD2F900E34C4C"><enum>(G)</enum><text>section 1396
(empowerment zone employment credit),</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="id06699A68545A48B58B70845858EE7AD5"><enum>(H)</enum><text>1400(d) (DC Zone
employment credit),</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="id5A20DF41A4CD4AB3A33376500F16E764"><enum>(I)</enum><text>Section 1400H
(renewal community employment credit), and</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="id35DF7D911D3F4661B2F5B3B7EFB9C52C"><enum>(J)</enum><text>any other section
as provided by the Secretary.</text>
</subparagraph></paragraph></subsection><subsection commented="no" display-inline="no-display-inline" id="H194870359BD44D15AF0137E8AFC528B9"><enum>(e)</enum><header>Special rule for
related party</header><text display-inline="yes-display-inline">This section
shall not apply in the case of a customer which bears a relationship to a
certified professional employer organization described in section 267(b) or
707(b). For purposes of the preceding sentence, such sections shall be applied
by substituting <quote>10 percent</quote> for <quote>50 percent</quote>.</text>
</subsection><subsection commented="no" display-inline="no-display-inline" id="HDD338AF8F8114182AF15A5AA2CD486CB"><enum>(f)</enum><header>Special rule for
certain individuals</header><text display-inline="yes-display-inline">For
purposes of the taxes imposed under this subtitle, an individual with net
earnings from self-employment derived from the customer’s trade or business is
not a work site employee with respect to remuneration paid by a certified
professional employer organization.</text>
</subsection><subsection commented="no" display-inline="no-display-inline" id="HC3F18639B4F44A868F342139C77BEBAB"><enum>(g)</enum><header>Regulations</header><text display-inline="yes-display-inline">The Secretary shall prescribe such
regulations as may be necessary or appropriate to carry out the purposes of
this
section.</text>
</subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection commented="no" display-inline="no-display-inline" id="HC0D9673985674EC1AD45DC981DC6FCD2"><enum>(b)</enum><header>Certified
professional employer organization defined</header><text display-inline="yes-display-inline">Chapter 79 (relating to definitions) is
amended by adding at the end the following new section:</text>
<quoted-block display-inline="no-display-inline" id="HEC46F15ABE804FD7A3DBC8D5D8DDC158" style="OLC">
<section commented="no" display-inline="no-display-inline" id="H90C3BB1B24C74D6C890077178FAE8DCA" section-type="subsequent-section"><enum>7705.</enum><header>Certified
professional employer organizations defined</header>
<subsection commented="no" display-inline="no-display-inline" id="H93FB53BB0F1E4685BE9FAF8B367CE853"><enum>(a)</enum><header>In
general</header><text display-inline="yes-display-inline">For purposes of this
title, the term <term>certified professional employer organization</term> means
a person who has been certified by the Secretary for purposes of section 3511
as meeting the requirements of subsection (b).</text>
</subsection><subsection commented="no" display-inline="no-display-inline" id="H9C5BFBB7D3CE4E418DCB45CDF27BA5EE"><enum>(b)</enum><header>General
requirements</header><text display-inline="yes-display-inline">A person meets
the requirements of this subsection if such person—</text>
<paragraph commented="no" display-inline="no-display-inline" id="HF4CDBB65DC7C46E9BCD7C6E146EDB3A7"><enum>(1)</enum><text display-inline="yes-display-inline">demonstrates that such person (and any
owner, officer, and such other persons as may be specified in regulations)
meets such requirements as the Secretary shall establish with respect to tax
status, background, experience, business location, and annual financial
audits,</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="H70EA3CD24DDE4C47963408EC09EE0DB"><enum>(2)</enum><text display-inline="yes-display-inline">computes its taxable income using an
accrual method of accounting unless the Secretary approves another
method,</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="H34AA2D25B72B489AA3A375BE80321C42"><enum>(3)</enum><text display-inline="yes-display-inline">agrees that it will satisfy the bond and
independent financial review requirements of subsection (c) on an ongoing
basis,</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="H328C7F4554AF483F861517859011A032"><enum>(4)</enum><text display-inline="yes-display-inline">agrees that it will satisfy such reporting
obligations as may be imposed by the Secretary,</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="HC71BAB0BFB144E4EAA5C139664C91F69"><enum>(5)</enum><text display-inline="yes-display-inline">agrees to verify on such periodic basis as
the Secretary may prescribe that it continues to meet the requirements of this
subsection, and</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="HA5DB3C8C5F434E6AA71173BC598346A8"><enum>(6)</enum><text display-inline="yes-display-inline">agrees to notify the Secretary in writing
within such time as the Secretary may prescribe of any change that materially
affects whether it continues to meet the requirements of this
subsection.</text>
</paragraph></subsection><subsection commented="no" display-inline="no-display-inline" id="H711EB8150C5A451596E20071362BB6BD"><enum>(c)</enum><header>Bond and
independent financial review requirements</header>
<paragraph commented="no" display-inline="no-display-inline" id="HB6CB080AF0164C1DA325CC4BFDB917DB"><enum>(1)</enum><header>In
general</header><text display-inline="yes-display-inline">An organization meets
the requirements of this paragraph if such organization—</text>
<subparagraph commented="no" display-inline="no-display-inline" id="HC3F2967E3DE34A07AEA67CDE6ED30E3"><enum>(A)</enum><text display-inline="yes-display-inline">meets the bond requirements of paragraph
(2), and</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="HBEA9DCDE8B07407AB45BD82506B200C2"><enum>(B)</enum><text display-inline="yes-display-inline">meets the independent financial review
requirements of paragraph (3).</text>
</subparagraph></paragraph><paragraph commented="no" display-inline="no-display-inline" id="HA7D5649FAE7C40AF9BAF87484B1C6AD"><enum>(2)</enum><header>Bond</header>
<subparagraph commented="no" display-inline="no-display-inline" id="HF149F9E04C4F49208C33767847321988"><enum>(A)</enum><header>In
general</header><text display-inline="yes-display-inline">A certified
professional employer organization meets the requirements of this paragraph if
the organization has posted a bond for the payment of taxes under subtitle C
(in a form acceptable to the Secretary) in an amount at least equal to the
amount specified in subparagraph (B).</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="H4277A389227B4E62AE3BEB4C34A1F46"><enum>(B)</enum><header>Amount of
bond</header><text display-inline="yes-display-inline">For the period April 1
of any calendar year through March 31 of the following calendar year, the
amount of the bond required is equal to the greater of—</text>
<clause commented="no" display-inline="no-display-inline" id="H8E9CC8169CB44FEC9B45266058FF98A6"><enum>(i)</enum><text display-inline="yes-display-inline">5 percent of the organization’s liability
under section 3511 for taxes imposed by subtitle C during the preceding
calendar year (but not to exceed $1,000,000), or</text>
</clause><clause commented="no" display-inline="no-display-inline" id="H3271C621D2BA4F23BC14009FE1B78411"><enum>(ii)</enum><text display-inline="yes-display-inline">$50,000.</text>
</clause></subparagraph></paragraph><paragraph commented="no" display-inline="no-display-inline" id="H3DECC6E1841C4ECE90694559143C2331"><enum>(3)</enum><header>Independent
financial review requirements</header><text display-inline="yes-display-inline">A certified professional employer
organization meets the requirements of this paragraph if such
organization—</text>
<subparagraph commented="no" display-inline="no-display-inline" id="H58323DE953EF4D65A0EB76348E568B00"><enum>(A)</enum><text display-inline="yes-display-inline">has, as of the most recent review date,
caused to be prepared and provided to the Secretary (in such manner as the
Secretary may prescribe) an opinion of an independent certified public
accountant that the certified professional employer organization’s financial
statements are presented fairly in accordance with generally accepted
accounting principles, and</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="H99E24F96557B4C26BC763231FEADE96"><enum>(B)</enum><text display-inline="yes-display-inline">provides, not later than the last day of
the second month beginning after the end of each calendar quarter, to the
Secretary from an independent certified public accountant an assertion
regarding Federal employment tax payments and an examination level attestation
on such assertion.</text>
</subparagraph><continuation-text commented="no" continuation-text-level="paragraph">Such assertion shall state that the
organization has withheld and made deposits of all taxes imposed by chapters
21, 22, and 24 of the Internal Revenue Code in accordance with regulations
imposed by the Secretary for such calendar quarter and such examination level
attestation shall state that such assertion is fairly stated, in all material
respects.</continuation-text></paragraph><paragraph commented="no" display-inline="no-display-inline" id="HB10181B1FAF3472397D4551F7128F39F"><enum>(4)</enum><header>Controlled group
rules</header><text display-inline="yes-display-inline">For purposes of the
requirements of paragraphs (2) and (3), all professional employer organizations
that are members of a controlled group within the meaning of sections 414(b)
and (c) shall be treated as a single organization.</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="H06A0234EEC3E4B82B57F6875AD978DDE"><enum>(5)</enum><header>Failure to file
assertion and attestation</header><text display-inline="yes-display-inline">If
the certified professional employer organization fails to file the assertion
and attestation required by paragraph (3) with respect to any calendar quarter,
then the requirements of paragraph (3) with respect to such failure shall be
treated as not satisfied for the period beginning on the due date for such
attestation.</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="H33740D28D5F543AD9904D4804ED4B290"><enum>(6)</enum><header>Review
date</header><text display-inline="yes-display-inline">For purposes of
paragraph (3)(A), the review date shall be 6 months after the completion of the
organization’s fiscal year.</text>
</paragraph></subsection><subsection commented="no" display-inline="no-display-inline" id="H37139EDE34AA461AA95361306C2E6B2D"><enum>(d)</enum><header>Suspension and
revocation authority</header><text display-inline="yes-display-inline">The
Secretary may suspend or revoke a certification of any person under subsection
(b) for purposes of section 3511 if the Secretary determines that such person
is not satisfying the representations or requirements of subsections (b) or
(c), or fails to satisfy applicable accounting, reporting, payment, or deposit
requirements.</text>
</subsection><subsection commented="no" display-inline="no-display-inline" id="H65A759380A5E4A51A45D09458FB0451"><enum>(e)</enum><header>Work site
employee</header><text display-inline="yes-display-inline">For purposes of this
title—</text>
<paragraph commented="no" display-inline="no-display-inline" id="H918E530B6500468AB6DCD2F8DA24B70"><enum>(1)</enum><header>In
general</header><text display-inline="yes-display-inline">The term <term>work
site employee</term> means, with respect to a certified professional employer
organization, an individual who—</text>
<subparagraph commented="no" display-inline="no-display-inline" id="HBD011145ACAD479E91F4341DF3F8617F"><enum>(A)</enum><text display-inline="yes-display-inline">performs services for a customer pursuant
to a contract which is between such customer and the certified professional
employer organization and which meets the requirements of paragraph (2),
and</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="H9BEA7E99D5B2474E9E58A7C82198D2D4"><enum>(B)</enum><text display-inline="yes-display-inline">performs services at a work site meeting
the requirements of paragraph (3).</text>
</subparagraph></paragraph><paragraph commented="no" display-inline="no-display-inline" id="H46D53144146E492D8979598CD097D05"><enum>(2)</enum><header>Service contract
requirements</header><text display-inline="yes-display-inline">A contract meets
the requirements of this paragraph with respect to an individual performing
services for a customer if such contract is in writing and provides that the
certified professional employer organization shall—</text>
<subparagraph commented="no" display-inline="no-display-inline" id="HCDA7362710E047EDA8ABF9AF6C2422B7"><enum>(A)</enum><text display-inline="yes-display-inline">assume responsibility for payment of wages
to such individual, without regard to the receipt or adequacy of payment from
the customer for such services,</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="HE9A51B4772764FF797CFBE19E47AD27"><enum>(B)</enum><text display-inline="yes-display-inline">assume responsibility for reporting,
withholding, and paying any applicable taxes under subtitle C, with respect to
such individual’s wages, without regard to the receipt or adequacy of payment
from the customer for such services,</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="H2AE870B60D4B486681BF963EEC1F09EE"><enum>(C)</enum><text display-inline="yes-display-inline">assume responsibility for any employee
benefits which the service contract may require the organization to provide,
without regard to the receipt or adequacy of payment from the customer for such
services,</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="H1F80A5FC37DE46BF992BCDE2BDADAD11"><enum>(D)</enum><text display-inline="yes-display-inline">assume responsibility for hiring, firing,
and recruiting workers in addition to the customer’s responsibility for hiring,
firing and recruiting workers,</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="H4DF260C577124EB3ADB8FFFC38FD53BE"><enum>(E)</enum><text display-inline="yes-display-inline">maintain employee records relating to such
individual, and</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="H575377EDA28D4CBEABA284A67D5083C1"><enum>(F)</enum><text display-inline="yes-display-inline">agree to be treated as a certified
professional employer organization for purposes of section 3511 with respect to
such individual.</text>
</subparagraph></paragraph><paragraph commented="no" display-inline="no-display-inline" id="H575AEDC2DB5B4FB9A0A9AF7DBFD7D9B"><enum>(3)</enum><header>Work site
coverage requirement</header><text display-inline="yes-display-inline">The
requirements of this paragraph are met with respect to an individual if at
least 85 percent of the individuals performing services for the customer at the
work site where such individual performs services are subject to 1 or more
contracts with the certified professional employer organization which meet the
requirements of paragraph (2) (but not taking into account those individuals
who are excluded employees within the meaning of section 414(q)(5)).</text>
</paragraph></subsection><subsection commented="no" display-inline="no-display-inline" id="H752B36370DFE4DF1AC724BF2D0D87B1E"><enum>(f)</enum><header>Determination of
employment status</header><text display-inline="yes-display-inline">Except to
the extent necessary for purposes of section 3511, nothing in this section
shall be construed to affect the determination of who is an employee or
employer for purposes of this title.</text>
</subsection><subsection commented="no" display-inline="no-display-inline" id="H1A6F60DB95064755817B3ED395CDEB23"><enum>(g)</enum><header>Regulations</header><text display-inline="yes-display-inline">The Secretary shall prescribe such
regulations as may be necessary or appropriate to carry out the purposes of
this
section.</text>
</subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection commented="no" display-inline="no-display-inline" id="H45FBB4DC2F874F77A3AE41F89198BF9C"><enum>(c)</enum><header>Conforming
amendments</header>
<paragraph commented="no" display-inline="no-display-inline" id="H884A9B3890F742409500F753B16788BD"><enum>(1)</enum><text display-inline="yes-display-inline">Section 3302 is amended by adding at the
end the following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="HEBF61BDCB73F4F47A1D5FCF4B8DA51D5" style="OLC">
<subsection commented="no" display-inline="no-display-inline" id="HBE26DF61A9BE49CF99BC925242B1C53D"><enum>(h)</enum><header>Treatment of
certified professional employer organizations</header><text display-inline="yes-display-inline">If a certified professional employer
organization (as defined in section 7705), or a customer of such organization,
makes a contribution to the State’s unemployment fund with respect to a work
site employee, such organization shall be eligible for the credits available
under this section with respect to such
contribution.</text>
</subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="HAC6CCDFB8A8843EC80FDE7A153F9748"><enum>(2)</enum><text display-inline="yes-display-inline">Section 3303(a) is amended—</text>
<subparagraph commented="no" display-inline="no-display-inline" id="H1D314D6407194FD3B8E0B8F17E91BC73"><enum>(A)</enum><text display-inline="yes-display-inline">by striking the period at the end of
paragraph (3) and inserting <quote>; and</quote> and by inserting after
paragraph (3) the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="H241854784E884998AAE8BC04A7AD02" style="OLC">
<paragraph commented="no" display-inline="no-display-inline" id="HEEAA01F2CB1E466BAF23C6587EDE95C0"><enum>(4)</enum><text display-inline="yes-display-inline">if the taxpayer is a certified professional
employer organization (as defined in section 7705) that is treated as the
employer under section 3511, such certified professional employer organization
is permitted to collect and remit, in accordance with paragraphs (1), (2), and
(3), contributions during the taxable year to the State unemployment fund with
respect to a work site employee.</text>
</paragraph><after-quoted-block>,
and</after-quoted-block></quoted-block>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="HCA5C8A3BAC194B6C9018D7AB87C0D0C3"><enum>(B)</enum><text display-inline="yes-display-inline">in the last sentence—</text>
<clause commented="no" display-inline="no-display-inline" id="HB21AFC6EC7944007BC5E2CBBB6FD4881"><enum>(i)</enum><text display-inline="yes-display-inline">by striking <quote>paragraphs (1), (2), and
(3)</quote> and inserting <quote>paragraphs (1), (2), (3), and (4)</quote>,
and</text>
</clause><clause commented="no" display-inline="no-display-inline" id="HD57E70C5062B4D3A9E1166252BD6B1E"><enum>(ii)</enum><text display-inline="yes-display-inline">by striking <quote>paragraph (1), (2), or
(3)</quote> and inserting <quote>paragraph (1), (2), (3), or
(4)</quote>.</text>
</clause></subparagraph></paragraph><paragraph commented="no" display-inline="no-display-inline" id="H0CE1B5B880DF4731B056AF5C49214371"><enum>(3)</enum><text display-inline="yes-display-inline">Section 6053(c) (relating to reporting of
tips) is amended by adding at the end the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="H5FA716A69A2345ED9E20EA64D27F3693" style="OLC">
<paragraph commented="no" display-inline="no-display-inline" id="H32D6BBD62E2C4860803200C6EAB92506"><enum>(8)</enum><header>Certified
professional employer organizations</header><text display-inline="yes-display-inline">For purposes of any report required by this
subsection, in the case of a certified professional employer organization that
is treated under section 3511 as the employer of a work site employee, the
customer with respect to whom a work site employee performs services shall be
the employer for purposes of reporting under this section and the certified
professional employer organization shall furnish to the customer any
information necessary to complete such reporting no later than such time as the
Secretary shall
prescribe.</text>
</paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection commented="no" display-inline="no-display-inline" id="HD2D58C4005724410B3044B2B005BA8E5"><enum>(d)</enum><header>Clerical
amendments</header>
<paragraph commented="no" display-inline="no-display-inline" id="HCE8EBF58918D476AB472EE1430AD2CA2"><enum>(1)</enum><text display-inline="yes-display-inline">The table of sections for chapter 25 is
amended by adding at the end the following new item:</text>
<quoted-block display-inline="no-display-inline" id="HCF7B28C940FA44398600D869E14F5627" style="OLC">
<toc regeneration="no-regeneration">
<toc-entry bold="off" level="section">Sec. 3511. Certified
professional employer
organizations.</toc-entry>
</toc>
<after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="H8DF23C55A7594CB29B42E2CB2BBA428C"><enum>(2)</enum><text display-inline="yes-display-inline">The table of sections for chapter 79 is
amended by inserting after the item relating to section 7704 the following new
item:</text>
<quoted-block display-inline="no-display-inline" id="H12BEC118C5764C6DB7C9F52E88C2A047" style="OLC">
<toc regeneration="no-regeneration">
<toc-entry bold="off" level="section">Sec. 7705. Certified
professional employer organizations
defined.</toc-entry>
</toc>
<after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection commented="no" display-inline="no-display-inline" id="H60489CD8B16242CD92FB888F02A3B89"><enum>(e)</enum><header>Reporting
requirements and obligations</header><text display-inline="yes-display-inline">The Secretary of the Treasury shall develop
such reporting and recordkeeping rules, regulations, and procedures as the
Secretary determines necessary or appropriate to ensure compliance with the
amendments made by this section with respect to entities applying for
certification as certified professional employer organizations or entities that
have been so certified. Such rules shall be designed in a manner which
streamlines, to the extent possible, the application of requirements of such
amendments, the exchange of information between a certified professional
employer organization and its customers, and the reporting and recordkeeping
obligations of the certified professional employer organization.</text>
</subsection><subsection commented="no" display-inline="no-display-inline" id="H7DD2DF63A7014928ADEE1E56235CC9CC"><enum>(f)</enum><header>User
fees</header><text display-inline="yes-display-inline">Subsection (b) of
section 7528 (relating to Internal Revenue Service user fees) is amended by
adding at the end the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="HC87F0EFFE17D431E82004D00054C1D4C" style="OLC">
<paragraph commented="no" display-inline="no-display-inline" id="H6B27483D8DBA49DAB7F724116BDFA76B"><enum>(4)</enum><header>Certified
professional employer organizations</header><text display-inline="yes-display-inline">The fee charged under the program in
connection with the certification by the Secretary of a professional employer
organization under section 7705 shall not exceed
$500.</text>
</paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection commented="no" display-inline="no-display-inline" id="HB959558F88994262BE5DC66756D9123F"><enum>(g)</enum><header>Effective
dates</header>
<paragraph commented="no" display-inline="no-display-inline" id="H2003024C100445E0B3E845EA32BA1282"><enum>(1)</enum><header>In
general</header><text display-inline="yes-display-inline">The amendments made
by this section shall apply with respect to wages for services performed on or
after January 1 of the first calendar year beginning more than 12 months after
the date of the enactment of this Act.</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="H10D98CD250AA4B64A1F0E809E2B36198"><enum>(2)</enum><header>Certification
program</header><text display-inline="yes-display-inline">The Secretary of the
Treasury shall establish the certification program described in section 7705(b)
of the Internal Revenue Code of 1986, as added by subsection (b), not later
than 6 months before the effective date determined under paragraph (1).</text>
</paragraph></subsection><subsection commented="no" display-inline="no-display-inline" id="H835CC4E0566B499CB743EA9495C6A85B"><enum>(h)</enum><header>No
inference</header><text display-inline="yes-display-inline">Nothing contained
in this section or the amendments made by this section shall be construed to
create any inference with respect to the determination of who is an employee or
employer—</text>
<paragraph commented="no" display-inline="no-display-inline" id="H724DBF2C44F34C50984FC612BA05F12"><enum>(1)</enum><text display-inline="yes-display-inline">for Federal tax purposes (other than the
purposes set forth in the amendments made by this section), or</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="H75983E75C1784269B0399EE2DA5F61E5"><enum>(2)</enum><text display-inline="yes-display-inline">for purposes of any other provision of
law.</text>
</paragraph></subsection></section></subtitle><subtitle id="id54FADEA0B2FC49C3B1E3218FDD8698A5"><enum>B</enum><header>Subchapter S
provisions</header>
<section id="IDCE27A6F708494C12895FE855793AB02A"><enum>111.</enum><header>Capital gain
of S corporation not treated as passive investment income</header>
<subsection id="IDD00C43E445824E838CECECAC50B4D28A"><enum>(a)</enum><header>In
general</header><text>Section 1362(d)(3) is amended by striking subparagraphs
(B), (C), (D), (E), and (F) and inserting the following new
subparagraph:</text>
<quoted-block id="IDA96BD199821944F5B6E5CDE18D9E8DCF" style="OLC">
<subparagraph id="ID18C28BD23A3849449C2250F3F3CE8D69"><enum>(B)</enum><header>Passive
investment income defined</header>
<clause id="id03A35FB9CDC441AEB0306DA4FF5ADD92"><enum>(i)</enum><header>In
general</header><text>Except as otherwise provided in this subparagraph, the
term <term>passive investment income</term> means gross receipts derived from
royalties, rents, dividends, interest, and annuities.</text>
</clause><clause id="IDACED562469764FDCAA8F367113F6FE8A"><enum>(ii)</enum><header>Exception for
interest on notes from sales of inventory</header><text>The term <term>passive
investment income</term> shall not include interest on any obligation acquired
in the ordinary course of the corporation’s trade or business from its sale of
property described in section 1221(a)(1).</text>
</clause><clause id="ID203E3765380C4EBA894288D3E1B664E4"><enum>(iii)</enum><header>Treatment of
certain lending or finance companies</header><text>If the S corporation meets
the requirements of section 542(c)(6) for the taxable year, the term
<term>passive investment income</term> shall not include gross receipts for the
taxable year which are derived directly from the active and regular conduct of
a lending or finance business (as defined in section 542(d)(1)).</text>
</clause><clause id="ID2B136B2B60A7463C885D4807D7E8C5DA"><enum>(iv)</enum><header>Treatment of
certain dividends</header><text>If an S corporation holds stock in a C
corporation meeting the requirements of section 1504(a)(2), the term
<term>passive investment income</term> shall not include dividends from such C
corporation to the extent such dividends are attributable to the earnings and
profits of such C corporation derived from the active conduct of a trade or
business.</text>
</clause><clause id="IDCA03069B227F49EC9C745C14E5FC2C62"><enum>(v)</enum><header>Exception for
banks, etc</header><text>In the case of a bank (as defined in section 581) or a
depository institution holding company (as defined in section 3(w)(1) of the
<act-name parsable-cite="FDIA">Federal Deposit Insurance Act</act-name> (12
U.S.C. 1813(w)(1)), the term <term>passive investment income</term> shall not
include—</text>
<subclause id="IDA341AA84FB954476828E5103D8C1828E"><enum>(I)</enum><text>interest income
earned by such bank or company, or</text>
</subclause><subclause id="ID7F7ECBC2BFEA40158C725546A9E9C11B"><enum>(II)</enum><text>dividends on
assets required to be held by such bank or company, including stock in the
Federal Reserve Bank, the Federal Home Loan Bank, or the Federal Agricultural
Mortgage Bank or participation certificates issued by a Federal Intermediate
Credit
Bank.</text>
</subclause></clause></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="ID6A6F30DD1A8B4A78BD062D52C9995DEB"><enum>(b)</enum><header>Conforming
Amendment</header><text>Clause (i) of section 1042(c)(4)(A) is amended by
striking <quote>section 1362(d)(3)(C)</quote> and inserting <quote>section
1362(d)(3)(B)</quote>.</text>
</subsection><subsection id="IDDFF6B078A70E439096FF3ABCDC4BDE54"><enum>(c)</enum><header>Effective
Date</header><text>The amendments made by this section shall apply to taxable
years beginning after the date of the enactment of this Act.</text>
</subsection></section><section id="id6554CC4FA0264866B8391F5D883297A9"><enum>112.</enum><header>Treatment of
bank director shares</header>
<subsection id="ID5D5859E8ECC64E90A6003D0E019B84D8"><enum>(a)</enum><header>In
General</header><text>Section 1361 (defining S corporation) is amended by
adding at the end the following new subsection:</text>
<quoted-block id="IDA78706FE653C4FF8A560E6A32E1FDB94" style="OLC">
<subsection id="ID7F959E33A9004DD69942E625B558F5A4"><enum>(f)</enum><header>Restricted Bank
Director Stock</header>
<paragraph id="IDFB471C01FE34466FB09545ED89821AB7"><enum>(1)</enum><header>In
general</header><text>Restricted bank director stock shall not be taken into
account as outstanding stock of the S corporation in applying this subchapter
(other than section 1368(f)).</text>
</paragraph><paragraph id="ID1CD5ED5EA07A4617991C6E2CD2A2C019"><enum>(2)</enum><header>Restricted bank
director stock</header><text>For purposes of this subsection, the term
<term>restricted bank director stock</term> means stock in a bank (as defined
in section 581) or a depository institution holding company (as defined in
section 3(w)(1) of the <act-name parsable-cite="FDIA">Federal Deposit Insurance
Act</act-name> (12 U.S.C. 1813(w)(1)), if such stock—</text>
<subparagraph id="ID218E4B5EFF31488C9A66B746F1E93DA1"><enum>(A)</enum><text>is required to be
held by an individual under applicable Federal or State law in order to permit
such individual to serve as a director, and</text>
</subparagraph><subparagraph id="IDD91E3965D8164517A3577AD3262F3C6C"><enum>(B)</enum><text>is subject to an
agreement with such bank or company (or a corporation which controls (within
the meaning of section 368(c)) such bank or company) pursuant to which the
holder is required to sell back such stock (at the same price as the individual
acquired such stock) upon ceasing to hold the office of director.</text>
</subparagraph></paragraph><paragraph id="ID04A63F9EA4AD479695F51CCBFEACD1C5"><enum>(3)</enum><header>Cross
reference</header>
<toc regeneration="no-regeneration">
<toc-entry level="section">For treatment of certain distributions
with respect to restricted bank director stock, see section
1368(f).</toc-entry>
</toc>
</paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="IDA24DDDEC01554EF89A3F77BD6DC1FCC6"><enum>(b)</enum><header>Distributions</header><text>Section
1368 (relating to distributions) is amended by adding at the end the following
new subsection:</text>
<quoted-block id="ID16317A7779F242509FE260FF7F74BD93" style="OLC">
<subsection id="ID0B5273E1BE8A45D9B1271E9A60F34AB7"><enum>(f)</enum><header>Restricted Bank
Director Stock</header><text>If a director receives a distribution (not in part
or full payment in exchange for stock) from an S corporation with respect to
any restricted bank director stock (as defined in section 1361(f)), the amount
of such distribution—</text>
<paragraph id="IDC67DF21157D44C8CA7DA4846DF46E389"><enum>(1)</enum><text>shall be
includible in gross income of the director, and</text>
</paragraph><paragraph id="IDEF74FF4274E140C8B163115E53CE609C"><enum>(2)</enum><text>shall be
deductible by the corporation for the taxable year of such corporation in which
or with which ends the taxable year in which such amount in included in the
gross income of the
director.</text>
</paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="ID9D43BD6EE26B42728EEDC6423CAC89DA"><enum>(c)</enum><header>Effective
Dates</header>
<paragraph id="idE61CAB5AE93F45D99FE6CE41122B2C69"><enum>(1)</enum><header>In
general</header><text>The amendments made by this section shall apply to
taxable years beginning after December 31, 2006.</text>
</paragraph><paragraph id="id8774CBE94BD34839A9AB199DDC9FBFBB"><enum>(2)</enum><header>Special rule
for treatment as second class of stock</header><text>In the case of any taxable
year beginning after December 31, 1996, restricted bank director stock (as
defined in section 1361(f) of the Internal Revenue Code of 1986, as added by
this section) shall not be taken into account in determining whether an S
corporation has more than 1 class of stock.</text>
</paragraph></subsection></section><section commented="no" display-inline="no-display-inline" id="IDB4D021A7878D436600AD78F974EEA95C" section-type="subsequent-section"><enum>113.</enum><header>Special rule for
bank required to change from the reserve method of accounting on becoming S
corporation</header>
<subsection id="id9583F05E89A6456F93930D307FC68E46"><enum>(a)</enum><header>In
general</header><text>Section 1361, as amended by this Act, is amended by
adding at the end the following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="id6AEC4D089B41413C987F3151E6BFEBDC" style="OLC">
<subsection id="idEDDC96642F2A459CA908FD9A33013B2B"><enum>(g)</enum><header>Special rule
for bank required To change from the reserve method of accounting on becoming S
corporation</header><text>In the case of a bank which changes from the reserve
method of accounting for bad debts described in section 585 or 593 for its
first taxable year for which an election under section 1362(a) is in effect,
the bank may elect to take into account any adjustments under section 481 by
reason of such change for the taxable year immediately preceding such first
taxable
year.</text>
</subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection commented="no" display-inline="no-display-inline" id="idFBE56E207EE347F190B9B6A1C9DB50FC"><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 taxable years beginning after December 31,
2006.</text>
</subsection></section><section id="ID6536273A03CA4AC7A98B4876EA002375"><enum>114.</enum><header>Treatment of
the sale of interest in a qualified subchapter
<enum-in-header>S</enum-in-header> subsidiary</header>
<subsection id="ID6820B55A84294BA2BE00CBE302D85697"><enum>(a)</enum><header>In
general</header><text>Subparagraph (C) of section 1361(b)(3) (relating to
treatment of terminations of qualified subchapter S subsidiary status) is
amended—</text>
<paragraph id="idFFBC2ED20B844318B63C49C81079ED1F"><enum>(1)</enum><text>by striking
<quote>For purposes of this title,</quote> and inserting the following:</text>
<quoted-block display-inline="no-display-inline" id="idA59CF77A2CDA46D2827A2C818D58D4C3" style="OLC">
<clause id="idC30AD98E806B4B1DB02A0550FC9B9F60"><enum>(i)</enum><header>In
general</header><text>For purposes of this
title,</text>
</clause><after-quoted-block>,
and</after-quoted-block></quoted-block>
</paragraph><paragraph id="id52EFF9D654744D6FB110558B92E17F88"><enum>(2)</enum><text>by inserting at
the end the following new clause:</text>
<quoted-block display-inline="no-display-inline" id="id30B3CF237EEB4049A7E3E567D2BE0729" style="OLC">
<clause id="idD7457C186002452DB48EB423DED7295A"><enum>(ii)</enum><header>Termination by
reason of sale of stock</header><text>If the failure to meet the requirements
of subparagraph (B) is by reason of the sale of stock of a corporation which is
a qualified subchapter S subsidiary, the sale of such stock shall be treated as
if—</text>
<subclause id="idFB7F3B7088194BE5A4021E4302B9DE0D"><enum>(I)</enum><text>the sale were a
sale of an undivided interest in the assets of such corporation (based on the
percentage of the corporation's stock sold), and</text>
</subclause><subclause id="id262F26B32B7F4E0C84CE21A38C79EA07"><enum>(II)</enum><text>the sale were
followed by an acquisition by such corporation of all of its assets (and the
assumption by such corporation of all of its liabilities) in a transaction to
which section 351
applies.</text>
</subclause></clause><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="ID127BE857732D4133AE256F303D932715"><enum>(b)</enum><header>Effective
date</header><text>The amendments made by this section shall apply to taxable
years beginning after December 31, 2006 .</text>
</subsection></section><section id="ID30F3F0F5F3604AE99548DF22541FFA1E"><enum>115.</enum><header>Elimination of
all earnings and profits attributable to pre-1983 years for certain
corporations</header><text display-inline="no-display-inline">In the case of a
corporation which is—</text>
<paragraph id="idEED8583C7CAA4107B200B2FE33CE9BF4"><enum>(1)</enum><text>described in
section 1311(a)(1) of the Small Business Job Protection Act of 1996, and</text>
</paragraph><paragraph id="idEE86986B1D764518A6DE95E4A4B56FC2"><enum>(2)</enum><text>not described in
section 1311(a)(2) of such Act,</text>
</paragraph><continuation-text continuation-text-level="section">the amount of
such corporation's accumulated earnings and profits (for the first taxable year
beginning after the date of the enactment of this Act) shall be reduced by an
amount equal to the portion (if any) of such accumulated earnings and profits
which were accumulated in any taxable year beginning before January 1, 1983,
for which such corporation was an electing small business corporation under
subchapter S of the Internal Revenue Code of 1986.</continuation-text></section><section id="ID699C05CE4A7B4899AFA3918D66FB9E34"><enum>116.</enum><header>Expansion of
qualifying beneficiaries of an electing small business trust</header>
<subsection id="ID129E23489DC44748B59CF7FFB1B9E006"><enum>(a)</enum><header>No look through
for eligibility purposes</header><text>Clause (v) of section 1361(c)(2)(B) is
amended by adding at the end the following new sentence: <quote>This clause
shall not apply for purposes of subsection (b)(1)(C).</quote>.</text>
</subsection><subsection id="ID82D4758307EE421C981CF7EF7FE5CA75"><enum>(b)</enum><header>Effective
Date</header><text>The amendment made by this section shall take effect on the
date of the enactment of this Act.</text>
</subsection></section></subtitle><enum>II</enum><header>Revenue
provisions</header>
<section id="ID7A0F9762D7BB4E3DADF8C40E34EB0944"><enum>201.</enum><header>Modification
of effective date of leasing provisions of the American Jobs Creation Act of
2004</header>
<subsection id="ID009B37610F52456AAD03F9E909AA753E"><enum>(a)</enum><header>Leases to
Foreign Entities</header><text>Section 849(b) of the American Jobs Creation Act
of 2004 is amended by adding at the end the following new paragraph:</text>
<quoted-block id="ID4EF01EDE45E540EDB24C9AF5D911EFD1" style="OLC">
<paragraph id="ID7B8B5F1D27834AB2AFDE303805453E73"><enum>(5)</enum><header>Leases to
foreign entities</header><text>In the case of tax-exempt use property leased to
a tax-exempt entity which is a foreign person or entity, the amendments made by
this part shall apply to taxable years beginning after December 31, 2006, with
respect to leases entered into on or before March 12,
2004.</text>
</paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="IDEA6D9B9FA577493CBF4E692960E55978"><enum>(b)</enum><header>Effective
Date</header><text>The amendment made by this section shall take effect as if
included in the enactment of the American Jobs Creation Act of 2004.</text>
</subsection></section><section id="id20B1129B37E64FFA9A840502F1AA6EFA"><enum>202.</enum><header>Application of
rules treating inverted corporations as domestic corporations to certain
transactions occurring after March 20, 2002</header>
<subsection id="id15CBA640847E432BB0A5D6958A7AF17E"><enum>(a)</enum><header>In
general</header><text>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 id="id7859869A231140ADBC207C7EAA12E5A5"><enum>(b)</enum><header>Inverted
corporations treated as domestic corporations</header>
<paragraph id="idF3CFDA32A4214083B05C64A338283DF0"><enum>(1)</enum><header>In
general</header><text>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 id="idE7852872DC1D42A9966FEDC469FC8372"><enum>(2)</enum><header>Special rule
for certain transactions occurring after March 20, 2002</header>
<subparagraph id="id3C3946EC1AB7400F90D30F4C1954A016"><enum>(A)</enum><header>In
general</header><text>If—</text>
<clause id="id5396046EBF684D40874C6CA37E382912"><enum>(i)</enum><text>paragraph (1)
does not apply to a foreign corporation, but</text>
</clause><clause id="idEE3553A0578D46A586D1269160D80723"><enum>(ii)</enum><text>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 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 id="id250B62A8C5B442769D557CF59D712E5A"><enum>(B)</enum><header>Special
rules</header><text>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 id="idA848A178A0844056819ADE076217F577"><enum>(i)</enum><text>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 id="idAFD04A9658A34031BD65EC5FBF87FF77"><enum>(ii)</enum><text>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 id="id3CD0D255E8DD4098BA543BD22760DF47"><enum>(iii)</enum><text>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 id="idDC3156FD8905485B9B16205D7C26DA67"><enum>(iv)</enum><text>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 id="id7D637F10CF5F484F853D4CC4B0CE1727"><enum>(C)</enum><header>Regulations</header><text>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>Effective
date</header><text>The amendment made by this section shall apply to taxable
years beginning after December 31, 2006.</text>
</subsection></section><section id="IDAE150D4122F84270BDD1620032BFD035"><enum>203.</enum><header>Denial of
deduction for punitive damages</header>
<subsection id="ID711F47023CB449778D3BD8C8834F91C5"><enum>(a)</enum><header>Disallowance of
Deduction</header>
<paragraph id="ID03A61997A5804B119932736851EE8330"><enum>(1)</enum><header>In
general</header><text>Section 162(g) (relating to treble damage payments under
the antitrust laws) is amended—</text>
<subparagraph id="ID256F80B788054835A83834B2B22E4BD9"><enum>(A)</enum><text>by redesignating
paragraphs (1) and (2) as subparagraphs (A) and (B), respectively,</text>
</subparagraph><subparagraph id="ID66E2177AC410418CA840CFB24CC891C1"><enum>(B)</enum><text>by striking
<quote>If</quote> and inserting:</text>
<quoted-block id="ID41C4E8B6E9C1452A94EBCE64EFFEF96B" style="OLC">
<paragraph id="ID1FF32BDBF0F148B69925725EA958BDB3"><enum>(1)</enum><header>Treble
damages</header><text>If</text>
</paragraph><after-quoted-block>,
and</after-quoted-block></quoted-block>
</subparagraph><subparagraph id="ID99E7893B07ED457EAEEB6DCE48C08430"><enum>(C)</enum><text>by adding at the
end the following new paragraph:</text>
<quoted-block id="IDA4873CACA884494784C5726079417D05" style="OLC">
<paragraph id="ID897E0512EEE14AB59D3AD502ACBE0D80"><enum>(2)</enum><header>Punitive
damages</header><text>No deduction shall be allowed under this chapter for any
amount paid or incurred for punitive damages in connection with any judgment
in, or settlement of, any action. This paragraph shall not apply to punitive
damages described in section
104(c).</text>
</paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph></paragraph><paragraph id="ID9D17946BA7BE4DEC84CF1DFC4F9B505B"><enum>(2)</enum><header>Conforming
amendment</header><text>The heading for section 162(g) is amended by inserting
<quote><header-in-text level="subsection">Or Punitive
Damages</header-in-text></quote> after <quote><header-in-text level="subsection">Laws</header-in-text></quote>.</text>
</paragraph></subsection><subsection id="ID8E86916BD03148959EB5C71497ADDEF3"><enum>(b)</enum><header>Inclusion in
Income of Punitive Damages Paid by Insurer or Otherwise</header>
<paragraph id="ID866FB1B72C8D49CB905BC0B2F760FA65"><enum>(1)</enum><header>In
general</header><text>Part II of subchapter B of chapter 1 (relating to items
specifically included in gross income) is amended by adding at the end the
following new section:</text>
<quoted-block id="ID4D3EDD7E1DC04C5FB55187E543197E78" style="OLC">
<section id="IDB5E275921BB64A4193DB8D612F5BAD38"><enum>91.</enum><header>Punitive
damages compensated by insurance or otherwise</header><text display-inline="no-display-inline">Gross income shall include any amount paid
to or on behalf of a taxpayer as insurance or otherwise by reason of the
taxpayer’s liability (or agreement) to pay punitive
damages.</text>
</section><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="ID525730B3A69847F69F47242324AD46EE"><enum>(2)</enum><header>Reporting
requirements</header><text>Section 6041 (relating to information at source) is
amended by adding at the end the following new subsection:</text>
<quoted-block id="ID1A5D4305B314477A8DE5A2F7FC9810FD" style="OLC">
<subsection id="ID6AB55EAA0FC2495394803FD22CB62432"><enum>(h)</enum><header>Section To
Apply to Punitive Damages Compensation</header><text>This section shall apply
to payments by a person to or on behalf of another person as insurance or
otherwise by reason of the other person’s liability (or agreement) to pay
punitive
damages.</text>
</subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="ID4DB697F78F3741939E17F67959E1E599"><enum>(3)</enum><header>Conforming
amendment</header><text>The table of sections for part II of subchapter B of
chapter 1 is amended by adding at the end the following new item:</text>
<quoted-block id="ID9DBB64529F5C454493CCEA5C3EFB4888" style="OLC">
<toc regeneration="no-regeneration">
<toc-entry level="section">Sec. 91. Punitive damages compensated by
insurance or
otherwise.</toc-entry>
</toc>
<after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="ID32A215F53BB54DB7ADF538F2B406FAB8"><enum>(c)</enum><header>Effective
Date</header><text>The amendments made by this section shall apply to damages
paid or incurred on or after the date of the enactment of this Act.</text>
</subsection></section><section id="ID35BC595724574AE3A36662B5882F1A42"><enum>204.</enum><header>Denial of
deduction for certain fines, penalties, and other amounts</header>
<subsection id="ID9E532C7D46EB48328B17D024D244BAAB"><enum>(a)</enum><header>In
General</header><text>Subsection (f) of section 162 (relating to trade or
business expenses) is amended to read as follows:</text>
<quoted-block id="IDB9CE48DB27E94ED5B9D44BBFAF83002D" style="OLC">
<subsection id="ID8C061FF9AD404182A005E3C1BD64CDEE"><enum>(f)</enum><header>Fines,
Penalties, and Other Amounts</header>
<paragraph id="ID4A040C8A9C7F43FC9A5E085CF97294AC"><enum>(1)</enum><header>In
general</header><text>Except as provided in paragraph (2), no deduction
otherwise allowable shall be allowed under this chapter for any amount paid or
incurred (whether by suit, agreement, or otherwise) to, or at the direction of,
a government or entity described in paragraph (4) in relation to the violation
of any law or the investigation or inquiry by such government or entity into
the potential violation of any law.</text>
</paragraph><paragraph id="ID4F56661BED2B47CF87D75557A2D999CA"><enum>(2)</enum><header>Exception for
amounts constituting restitution or paid to come into compliance with
law</header><text>Paragraph (1) shall not apply to any amount which—</text>
<subparagraph id="IDFCCE38F776734263B0B91979F5F53CE4"><enum>(A)</enum><text>the taxpayer
establishes—</text>
<clause id="ID14AC23905275463ABC8307439AC90EA5"><enum>(i)</enum><text>constitutes
restitution (including remediation of property) for damage or harm caused by or
which may be caused by the violation of any law or the potential violation of
any law, or</text>
</clause><clause id="ID01F2C0656CD2437D9539C8C2EB053C74"><enum>(ii)</enum><text>is paid to come
into compliance with any law which was violated or involved in the
investigation or inquiry, and</text>
</clause></subparagraph><subparagraph id="IDE0570EBB38EC4360A2CE7A8AF462551B"><enum>(B)</enum><text>is identified as
restitution or as an amount paid to come into compliance with the law, as the
case may be, in the court order or settlement agreement.</text>
</subparagraph><continuation-text continuation-text-level="paragraph">A taxpayer
shall not meet the requirements of subparagraph (A) solely by reason an
identification under subparagraph (B). This paragraph shall not apply to any
amount paid or incurred as reimbursement to the government or entity for the
costs of any investigation or litigation.</continuation-text></paragraph><paragraph id="ID1060A7CC2B9C42A99A5D35349B9F29E6"><enum>(3)</enum><header>Exception for
amounts paid or incurred as the result of certain court
orders</header><text>Paragraph (1) shall not apply to any amount paid or
incurred by order of a court in a suit in which no government or entity
described in paragraph (4) is a party.</text>
</paragraph><paragraph id="IDCD9426CF7625437DB8480086AA7A72AB"><enum>(4)</enum><header>Certain
nongovernmental regulatory entities</header><text>An entity is described in
this paragraph if it is—</text>
<subparagraph id="ID0CEFB440ED3349D6A7A10B4DC0517355"><enum>(A)</enum><text>a nongovernmental
entity which exercises self-regulatory powers (including imposing sanctions) in
connection with a qualified board or exchange (as defined in section
1256(g)(7)), or</text>
</subparagraph><subparagraph id="ID6B39F7A3DF5A412E8BA8373DE76932D6"><enum>(B)</enum><text>to the extent
provided in regulations, a nongovernmental entity which exercises
self-regulatory powers (including imposing sanctions) as part of performing an
essential governmental function.</text>
</subparagraph></paragraph><paragraph id="ID16E0C1454AE147488EB9C1132A5D9A93"><enum>(5)</enum><header>Exception for
taxes due</header><text>Paragraph (1) shall not apply to any amount paid or
incurred as taxes
due.</text>
</paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="ID3668D24F01C04FEC8BD682D26FBE88AF"><enum>(b)</enum><header>Reporting of
Deductible Amounts</header>
<paragraph id="IDB2283C3C47214FF180D141579AE85E92"><enum>(1)</enum><header>In
general</header><text>Subpart B of part III of subchapter A of chapter 61 is
amended by inserting after section 6050V the following new section:</text>
<quoted-block id="IDBC86B00839BD4F32899AA5BFE8C25C1E" style="OLC">
<section id="ID287F01477B0341F0BE000359B06AE21A"><enum>6050W.</enum><header>Information
with respect to certain fines, penalties, and other amounts</header>
<subsection id="IDBFFEC3EDED7E4CBAA1915269D83C089B"><enum>(a)</enum><header>Requirement of
Reporting</header>
<paragraph id="ID44CD44AB906E498C8602A62257A3F55A"><enum>(1)</enum><header>In
general</header><text>The appropriate official of any government or entity
which is described in section 162(f)(4) which is involved in a suit or
agreement described in paragraph (2) shall make a return in such form as
determined by the Secretary setting forth—</text>
<subparagraph id="ID4C4DDD7C993A4175B24D840A4FE757FE"><enum>(A)</enum><text>the amount
required to be paid as a result of the suit or agreement to which paragraph (1)
of section 162(f) applies,</text>
</subparagraph><subparagraph id="ID363081AC27B040CF9DA0F39B408CB938"><enum>(B)</enum><text>any amount
required to be paid as a result of the suit or agreement which constitutes
restitution or remediation of property, and</text>
</subparagraph><subparagraph id="IDC89E882141A6479B8C844F8B2E7D73B6"><enum>(C)</enum><text>any amount
required to be paid as a result of the suit or agreement for the purpose of
coming into compliance with any law which was violated or involved in the
investigation or inquiry.</text>
</subparagraph></paragraph><paragraph id="ID6D94DD4842C446908EAFB173EE1341B1"><enum>(2)</enum><header>Suit or
agreement described</header>
<subparagraph id="IDF1730F616CA14BE7A2C6CBBB5B37A7F3"><enum>(A)</enum><header>In
general</header><text>A suit or agreement is described in this paragraph
if—</text>
<clause id="ID45B16F3D7A45427B90B72062AC24B770"><enum>(i)</enum><text>it is—</text>
<subclause id="ID6E77FF7152554AD5A8CEC9B04BA3AE8A"><enum>(I)</enum><text>a suit with
respect to a violation of any law over which the government or entity has
authority and with respect to which there has been a court order, or</text>
</subclause><subclause id="ID572815C388B8441CAE27B8410B03362A"><enum>(II)</enum><text>an agreement
which is entered into with respect to a violation of any law over which the
government or entity has authority, or with respect to an investigation or
inquiry by the government or entity into the potential violation of any law
over which such government or entity has authority, and</text>
</subclause></clause><clause id="IDAA5EE45ADBD948AABAFACAB9B0831C6B"><enum>(ii)</enum><text>the aggregate
amount involved in all court orders and agreements with respect to the
violation, investigation, or inquiry is $600 or more.</text>
</clause></subparagraph><subparagraph id="ID05645E13EF1548138B3F0D69BD910289"><enum>(B)</enum><header>Adjustment of
reporting threshold</header><text>The Secretary may adjust the $600 amount in
subparagraph (A)(ii) as necessary in order to ensure the efficient
administration of the internal revenue laws.</text>
</subparagraph></paragraph><paragraph id="IDB4CE2CD5FBD44113A0EAA52076B6F6CB"><enum>(3)</enum><header>Time of
filing</header><text>The return required under this subsection shall be filed
not later than—</text>
<subparagraph id="ID32ACE0F18FA3474793350814E63D8063"><enum>(A)</enum><text>30 days after the
date on which a court order is issued with respect to the suit or the date the
agreement is entered into, as the case may be, or</text>
</subparagraph><subparagraph id="ID675CBF16339943D9B67BCA4DE23DBD84"><enum>(B)</enum><text>the date
specified Secretary.</text>
</subparagraph></paragraph></subsection><subsection id="ID11FF5782A9FE44B7B22DBAC50E2ED046"><enum>(b)</enum><header>Statements To
Be Furnished to Individuals Involved in the Settlement</header><text>Every
person required to make a return under subsection (a) shall furnish to each
person who is a party to the suit or agreement a written statement
showing—</text>
<paragraph id="ID347062DD974044CB95EF05E09385E569"><enum>(1)</enum><text>the name of the
government or entity, and</text>
</paragraph><paragraph id="ID3E6A8429F0BB44559D9499B00E3D3413"><enum>(2)</enum><text>the information
supplied to the Secretary under subsection (a)(1).</text>
</paragraph><continuation-text continuation-text-level="subsection">The
written statement required under the preceding sentence shall be furnished to
the person at the same time the government or entity provides the Secretary
with the information required under subsection (a).</continuation-text></subsection><subsection id="ID32F3DE8A955146CFBEB55C2CE2D3A5D2"><enum>(c)</enum><header>Appropriate
Official Defined</header><text>For purposes of this section, the term
<term>appropriate official</term> means the officer or employee having control
of the suit, investigation, or inquiry or the person appropriately designated
for purposes of this
section.</text>
</subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="ID4AD56331B18141B8A1390D9E0D5F7354"><enum>(2)</enum><header>Conforming
amendment</header><text>The table of sections for subpart B of part III of
subchapter A of chapter 61 is amended by inserting after the item relating to
section 6050V the following new item:</text>
<quoted-block id="IDABF7FBEF5C6B406581AF0482E67ECF3F" style="OLC">
<toc regeneration="no-regeneration">
<toc-entry level="section">Sec. 6050W. Information with respect to
certain fines, penalties, and other
amounts.</toc-entry>
</toc>
<after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="IDEE426C6C57F9416EB68D7990B4C7B2D0"><enum>(c)</enum><header>Effective
Date</header><text>The amendments made by this section shall apply to amounts
paid or incurred on or after the date of the enactment of this Act, except that
such amendments shall not apply to amounts paid or incurred under any binding
order or agreement entered into before such date. Such exception shall not
apply to an order or agreement requiring court approval unless the approval was
obtained before such date.</text>
</subsection></section><section id="IDE4EE56265390443B81F00263EF7B717F"><enum>205.</enum><header>Revision of
tax rules on expatriation of individuals</header>
<subsection id="ID64DC7976D90144DB87190673502DFF9F"><enum>(a)</enum><header>In
General</header><text>Subpart A of part II of subchapter N of chapter 1 is
amended by inserting after section 877 the following new section:</text>
<quoted-block id="IDC81677561FC24FB6B4CA42D0F125BEE4" style="OLC">
<section id="ID7615AB58C5E84673AA5768436EB1DD42"><enum>877A.</enum><header>Tax
responsibilities of expatriation</header>
<subsection id="IDAE337DE531E649489DBD7DBFF8A6E98D"><enum>(a)</enum><header>General
Rules</header><text>For purposes of this subtitle—</text>
<paragraph id="ID64F022AD77C44AC49810A6B84C67DCE2"><enum>(1)</enum><header>Mark to
market</header><text>Except as provided in subsections (d) and (f), all
property of a covered expatriate to whom this section applies shall be treated
as sold on the day before the expatriation date for its fair market
value.</text>
</paragraph><paragraph id="IDF1BE7AC651FF4A5F9E872610D86AE63C"><enum>(2)</enum><header>Recognition of
gain or loss</header><text>In the case of any sale under paragraph (1)—</text>
<subparagraph id="IDCD2151A44CC24F8787F815CD51413F7B"><enum>(A)</enum><text>notwithstanding
any other provision of this title, any gain arising from such sale shall be
taken into account for the taxable year of the sale, and</text>
</subparagraph><subparagraph id="IDE54D47BD355A434D80AAAE32091DCCDB"><enum>(B)</enum><text>any loss arising
from such sale shall be taken into account for the taxable year of the sale to
the extent otherwise provided by this title, except that section 1091 shall not
apply to any such loss.</text>
</subparagraph><continuation-text continuation-text-level="paragraph">Proper
adjustment shall be made in the amount of any gain or loss subsequently
realized for gain or loss taken into account under the preceding
sentence.</continuation-text></paragraph><paragraph id="IDD571F79886BC49E19EA1D066ACF733C0"><enum>(3)</enum><header>Exclusion for
certain gain</header>
<subparagraph id="ID5311F8830CE948E1A2283CCF2B90B978"><enum>(A)</enum><header>In
general</header><text>The amount which, but for this paragraph, would be
includible in the gross income of any individual by reason of this section
shall be reduced (but not below zero) by $600,000. For purposes of this
paragraph, allocable expatriation gain taken into account under subsection
(f)(2) shall be treated in the same manner as an amount required to be
includible in gross income.</text>
</subparagraph><subparagraph id="IDDDF2D80F36334C32BDF6A84CACF0381D"><enum>(B)</enum><header>Cost-of-living
adjustment</header>
<clause id="ID3C8CF1CE6A6745B59510288DAE13178C"><enum>(i)</enum><header>In
general</header><text>In the case of an expatriation date occurring in any
calendar year after 2007, the $600,000 amount under subparagraph (A) shall be
increased by an amount equal to—</text>
<subclause id="IDFB6ED3AA44954B24BFF8075D6180424E"><enum>(I)</enum><text>such dollar
amount, multiplied by</text>
</subclause><subclause id="IDFA7D2F6BD3884E67883A483814F47872"><enum>(II)</enum><text>the
cost-of-living adjustment determined under section 1(f)(3) for such calendar
year, determined by substituting <quote>calendar year 2006</quote> for
<quote>calendar year 1992</quote> in subparagraph (B) thereof.</text>
</subclause></clause><clause id="IDF9A0545D0E60459D8CFD66385154965A"><enum>(ii)</enum><header>Rounding
rules</header><text>If any amount after adjustment under clause (i) is not a
multiple of $1,000, such amount shall be rounded to the next lower multiple of
$1,000.</text>
</clause></subparagraph></paragraph><paragraph id="ID3AA07D043A3E46C3A2BE9CD87CFE9B6A"><enum>(4)</enum><header>Election to
continue to be taxed as united states citizen</header>
<subparagraph id="IDB53A39FED26D4FAE98177E5CF9A385D9"><enum>(A)</enum><header>In
general</header><text>If a covered expatriate elects the application of this
paragraph—</text>
<clause id="IDF6417E6FB05745E3A2216E539B01E47A"><enum>(i)</enum><text>this section
(other than this paragraph and subsection (i)) shall not apply to the
expatriate, but</text>
</clause><clause id="ID731B4757D256401E99E17BA77DBB8B08"><enum>(ii)</enum><text>in the case of
property to which this section would apply but for such election, the
expatriate shall be subject to tax under this title in the same manner as if
the individual were a United States citizen.</text>
</clause></subparagraph><subparagraph id="ID6F383CA853204ECAB3FF5E6014262035"><enum>(B)</enum><header>Requirements</header><text>Subparagraph
(A) shall not apply to an individual unless the individual—</text>
<clause id="ID3EDED55DD5194D9089DAC43CD94B0B1B"><enum>(i)</enum><text>provides security
for payment of tax in such form and manner, and in such amount, as the
Secretary may require,</text>
</clause><clause id="IDAAA9A86202E8479284AC2A01C2E5E64B"><enum>(ii)</enum><text>consents to the
waiver of any right of the individual under any treaty of the United States
which would preclude assessment or collection of any tax which may be imposed
by reason of this paragraph, and</text>
</clause><clause id="IDD5DDFFC4F4DC498ABB59AD48A7341197"><enum>(iii)</enum><text>complies with
such other requirements as the Secretary may prescribe.</text>
</clause></subparagraph><subparagraph id="IDB0FEDF4984E64BB0B5CC371742D09A9B"><enum>(C)</enum><header>Election</header><text>An
election under subparagraph (A) shall apply to all property to which this
section would apply but for the election and, once made, shall be irrevocable.
Such election shall also apply to property the basis of which is determined in
whole or in part by reference to the property with respect to which the
election was made.</text>
</subparagraph></paragraph></subsection><subsection id="ID500DA8D6511D4BAFAD5DD52FE9FAB5E7"><enum>(b)</enum><header>Election To
Defer Tax</header>
<paragraph id="IDC2C7FB44013E49BD8E95D987A634B4DB"><enum>(1)</enum><header>In
general</header><text>If the taxpayer elects the application of this subsection
with respect to any property treated as sold by reason of subsection (a), the
payment of the additional tax attributable to such property shall be postponed
until the due date of the return for the taxable year in which such property is
disposed of (or, in the case of property disposed of in a transaction in which
gain is not recognized in whole or in part, until such other date as the
Secretary may prescribe).</text>
</paragraph><paragraph id="ID755BD6B020DD44F38FA3F48DC39FB6C0"><enum>(2)</enum><header>Determination
of tax with respect to property</header><text>For purposes of paragraph (1),
the additional tax attributable to any property is an amount which bears the
same ratio to the additional tax imposed by this chapter for the taxable year
solely by reason of subsection (a) as the gain taken into account under
subsection (a) with respect to such property bears to the total gain taken into
account under subsection (a) with respect to all property to which subsection
(a) applies.</text>
</paragraph><paragraph id="ID92A489959723469BA0899CBEDF27335C"><enum>(3)</enum><header>Termination of
postponement</header><text>No tax may be postponed under this subsection later
than the due date for the return of tax imposed by this chapter for the taxable
year which includes the date of death of the expatriate (or, if earlier, the
time that the security provided with respect to the property fails to meet the
requirements of paragraph (4), unless the taxpayer corrects such failure within
the time specified by the Secretary).</text>
</paragraph><paragraph id="IDA9BB5BC20CCE4B93A69406D95200CB60"><enum>(4)</enum><header>Security</header>
<subparagraph id="ID277629A6FE44486BB6895B17B73DFBD0"><enum>(A)</enum><header>In
general</header><text>No election may be made under paragraph (1) with respect
to any property unless adequate security is provided to the Secretary with
respect to such property.</text>
</subparagraph><subparagraph id="IDB1E0D65C809244D48C784B6B1E80344C"><enum>(B)</enum><header>Adequate
security</header><text>For purposes of subparagraph (A), security with respect
to any property shall be treated as adequate security if—</text>
<clause id="ID2FE76FB3FB624318AA1FD7BDDB71D130"><enum>(i)</enum><text>it is a bond in
an amount equal to the deferred tax amount under paragraph (2) for the
property, or</text>
</clause><clause id="ID0B2F8E8BF2AD4AD79C0D78EFADA3C9ED"><enum>(ii)</enum><text>the taxpayer
otherwise establishes to the satisfaction of the Secretary that the security is
adequate.</text>
</clause></subparagraph></paragraph><paragraph id="ID9C55A76A287B4FEEA2E019733636E549"><enum>(5)</enum><header>Waiver of
certain rights</header><text>No election may be made under paragraph (1) unless
the taxpayer consents to the waiver of any right under any treaty of the United
States which would preclude assessment or collection of any tax imposed by
reason of this section.</text>
</paragraph><paragraph id="ID42BD5A6E9B4E4471BA50EE8ED4AD9FFF"><enum>(6)</enum><header>Elections</header><text>An
election under paragraph (1) shall only apply to property described in the
election and, once made, is irrevocable. An election may be made under
paragraph (1) with respect to an interest in a trust with respect to which gain
is required to be recognized under subsection (f)(1).</text>
</paragraph><paragraph id="ID3360DB692551413F93BEEA4CEC3A9CD9"><enum>(7)</enum><header>Interest</header><text>For
purposes of section 6601—</text>
<subparagraph id="IDD6FE6DF2B49B4BF3927B305F77CD5CB0"><enum>(A)</enum><text>the last date for
the payment of tax shall be determined without regard to the election under
this subsection, and</text>
</subparagraph><subparagraph id="ID02EF8E98991F4FDAA03AFE444B292F4E"><enum>(B)</enum><text>section
6621(a)(2) shall be applied by substituting <quote>5 percentage points</quote>
for <quote>3 percentage points</quote> in subparagraph (B) thereof.</text>
</subparagraph></paragraph></subsection><subsection id="IDE991FB76C30F44F18808616C0ECAA366"><enum>(c)</enum><header>Covered
Expatriate</header><text>For purposes of this section—</text>
<paragraph id="ID0D281C7B381C4FB8B485EAFBDA95C748"><enum>(1)</enum><header>In
general</header><text>Except as provided in paragraph (2), the term
<term>covered expatriate</term> means an expatriate.</text>
</paragraph><paragraph id="ID2028FC2B232A4454B51EE427E5F7B6EE"><enum>(2)</enum><header>Exceptions</header><text>An
individual shall not be treated as a covered expatriate if—</text>
<subparagraph id="IDEB47EDBECE05487F9FA51B13EE0BDFB1"><enum>(A)</enum><text>the
individual—</text>
<clause id="IDD90F8D674C2843E081EC588323AED89A"><enum>(i)</enum><text>became at birth a
citizen of the United States and a citizen of another country and, as of the
expatriation date, continues to be a citizen of, and is taxed as a resident of,
such other country, and</text>
</clause><clause id="ID759C01C7E3DC463E94B20C33FC360A32"><enum>(ii)</enum><text>has not been a
resident of the United States (as defined in section 7701(b)(1)(A)(ii)) during
the 5 taxable years ending with the taxable year during which the expatriation
date occurs, or</text>
</clause></subparagraph><subparagraph id="ID87B6BB40B62D455ABA42C27755468DE6"><enum>(B)</enum><clause commented="no" display-inline="yes-display-inline" id="ID9F83A54C5F134EFF8207ECA1EE6E4188"><enum>(i)</enum><text>the individual’s
relinquishment of United States citizenship occurs before such individual
attains age 18<fraction>1/2</fraction>, and</text>
</clause><clause id="ID9BC47D38CCC04F089797884AE5ED882E" indent="up1"><enum>(ii)</enum><text>the individual has been a resident
of the United States (as so defined) for not more than 5 taxable years before
the date of relinquishment.</text>
</clause></subparagraph></paragraph></subsection><subsection id="IDEE99C8CA6D484173AE09D67FF33F3A1F"><enum>(d)</enum><header>Exempt
Property; Special Rules for Pension Plans</header>
<paragraph id="IDB20C0B934DC14F669821516A0C57BBD6"><enum>(1)</enum><header>Exempt
property</header><text>This section shall not apply to the following:</text>
<subparagraph id="ID2EEE0F9DD44946AD8930F1CD9D6E19BE"><enum>(A)</enum><header>United states
real property interests</header><text>Any United States real property interest
(as defined in section 897(c)(1)), other than stock of a United States real
property holding corporation which does not, on the day before the expatriation
date, meet the requirements of section 897(c)(2).</text>
</subparagraph><subparagraph id="IDB795B20E13C143BCAE13F242660ADDAD"><enum>(B)</enum><header>Specified
property</header><text>Any property or interest in property not described in
subparagraph (A) which the Secretary specifies in regulations.</text>
</subparagraph></paragraph><paragraph id="ID6B9036A5A3F84D74A188C3CE723C1620"><enum>(2)</enum><header>Special rules
for certain retirement plans</header>
<subparagraph id="IDBA48719A649A483A89ED845BDB2B45D2"><enum>(A)</enum><header>In
general</header><text>If a covered expatriate holds on the day before the
expatriation date any interest in a retirement plan to which this paragraph
applies—</text>
<clause id="ID3989ED782EDF4C0B99B07E7DEA4AC68B"><enum>(i)</enum><text>such interest
shall not be treated as sold for purposes of subsection (a)(1), but</text>
</clause><clause id="IDB6B12765897A4A1B91604436DE12082D"><enum>(ii)</enum><text>an amount equal
to the present value of the expatriate’s nonforfeitable accrued benefit shall
be treated as having been received by such individual on such date as a
distribution under the plan.</text>
</clause></subparagraph><subparagraph id="ID896AB584834748A39C4619021D02D90E"><enum>(B)</enum><header>Treatment of
subsequent distributions</header><text>In the case of any distribution on or
after the expatriation date to or on behalf of the covered expatriate from a
plan from which the expatriate was treated as receiving a distribution under
subparagraph (A), the amount otherwise includible in gross income by reason of
the subsequent distribution shall be reduced by the excess of the amount
includible in gross income under subparagraph (A) over any portion of such
amount to which this subparagraph previously applied.</text>
</subparagraph><subparagraph id="IDC2D500E700AC4FD293E5E2817AC16E7D"><enum>(C)</enum><header>Treatment of
subsequent distributions by plan</header><text>For purposes of this title, a
retirement plan to which this paragraph applies, and any person acting on the
plan’s behalf, shall treat any subsequent distribution described in
subparagraph (B) in the same manner as such distribution would be treated
without regard to this paragraph.</text>
</subparagraph><subparagraph id="ID66296A91872B4DE29736E59D44FA1BC0"><enum>(D)</enum><header>Applicable
plans</header><text>This paragraph shall apply to—</text>
<clause id="IDC692D38FC62744ECB4F00A848C5565E8"><enum>(i)</enum><text>any qualified
retirement plan (as defined in section 4974(c)),</text>
</clause><clause id="ID4B5E0D31788947B9B9609B1A289B4D3C"><enum>(ii)</enum><text>an eligible
deferred compensation plan (as defined in section 457(b)) of an eligible
employer described in section 457(e)(1)(A), and</text>
</clause><clause id="ID714D39B680634748B71A4C5E845DE9E5"><enum>(iii)</enum><text>to the extent
provided in regulations, any foreign pension plan or similar retirement
arrangements or programs.</text>
</clause></subparagraph></paragraph></subsection><subsection id="ID7647F5DC9F074414BFE0991923C2AFEE"><enum>(e)</enum><header>Definitions</header><text>For
purposes of this section—</text>
<paragraph id="IDF0D75810030A4BE6B3AA32C39C1D867B"><enum>(1)</enum><header>Expatriate</header><text>The
term <term>expatriate</term> means—</text>
<subparagraph id="IDDF59530161EB477F9C8BCC3336A4FE20"><enum>(A)</enum><text>any United States
citizen who relinquishes citizenship, and</text>
</subparagraph><subparagraph id="ID9EAECF66C7EC453396A85F5ABA73E382"><enum>(B)</enum><text>any long-term
resident of the United States who—</text>
<clause id="IDACC00E2A28154283AD535C76777F3B64"><enum>(i)</enum><text>ceases to be a
lawful permanent resident of the United States (within the meaning of section
7701(b)(6)), or</text>
</clause><clause id="IDD953E89C37494EABB08EED295E7ED205"><enum>(ii)</enum><text>commences to be
treated as a resident of a foreign country under the provisions of a tax treaty
between the United States and the foreign country and who does not waive the
benefits of such treaty applicable to residents of the foreign country.</text>
</clause></subparagraph></paragraph><paragraph id="ID29035A61E29B41599EAD83C096A9B160"><enum>(2)</enum><header>Expatriation
date</header><text>The term <term>expatriation date</term> means—</text>
<subparagraph id="ID5F347152D35F48C7BAD4BBA41197CD65"><enum>(A)</enum><text>the date an
individual relinquishes United States citizenship, or</text>
</subparagraph><subparagraph id="ID4BCE88CE4EAE472ABE50BE98541FC824"><enum>(B)</enum><text>in the case of a
long-term resident of the United States, the date of the event described in
clause (i) or (ii) of paragraph (1)(B).</text>
</subparagraph></paragraph><paragraph id="ID0EFCCBB233974E47AEFCB5DFFCD1F048"><enum>(3)</enum><header>Relinquishment
of citizenship</header><text>A citizen shall be treated as relinquishing United
States citizenship on the earliest of—</text>
<subparagraph id="IDB34D651D4ECA4212840C7A23D5A093F5"><enum>(A)</enum><text>the date the
individual renounces such individual’s United States nationality before a
diplomatic or consular officer of the United States pursuant to paragraph (5)
of section 349(a) of the <act-name parsable-cite="INA">Immigration and
Nationality Act</act-name> (8 U.S.C. 1481(a)(5)),</text>
</subparagraph><subparagraph id="IDCBCF87DFA40E4A08BB8A9EB9E357AB0C"><enum>(B)</enum><text>the date the
individual furnishes to the United States Department of State a signed
statement of voluntary relinquishment of United States nationality confirming
the performance of an act of expatriation specified in paragraph (1), (2), (3),
or (4) of section 349(a) of the <act-name parsable-cite="INA">Immigration and
Nationality Act</act-name> (8 U.S.C. 1481(a)(1)–(4)),</text>
</subparagraph><subparagraph id="ID2114C503B55D4A5795F2D133D8EE101E"><enum>(C)</enum><text>the date the
United States Department of State issues to the individual a certificate of
loss of nationality, or</text>
</subparagraph><subparagraph id="ID37EDDB3929AE4742A4B28F29A7E384DC"><enum>(D)</enum><text>the date a court
of the United States cancels a naturalized citizen’s certificate of
naturalization.</text>
</subparagraph><continuation-text continuation-text-level="paragraph">Subparagraph (A) or (B) shall not
apply to any individual unless the renunciation or voluntary relinquishment is
subsequently approved by the issuance to the individual of a certificate of
loss of nationality by the United States Department of State.</continuation-text></paragraph><paragraph id="IDBB6AC2D6F50A428D9866C6815EAC5B70"><enum>(4)</enum><header>Long-term
resident</header><text>The term <term>long-term resident</term> has the meaning
given to such term by section 877(e)(2).</text>
</paragraph></subsection><subsection id="ID3B2448CA24EB4E8E818E825EAF962B3E"><enum>(f)</enum><header>Special Rules
Applicable to Beneficiaries’ Interests in Trust</header>
<paragraph id="ID183116C9809C48D388B9EF2628563DCD"><enum>(1)</enum><header>In
general</header><text>Except as provided in paragraph (2), if an individual is
determined under paragraph (3) to hold an interest in a trust on the day before
the expatriation date—</text>
<subparagraph id="ID29A6DA59B44848949C72E643321DE477"><enum>(A)</enum><text>the individual
shall not be treated as having sold such interest,</text>
</subparagraph><subparagraph id="IDD7B6564889144F53AF5B6838CDEC3D8E"><enum>(B)</enum><text>such interest
shall be treated as a separate share in the trust, and</text>
</subparagraph><subparagraph id="IDD374103E80FB46CCBA64B646244CED61"><enum>(C)</enum><clause commented="no" display-inline="yes-display-inline" id="ID7193A621936B45BFAD21CA13FC093B72"><enum>(i)</enum><text>such separate share
shall be treated as a separate trust consisting of the assets allocable to such
share,</text>
</clause><clause id="ID69A4E6A6EF404F14825B6D013CA69887" indent="up1"><enum>(ii)</enum><text>the separate trust shall be
treated as having sold its assets on the day before the expatriation date for
their fair market value and as having distributed all of its assets to the
individual as of such time, and</text>
</clause><clause id="ID13B922FC57D84B779A0B714B3AFBB438" indent="up1"><enum>(iii)</enum><text>the individual shall be treated
as having recontributed the assets to the separate trust.</text>
</clause></subparagraph><continuation-text continuation-text-level="paragraph">Subsection
(a)(2) shall apply to any income, gain, or loss of the individual arising from
a distribution described in subparagraph (C)(ii). In determining the amount of
such distribution, proper adjustments shall be made for liabilities of the
trust allocable to an individual’s share in the trust.</continuation-text></paragraph><paragraph id="IDE3DE2B7B591F405BB74E8216877D0F28"><enum>(2)</enum><header>Special rules
for interests in qualified trusts</header>
<subparagraph id="IDD52CC9CEC419445ABC2A1A181ED81815"><enum>(A)</enum><header>In
general</header><text>If the trust interest described in paragraph (1) is an
interest in a qualified trust—</text>
<clause id="ID737642F0F7674C6AABEDAC4023E03D7B"><enum>(i)</enum><text>paragraph (1) and
subsection (a) shall not apply, and</text>
</clause><clause id="ID7E4A57086F754112B2863E129A574250"><enum>(ii)</enum><text>in addition to
any other tax imposed by this title, there is hereby imposed on each
distribution with respect to such interest a tax in the amount determined under
subparagraph (B).</text>
</clause></subparagraph><subparagraph id="ID4398CC5F38374B9494D29F94739608C9"><enum>(B)</enum><header>Amount of
tax</header><text>The amount of tax under subparagraph (A)(ii) shall be equal
to the lesser of—</text>
<clause id="IDCAE17718CB004A5593F7A45B4313CFEB"><enum>(i)</enum><text>the highest rate
of tax imposed by section 1(e) for the taxable year which includes the day
before the expatriation date, multiplied by the amount of the distribution,
or</text>
</clause><clause id="IDBB6867D102424827A5D008D852C4527E"><enum>(ii)</enum><text>the balance in
the deferred tax account immediately before the distribution determined without
regard to any increases under subparagraph (C)(ii) after the 30th day preceding
the distribution.</text>
</clause></subparagraph><subparagraph id="ID9E3CA1EBEED5472AA028291EBAD883A0"><enum>(C)</enum><header>Deferred tax
account</header><text>For purposes of subparagraph (B)(ii)—</text>
<clause id="ID7025CB7A2C87400BAAB4D495B12BA2C1"><enum>(i)</enum><header>Opening
balance</header><text>The opening balance in a deferred tax account with
respect to any trust interest is an amount equal to the tax which would have
been imposed on the allocable expatriation gain with respect to the trust
interest if such gain had been included in gross income under subsection
(a).</text>
</clause><clause id="ID5390989B298A4BDB93174E51CF6945D6"><enum>(ii)</enum><header>Increase for
interest</header><text>The balance in the deferred tax account shall be
increased by the amount of interest determined (on the balance in the account
at the time the interest accrues), for periods after the 90th day after the
expatriation date, by using the rates and method applicable under section 6621
for underpayments of tax for such periods, except that section 6621(a)(2) shall
be applied by substituting <quote>5 percentage points</quote> for <quote>3
percentage points</quote> in subparagraph (B) thereof.</text>
</clause><clause id="IDDCA5761CAF1F46EEB81AC4399E73AE65"><enum>(iii)</enum><header>Decrease for
taxes previously paid</header><text>The balance in the tax deferred account
shall be reduced—</text>
<subclause id="ID41A30BE329064492A0437BFA97BBF3C0"><enum>(I)</enum><text>by the amount of
taxes imposed by subparagraph (A) on any distribution to the person holding the
trust interest, and</text>
</subclause><subclause id="ID54BC15D876EE460E886ACFC97AE0324F"><enum>(II)</enum><text>in the case of a
person holding a nonvested interest, to the extent provided in regulations, by
the amount of taxes imposed by subparagraph (A) on distributions from the trust
with respect to nonvested interests not held by such person.</text>
</subclause></clause></subparagraph><subparagraph id="IDB34E2CC34FE84AAEBE7631643043453F"><enum>(D)</enum><header>Allocable
expatriation gain</header><text>For purposes of this paragraph, the allocable
expatriation gain with respect to any beneficiary’s interest in a trust is the
amount of gain which would be allocable to such beneficiary’s vested and
nonvested interests in the trust if the beneficiary held directly all assets
allocable to such interests.</text>
</subparagraph><subparagraph id="IDCD7A143B35E74FB5969EE5C92BDD228F"><enum>(E)</enum><header>Tax deducted
and withheld</header>
<clause id="IDF7FB1B3A3D664EEB812FBA8CCC2A57F3"><enum>(i)</enum><header>In
general</header><text>The tax imposed by subparagraph (A)(ii) shall be deducted
and withheld by the trustees from the distribution to which it relates.</text>
</clause><clause id="ID9F424CC68F0C46DEB4F1F21CA1C622FC"><enum>(ii)</enum><header>Exception
where failure to waive treaty rights</header><text>If an amount may not be
deducted and withheld under clause (i) by reason of the distributee failing to
waive any treaty right with respect to such distribution—</text>
<subclause id="ID16E766A7FE824447ACD50A7292AFEE58"><enum>(I)</enum><text>the tax imposed
by subparagraph (A)(ii) shall be imposed on the trust and each trustee shall be
personally liable for the amount of such tax, and</text>
</subclause><subclause id="IDBB9693ADA79644CCA1FB9616FBE4BA6A"><enum>(II)</enum><text>any other
beneficiary of the trust shall be entitled to recover from the distributee the
amount of such tax imposed on the other beneficiary.</text>
</subclause></clause></subparagraph><subparagraph id="ID92D2676424DB46A0AE665D75906B572A"><enum>(F)</enum><header>Disposition</header><text>If
a trust ceases to be a qualified trust at any time, a covered expatriate
disposes of an interest in a qualified trust, or a covered expatriate holding
an interest in a qualified trust dies, then, in lieu of the tax imposed by
subparagraph (A)(ii), there is hereby imposed a tax equal to the lesser
of—</text>
<clause id="IDCA16267C88C441FDAC9534B33F9AB496"><enum>(i)</enum><text>the tax
determined under paragraph (1) as if the day before the expatriation date were
the date of such cessation, disposition, or death, whichever is applicable,
or</text>
</clause><clause id="ID9DC437CBA6B142AD9322A69CEC2D9E64"><enum>(ii)</enum><text>the balance in
the tax deferred account immediately before such date.</text>
</clause><continuation-text continuation-text-level="subparagraph">Such
tax shall be imposed on the trust and each trustee shall be personally liable
for the amount of such tax and any other beneficiary of the trust shall be
entitled to recover from the covered expatriate or the estate the amount of
such tax imposed on the other beneficiary.</continuation-text></subparagraph><subparagraph id="ID36675FE6DD2E4717B36C833DCC8A553E"><enum>(G)</enum><header>Definitions and
special rules</header><text>For purposes of this paragraph—</text>
<clause id="ID5363EA3CC1BE48F0BF1B4785AB5E6591"><enum>(i)</enum><header>Qualified
trust</header><text>The term <term>qualified trust</term> means a trust which
is described in section 7701(a)(30)(E).</text>
</clause><clause id="IDF0627E2519194424A5644A5D34C4773C"><enum>(ii)</enum><header>Vested
interest</header><text>The term <term>vested interest</term> means any interest
which, as of the day before the expatriation date, is vested in the
beneficiary.</text>
</clause><clause id="ID6942893FEFCC4423AB01BECD069D49AF"><enum>(iii)</enum><header>Nonvested
interest</header><text>The term <term>nonvested interest</term> means, with
respect to any beneficiary, any interest in a trust which is not a vested
interest. Such interest shall be determined by assuming the maximum exercise of
discretion in favor of the beneficiary and the occurrence of all contingencies
in favor of the beneficiary.</text>
</clause><clause id="ID1E1FF3A3BBA14D76BA6DCA634F17CFCA"><enum>(iv)</enum><header>Adjustments</header><text>The
Secretary may provide for such adjustments to the bases of assets in a trust or
a deferred tax account, and the timing of such adjustments, in order to ensure
that gain is taxed only once.</text>
</clause><clause id="ID29DDBDF349CC4DA5B9FED514E1B7D06D"><enum>(v)</enum><header>Coordination
with retirement plan rules</header><text>This subsection shall not apply to an
interest in a trust which is part of a retirement plan to which subsection
(d)(2) applies.</text>
</clause></subparagraph></paragraph><paragraph id="IDD10FF2A57F1F450E91DABB1A0B26E1AA"><enum>(3)</enum><header>Determination
of beneficiaries’ interest in trust</header>
<subparagraph id="ID21D74C48E5374009AC4F89259A9689E7"><enum>(A)</enum><header>Determinations
under paragraph <enum-in-header>(1)</enum-in-header></header><text>For purposes
of paragraph (1), a beneficiary’s interest in a trust shall be based upon all
relevant facts and circumstances, including the terms of the trust instrument
and any letter of wishes or similar document, historical patterns of trust
distributions, and the existence of and functions performed by a trust
protector or any similar adviser.</text>
</subparagraph><subparagraph id="IDA4704AF4424F4994A18039DC9ED02854"><enum>(B)</enum><header>Other
determinations</header><text>For purposes of this section—</text>
<clause id="ID21A038BEF3924ED2B8BA212C3B2582F5"><enum>(i)</enum><header>Constructive
ownership</header><text>If a beneficiary of a trust is a corporation,
partnership, trust, or estate, the shareholders, partners, or beneficiaries
shall be deemed to be the trust beneficiaries for purposes of this
section.</text>
</clause><clause id="IDB6B0F313E38C4A639FDC263FA0A3696E"><enum>(ii)</enum><header>Taxpayer
return position</header><text>A taxpayer shall clearly indicate on its income
tax return—</text>
<subclause id="IDF218CA233106444393AA7D56AB9E6F4A"><enum>(I)</enum><text>the methodology
used to determine that taxpayer’s trust interest under this section, and</text>
</subclause><subclause id="ID531C258C956544178A8E34101AD354FE"><enum>(II)</enum><text>if the taxpayer
knows (or has reason to know) that any other beneficiary of such trust is using
a different methodology to determine such beneficiary’s trust interest under
this section.</text>
</subclause></clause></subparagraph></paragraph></subsection><subsection id="ID7D620D96D34E4335990CDC020C7D7DB5"><enum>(g)</enum><header>Termination of
Deferrals, etc</header><text>In the case of any covered expatriate,
notwithstanding any other provision of this title—</text>
<paragraph id="ID5E32BA32A6534488BD2694AE27AF610B"><enum>(1)</enum><text>any period during
which recognition of income or gain is deferred shall terminate on the day
before the expatriation date, and</text>
</paragraph><paragraph id="ID2A8E710B008A483CBEF91786AED854CF"><enum>(2)</enum><text>any extension of
time for payment of tax shall cease to apply on the day before the expatriation
date and the unpaid portion of such tax shall be due and payable at the time
and in the manner prescribed by the Secretary.</text>
</paragraph></subsection><subsection id="IDC733CC40602F4A6C944798CA20C47B49"><enum>(h)</enum><header>Imposition of
Tentative Tax</header>
<paragraph id="ID0458001303684F839F620AA064AA4B9D"><enum>(1)</enum><header>In
general</header><text>If an individual is required to include any amount in
gross income under subsection (a) for any taxable year, there is hereby
imposed, immediately before the expatriation date, a tax in an amount equal to
the amount of tax which would be imposed if the taxable year were a short
taxable year ending on the expatriation date.</text>
</paragraph><paragraph id="ID263F32508C7146259AE64DDDF4E8F41C"><enum>(2)</enum><header>Due
date</header><text>The due date for any tax imposed by paragraph (1) shall be
the 90th day after the expatriation date.</text>
</paragraph><paragraph id="IDD446F5CEFC194948A26E2CD0099D8029"><enum>(3)</enum><header>Treatment of
tax</header><text>Any tax paid under paragraph (1) shall be treated as a
payment of the tax imposed by this chapter for the taxable year to which
subsection (a) applies.</text>
</paragraph><paragraph id="ID5ADA83790E18426EA00EAF1093994B37"><enum>(4)</enum><header>Deferral of
tax</header><text>The provisions of subsection (b) shall apply to the tax
imposed by this subsection to the extent attributable to gain includible in
gross income by reason of this section.</text>
</paragraph></subsection><subsection id="IDAF6DF0A5E8394CB8BAFD0EAC5C0B9FC4"><enum>(i)</enum><header>Special Liens
for Deferred Tax Amounts</header>
<paragraph id="IDF5547D337D5C4179ABEC35275526A056"><enum>(1)</enum><header>Imposition of
lien</header>
<subparagraph id="IDB62138ACA53D463181BBA30B71DB75E6"><enum>(A)</enum><header>In
general</header><text>If a covered expatriate makes an election under
subsection (a)(4) or (b) which results in the deferral of any tax imposed by
reason of subsection (a), the deferred amount (including any interest,
additional amount, addition to tax, assessable penalty, and costs attributable
to the deferred amount) shall be a lien in favor of the United States on all
property of the expatriate located in the United States (without regard to
whether this section applies to the property).</text>
</subparagraph><subparagraph id="ID7751B7D743034B518C56018F51D19F39"><enum>(B)</enum><header>Deferred
amount</header><text>For purposes of this subsection, the deferred amount is
the amount of the increase in the covered expatriate’s income tax which, but
for the election under subsection (a)(4) or (b), would have occurred by reason
of this section for the taxable year including the expatriation date.</text>
</subparagraph></paragraph><paragraph id="IDB07F03B549FB453E9970562F19897828"><enum>(2)</enum><header>Period of
lien</header><text>The lien imposed by this subsection shall arise on the
expatriation date and continue until—</text>
<subparagraph id="ID2E7341AD7DC242979BFDED4D58D850F4"><enum>(A)</enum><text>the liability for
tax by reason of this section is satisfied or has become unenforceable by
reason of lapse of time, or</text>
</subparagraph><subparagraph id="ID43A6A9E9D339439CB1EE04B80E816EE0"><enum>(B)</enum><text>it is established
to the satisfaction of the Secretary that no further tax liability may arise by
reason of this section.</text>
</subparagraph></paragraph><paragraph id="ID7A2D021FB58C4D1891A53A380FFD9412"><enum>(3)</enum><header>Certain rules
apply</header><text>The rules set forth in paragraphs (1), (3), and (4) of
section 6324A(d) shall apply with respect to the lien imposed by this
subsection as if it were a lien imposed by section 6324A.</text>
</paragraph></subsection><subsection id="ID2BECB23D09DD46BDB7A3EBC310F3E6F7"><enum>(j)</enum><header>Regulations</header><text>The
Secretary shall prescribe such regulations as may be necessary or appropriate
to carry out the purposes of this
section.</text>
</subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="IDB5D9E49EF5224E5792B46673B9D02B88"><enum>(b)</enum><header>Inclusion in
Income of Gifts and Bequests Received by United States Citizens and Residents
From Expatriates</header><text>Section 102 (relating to gifts, etc. not
included in gross income) is amended by adding at the end the following new
subsection:</text>
<quoted-block id="ID5D73F46B22B04C7FB9AF639F162B80DC" style="OLC">
<subsection id="ID302E73A4150646ECB530B98828E65501"><enum>(d)</enum><header>Gifts and
Inheritances From Covered Expatriates</header>
<paragraph id="IDBD495546AF7649848514F5AB99E181CD"><enum>(1)</enum><header>Treatment of
gifts and inheritances</header>
<subparagraph id="id02E61B478FE34B0ABD79DB713BAF48DA"><enum>(A)</enum><header>In
general</header><text>Subsection (a) shall not exclude from gross income the
value of any property acquired by gift, bequest, devise, or inheritance from a
covered expatriate after the expatriation date.</text>
</subparagraph><subparagraph id="id3AF2EDBD31B345E495230ACF5664F55B"><enum>(B)</enum><header>Determination
of basis</header><text>Notwithstanding sections 1015 or 1022, the basis of any
property described in subparagraph (A) in the hands of the donee or the person
acquiring such property from the decedent shall be equal to the fair market
value of the property at the time of the gift, bequest, devise, or
inheritance.</text>
</subparagraph></paragraph><paragraph id="ID5E325CB50B4C43A094B360DBE10B25FD"><enum>(2)</enum><header>Exceptions for
transfers otherwise subject to estate or gift tax</header><text>Paragraph (1)
shall not apply to any property if either—</text>
<subparagraph id="ID3C300C78F80B44CCAE240C275DBA0726"><enum>(A)</enum><text>the gift,
bequest, devise, or inheritance is—</text>
<clause id="ID3C64608609DA426B894AAFC4DAD6AF58"><enum>(i)</enum><text>shown on a timely
filed return of tax imposed by chapter 12 as a taxable gift by the covered
expatriate, or</text>
</clause><clause id="IDA40CD82C1D084771B319145F1255ACD9"><enum>(ii)</enum><text>included in the
gross estate of the covered expatriate for purposes of chapter 11 and shown on
a timely filed return of tax imposed by chapter 11 of the estate of the covered
expatriate, or</text>
</clause></subparagraph><subparagraph id="ID1FD80FAA92F24667B6360BBAA4D70B46"><enum>(B)</enum><text>no such return
was timely filed but no such return would have been required to be filed even
if the covered expatriate were a citizen or long-term resident of the United
States.</text>
</subparagraph></paragraph><paragraph id="id5E6CF5EA321C45C3B16E543CE9C0D588"><enum>(3)</enum><header>Definitions</header><text>For
purposes of this subsection, any term used in this subsection which is also
used in section 877A shall have the same meaning as when used in section
877A.</text>
</paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="ID2FCB0D7EAA844A5F82390CB168BCA5B7"><enum>(c)</enum><header>Definition of
Termination of United States Citizenship</header><text>Section 7701(a) is
amended by adding at the end the following new paragraph:</text>
<quoted-block id="ID74F4C7A2A3DE4CECB5EFEE58E9A2D7F2" style="OLC">
<paragraph id="ID7F6DB58FA3854AE3A3A42E29D4961131"><enum>(50)</enum><header>Termination of
united states citizenship</header>
<subparagraph id="IDA360C2CEC3744BFABBFE727EAA046D79"><enum>(A)</enum><header>In
general</header><text>An individual shall not cease to be treated as a United
States citizen before the date on which the individual’s citizenship is treated
as relinquished under section 877A(e)(3).</text>
</subparagraph><subparagraph id="ID4991828E53104407AB2D4C83657316A6"><enum>(B)</enum><header>Dual
citizens</header><text>Under regulations prescribed by the Secretary,
subparagraph (A) shall not apply to an individual who became at birth a citizen
of the United States and a citizen of another
country.</text>
</subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="ID1BAE7A6561CA4412943996157BC00D12"><enum>(d)</enum><header>Ineligibility
for Visa or Admission to United States</header>
<paragraph commented="no" id="IDAD66654C1741441AA23A40F59C7936C8"><enum>(1)</enum><header>In
general</header><text>Section 212(a)(10)(E) of the
<act-name parsable-cite="INA">Immigration and Nationality Act</act-name> (8
U.S.C. 1182(a)(10)(E)) is amended to read as follows:</text>
<quoted-block act-name="Immigration and Nationality Act" id="ID0FCD6426B2804FBFAB248FF2FBC0C709" style="OLC">
<subparagraph commented="no" id="IDFC1A84D66CBB4B9082A031C40627663E"><enum>(E)</enum><header>Former citizens
not in compliance with expatriation revenue provisions</header><text>Any alien
who is a former citizen of the United States who relinquishes United States
citizenship (within the meaning of section 877A(e)(3) of the Internal Revenue
Code of 1986) and who is not in compliance with section 877A of such Code
(relating to expatriation) is
inadmissible.</text>
</subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="ID246020DA119C45F992EB20E6106F9C86"><enum>(2)</enum><header>Availability of
information</header>
<subparagraph id="ID01AA67FDA44F4909A99DF188BD2D4340"><enum>(A)</enum><header>In
general</header><text>Section 6103(l) (relating to disclosure of returns and
return information for purposes other than tax administration) is amended by
adding at the end the following new paragraph:</text>
<quoted-block id="ID7BD79FFB3E3D4C9D86829B04AD332B1D" style="OLC">
<paragraph id="IDB70274CE2471457D97CD66F920F90555"><enum>(21)</enum><header>Disclosure to
deny visa or admission to certain expatriates</header><text>Upon written
request of the Attorney General or the Attorney General’s delegate, the
Secretary shall disclose whether an individual is in compliance with section
877A (and if not in compliance, any items of noncompliance) to officers and
employees of the Federal agency responsible for administering section
212(a)(10)(E) of the <act-name parsable-cite="INA">Immigration and Nationality
Act</act-name> solely for the purpose of, and to the extent necessary in,
administering such section
212(a)(10)(E).</text>
</paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph><subparagraph id="IDE7C7DA20B3ED43AF8B2F8F8AC4F64E84"><enum>(B)</enum><header>Safeguards</header><text>Section
6103(p)(4) (relating to safeguards) is amended by striking <quote>or
(20)</quote> each place it appears and inserting <quote>(20), or
(21)</quote>.</text>
</subparagraph></paragraph><paragraph id="IDFAB4A1209F204C9D99B1DE4FC0BAC446"><enum>(3)</enum><header>Effective
dates</header><text>The amendments made by this subsection shall apply to
individuals who relinquish United States citizenship on or after the date of
the enactment of this Act.</text>
</paragraph></subsection><subsection id="ID4EE84177804E45E8AA03FECD76AB40BE"><enum>(e)</enum><header>Conforming
Amendments</header>
<paragraph id="IDC4DC89DD63764F739B3A948C1F2680E0"><enum>(1)</enum><text>Section 877 is
amended by adding at the end the following new subsection:</text>
<quoted-block id="ID2BE12C67B021494EAD0B4C823122DB55" style="OLC">
<subsection id="ID63873327ABB74BBA9898D18030B8254C"><enum>(h)</enum><header>Application</header><text>This
section shall not apply to an expatriate (as defined in section 877A(e)) whose
expatriation date (as so defined) occurs on or after the date of the enactment
of this
subsection.</text>
</subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="ID0CA87737239F425F91B793019DA8846A"><enum>(2)</enum><text>Section 2107 is
amended by adding at the end the following new subsection:</text>
<quoted-block id="ID75B7207B856E4043A79AA43A5C2347B6" style="OLC">
<subsection id="ID0760C2E06283427A979A4424C519B4BA"><enum>(f)</enum><header>Application</header><text>This
section shall not apply to any expatriate subject to section
877A.</text>
</subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="IDD2F8403C434B48D9BEB16F79E893B6D8"><enum>(3)</enum><text>Section
2501(a)(3) is amended by adding at the end the following new
subparagraph:</text>
<quoted-block id="ID6D36ACEF90CD4A94B75EEA585BC298D1" style="OLC">
<subparagraph id="ID3E620D2A522F4814BE9828601F4143B2"><enum>(C)</enum><header>Application</header><text>This
paragraph shall not apply to any expatriate subject to section
877A.</text>
</subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="IDB2E94B02DC2F476E82604EB0DD723490"><enum>(4)</enum><text>Section 6039G(a)
is amended by inserting <quote>or 877A</quote> after <quote>section
877(b)</quote>.</text>
</paragraph><paragraph id="ID8005D6BB2355403CB127DEAF5FBBEE9D"><enum>(5)</enum><text>The second
sentence of section 6039G(d) is amended by inserting <quote>or who relinquishes
United States citizenship (within the meaning of section 877A(e)(3))</quote>
after <quote>section 877(a))</quote>.</text>
</paragraph></subsection><subsection id="IDC75B42F9A812491DB59DA6DA2E0DD33A"><enum>(f)</enum><header>Clerical
Amendment</header><text>The table of sections for subpart A of part II of
subchapter N of chapter 1 is amended by inserting after the item relating to
section 877 the following new item:</text>
<quoted-block id="IDFD73A0D79C664809843A9635CAB7EF4A" style="OLC">
<toc regeneration="no-regeneration">
<toc-entry level="section">Sec. 877A. Tax responsibilities of
expatriation.</toc-entry>
</toc>
<after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="ID2125A4D25D594BAC9B0318F1441ADE7E"><enum>(g)</enum><header>Effective
Date</header>
<paragraph id="IDA6FAC928F8CD4E17847B20DEFF1E933A"><enum>(1)</enum><header>In
general</header><text>Except as provided in this subsection, the amendments
made by this section shall apply to expatriates (within the meaning of section
877A(e) of the Internal Revenue Code of 1986, as added by this section) whose
expatriation date (as so defined) occurs on or after the date of the enactment
of this Act.</text>
</paragraph><paragraph id="IDA7E7388B56BC4081BE6733BA9DE760F4"><enum>(2)</enum><header>Gifts and
bequests</header><text>Section 102(d) of the Internal Revenue Code of 1986 (as
added by subsection (b)) shall apply to gifts and bequests received on or after
the date of the enactment of this Act, from an individual or the estate of an
individual whose expatriation date (as so defined) occurs after such
date.</text>
</paragraph><paragraph id="ID6FDCA7DB4B50479E8C3D762BDC074238"><enum>(3)</enum><header>Due date for
tentative tax</header><text>The due date under section 877A(h)(2) of the
Internal Revenue Code of 1986, as added by this section, shall in no event
occur before the 90th day after the date of the enactment of this Act.</text>
</paragraph></subsection></section><section id="id5E446215CF7B43718C9CC8157D499ECF"><enum>206.</enum><header>Limitation on
annual amounts which may be deferred under nonqualified deferred compensation
arrangements</header>
<subsection id="id922C32E330DF42448CA9F56903809204"><enum>(a)</enum><header>In
general</header><text>Section 409A(a) of the Internal Revenue Code of 1986
(relating to inclusion of gross income under nonqualified deferred compensation
plans) is amended—</text>
<paragraph id="id0E92E7D44B8C454DB65AD03F717E4DCF"><enum>(1)</enum><text>by striking
<quote>and (4)</quote> in subclause (I) of paragraph (1)(A)(i) and inserting
<quote>(4), and (5)</quote>, and</text>
</paragraph><paragraph id="id887DBFE5FF214610B77CB6908CA68C67"><enum>(2)</enum><text>by adding at the
end the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="idBDE26154D6B84C13BBC147B6F8B7DCA7" style="OLC">
<paragraph id="id460F5446493744E6AD48444BBADE896F"><enum>(5)</enum><header>Annual
limitation on aggregate deferred amounts</header>
<subparagraph id="id3C3AE93D7DFB48C086EC1086E4D72BB9"><enum>(A)</enum><header>Limitation</header><text>The
requirements of this paragraph are met if the plan provides that the aggregate
amount of compensation which is deferred for any taxable year with respect to a
participant under the plan may not exceed the applicable dollar amount for the
taxable year.</text>
</subparagraph><subparagraph commented="no" id="id68E5B018181C4AE6A0F9539FAAC57D50"><enum>(B)</enum><header>Inclusion of
future earnings</header><text>If an amount is includible under paragraph (1) in
the gross income of a participant for any taxable year by reason of any failure
to meet the requirements of this paragraph, any income (whether actual or
notional) for any subsequent taxable year shall be included in gross income
under paragraph (1)(A) in such subsequent taxable year to the extent such
income—</text>
<clause commented="no" id="id07BA980E9C004BCE8E3FBE380063293B"><enum>(i)</enum><text>is attributable
to compensation (or income attributable to such compensation) required to be
included in gross income by reason of such failure (including by reason of this
subparagraph), and</text>
</clause><clause commented="no" id="id49C0049749FE49158A5597736F98C00B"><enum>(ii)</enum><text>is not subject
to a substantial risk of forfeiture and has not been previously included in
gross income.</text>
</clause></subparagraph><subparagraph id="id32BF9F8F2D72489994D06B44271887DF"><enum>(C)</enum><header>Aggregation
rule</header><text>For purposes of this paragraph, all nonqualified deferred
compensation plans maintained by all employers treated as a single employer
under subsection (d)(6) shall be treated as 1 plan.</text>
</subparagraph><subparagraph id="id8D29B692949745869751FC73DD354158"><enum>(D)</enum><header>Applicable
dollar amount</header><text>For purposes of this paragraph—</text>
<clause id="id94513C02749546CC922112E032C20AF4"><enum>(i)</enum><header>In
general</header><text>The term <term>applicable dollar amount</term> means,
with respect to any participant, the lesser of—</text>
<subclause id="idFA83AE4546854B5BA3CEF642720EB5A6"><enum>(I)</enum><text>the average
annual compensation which was payable during the base period to the participant
by the employer maintaining the nonqualified deferred compensation plan (or any
predecessor of the employer) and which was includible in the participant's
gross income for taxable years in the base period, or</text>
</subclause><subclause id="id40F766B5CDC946E38BC983D41DF2920C"><enum>(II)</enum><text>$1,000,000.</text>
</subclause></clause><clause id="id364180CE5F654C3F9BB21AB21FA66BEA"><enum>(ii)</enum><header>Base
period</header>
<subclause id="id9693E8A52F4D4A92B3709001709B7433"><enum>(I)</enum><header>In
general</header><text>The term <term>base period</term> means, with respect to
any computation year, the 5-taxable year period ending with the taxable year
preceding the computation year.</text>
</subclause><subclause id="id4C7C5F7862364103ADDBD81171B0C746"><enum>(II)</enum><header>Elections made
before computation year</header><text>If, before the beginning of the
computation year, an election described in paragraph (4)(B) is made by the
participant to have compensation for services performed in the computation year
deferred under a nonqualified deferred compensation plan, the base period shall
be the 5-taxable year period ending with the taxable year preceding the taxable
year in which the election is made.</text>
</subclause><subclause id="idB2FF7FEDEDEA452FB626205BA7A3A79C"><enum>(III)</enum><header>Computation
year</header><text>For purposes of this clause, the term <term>computation
year</term> means any taxable year of the participant for which the limitation
under subparagraph (A) is being determined.</text>
</subclause><subclause id="id431C350ABEAF4B0AA885929C0B340CA7"><enum>(IV)</enum><header>Special rule
for employees of less than 5 years</header><text>If a participant did not
perform services for the employer maintaining the nonqualified deferred
compensation plan (or any predecessor of the employer) during the entire
5-taxable year period referred to in subparagraph (A) or (B), only the portion
of such period during which the participant performed such services shall be
taken into
account.</text>
</subclause></clause></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection commented="no" display-inline="no-display-inline" id="idD57B230C02A64D4B8E4F0F539D849CD4"><enum>(b)</enum><header>Effective
date</header>
<paragraph commented="no" display-inline="no-display-inline" id="id399ACF0A68E14F19AB796FA6E91A7BA4"><enum>(1)</enum><header>In
general</header><text>The amendments made by this section shall apply to
taxable years beginning after December 31, 2006, except that—</text>
<subparagraph commented="no" display-inline="no-display-inline" id="idD312DDEBB57545C0B4B69179F77E9118"><enum>(A)</enum><text>the amendments
shall only apply to amounts deferred after December 31, 2006 (and to earnings
on such amounts), and</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="id116C124B23F04D18B7F9F7E4AD0E6228"><enum>(B)</enum><text>taxable years
beginning on or before December 31, 2006, shall be taken into account in
determining the average annual compensation of a participant during any base
period for purposes of section 409A(a)(5)(D) of the Internal Revenue Code of
1986 (as added by such amendments).</text>
</subparagraph></paragraph><paragraph commented="no" display-inline="no-display-inline" id="id912C4025D2B04D9DB8C7DA2421E17442"><enum>(2)</enum><header>Guidance
relating to certain existing arrangements</header><text>Not later than 60 days
after the date of the enactment of this Act, the Secretary of the Treasury
shall issue guidance providing a limited period during which a nonqualified
deferred compensation plan adopted before December 31, 2006, may, without
violating the requirements of section 409A(a) of such Code, be amended—</text>
<subparagraph commented="no" display-inline="no-display-inline" id="id7E3C42A47980496C929BDD75A87C469C"><enum>(A)</enum><text>to provide that a
participant may, no later than December 31, 2007, cancel or modify an
outstanding deferral election with regard to all or a portion of amounts
deferred after December 31, 2006, to the extent necessary for the plan to meet
the requirements of section 409A(a)(5) of such Code (as added by the amendments
made by this section), but only if amounts subject to the cancellation or
modification are, to the extent not previously included in gross income,
includible in income of the participant when no longer subject to substantial
risk of forfeiture, and</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="idFD1EE7E334F84C2BBBA87A6B05DD8AE3"><enum>(B)</enum><text>to conform to the
requirements of section 409A(a)(5) of such Code (as added by the amendments
made by this section) with regard to amounts deferred after December 31,
2006.</text>
</subparagraph></paragraph></subsection></section><section id="ID7CC507A79EA74C9F9A57E0D632242791"><enum>207.</enum><header>Increase in
criminal monetary penalty limitation for the underpayment or overpayment of tax
due to fraud</header>
<subsection commented="no" id="IDB87D81590E3E449BAD773CD9991AF901"><enum>(a)</enum><header>In
General</header><text>Section 7206 (relating to fraud and false statements) is
amended—</text>
<paragraph commented="no" id="ID0CBB8AE20E9845BDA99408EC0BC280CF"><enum>(1)</enum><text>by striking
<quote>Any person who—</quote> and inserting <quote>(a)
<header-in-text level="subsection" style="OLC">In
General</header-in-text>.—</quote>, and</text>
</paragraph><paragraph commented="no" id="ID5CA95D6A26D841438343A44244A30480"><enum>(2)</enum><text>by adding at the
end the following new subsection:</text>
<quoted-block id="ID36B4664966574C79BDA1C70E2340983E" style="OLC">
<subsection commented="no" id="IDE83AB5CC54B2403EAFBB2D2C6A740E71"><enum>(b)</enum><header>Increase in
Monetary Limitation for Underpayment or Overpayment of Tax Due to
Fraud</header><text>If any portion of any underpayment (as defined in section
6664(a)) or overpayment (as defined in section 6401(a)) of tax required to be
shown on a return is attributable to fraudulent action described in subsection
(a), the applicable dollar amount under subsection (a) shall in no event be
less than an amount equal to such portion. A rule similar to the rule under
section 6663(b) shall apply for purposes of determining the portion so
attributable.</text>
</subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="IDDF9D16F31F2047849553F9B0D06CAEA4"><enum>(b)</enum><header>Increase in
Penalties</header>
<paragraph id="ID7E82196F132A467ABC005FFDC5BD17ED"><enum>(1)</enum><header>Attempt to
evade or defeat tax</header><text>Section 7201 is amended—</text>
<subparagraph id="ID668C40C1D6D0401899788654B1AB2CD0"><enum>(A)</enum><text>by striking
<quote>$100,000</quote> and inserting <quote>$500,000</quote>,</text>
</subparagraph><subparagraph id="ID97BD049377764584B8D11E3CF95363B3"><enum>(B)</enum><text>by striking
<quote>$500,000</quote> and inserting <quote>$1,000,000</quote>, and</text>
</subparagraph><subparagraph id="IDF8C86D7F506346B0AFBD00D26C7C26EB"><enum>(C)</enum><text>by striking
<quote>5 years</quote> and inserting <quote>10 years</quote>.</text>
</subparagraph></paragraph><paragraph id="ID671AAB99873F4CBCB1BB77BF7D6225C2"><enum>(2)</enum><header>Willful failure
to file return, supply information, or pay tax</header><text>Section 7203 is
amended—</text>
<subparagraph id="IDBE21FDC8F4984C02A4D9F4EDC7A978F7"><enum>(A)</enum><text>in the first
sentence—</text>
<clause id="ID722AAA8E091642988FFABEE547249BBE"><enum>(i)</enum><text>by
striking <quote>Any person</quote> and inserting the following:</text>
<quoted-block id="IDE74D069BC15847739B669276DC984B00" style="OLC">
<subsection id="ID7B04674DB4D64ADEA88B79F51352B8A6"><enum>(a)</enum><header>In
General</header><text>Any person</text>
</subsection><after-quoted-block>,
and</after-quoted-block></quoted-block>
</clause><clause id="ID7C6F621B4FDC4ECEB51F70A342C04E5F"><enum>(ii)</enum><text>by
striking <quote>$25,000</quote> and inserting <quote>$50,000</quote>,</text>
</clause></subparagraph><subparagraph id="ID06CFB3EE572748FDABEF214A0952426E"><enum>(B)</enum><text>in the third
sentence, by striking <quote>section</quote> and inserting
<quote>subsection</quote>, and</text>
</subparagraph><subparagraph id="IDEE45BF7C54804092B9FF43EA09D6BB4B"><enum>(C)</enum><text>by adding at the
end the following new subsection:</text>
<quoted-block id="IDA2C65973E05A49C6B1CEF343ED4FEFAC" style="OLC">
<subsection id="ID3384842E5AF64148A08FECFAFB07DBB4"><enum>(b)</enum><header>Aggravated
Failure To File</header>
<paragraph id="ID73C449E26A8D492F97F7BF244F33690A"><enum>(1)</enum><header>In
general</header><text>In the case of any failure described in paragraph (2),
the first sentence of subsection (a) shall be applied by substituting—</text>
<subparagraph id="ID742E8D67C64440DEA6BE2A29E4B1FD36"><enum>(A)</enum><text><quote>felony</quote>
for <quote>misdemeanor</quote>,</text>
</subparagraph><subparagraph id="ID02E1AE785F89430AAD7031435D4B1C56"><enum>(B)</enum><text><quote>$500,000
($1,000,000</quote> for <quote>$25,000 ($100,000</quote>, and</text>
</subparagraph><subparagraph id="ID61292BDC540D47AEB4EBE18DFD0282BE"><enum>(C)</enum><text><quote>10
years</quote> for <quote>1
year</quote>.</text>
</subparagraph></paragraph></subsection><after-quoted-block>.
</after-quoted-block></quoted-block>
<quoted-block display-inline="no-display-inline" id="id67DAF754EE8047D29AB7855724194FAD" style="OLC">
<paragraph commented="no" id="ID4a53b3ac8d8a47179b18a95207fd5c85"><enum>(2)</enum><header>Failure
described</header><text>A failure described in this paragraph is a failure to
make a return described in subsection (a) for a period of 3 or more consecutive
taxable years if the aggregate tax liability for such period is not less than
$100,000.</text>
</paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph></paragraph><paragraph id="ID61554FA10EAA45B995BEE16407787D4C"><enum>(3)</enum><header>Fraud and false
statements</header><text>Section 7206(a) (as redesignated by subsection (a)) is
amended—</text>
<subparagraph id="IDE70CEE720D8044CA8E3BF9D52045EF2C"><enum>(A)</enum><text>by striking
<quote>$100,000</quote> and inserting <quote>$500,000</quote>,</text>
</subparagraph><subparagraph id="IDFA107BAC7CA6465F8A04045F62AE933D"><enum>(B)</enum><text>by striking
<quote>$500,000</quote> and inserting <quote>$1,000,000</quote>, and</text>
</subparagraph><subparagraph id="IDCB2BA76850E04FD397387E88CE73468E"><enum>(C)</enum><text>by striking
<quote>3 years</quote> and inserting <quote>5 years</quote>.</text>
</subparagraph></paragraph></subsection><subsection id="IDB1A40D6626D44D1B87F57FE47BFAB2FD"><enum>(c)</enum><header>Effective
Date</header><text>The amendments made by this section shall apply to actions,
and failures to act, occurring after the date of the enactment of this
Act.</text>
</subsection></section><section id="ID9094E10E6FF8401E92DAE728BD54EE56"><enum>208.</enum><header>Doubling of
certain penalties, fines, and interest on underpayments related to certain
offshore financial arrangements</header>
<subsection id="ID6F567C9951434E7CB145CE6C0FD9673C"><enum>(a)</enum><header>Determination
of Penalty</header>
<paragraph id="IDC9F6838397F641A292B749FE89EDD7E2"><enum>(1)</enum><header>In
general</header><text>Notwithstanding any other provision of law, in the case
of an applicable taxpayer—</text>
<subparagraph id="IDB61FDE3EFAA7453B9C0271BC9F38B6CF"><enum>(A)</enum><text>the determination
as to whether any interest or applicable penalty is to be imposed with respect
to any arrangement described in paragraph (2), or to any underpayment of
Federal income tax attributable to items arising in connection with any such
arrangement, shall be made without regard to the rules of subsections (b), (c),
and (d) of section 6664 of the Internal Revenue Code of 1986, and</text>
</subparagraph><subparagraph id="IDBFF8822BE6A34233818831602E3F86E1"><enum>(B)</enum><text>if any such
interest or applicable penalty is imposed, the amount of such interest or
penalty shall be equal to twice that determined without regard to this
section.</text>
</subparagraph></paragraph><paragraph id="IDF92FE87FC3204F9BBBF64C5F3C2E89E7"><enum>(2)</enum><header>Applicable
taxpayer</header><text>For purposes of this subsection—</text>
<subparagraph id="IDF60165D4024440B998AAECC61E99BC47"><enum>(A)</enum><header>In
general</header><text>The term <term>applicable taxpayer</term> means a
taxpayer which—</text>
<clause id="ID4585A26884E246FBAB92585C1698925D"><enum>(i)</enum><text>has
underreported its United States income tax liability with respect to any item
which directly or indirectly involves—</text>
<subclause id="IDEC6CB841393C40DE963DD4A2ECE1DC7C"><enum>(I)</enum><text>any financial
arrangement which in any manner relies on the use of offshore payment
mechanisms (including credit, debit, or charge cards) issued by banks or other
entities in foreign jurisdictions, or</text>
</subclause><subclause id="IDAC43F6C94C1F45049CFE1551B283E14C"><enum>(II)</enum><text>any offshore
financial arrangement (including any arrangement with foreign banks, financial
institutions, corporations, partnerships, trusts, or other entities),
and</text>
</subclause></clause><clause id="IDE11D5101082442C797B126004A014B86"><enum>(ii)</enum><text>has neither
signed a closing agreement pursuant to the Voluntary Offshore Compliance
Initiative established by the Department of the Treasury under Revenue
Procedure 2003–11 nor voluntarily disclosed its participation in such
arrangement by notifying the Internal Revenue Service of such arrangement prior
to the issue being raised by the Internal Revenue Service during an
examination.</text>
</clause></subparagraph><subparagraph id="IDB6E39E2BABE541159CEC1FCDFF102B16"><enum>(B)</enum><header>Authority to
waive</header><text>The Secretary of the Treasury or the Secretary’s delegate
may waive the application of paragraph (1) to any taxpayer if the Secretary or
the Secretary’s delegate determines that the use of such offshore payment
mechanisms is incidental to the transaction and, in addition, in the case of a
trade or business, such use is conducted in the ordinary course of the type of
trade or business of the taxpayer.</text>
</subparagraph><subparagraph id="ID2A1303098F564ED79ADDD526501A441E"><enum>(C)</enum><header>Issues
raised</header><text>For purposes of subparagraph (A)(ii), an item shall be
treated as an issue raised during an examination if the individual examining
the return—</text>
<clause id="ID580C92BA7A9643608A28F4064DDD7145"><enum>(i)</enum><text>communicates to
the taxpayer knowledge about the specific item, or</text>
</clause><clause id="IDE800573F992F49BE81B87F05F4534F3B"><enum>(ii)</enum><text>has made a
request to the taxpayer for information and the taxpayer could not make a
complete response to that request without giving the examiner knowledge of the
specific item.</text>
</clause></subparagraph></paragraph></subsection><subsection id="IDA537D5F38F0548C3BE1166B9996E4624"><enum>(b)</enum><header>Applicable
Penalty</header><text>For purposes of this section, the term <term>applicable
penalty</term> means any penalty, addition to tax, or fine imposed under
chapter 68 of the Internal Revenue Code of 1986.</text>
</subsection><subsection id="ID4139B3F84C8E49789557BC6122BF0EA6"><enum>(c)</enum><header>Effective
Date</header><text>The provisions of this section shall apply to interest,
penalties, additions to tax, and fines with respect to any taxable year if, as
of the date of the enactment of this Act, the assessment of any tax, penalty,
or interest with respect to such taxable year is not prevented by the operation
of any law or rule of law.</text>
</subsection></section><section id="ID838BF1A043BA40808BB88F3B5B1B35B9"><enum>209.</enum><header>Increase in
penalty for bad checks and money orders</header>
<subsection id="ID511FDB429CF04FE9AB9357CAE43898B3"><enum>(a)</enum><header>In
General</header><text>Section 6657 (relating to bad checks) is amended—</text>
<paragraph id="IDDF401BA1B5F843679BAC976AA51491ED"><enum>(1)</enum><text>by striking
<quote>$750</quote> and inserting <quote>$1,250</quote>, and</text>
</paragraph><paragraph id="IDA7EC81E09D86490B8F20C8D78AFF9083"><enum>(2)</enum><text>by striking
<quote>$15</quote> and inserting <quote>$25</quote>.</text>
</paragraph></subsection><subsection id="IDB0FA076A2A674FAAB235C828963D5ADA"><enum>(b)</enum><header>Effective
Date</header><text>The amendments made by this section apply to checks or money
orders received after the date of the enactment of this Act.</text>
</subsection></section><section id="ID4CB0652085F241FBA4D07008318B3B5F"><enum>210.</enum><header>Treatment of
contingent payment convertible debt instruments</header>
<subsection id="ID6EE31DC67E39425284B8039BAE4B2CD2"><enum>(a)</enum><header>In
General</header><text>Section 1275(d) (relating to regulation authority) is
amended—</text>
<paragraph id="ID712DB940626F401CA4A5CC031D3E7B9C"><enum>(1)</enum><text>by striking
<quote>The Secretary</quote> and inserting the following:</text>
<quoted-block id="IDD0B9285D23384952A5C3D8835D9EBA08" style="OLC">
<paragraph id="IDC9364C42C13C4FF595A2B75213D97C18"><enum>(1)</enum><header>In
general</header><text>The Secretary</text>
</paragraph><after-quoted-block>,
and</after-quoted-block></quoted-block>
</paragraph><paragraph id="IDB8F665BC3FDF4EA789EB1A75F09DD816"><enum>(2)</enum><text>by adding at the
end the following new paragraph:</text>
<quoted-block id="ID470CF55B93F44886B4D00C00E57E7109" style="OLC">
<paragraph id="IDC2736DC4056D43BA9F545A6347FB1FE7"><enum>(2)</enum><header>Treatment of
contingent payment convertible debt</header>
<subparagraph id="ID4FF916D8B9C64D48B6B0BF77D6AD92E5"><enum>(A)</enum><header>In
general</header><text>In the case of a debt instrument which—</text>
<clause id="IDFB2789144E8F4DFABA9942CDF9702EB0"><enum>(i)</enum><text>is convertible
into stock of the issuing corporation, into stock or debt of a related party
(within the meaning of section 267(b) or 707(b)(1)), or into cash or other
property in an amount equal to the approximate value of such stock or debt,
and</text>
</clause><clause id="ID9F9DA558E4CB4740AB6D68CEB069F6F5"><enum>(ii)</enum><text>provides for
contingent payments,</text>
</clause><continuation-text continuation-text-level="subparagraph">any
regulations which require original issue discount to be determined by reference
to the comparable yield of a noncontingent fixed-rate debt instrument shall be
applied as if the regulations require that such comparable yield be determined
by reference to a noncontingent fixed-rate debt instrument which is convertible
into stock.</continuation-text></subparagraph><subparagraph id="ID99FA99FBB2C74092B00C2DA6B36CFE5E"><enum>(B)</enum><header>Special
rule</header><text>For purposes of subparagraph (A), the comparable yield shall
be determined without taking into account the yield resulting from the
conversion of a debt instrument into
stock.</text>
</subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="IDEE0308DFFC0545AFBD091978B7595AA1"><enum>(b)</enum><header>Cross
Reference</header><text>Section 163(e)(6) (relating to cross references) is
amended by adding at the end the following:</text>
<quoted-block id="ID95B9224E491B42D8AD2FB1B18D7CEC18" style="OLC">
<subparagraph id="ID9A9E687292544CFC9D98CD6A2E8B60E7"><enum></enum><text>For the
treatment of contingent payment convertible debt, see section
1275(d)(2).</text>
</subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="ID8D9F73AC9A82408A8B7C23A5CA103DED"><enum>(c)</enum><header>Effective
Date</header><text>The amendments made by this section shall apply to debt
instruments issued on or after the date of the enactment of this Act.</text>
</subsection></section><section id="idDA25B461341349ADA8CD86F5A9B033FB"><enum>211.</enum><header>Extension of
IRS user fees</header><text display-inline="no-display-inline">Subsection (c)
of section 7528 (relating to Internal Revenue Service user fees) is amended by
striking <quote>September 30, 2014</quote> and inserting <quote>September 30,
2016</quote>.</text>
</section><section id="id7B6DF7D97B5241369EFE337B459A8B50"><enum>212.</enum><header>Modification
of collection due process procedures for employment tax liabilities</header>
<subsection id="id4AACC13AAF5D4D8C9E0FB8DB3178FDDC"><enum>(a)</enum><header>In
general</header><text>Section 6330(f) (relating to jeopardy and State refund
collection) is amended—</text>
<paragraph id="id73D028038BCD4918B7B7D851D494DD4A"><enum>(1)</enum><text>by striking
<quote>; or</quote> at the end of paragraph (1) and inserting a comma,</text>
</paragraph><paragraph id="idF823EEFB11F445A7854A9255B0F8BA8C"><enum>(2)</enum><text>by adding
<quote>or</quote> at the end of paragraph (2), and</text>
</paragraph><paragraph id="id0D8D1966665C49BD821C3EDABFA59CE1"><enum>(3)</enum><text>by inserting
after paragraph (2) the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="id5E1CA41F19D84CA096B02D3489F399AC" style="OLC">
<paragraph id="id3703296F7A624B54B68B3D5A0BDBD789"><enum>(3)</enum><text>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>Effective
date</header><text>The amendments made by this section shall apply to levies
issued on or after the date that is 120 days after the date of the enactment of
this Act.</text>
</subsection></section><section commented="no" display-inline="no-display-inline" id="id87C75CE998F24C698D2022AF702659B0"><enum>213.</enum><header>Modifications
to whistleblower reforms</header>
<subsection id="idCD8AE21CB94C4B9F90D3E5517E2DAA59"><enum>(a)</enum><header>Modification of
tax threshold for awards</header><text>Subparagraph (B) of section 7623(b)(5),
as added by the Tax Relief and Health Care Act of 2006, is amended by striking
<quote>$2,000,000</quote> and inserting <quote>$20,000</quote>.</text>
</subsection><subsection id="id84E2AF4C52D84DD5B7CD339A317573FC"><enum>(b)</enum><header>Whistleblower
Office</header>
<paragraph id="idA96727E287C84B7C81E44EBF9F8CA057"><enum>(1)</enum><header>In
general</header><text>Section 7623 is amended by adding at the end the
following new subsections:</text>
<quoted-block display-inline="no-display-inline" id="id2EE60163364049449A806443184A83E0" style="OLC">
<subsection id="id4143E07888A14E8D837679F2E6A44B58"><enum>(c)</enum><header>Whistleblower
Office</header>
<paragraph id="idAF644793E0CB42C8B71D16ECBBBA6A6A"><enum>(1)</enum><header>In
general</header><text>There is established in the Internal Revenue Service an
office to be known as the <quote>Whistleblower Office</quote> which—</text>
<subparagraph id="idB307B9775374447DAFC2D1DDDFE904A7"><enum>(A)</enum><text>shall at all
times operate at the direction of the Commissioner and coordinate and consult
with other divisions in the Internal Revenue Service as directed by the
Commissioner,</text>
</subparagraph><subparagraph id="idE2393F54C03448CABD12CB77A594E255"><enum>(B)</enum><text>shall analyze
information received from any individual described in subsection (b) and either
investigate the matter itself or assign it to the appropriate Internal Revenue
Service office,</text>
</subparagraph><subparagraph id="id4C3D21AE68834EEDB9E9605FFE109EBE"><enum>(C)</enum><text>shall monitor any
action taken with respect to such matter,</text>
</subparagraph><subparagraph id="id73A400A39A2F42A8911C74ABA553E64E"><enum>(D)</enum><text>shall inform such
individual that it has accepted the individual’s information for further
review,</text>
</subparagraph><subparagraph id="id914DF418FB48442DB108E4A9D86486F6"><enum>(E)</enum><text>may require such
individual and any legal representative of such individual to not disclose any
information so provided,</text>
</subparagraph><subparagraph id="idA384FF95017343A8B5FBBFE2D7E4F0FA"><enum>(F)</enum><text>in its sole
discretion, may ask for additional assistance from such individual or any legal
representative of such individual, and</text>
</subparagraph><subparagraph id="idD896828A329B48FD98E73C1A8D156D58"><enum>(G)</enum><text>shall determine
the amount to be awarded to such individual under subsection (b).</text>
</subparagraph></paragraph><paragraph id="id7C50D7B5F88B45379902B0CA29195B5B"><enum>(2)</enum><header>Funding for
office</header><text>There is authorized to be appropriated $10,000,000 for
each fiscal year for the Whistleblower Office. These funds shall be used to
maintain the Whistleblower Office and also to reimburse other Internal Revenue
Service offices for related costs, such as costs of investigation and
collection.</text>
</paragraph><paragraph id="id449BDCA9B9BF410F918EEF9266189EF0"><enum>(3)</enum><header>Request for
assistance</header>
<subparagraph id="id8FA58282D66B432E81FAE19DDF3CC3E7"><enum>(A)</enum><header>In
general</header><text>Any assistance requested under paragraph (1)(F) shall be
under the direction and control of the Whistleblower Office or the office
assigned to investigate the matter under subparagraph (A). No individual or
legal representative whose assistance is so requested may by reason of such
request represent himself or herself as an employee of the Federal
Government.</text>
</subparagraph><subparagraph id="id43614E5426094A439611A503C221B915"><enum>(B)</enum><header>Funding of
assistance</header><text>From the amounts available for expenditure under
subsection (b), the Whistleblower Office may, with the agreement of the
individual described in subsection (b), reimburse the costs incurred by any
legal representative of such individual in providing assistance described in
subparagraph (A).</text>
</subparagraph></paragraph></subsection><subsection id="id36E7664C17E941A4BEEDFE77279544EC"><enum>(d)</enum><header>Reports</header><text>The
Secretary shall each year conduct a study and report to Congress on the use of
this section, including—</text>
<paragraph id="id351D1783B0094C34B5E95ED295D1C689"><enum>(1)</enum><text>an analysis of
the use of this section during the preceding year and the results of such use,
and</text>
</paragraph><paragraph id="idD303CDA9FF8C45C682859EFB5100BDA2"><enum>(2)</enum><text>any legislative
or administrative recommendations regarding the provisions of this section and
its
application.</text>
</paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="id27BB12B0339A492E96779B3A242B6D55"><enum>(2)</enum><header>Conforming
amendment</header><text>Section 406 of division A of the Tax Relief and Health
Care Act of 2006 is amended by striking subsections (b) and (c).</text>
</paragraph><paragraph id="id1869A1A7256A4AA4AA9F004C61E1D035"><enum>(3)</enum><header>Report on
implementation</header><text>Not later than 6 months after the date of the
enactment of this Act, the Secretary of the Treasury shall submit to Congress a
report on the establishment and operation of the Whistleblower Office under
section 7623(c) of the Internal Revenue Code of 1986.</text>
</paragraph></subsection><subsection id="idDAD9360F0C9F4516BF10DD04F9F5CDE3"><enum>(c)</enum><header>Publicity of
award appeals</header><text>Paragraph (4) of section 7623(b), as added by the
Tax Relief and Health Care Act of 2006, is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="idC36C6C3F085C4635BE94742BD82B21DA" style="OLC">
<paragraph id="idF6F2B7FA555C462997A814CFC2D4F75F"><enum>(4)</enum><header>Appeal of award
determination</header>
<subparagraph id="id6CFA698F80624488BC57F7F3EBEE7E1A"><enum>(A)</enum><header>In
general</header><text display-inline="yes-display-inline">Any determination
regarding an award under paragraph (1), (2), or (3) may, within 30 days of such
determination, be appealed to the Tax Court (and the Tax Court shall have
jurisdiction with respect to such matter).</text>
</subparagraph><subparagraph id="id4EF6C0B15D804AF8A50229BDBF658C6A"><enum>(B)</enum><header>Publicity of
appeals</header><text>Notwithstanding sections 7458 and 7461, the Tax Court
may, in order to preserve the anonymity, privacy, or confidentiality of any
person under this subsection, provide by rules adopted under section 7453 that
portions of filings, hearings, testimony, evidence, and reports in connection
with proceedings under this subsection may be closed to the public or to
inspection by the
public.</text>
</subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection commented="no" display-inline="no-display-inline" id="id99D1D0AAFE4C41A48C5465DFBFB52B2D"><enum>(d)</enum><header>Effective
date</header>
<paragraph commented="no" display-inline="no-display-inline" id="id3616C85ADC8E47868DBDA6D6D0C27472"><enum>(1)</enum><header>In
general</header><text>Except as provided in paragraph (2), the amendments made
by this section shall apply to information provided on or after the date of the
enactment of this Act.</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="id376009D2118F441CAA481AB93759ACAC"><enum>(2)</enum><header>Publicity of
award appeals</header><text>The amendment made by subsection (c) shall take
effect as if included in the amendments made by section 406 of the Tax Relief
and Health Care Act of 2006.</text>
</paragraph></subsection></section><section id="id4856A201A6A141E5B6D60DED139CAF44"><enum>214.</enum><header>Modifications
of definition of employees covered by denial of deduction for excessive
employee remuneration</header>
<subsection id="idCBABFCA5C63343258CECD85370A32DC6"><enum>(a)</enum><header>In
general</header><text>Paragraph (3) of section 162(m) is amended to read as
follows:</text>
<quoted-block display-inline="no-display-inline" id="id49E0F62D221446ADAB4DC1ABA494FD93" style="OLC">
<paragraph id="id1843E35FC9D9465DAD4094CA9E3E4B37"><enum>(3)</enum><header>Covered
employee</header><text>For purposes of this subsection, the term <term>covered
employee</term> means, with respect to any taxpayer for any taxable year, an
individual who—</text>
<subparagraph id="idCA4CA6A3F7064A268F4CD0C0A593813E"><enum>(A)</enum><text>was the chief
executive officer of the taxpayer, or an individual acting in such a capacity,
at any time during the taxable year,</text>
</subparagraph><subparagraph id="id52D3CE23E2A54D55B1D806F50A5B85BB"><enum>(B)</enum><text>is 1 of the 4
highest compensated officers of the taxpayer for the taxable year (other than
the individual described in subparagraph (A)), or</text>
</subparagraph><subparagraph id="id015EB9F01BD1464F866BEB13C37791D1"><enum>(C)</enum><text>was a covered
employee of the taxpayer (or any predecessor) for any preceding taxable year
beginning after December 31, 2006.</text>
</subparagraph><continuation-text continuation-text-level="paragraph">In the
case of an individual who was a covered employee for any taxable year beginning
after December 31, 2006, the term <term>covered employee</term> shall include a
beneficiary of such employee with respect to any remuneration for services
performed by such employee as a covered employee (whether or not such services
are performed during the taxable year in which the remuneration is
paid).</continuation-text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="idC243424F07BB4E96BF87824EAD5A620D"><enum>(b)</enum><header>Effective
date</header><text>The amendment made by this section shall apply to taxable
years beginning after December 31, 2006.</text>
</subsection></section>
January 22, 2007
Read twice and placed on the calendar