[Congressional Bills 111th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1586 Enrolled Bill (ENR)]

        H.R.1586

                      One Hundred Eleventh Congress

                                 of the

                        United States of America


                          AT THE SECOND SESSION

          Begun and held at the City of Washington on Tuesday,
             the fifth day of January, two thousand and ten


                                 An Act


 
    To modernize the air traffic control system, improve the safety, 
  reliability, and availability of transportation by air in the United 
  States, provide for modernization of the air traffic control system, 
reauthorize the Federal Aviation Administration, and for other purposes.

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


                               short title

  Section 1. This Act may be cited as the ``______Act of____''.

                                TITLE I

                          EDUCATION JOBS FUND


                           education jobs funds

    Sec. 101. There are authorized to be appropriated and there are 
appropriated out of any money in the Treasury not otherwise obligated 
for necessary expenses for an Education Jobs Fund, $10,000,000,000: 
Provided, That the amount under this heading shall be administered 
under the terms and conditions of sections 14001 through 14013 and 
title XV of division A of the American Recovery and Reinvestment Act of 
2009 (Public Law 111-5) except as follows:
        (1) Allocation of funds.--
            (A) Funds appropriated under this heading shall be 
        available only for allocation by the Secretary of Education (in 
        this heading referred to as the Secretary) in accordance with 
        subsections (a), (b), (d), (e), and (f) of section 14001 of 
        division A of Public Law 111-5 and subparagraph (B) of this 
        paragraph, except that the amount reserved under such 
        subsection (b) shall not exceed $1,000,000 and such subsection 
        (f) shall be applied by substituting one year for two years.
            (B) Prior to allocating funds to States under section 
        14001(d) of division A of Public Law 111-5, the Secretary shall 
        allocate 0.5 percent to the Secretary of the Interior for 
        schools operated or funded by the Bureau of Indian Affairs on 
        the basis of the schools' respective needs for activities 
        consistent with this heading under such terms and conditions as 
        the Secretary of the Interior may determine.
        (2) Reservation.--A State that receives an allocation of funds 
    appropriated under this heading may reserve not more than 2 percent 
    for the administrative costs of carrying out its responsibilities 
    with respect to those funds.
        (3) Awards to local educational agencies.--
            (A) Except as specified in paragraph (2), an allocation of 
        funds to a State shall be used only for awards to local 
        educational agencies for the support of elementary and 
        secondary education in accordance with paragraph (5) for the 
        2010-2011 school year (or, in the case of reallocations made 
        under section 14001(f) of division A of Public Law 111-5, for 
        the 2010-2011 or the 2011-2012 school year).
            (B) Funds used to support elementary and secondary 
        education shall be distributed through a State's primary 
        elementary and secondary funding formulae or based on local 
        educational agencies' relative shares of funds under part A of 
        title I of the Elementary and Secondary Education Act of 1965 
        (20 U.S.C. 6311 et seq.) for the most recent fiscal year for 
        which data are available.
            (C) Subsections (a) and (b) of section 14002 of division A 
        of Public Law 111-5 shall not apply to funds appropriated under 
        this heading.
        (4) Compliance with education reform assurances.--For purposes 
    of awarding funds appropriated under this heading, any State that 
    has an approved application for Phase II of the State Fiscal 
    Stabilization Fund that was submitted in accordance with the 
    application notice published in the Federal Register on November 
    17, 2009 (74 Fed. Reg. 59142) shall be deemed to be in compliance 
    with subsection (b) and paragraphs (2) through (5) of subsection 
    (d) of section 14005 of division A of Public Law 111-5.
        (5) Requirement to use funds to retain or create education 
    jobs.--Notwithstanding section 14003(a) of division A of Public Law 
    111-5, funds awarded to local educational agencies under paragraph 
    (3)--
            (A) may be used only for compensation and benefits and 
        other expenses, such as support services, necessary to retain 
        existing employees, to recall or rehire former employees, and 
        to hire new employees, in order to provide early childhood, 
        elementary, or secondary educational and related services; and
            (B) may not be used for general administrative expenses or 
        for other support services expenditures as those terms were 
        defined by the National Center for Education Statistics in its 
        Common Core of Data as of the date of enactment of this Act.
        (6) Prohibition on use of funds for rainy-day funds or debt 
    retirement.--A State that receives an allocation may not use such 
    funds, directly or indirectly, to--
            (A) establish, restore, or supplement a rainy-day fund;
            (B) supplant State funds in a manner that has the effect of 
        establishing, restoring, or supplementing a rainy-day fund;
            (C) reduce or retire debt obligations incurred by the 
        State; or
            (D) supplant State funds in a manner that has the effect of 
        reducing or retiring debt obligations incurred by the State.
        (7) Deadline for award.--The Secretary shall award funds 
    appropriated under this heading not later than 45 days after the 
    date of the enactment of this Act to States that have submitted 
    applications meeting the requirements applicable to funds under 
    this heading. The Secretary shall not require information in 
    applications beyond what is necessary to determine compliance with 
    applicable provisions of law.
        (8) Alternate distribution of funds.--If, within 30 days after 
    the date of the enactment of this Act, a Governor has not submitted 
    an approvable application, the Secretary shall provide for funds 
    allocated to that State to be distributed to another entity or 
    other entities in the State (notwithstanding section 14001(e) of 
    division A of Public Law 111-5) for support of elementary and 
    secondary education, under such terms and conditions as the 
    Secretary may establish, provided that all terms and conditions 
    that apply to funds appropriated under this heading shall apply to 
    such funds distributed to such entity or entities. No distribution 
    shall be made to a State under this paragraph, however, unless the 
    Secretary has determined (on the basis of such information as may 
    be available) that the requirements of clauses (i), (ii), or (iii) 
    of paragraph 10(A) are likely to be met, notwithstanding the lack 
    of an application from the Governor of that State.
        (9) Local educational agency application.--Section 442 of the 
    General Education Provisions Act shall not apply to a local 
    educational agency that has previously submitted an application to 
    the State under title XIV of division A of Public Law 111-5. The 
    assurances provided under that application shall continue to apply 
    to funds awarded under this heading.
        (10) Maintenance of effort.--
            (A) Except as provided in paragraph (8), the Secretary 
        shall not allocate funds to a State under paragraph (1) unless 
        the Governor of the State provides an assurance to the 
        Secretary that--
                (i) for State fiscal year 2011, the State will maintain 
            State support for elementary and secondary education (in 
            the aggregate or on the basis of expenditures per pupil) 
            and for public institutions of higher education (not 
            including support for capital projects or for research and 
            development or tuition and fees paid by students) at not 
            less than the level of such support for each of the two 
            categories, respectively, for State fiscal year 2009;
                (ii) for State fiscal year 2011, the State will 
            maintain State support for elementary and secondary 
            education and for public institutions of higher education 
            (not including support for capital projects or for research 
            and development or tuition and fees paid by students) at a 
            percentage of the total revenues available to the State 
            that is equal to or greater than the percentage provided 
            for each of the two categories, respectively, for State 
            fiscal year 2010; or
                (iii) in the case of a State in which State tax 
            collections for calendar year 2009 were less than State tax 
            collections for calendar year 2006, for State fiscal year 
            2011 the State will maintain State support for elementary 
            and secondary education (in the aggregate) and for public 
            institutions of higher education (not including support for 
            capital projects or for research and development or tuition 
            and fees paid by students)--

                    (I) at not less than the level of such support for 
                each of the two categories, respectively, for State 
                fiscal year 2006; or
                    (II) at a percentage of the total revenues 
                available to the State that is equal to or greater than 
                the percentage provided for each of the two categories, 
                respectively, for State fiscal year 2006.

            (B) Section 14005(d)(1) and subsections (a) through (c) of 
        section 14012 of division A of Public Law 111-5 shall not apply 
        to funds appropriated under this heading.
        (11) Additional requirements for the state of texas.--The 
    following requirements shall apply to the State of Texas:
            (A) Notwithstanding paragraph (3)(B), funds used to support 
        elementary and secondary education shall be distributed based 
        on local educational agencies' relative shares of funds under 
        part A of title I of the Elementary and Secondary Education Act 
        of 1965 (20 U.S.C. 6311 et seq.) for the most recent fiscal 
        year which data are available. Funds distributed pursuant to 
        this paragraph shall be used to supplement and not supplant 
        State formula funding that is distributed on a similar basis to 
        part A of title I of the Elementary and Secondary Education Act 
        of 1965 (20 U.S.C. 6311 et seq.).
            (B) The Secretary shall not allocate funds to the State of 
        Texas under paragraph (1) unless the Governor of the State 
        provides an assurance to the Secretary that the State will for 
        fiscal years 2011, 2012, and 2013 maintain State support for 
        elementary and secondary education at a percentage of the total 
        revenues available to the State that is equal to or greater 
        than the percentage provided for such purpose for fiscal year 
        2011 prior to the enactment of this Act.
            (C) Notwithstanding paragraph (8), no distribution shall be 
        made to the State of Texas or local education agencies therein 
        unless the Governor of Texas makes an assurance to the 
        Secretary that the requirements in paragraphs (11)(A) and 
        (11)(B) will be met, notwithstanding the lack of an application 
        from the Governor of Texas.

                                TITLE II

       STATE FISCAL RELIEF AND OTHER PROVISIONS; REVENUE OFFSETS

          Subtitle A--State Fiscal Relief and Other Provisions


                    extension of arra increase in fmap

    Sec. 201. Section 5001 of the American Recovery and Reinvestment 
Act of 2009 (Public Law 111-5) is amended--
        (1) in subsection (a)(3), by striking ``first calendar 
    quarter'' and inserting ``first 3 calendar quarters'';
        (2) in subsection (b)--
            (A) in paragraph (1), by striking ``paragraph (2)'' and 
        inserting ``paragraphs (2) and (3)''; and
            (B) by adding at the end the following:
        ``(3) Phase-down of general increase.--
            ``(A) Second quarter of fiscal year 2011.--For each State, 
        for the second quarter of fiscal year 2011, the FMAP percentage 
        increase for the State under paragraph (1) or (2) (as 
        applicable) shall be 3.2 percentage points.
            ``(B) Third quarter of fiscal year 2011.--For each State, 
        for the third quarter of fiscal year 2011, the FMAP percentage 
        increase for the State under paragraph (1) or (2) (as 
        applicable) shall be 1.2 percentage points.'';
        (3) in subsection (c)--
            (A) in paragraph (2)(B), by striking ``July 1, 2010'' and 
        inserting ``January 1, 2011'';
            (B) in paragraph (3)(B)(i), by striking ``July 1, 2010'' 
        and inserting ``January 1, 2011'' each place it appears; and
            (C) in paragraph (4)(C)(ii), by striking ``the 3-
        consecutive-month period beginning with January 2010'' and 
        inserting ``any 3-consecutive-month period that begins after 
        December 2009 and ends before January 2011'';
        (4) in subsection (e), by adding at the end the following:
``Notwithstanding paragraph (5), effective for payments made on or 
after January 1, 2010, the increases in the FMAP for a State under this 
section shall apply to payments under title XIX of such Act that are 
attributable to expenditures for medical assistance provided to 
nonpregnant childless adults made eligible under a State plan under 
such title (including under any waiver under such title or under 
section 1115 of such Act (42 U.S.C. 1315)) who would have been eligible 
for child health assistance or other health benefits under eligibility 
standards in effect as of December 31, 2009, of a waiver of the State 
child health plan under the title XXI of such Act.'';
        (5) in subsection (g)--
            (A) in paragraph (1), by striking ``September 30, 2011'' 
        and inserting ``March 31, 2012'';
            (B) in paragraph (2), by inserting ``of such Act'' after 
        ``1923''; and
            (C) by adding at the end the following:
        ``(3) Certification by chief executive officer.--No additional 
    Federal funds shall be paid to a State as a result of this section 
    with respect to a calendar quarter occurring during the period 
    beginning on January 1, 2011, and ending on June 30, 2011, unless, 
    not later than 45 days after the date of enactment of this 
    paragraph, the chief executive officer of the State certifies that 
    the State will request and use such additional Federal funds.''; 
    and
        (6) in subsection (h)(3), by striking ``December 31, 2010'' and 
    inserting ``June 30, 2011''.


        treatment of certain drugs for computation of medicaid amp

    Sec. 202. Effective as if included in the enactment of Public Law 
111-148, section 1927(k)(1)(B)(i)(IV) of the Social Security Act (42 
U.S.C. 1396r-8(k)(1)(B)(i)(IV)), as amended by section 2503(a)(2)(B) of 
Public Law 111-148 and section 1101(c)(2) of Public Law 111-152, is 
amended by adding at the end the following: ``, unless the drug is an 
inhalation, infusion, instilled, implanted, or injectable drug that is 
not generally dispensed through a retail community pharmacy; and''.


     sunset of temporary increase in benefits under the supplemental 
                      nutrition assistance program

    Sec. 203. Section 101(a) of title I of division A of Public Law 
111-5 (123 Stat. 120), as amended by section 4262 of this Act, is 
amended by striking paragraph (2) and inserting the following:
        ``(2) Termination.--The authority provided by this subsection 
    shall terminate after March 31, 2014.''.

                      Subtitle B--Revenue Offsets


    rules to prevent splitting foreign tax credits from the income to 
                           which they relate

    Sec. 211.  (a) In General.--Subpart A of part III of subchapter N 
of chapter 1 of the Internal Revenue Code of 1986 is amended by adding 
at the end the following new section:
    ``SEC. 909. SUSPENSION OF TAXES AND CREDITS UNTIL RELATED INCOME 
      TAKEN INTO ACCOUNT.
    ``(a) In General.--If there is a foreign tax credit splitting event 
with respect to a foreign income tax paid or accrued by the taxpayer, 
such tax shall not be taken into account for purposes of this title 
before the taxable year in which the related income is taken into 
account under this chapter by the taxpayer.
    ``(b) Special Rules With Respect to Section 902 Corporations.--If 
there is a foreign tax credit splitting event with respect to a foreign 
income tax paid or accrued by a section 902 corporation, such tax shall 
not be taken into account--
        ``(1) for purposes of section 902 or 960, or
        ``(2) for purposes of determining earnings and profits under 
    section 964(a),
before the taxable year in which the related income is taken into 
account under this chapter by such section 902 corporation or a 
domestic corporation which meets the ownership requirements of 
subsection (a) or (b) of section 902 with respect to such section 902 
corporation.
    ``(c) Special Rules.--For purposes of this section--
        ``(1) Application to partnerships, etc.--In the case of a 
    partnership, subsections (a) and (b) shall be applied at the 
    partner level. Except as otherwise provided by the Secretary, a 
    rule similar to the rule of the preceding sentence shall apply in 
    the case of any S corporation or trust.
        ``(2) Treatment of foreign taxes after suspension.--In the case 
    of any foreign income tax not taken into account by reason of 
    subsection (a) or (b), except as otherwise provided by the 
    Secretary, such tax shall be so taken into account in the taxable 
    year referred to in such subsection (other than for purposes of 
    section 986(a)) as a foreign income tax paid or accrued in such 
    taxable year.
    ``(d) Definitions.--For purposes of this section--
        ``(1) Foreign tax credit splitting event.--There is a foreign 
    tax credit splitting event with respect to a foreign income tax if 
    the related income is (or will be) taken into account under this 
    chapter by a covered person.
        ``(2) Foreign income tax.--The term `foreign income tax' means 
    any income, war profits, or excess profits tax paid or accrued to 
    any foreign country or to any possession of the United States.
        ``(3) Related income.--The term `related income' means, with 
    respect to any portion of any foreign income tax, the income (or, 
    as appropriate, earnings and profits) to which such portion of 
    foreign income tax relates.
        ``(4) Covered person.--The term `covered person' means, with 
    respect to any person who pays or accrues a foreign income tax 
    (hereafter in this paragraph referred to as the `payor')--
            ``(A) any entity in which the payor holds, directly or 
        indirectly, at least a 10 percent ownership interest 
        (determined by vote or value),
            ``(B) any person which holds, directly or indirectly, at 
        least a 10 percent ownership interest (determined by vote or 
        value) in the payor,
            ``(C) any person which bears a relationship to the payor 
        described in section 267(b) or 707(b), and
            ``(D) any other person specified by the Secretary for 
        purposes of this paragraph.
        ``(5) Section 902 corporation.--The term `section 902 
    corporation' means any foreign corporation with respect to which 
    one or more domestic corporations meets the ownership requirements 
    of subsection (a) or (b) of section 902.
    ``(e) Regulations.--The Secretary may issue such regulations or 
other guidance as is necessary or appropriate to carry out the purposes 
of this section, including regulations or other guidance which 
provides--
        ``(1) appropriate exceptions from the provisions of this 
    section, and
        ``(2) for the proper application of this section with respect 
    to hybrid instruments.''.
    (b) Clerical Amendment.--The table of sections for subpart A of 
part III of subchapter N of chapter 1 of the Internal Revenue Code of 
1986 is amended by adding at the end the following new item:

``Sec. 909. Suspension of taxes and credits until related income taken 
          into account.''.

    (c) Effective Date.--The amendments made by this section shall 
apply to--
        (1) foreign income taxes (as defined in section 909(d) of the 
    Internal Revenue Code of 1986, as added by this section) paid or 
    accrued in taxable years beginning after December 31, 2010; and
        (2) foreign income taxes (as so defined) paid or accrued by a 
    section 902 corporation (as so defined) in taxable years beginning 
    on or before such date (and not deemed paid under section 902(a) or 
    960 of such Code on or before such date), but only for purposes of 
    applying sections 902 and 960 with respect to periods after such 
    date.
Section 909(b)(2) of the Internal Revenue Code of 1986, as added by 
this section, shall not apply to foreign income taxes described in 
paragraph (2).


     denial of foreign tax credit with respect to foreign income not 
     subject to united states taxation by reason of covered asset 
                              acquisitions

    Sec. 212.  (a) In General.--Section 901 of the Internal Revenue 
Code of 1986 is amended by redesignating subsection (m) as subsection 
(n) and by inserting after subsection (l) the following new subsection:
    ``(m) Denial of Foreign Tax Credit With Respect to Foreign Income 
Not Subject to United States Taxation by Reason of Covered Asset 
Acquisitions.--
        ``(1) In general.--In the case of a covered asset acquisition, 
    the disqualified portion of any foreign income tax determined with 
    respect to the income or gain attributable to the relevant foreign 
    assets--
            ``(A) shall not be taken into account in determining the 
        credit allowed under subsection (a), and
            ``(B) in the case of a foreign income tax paid by a section 
        902 corporation (as defined in section 909(d)(5)), shall not be 
        taken into account for purposes of section 902 or 960.
        ``(2) Covered asset acquisition.--For purposes of this section, 
    the term `covered asset acquisition' means--
            ``(A) a qualified stock purchase (as defined in section 
        338(d)(3)) to which section 338(a) applies,
            ``(B) any transaction which--
                ``(i) is treated as an acquisition of assets for 
            purposes of this chapter, and
                ``(ii) is treated as the acquisition of stock of a 
            corporation (or is disregarded) for purposes of the foreign 
            income taxes of the relevant jurisdiction,
            ``(C) any acquisition of an interest in a partnership which 
        has an election in effect under section 754, and
            ``(D) to the extent provided by the Secretary, any other 
        similar transaction.
        ``(3) Disqualified portion.--For purposes of this section--
            ``(A) In general.--The term `disqualified portion' means, 
        with respect to any covered asset acquisition, for any taxable 
        year, the ratio (expressed as a percentage) of--
                ``(i) the aggregate basis differences (but not below 
            zero) allocable to such taxable year under subparagraph (B) 
            with respect to all relevant foreign assets, divided by
                ``(ii) the income on which the foreign income tax 
            referred to in paragraph (1) is determined (or, if the 
            taxpayer fails to substantiate such income to the 
            satisfaction of the Secretary, such income shall be 
            determined by dividing the amount of such foreign income 
            tax by the highest marginal tax rate applicable to such 
            income in the relevant jurisdiction).
            ``(B) Allocation of basis difference.--For purposes of 
        subparagraph (A)(i)--
                ``(i) In general.--The basis difference with respect to 
            any relevant foreign asset shall be allocated to taxable 
            years using the applicable cost recovery method under this 
            chapter.
                ``(ii) Special rule for disposition of assets.--Except 
            as otherwise provided by the Secretary, in the case of the 
            disposition of any relevant foreign asset--

                    ``(I) the basis difference allocated to the taxable 
                year which includes the date of such disposition shall 
                be the excess of the basis difference with respect to 
                such asset over the aggregate basis difference with 
                respect to such asset which has been allocated under 
                clause (i) to all prior taxable years, and
                    ``(II) no basis difference with respect to such 
                asset shall be allocated under clause (i) to any 
                taxable year thereafter.

            ``(C) Basis difference.--
                ``(i) In general.--The term `basis difference' means, 
            with respect to any relevant foreign asset, the excess of--

                    ``(I) the adjusted basis of such asset immediately 
                after the covered asset acquisition, over
                    ``(II) the adjusted basis of such asset immediately 
                before the covered asset acquisition.

                ``(ii) Built-in loss assets.--In the case of a relevant 
            foreign asset with respect to which the amount described in 
            clause (i)(II) exceeds the amount described in clause 
            (i)(I), such excess shall be taken into account under this 
            subsection as a basis difference of a negative amount.
                ``(iii) Special rule for section 338 elections.--In the 
            case of a covered asset acquisition described in paragraph 
            (2)(A), the covered asset acquisition shall be treated for 
            purposes of this subparagraph as occurring at the close of 
            the acquisition date (as defined in section 338(h)(2)).
        ``(4) Relevant foreign assets.--For purposes of this section, 
    the term `relevant foreign asset' means, with respect to any 
    covered asset acquisition, any asset (including any goodwill, going 
    concern value, or other intangible) with respect to such 
    acquisition if income, deduction, gain, or loss attributable to 
    such asset is taken into account in determining the foreign income 
    tax referred to in paragraph (1).
        ``(5) Foreign income tax.--For purposes of this section, the 
    term `foreign income tax' means any income, war profits, or excess 
    profits tax paid or accrued to any foreign country or to any 
    possession of the United States.
        ``(6) Taxes allowed as a deduction, etc.--Sections 275 and 78 
    shall not apply to any tax which is not allowable as a credit under 
    subsection (a) by reason of this subsection.
        ``(7) Regulations.--The Secretary may issue such regulations or 
    other guidance as is necessary or appropriate to carry out the 
    purposes of this subsection, including to exempt from the 
    application of this subsection certain covered asset acquisitions, 
    and relevant foreign assets with respect to which the basis 
    difference is de minimis.''.
    (b) Effective Date.--
        (1) In general.--Except as provided in paragraph (2), the 
    amendments made by this section shall apply to covered asset 
    acquisitions (as defined in section 901(m)(2) of the Internal 
    Revenue Code of 1986, as added by this section) after December 31, 
    2010.
        (2) Transition rule.--The amendments made by this section shall 
    not apply to any covered asset acquisition (as so defined) with 
    respect to which the transferor and the transferee are not related 
    if such acquisition is--
            (A) made pursuant to a written agreement which was binding 
        on January 1, 2011, and at all times thereafter,
            (B) described in a ruling request submitted to the Internal 
        Revenue Service on or before July 29, 2010, or
            (C) described on or before January 1, 2011, in a public 
        announcement or in a filing with the Securities and Exchange 
        Commission.
        (3) Related persons.--For purposes of this subsection, a person 
    shall be treated as related to another person if the relationship 
    between such persons is described in section 267 or 707(b) of the 
    Internal Revenue Code of 1986.


  separate application of foreign tax credit limitation, etc., to items 
                        resourced under treaties

    Sec. 213.  (a) In General.--Subsection (d) of section 904 of the 
Internal Revenue Code of 1986 is amended by redesignating paragraph (6) 
as paragraph (7) and by inserting after paragraph (5) the following new 
paragraph:
        ``(6) Separate application to items resourced under treaties.--
            ``(A) In general.--If--
                ``(i) without regard to any treaty obligation of the 
            United States, any item of income would be treated as 
            derived from sources within the United States,
                ``(ii) under a treaty obligation of the United States, 
            such item would be treated as arising from sources outside 
            the United States, and
                ``(iii) the taxpayer chooses the benefits of such 
            treaty obligation,
        subsections (a), (b), and (c) of this section and sections 902, 
        907, and 960 shall be applied separately with respect to each 
        such item.
            ``(B) Coordination with other provisions.--This paragraph 
        shall not apply to any item of income to which subsection 
        (h)(10) or section 865(h) applies.
            ``(C) Regulations.--The Secretary may issue such 
        regulations or other guidance as is necessary or appropriate to 
        carry out the purposes of this paragraph, including regulations 
        or other guidance which provides that related items of income 
        may be aggregated for purposes of this paragraph.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.


  limitation on the amount of foreign taxes deemed paid with respect to 
                         section 956 inclusions

    Sec. 214.  (a) In General.--Section 960 of the Internal Revenue 
Code of 1986 is amended by adding at the end the following new 
subsection:
    ``(c) Limitation With Respect to Section 956 Inclusions.--
        ``(1) In general.--If there is included under section 
    951(a)(1)(B) in the gross income of a domestic corporation any 
    amount attributable to the earnings and profits of a foreign 
    corporation which is a member of a qualified group (as defined in 
    section 902(b)) with respect to the domestic corporation, the 
    amount of any foreign income taxes deemed to have been paid during 
    the taxable year by such domestic corporation under section 902 by 
    reason of subsection (a) with respect to such inclusion in gross 
    income shall not exceed the amount of the foreign income taxes 
    which would have been deemed to have been paid during the taxable 
    year by such domestic corporation if cash in an amount equal to the 
    amount of such inclusion in gross income were distributed as a 
    series of distributions (determined without regard to any foreign 
    taxes which would be imposed on an actual distribution) through the 
    chain of ownership which begins with such foreign corporation and 
    ends with such domestic corporation.
        ``(2) Authority to prevent abuse.--The Secretary shall issue 
    such regulations or other guidance as is necessary or appropriate 
    to carry out the purposes of this subsection, including regulations 
    or other guidance which prevent the inappropriate use of the 
    foreign corporation's foreign income taxes not deemed paid by 
    reason of paragraph (1).''.
    (b) Effective Date.--The amendment made by this section shall apply 
to acquisitions of United States property (as defined in section 956(c) 
of the Internal Revenue Code of 1986) after December 31, 2010.


       special rule with respect to certain redemptions by foreign 
                              subsidiaries

    Sec. 215.  (a) In General.--Paragraph (5) of section 304(b) of the 
Internal Revenue Code of 1986 is amended by redesignating subparagraph 
(B) as subparagraph (C) and by inserting after subparagraph (A) the 
following new subparagraph:
            ``(B) Special rule in case of foreign acquiring 
        corporation.--In the case of any acquisition to which 
        subsection (a) applies in which the acquiring corporation is a 
        foreign corporation, no earnings and profits shall be taken 
        into account under paragraph (2)(A) (and subparagraph (A) shall 
        not apply) if more than 50 percent of the dividends arising 
        from such acquisition (determined without regard to this 
        subparagraph) would neither--
                ``(i) be subject to tax under this chapter for the 
            taxable year in which the dividends arise, nor
                ``(ii) be includible in the earnings and profits of a 
            controlled foreign corporation (as defined in section 957 
            and without regard to section 953(c)).''.
    (b) Effective Date.--The amendments made by this section shall 
apply to acquisitions after the date of the enactment of this Act.


   modification of affiliation rules for purposes of rules allocating 
                            interest expense

    Sec. 216.  (a) In General.--Subparagraph (A) of section 864(e)(5) 
of the Internal Revenue Code of 1986 is amended by adding at the end 
the following: ``Notwithstanding the preceding sentence, a foreign 
corporation shall be treated as a member of the affiliated group if--
                ``(i) more than 50 percent of the gross income of such 
            foreign corporation for the taxable year is effectively 
            connected with the conduct of a trade or business within 
            the United States, and
                ``(ii) at least 80 percent of either the vote or value 
            of all outstanding stock of such foreign corporation is 
            owned directly or indirectly by members of the affiliated 
            group (determined with regard to this sentence).''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after the date of the enactment of this Act.


  termination of special rules for interest and dividends received from 
      persons meeting the 80-percent foreign business requirements

    Sec. 217.  (a) In General.--Paragraph (1) of section 861(a) of the 
Internal Revenue Code of 1986 is amended by striking subparagraph (A) 
and by redesignating subparagraphs (B) and (C) as subparagraphs (A) and 
(B), respectively.
    (b) Grandfather Rule With Respect To Withholding on Interest and 
Dividends Received From Persons Meeting the 80-percent Foreign Business 
Requirements.--
        (1) In general.--Subparagraph (B) of section 871(i)(2) of the 
    Internal Revenue Code of 1986 is amended to read as follows:
            ``(B) The active foreign business percentage of--
                ``(i) any dividend paid by an existing 80/20 company, 
            and
                ``(ii) any interest paid by an existing 80/20 
            company.''.
        (2) Definitions and special rules.--Section 871 of such Code is 
    amended by redesignating subsections (l) and (m) as subsections (m) 
    and (n), respectively, and by inserting after subsection (k) the 
    following new subsection:
    ``(l) Rules Relating to Existing 80/20 Companies.--For purposes of 
this subsection and subsection (i)(2)(B)--
        ``(1) Existing 80/20 company.--
            ``(A) In general.--The term `existing 80/20 company' means 
        any corporation if--
                ``(i) such corporation met the 80-percent foreign 
            business requirements of section 861(c)(1) (as in effect 
            before the date of the enactment of this subsection) for 
            such corporation's last taxable year beginning before 
            January 1, 2011,
                ``(ii) such corporation meets the 80-percent foreign 
            business requirements of subparagraph (B) with respect to 
            each taxable year after the taxable year referred to in 
            clause (i), and
                ``(iii) there has not been an addition of a substantial 
            line of business with respect to such corporation after the 
            date of the enactment of this subsection.
            ``(B) Foreign business requirements.--
                ``(i) In general.--Except as provided in clause (iv), a 
            corporation meets the 80-percent foreign business 
            requirements of this subparagraph if it is shown to the 
            satisfaction of the Secretary that at least 80 percent of 
            the gross income from all sources of such corporation for 
            the testing period is active foreign business income.
                ``(ii) Active foreign business income.--For purposes of 
            clause (i), the term `active foreign business income' means 
            gross income which--

                    ``(I) is derived from sources outside the United 
                States (as determined under this subchapter), and
                    ``(II) is attributable to the active conduct of a 
                trade or business in a foreign country or possession of 
                the United States.

                ``(iii) Testing period.--For purposes of this 
            subsection, the term `testing period' means the 3-year 
            period ending with the close of the taxable year of the 
            corporation preceding the payment (or such part of such 
            period as may be applicable). If the corporation has no 
            gross income for such 3-year period (or part thereof), the 
            testing period shall be the taxable year in which the 
            payment is made.
                ``(iv) Transition rule.--In the case of a taxable year 
            for which the testing period includes 1 or more taxable 
            years beginning before January 1, 2011--

                    ``(I) a corporation meets the 80-percent foreign 
                business requirements of this subparagraph if and only 
                if the weighted average of--

                        ``(aa) the percentage of the corporation's 
                    gross income from all sources that is active 
                    foreign business income (as defined in subparagraph 
                    (B) of section 861(c)(1) (as in effect before the 
                    date of the enactment of this subsection)) for the 
                    portion of the testing period that includes taxable 
                    years beginning before January 1, 2011, and
                        ``(bb) the percentage of the corporation's 
                    gross income from all sources that is active 
                    foreign business income (as defined in clause (ii) 
                    of this subparagraph) for the portion of the 
                    testing period, if any, that includes taxable years 
                    beginning on or after January 1, 2011,

                is at least 80 percent, and
                    ``(II) the active foreign business percentage for 
                such taxable year shall equal the weighted average 
                percentage determined under subclause (I).

        ``(2) Active foreign business percentage.--Except as provided 
    in paragraph (1)(B)(iv), the term `active foreign business 
    percentage' means, with respect to any existing 80/20 company, the 
    percentage which--
            ``(A) the active foreign business income of such company 
        for the testing period, is of
            ``(B) the gross income of such company for the testing 
        period from all sources.
        ``(3) Aggregation rules.--For purposes of applying paragraph 
    (1) (other than subparagraphs (A)(i) and (B)(iv) thereof) and 
    paragraph (2)--
            ``(A) In general.--The corporation referred to in paragraph 
        (1)(A) and all of such corporation's subsidiaries shall be 
        treated as one corporation.
            ``(B) Subsidiaries.--For purposes of subparagraph (A), the 
        term `subsidiary' means any corporation in which the 
        corporation referred to in subparagraph (A) owns (directly or 
        indirectly) stock meeting the requirements of section 
        1504(a)(2) (determined by substituting `50 percent' for `80 
        percent' each place it appears and without regard to section 
        1504(b)(3)).
        ``(4) Regulations.--The Secretary may issue such regulations or 
    other guidance as is necessary or appropriate to carry out the 
    purposes of this section, including regulations or other guidance 
    which provide for the proper application of the aggregation rules 
    described in paragraph (3).''.
    (c) Conforming Amendments.--
        (1) Section 861 of the Internal Revenue Code of 1986 is amended 
    by striking subsection (c) and by redesignating subsections (d), 
    (e), and (f) as subsections (c), (d), and (e), respectively.
        (2) Paragraph (9) of section 904(h) of such Code is amended to 
    read as follows:
        ``(9) Treatment of certain domestic corporations.--In the case 
    of any dividend treated as not from sources within the United 
    States under section 861(a)(2)(A), the corporation paying such 
    dividend shall be treated for purposes of this subsection as a 
    United States-owned foreign corporation.''.
        (3) Subsection (c) of section 2104 of such Code is amended in 
    the last sentence by striking ``or to a debt obligation of a 
    domestic corporation'' and all that follows and inserting a period.
    (d) Effective Date.--
        (1) In general.--Except as provided in paragraph (2), the 
    amendments made by this section shall apply to taxable years 
    beginning after December 31, 2010.
        (2) Grandfather rule for outstanding debt obligations.--
            (A) In general.--The amendments made by this section shall 
        not apply to payments of interest on obligations issued before 
        the date of the enactment of this Act.
            (B) Exception for related party debt.--Subparagraph (A) 
        shall not apply to any interest which is payable to a related 
        person (determined under rules similar to the rules of section 
        954(d)(3)).
            (C) Significant modifications treated as new issues.--For 
        purposes of subparagraph (A), a significant modification of the 
        terms of any obligation (including any extension of the term of 
        such obligation) shall be treated as a new issue.


    limitation on extension of statute of limitations for failure to 
             notify secretary of certain foreign transfers

    Sec. 218.  (a) In General.--Paragraph (8) of section 6501(c) of the 
Internal Revenue Code of 1986 is amended--
        (1) by striking ``In the case of any information'' and 
    inserting the following:
            ``(A) In general.--In the case of any information''; and
        (2) by adding at the end the following:
            ``(B) Application to failures due to reasonable cause.--If 
        the failure to furnish the information referred to in 
        subparagraph (A) is due to reasonable cause and not willful 
        neglect, subparagraph (A) shall apply only to the item or items 
        related to such failure.''.
    (b) Effective Date.--The amendments made by this section shall take 
effect as if included in section 513 of the Hiring Incentives to 
Restore Employment Act.


       elimination of advance refundability of earned income credit

    Sec. 219.  (a) In General.--The following provisions of the 
Internal Revenue Code of 1986 are repealed:
        (1) Section 3507.
        (2) Subsection (g) of section 32.
        (3) Paragraph (7) of section 6051(a).
    (b) Conforming Amendments.--
        (1) Section 6012(a) of the Internal Revenue Code of 1986 is 
    amended by striking paragraph (8) and by redesignating paragraph 
    (9) as paragraph (8).
        (2) Section 6302 of such Code is amended by striking subsection 
    (i).
        (3) The table of sections for chapter 25 of such Code is 
    amended by striking the item relating to section 3507.
    (c) Effective Date.--The repeals and amendments made by this 
section shall apply to taxable years beginning after December 31, 2010.

                               TITLE III

                              RESCISSIONS

    Sec. 301.  There is rescinded from accounts under the heading 
``Department of Agriculture--Rural Development'', $122,000,000, to be 
derived from the unobligated balances of funds that were provided for 
such accounts in prior appropriation Acts (other than Public Law 111-5) 
and that were designated by the Congress in such Acts as an emergency 
requirement pursuant to a concurrent resolution on the budget or the 
Balanced Budget and Emergency Deficit Control Act of 1985.
    Sec. 302.  Of the funds made available for ``Department of 
Commerce--National Telecommunications and Information Administration--
Broadband Technology Opportunities Program'' in title II of division A 
of Public Law 111-5, $302,000,000 are rescinded.
    Sec. 303.  Of the funds appropriated in Department of Defense 
Appropriations Acts, the following funds are rescinded from the 
following accounts in the specified amounts:
        ``Aircraft Procurement, Army, 2008/2010'', $21,000,000;
        ``Procurement of Weapons and Tracked Combat Vehicles, Army, 
    2008/2010'', $21,000,000;
        ``Procurement of Ammunition, Army, 2008/2010'', $17,000,000;
        ``Other Procurement, Army, 2008/2010'', $75,000,000;
        ``Weapons Procurement, Navy, 2008/2010'', $26,000,000;
        ``Other Procurement, Navy, 2008/2010'', $42,000,000;
        ``Procurement, Marine Corps, 2008/2010'', $13,000,000;
        ``Aircraft Procurement, Air Force, 2008/2010'', $102,000,000;
        ``Missile Procurement, Air Force, 2008/2010'', $28,000,000;
        ``Procurement of Ammunition, Air Force, 2008/2010'', 
    $7,000,000;
        ``Other Procurement, Air Force, 2008/2010'', $130,000,000;
        ``Procurement, Defense-Wide, 2008/2010'', $33,000,000;
        ``Research, Development, Test and Evaluation, Army, 2009/
    2010'', $76,000,000;
        ``Research, Development, Test and Evaluation, Air Force, 2009/
    2010'', $164,000,000;
        ``Research, Development, Test and Evaluation, Defense-Wide, 
    2009/2010'', $137,000,000;
        ``Operation, Test and Evaluation, Defense, 2009/2010'', 
    $1,000,000;
        ``Operation and Maintenance, Army, 2010'', $154,000,000;
        ``Operation and Maintenance, Navy, 2010'', $155,000,000;
        ``Operation and Maintenance, Marine Corps, 2010'', $25,000,000;
        ``Operation and Maintenance, Air Force, 2010'', $155,000,000;
        ``Operation and Maintenance, Defense-Wide, 2010'', 
    $126,000,000;
        ``Operation and Maintenance, Army Reserve, 2010'', $12,000,000;
        ``Operation and Maintenance, Navy Reserve, 2010'', $6,000,000;
        ``Operation and Maintenance, Marine Corps Reserve, 2010'', 
    $1,000,000;
        ``Operation and Maintenance, Air Force Reserve, 2010'', 
    $14,000,000;
        ``Operation and Maintenance, Army National Guard, 2010'', 
    $28,000,000; and
        ``Operation and Maintenance, Air National Guard, 2010'', 
    $27,000,000.
    Sec. 304. (a) Of the funds appropriated in the American Recovery 
and Reinvestment Act of 2009 (Public Law 111-5), the following funds 
are rescinded from the following accounts in the specified amounts:
        ``Operation and Maintenance, Army, 2009/2010'', $113,500,000;
        ``Operation and Maintenance, Navy, 2009/2010'', $34,000,000;
        ``Operation and Maintenance, Marine Corps, 2009/2010'', 
    $7,000,000;
        ``Operation and Maintenance, Air Force, 2009/2010'', 
    $61,000,000;
        ``Operation and Maintenance, Army Reserve, 2009/2010'', 
    $3,500,000;
        ``Operation and Maintenance, Navy Reserve, 2009/2010'', 
    $8,000,000;
        ``Operation and Maintenance, Marine Corps Reserve, 2009/2010'', 
    $1,000,000;
        ``Operation and Maintenance, Air Force Reserve, 2009/2010'', 
    $2,000,000;
        ``Operation and Maintenance, Army National Guard, 2009/2010'', 
    $1,000,000;
        ``Operation and Maintenance, Air National Guard, 2009/2010'', 
    $2,500,000; and
        ``Defense Health Program, 2009/2010'', $27,000,000.
    (b) Of the funds appropriated in the Supplemental Appropriations 
Act, 2008 (Public Law 110-252), the following funds are rescinded from 
the following account in the specified amount:
        ``Procurement, Marine Corps, 2009/2011'', $122,000,000.
    Sec. 305. (a) Of the funds appropriated for ``Procurement of 
Weapons and Tracked Combat Vehicles, Army'' in title III of division A 
of public Law 111-118, $116,000,000 are rescinded.
    (b) Of the funds appropriated for ``Other Procurement, Army'' in 
title III of division C of Public Law 110-329, $87,000,000 are 
rescinded.
    Sec. 306.  There are rescinded the following amounts from the 
specified accounts:
        (1) $20,000,000, to be derived from unobligated balances of 
    funds made available in prior appropriations Acts under the heading 
    ``Department of Energy--Nuclear Energy''.
    Sec. 307.  Of the unobligated balances of funds provided under the 
heading ``Nuclear Regulatory Commission'' in prior appropriations Acts, 
$18,000,000 is permanently rescinded.
    Sec. 308.  Of the funds made available for ``Department of Energy--
Title 17--Innovative Technology Loan Guarantee Program'' in title III 
of division A of Public Law 111-5, $1,500,000,000 are rescinded.
    Sec. 309.  There are permanently rescinded from ``General Services 
Administration--Real Property Activities--Federal Building Fund'', 
$75,000,000 from Rental of Space and $25,000,000 from Building 
Operations, to be derived from unobligated balances that were provided 
in previous appropriations Acts.
    Sec. 310.  Of the funds made available for ``Bureau of Indian 
Affairs--Indian Guaranteed Loan Program Account'' in title VII of 
division A of Public Law 111-5, $6,820,000 are rescinded.
    Sec. 311.  Of the funds made available for ``Environmental 
Protection Agency--Hazardous Substance Superfund'' in title VII of 
division A of Public Law 111-5, $2,600,000 are rescinded.
    Sec. 312.  Of the funds made available for ``Environmental 
Protection Agency--Leaking Underground Storage Tank Trust Fund 
Program'' in title VII of division A of Public Law 111-5, $9,200,000 
are rescinded.
    Sec. 313.  Of the funds made available for transfer in title VII of 
division A of Public Law 111-5, ``Environmental Protection Agency--
Environmental Programs and Management'', $10,000,000 are rescinded.
    Sec. 314.  Of the funds made available for ``National Park 
Service--Construction'' in chapter 7 of division B of Public Law 108-
324, $4,800,000 are rescinded.
    Sec. 315.  Of the funds made available for ``National Park 
Service--Construction'' in chapter 5 of title II of Public Law 109-234, 
$6,400,000 are rescinded.
    Sec. 316.  Of the funds made available for ``Fish and Wildlife 
Service--Construction'' in chapter 6 of title I of division B of Public 
Law 110-329, $3,000,000 are rescinded.
    Sec. 317.  The unobligated balance of funds appropriated in the 
Departments of Labor, Health and Human Services, and Education, and 
Related Agencies Appropriations Act, 1995 (Public Law 103-333; 108 
Stat. 2574) under the heading ``Public Health and Social Services 
Emergency Fund'' is rescinded.
    Sec. 318.  Of the funds appropriated for the Commissioner of Social 
Security under section 2201(e)(2)(B) in title II of division B of 
Public Law 111-5, $47,000,000 are rescinded.
    Sec. 319.  Of the funds appropriated in part VI of subtitle I of 
title II of division B of Public Law 111-5, $110,000,000 are rescinded, 
to be derived only from the amount provided under section 1899K(b) of 
such title.
    Sec. 320.  Of the funds appropriated for ``Department of 
Education--Education for the Disadvantaged'' in division D of Public 
Law 111-117, $50,000,000 are rescinded, to be derived only from the 
amount provided for a comprehensive literacy development and education 
program under section 1502 of the Elementary and Secondary Education 
Act of 1965.
    Sec. 321.  Of the funds appropriated for ``Department of 
Education--Student Aid Administration'' in division D of Public Law 
111-117, $82,000,000 are rescinded.
    Sec. 322.  Of the funds appropriated for ``Department of 
Education--Innovation and Improvement'' in division D of Public Law 
111-117, $10,700,000 are rescinded, to be derived only from the amount 
provided to carry out subpart 8 of part D of title V of the Elementary 
and Secondary Education Act of 1965.
    Sec. 323.  Of the unobligated balances available under ``Department 
of Defense, Military Construction, Army'' from prior appropriations 
Acts, $340,000,000 is rescinded: Provided, That no funds may be 
rescinded from amounts that were designated by the Congress as an 
emergency requirement or as appropriations for overseas deployments and 
other activities pursuant to a concurrent resolution on the budget or 
the Balanced Budget and Emergency Deficit Control Act of 1985.
    Sec. 324.  Of the unobligated balances available under ``Department 
of Defense, Military Construction, Navy and Marine Corps'' from prior 
appropriations Acts, $110,000,000 is rescinded: Provided, That no funds 
may be rescinded from amounts that were designated by the Congress as 
an emergency requirement or as appropriations for overseas deployments 
and other activities pursuant to a concurrent resolution on the budget 
or the Balanced Budget and Emergency Deficit Control Act of 1985.
    Sec. 325.  Of the unobligated balances available under ``Department 
of Defense, Military Construction, Air Force'' from prior 
appropriations Acts, $50,000,000 is rescinded: Provided, That no funds 
may be rescinded from amounts that were designated by the Congress as 
an emergency requirement or as appropriations for overseas deployments 
and other activities pursuant to a concurrent resolution on the budget 
or the Balanced Budget and Emergency Deficit Control Act of 1985.
    Sec. 326.  Of the funds made available for the General Operating 
Expenses account of the Department of Veterans Affairs in section 
2201(e)(4)(A)(ii) of division B of Public Law 111-5 (123 Stat. 454; 26 
U.S.C. 6428 note), $6,100,000 are rescinded.
    Sec. 327.  Of the amount appropriated or otherwise made available 
by title X of division A of Public Law 111-5, the American Recovery and 
Reinvestment Act of 2009, under the heading `` Departmental 
Administration, Information Technology Systems'' $5,000,000 is hereby 
rescinded.
    Sec. 328. (a) Millennium Challenge Corporation.--Of the unobligated 
balances available under the heading ``Millennium Challenge 
Corporation'' in title III of division H of Public Law 111-8 and under 
such heading in prior Acts making appropriations for the Department of 
State, foreign operations, and related programs, $50,000,000 are 
rescinded.
    (b) Civilian Stabilization Initiative.--
        (1) Department of state.--Of the unobligated balances available 
    under the heading ``Department of State--Administration of Foreign 
    Affairs--Civilian Stabilization Initiative'' in prior Acts making 
    appropriations for the Department of State, foreign operations, and 
    related programs, $40,000,000 are rescinded.
        (2) United states agency for international development.--Of the 
    unobligated balances available under the heading ``United States 
    Agency for International Development--Funds Appropriated to the 
    President--Civilian Stabilization Initiative'' in prior Acts making 
    appropriations for the Department of State, foreign operations, and 
    related programs, $30,000,000 are rescinded.
    Sec. 329.  There are rescinded the following amounts from the 
specified accounts:
        (1) ``Department of Transportation--Federal Aviation 
    Administration--Facilities and Equipment'', $2,182,544, to be 
    derived from unobligated balances made available under this heading 
    in Public Law 108-324.
        (2) ``Department of Transportation--Federal Aviation 
    Administration--Facilities and Equipment'', $5,705,750, to be 
    derived from unobligated balances made available under this heading 
    in Public Law 109-148.
    Sec. 330.  Of the unobligated balances of funds apportioned to each 
State under chapter 1 of title 23, United States Code, $2,200,000,000 
are permanently rescinded: Provided, That such rescission shall be 
distributed among the States in the same proportion as the funds 
subject to such rescission were apportioned to the States for fiscal 
year 2009: Provided further, That such rescission shall not apply to 
the funds distributed in accordance with sections 130(f) and 104(b)(5) 
of title 23, United States Code; sections 133(d)(1) and 163 of such 
title, as in effect on the day before the date of enactment of Public 
Law 109-59; and the first sentence of section 133(d)(3)(A) of such 
title: Provided further, That notwithstanding section 1132 of Public 
Law 110-140, in administering the rescission required under this 
heading, the Secretary of Transportation shall allow each State to 
determine the amount of the required rescission to be drawn from the 
programs to which the rescission applies.

                                TITLE IV

                          BUDGETARY PROVISIONS


                           budgetary provisions

    Sec. 401. The budgetary effects of this Act, for the purpose of 
complying with the Statutory Pay-As-You-Go Act of 2010, shall be 
determined by reference to the latest statement titled ``Budgetary 
Effects of PAYGO Legislation'' for this Act, jointly submitted for 
printing in the Congressional Record by the Chairmen of the House and 
Senate Budget Committees, provided that such statement has been 
submitted prior to the vote on passage in the House acting first on 
this conference report or amendment between the Houses.

                               Speaker of the House of Representatives.

                            Vice President of the United States and    
                                               President of the Senate.