[Congressional Bills 111th Congress]
[From the U.S. Government Publishing Office]
[H.R. 5893 Introduced in House (IH)]

111th CONGRESS
  2d Session
                                H. R. 5893

   To amend the Internal Revenue Code of 1986 to create jobs through 
 increased investment in infrastructure, to eliminate loopholes which 
    encourage companies to move operations offshore, and for other 
                               purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             July 28, 2010

Mr. Levin (for himself, Mr. Rangel, Mr. Stark, Mr. McDermott, Mr. Lewis 
 of Georgia, Mr. Becerra, Mr. Pascrell, Mr. Crowley, Ms. Berkley, Mr. 
Meek of Florida, Mr. Davis of Illinois, Mr. Etheridge, Mr. Higgins, Mr. 
 Garamendi, Mrs. Dahlkemper, Mr. Kagen, Mr. Perriello, Ms. Kilroy, Mr. 
 McMahon, Mr. Kissell, and Mr. Carney) introduced the following bill; 
which was referred to the Committee on Ways and Means, and in addition 
    to the Committee on the Budget, for a period to be subsequently 
   determined by the Speaker, in each case for consideration of such 
 provisions as fall within the jurisdiction of the committee concerned

_______________________________________________________________________

                                 A BILL


 
   To amend the Internal Revenue Code of 1986 to create jobs through 
 increased investment in infrastructure, to eliminate loopholes which 
    encourage companies to move operations offshore, and for other 
                               purposes.

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

SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Investing in 
American Jobs and Closing Tax Loopholes Act of 2010''.
    (b) Amendment of 1986 Code.--Except as otherwise expressly 
provided, whenever in this Act an amendment or repeal is expressed in 
terms of an amendment to, or repeal of, a section or other provision, 
the reference shall be considered to be made to a section or other 
provision of the Internal Revenue Code of 1986.
    (c) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title; amendment of 1986 Code; table of contents.
                   TITLE I--INFRASTRUCTURE INCENTIVES

Sec. 101. Extension of Build America Bonds.
Sec. 102. Exempt-facility bonds for sewage and water supply facilities.
Sec. 103. Extension of exemption from alternative minimum tax treatment 
                            for certain tax-exempt bonds.
Sec. 104. Extension and additional allocations of recovery zone bond 
                            authority.
Sec. 105. Allowance of new markets tax credit against alternative 
                            minimum tax.
Sec. 106. Extension of tax-exempt eligibility for loans guaranteed by 
                            Federal home loan banks.
Sec. 107. Extension of temporary small issuer rules for allocation of 
                            tax-exempt interest expense by financial 
                            institutions.
        TITLE II--EMERGENCY FUND FOR JOB CREATION AND ASSISTANCE

Sec. 201. Extension of the Emergency Fund for Job Creation and 
                            Assistance.
                     TITLE III--FOREIGN PROVISIONS

Sec. 301. Rules to prevent splitting foreign tax credits from the 
                            income to which they relate.
Sec. 302. Denial of foreign tax credit with respect to foreign income 
                            not subject to United States taxation by 
                            reason of covered asset acquisitions.
Sec. 303. Separate application of foreign tax credit limitation, etc., 
                            to items resourced under treaties.
Sec. 304. Limitation on the amount of foreign taxes deemed paid with 
                            respect to section 956 inclusions.
Sec. 305. Special rule with respect to certain redemptions by foreign 
                            subsidiaries.
Sec. 306. Modification of affiliation rules for purposes of rules 
                            allocating interest expense.
Sec. 307. Termination of special rules for interest and dividends 
                            received from persons meeting the 80-
                            percent foreign business requirements.
Sec. 308. Source rules for income on guarantees.
Sec. 309. Limitation on extension of statute of limitations for failure 
                            to notify Secretary of certain foreign 
                            transfers.
                     TITLE IV--BUDGETARY PROVISIONS

Sec. 401. Paygo compliance.
Sec. 402. Time for payment of corporate estimated taxes.

                   TITLE I--INFRASTRUCTURE INCENTIVES

SEC. 101. EXTENSION OF BUILD AMERICA BONDS.

    (a) In General.--Subparagraph (B) of section 54AA(d)(1) is amended 
by striking ``January 1, 2011'' and inserting ``January 1, 2013''.
    (b) Extension of Payments to Issuers.--
            (1) In general.--Section 6431 is amended--
                    (A) by striking ``January 1, 2011'' in subsection 
                (a) and inserting ``January 1, 2013''; and
                    (B) by striking ``January 1, 2011'' in subsection 
                (f)(1)(B) and inserting ``a particular date''.
            (2) Conforming amendments.--Subsection (g) of section 54AA 
        is amended--
                    (A) by striking ``January 1, 2011'' and inserting 
                ``January 1, 2013''; and
                    (B) by striking ``Qualified Bonds Issued Before 
                2011'' in the heading and inserting ``Certain Qualified 
                Bonds''.
    (c) Reduction in Percentage of Payments to Issuers.--Subsection (b) 
of section 6431 is amended--
            (1) by striking ``The Secretary'' and inserting the 
        following:
            ``(1) In general.--The Secretary'';
            (2) by striking ``35 percent'' and inserting ``the 
        applicable percentage''; and
            (3) by adding at the end the following new paragraph:
            ``(2) Applicable percentage.--For purposes of this 
        subsection, the term `applicable percentage' means the 
        percentage determined in accordance with the following table:


----------------------------------------------------------------------------------------------------------------
  ``In the case of a qualified bond issued during calendar
                           year:                                        The applicable percentage is:
----------------------------------------------------------------------------------------------------------------
2009 or 2010...............................................  35 percent
2011.......................................................  32 percent
2012.......................................................  30 percent.''.
----------------------------------------------------------------------------------------------------------------

    (d) Current Refundings Permitted.--Subsection (g) of section 54AA 
is amended by adding at the end the following new paragraph:
            ``(3) Treatment of current refunding bonds.--
                    ``(A) In general.--For purposes of this subsection, 
                the term `qualified bond' includes any bond (or series 
                of bonds) issued to refund a qualified bond if--
                            ``(i) the average maturity date of the 
                        issue of which the refunding bond is a part is 
                        not later than the average maturity date of the 
                        bonds to be refunded by such issue,
                            ``(ii) the amount of the refunding bond 
                        does not exceed the outstanding amount of the 
                        refunded bond, and
                            ``(iii) the refunded bond is redeemed not 
                        later than 90 days after the date of the 
                        issuance of the refunding bond.
                    ``(B) Applicable percentage.--In the case of a 
                refunding bond referred to in subparagraph (A), the 
                applicable percentage with respect to such bond under 
                section 6431(b) shall be the lowest percentage 
                specified in paragraph (2) of such section.
                    ``(C) Determination of average maturity.--For 
                purposes of subparagraph (A)(i), average maturity shall 
                be determined in accordance with section 
                147(b)(2)(A).''.
    (e) Clarification Related to Levees and Flood Control Projects.--
Subparagraph (A) of section 54AA(g)(2) is amended by inserting 
``(including capital expenditures for levees and other flood control 
projects)'' after ``capital expenditures''.

SEC. 102. EXEMPT-FACILITY BONDS FOR SEWAGE AND WATER SUPPLY FACILITIES.

    (a) Bonds for Water and Sewage Facilities Exempt From Volume Cap on 
Private Activity Bonds.--
            (1) In general.--Paragraph (3) of section 146(g) is amended 
        by inserting ``(4), (5),'' after ``(2),''.
            (2) Conforming amendment.--Paragraphs (2) and (3)(B) of 
        section 146(k) are both amended by striking ``(4), (5), (6),'' 
        and inserting ``(6)''.
    (b) Tax-Exempt Issuance by Indian Tribal Governments.--
            (1) In general.--Subsection (c) of section 7871 is amended 
        by adding at the end the following new paragraph:
            ``(4) Exception for bonds for water and sewage 
        facilities.--Paragraph (2) shall not apply to an exempt 
        facility bond 95 percent or more of the net proceeds (as 
        defined in section 150(a)(3)) of which are to be used to 
        provide facilities described in paragraph (4) or (5) of section 
        142(a).''.
            (2) Conforming amendment.--Paragraph (2) of section 7871(c) 
        is amended by striking ``paragraph (3)'' and inserting 
        ``paragraphs (3) and (4)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to obligations issued after the date of the enactment of this 
Act.

SEC. 103. EXTENSION OF EXEMPTION FROM ALTERNATIVE MINIMUM TAX TREATMENT 
              FOR CERTAIN TAX-EXEMPT BONDS.

    (a) In General.--Clause (vi) of section 57(a)(5)(C) is amended--
            (1) by striking ``January 1, 2011'' in subclause (I) and 
        inserting ``January 1, 2012''; and
            (2) by striking ``and 2010'' in the heading and inserting 
        ``, 2010, and 2011''.
    (b) Adjusted Current Earnings.--Clause (iv) of section 56(g)(4)(B) 
is amended--
            (1) by striking ``January 1, 2011'' in subclause (I) and 
        inserting ``January 1, 2012''; and
            (2) by striking ``and 2010'' in the heading and inserting 
        ``, 2010, and 2011''.
    (c) Effective Date.--The amendments made by this section shall 
apply to obligations issued after December 31, 2010.

SEC. 104. EXTENSION AND ADDITIONAL ALLOCATIONS OF RECOVERY ZONE BOND 
              AUTHORITY.

    (a) Extension of Recovery Zone Bond Authority.--Section 1400U-
2(b)(1) and section 1400U-3(b)(1)(B) are each amended by striking 
``January 1, 2011'' and inserting ``January 1, 2012''.
    (b) Additional Allocations of Recovery Zone Bond Authority Based on 
Unemployment.--Section 1400U-1 is amended by adding at the end the 
following new subsection:
    ``(c) Allocation of 2010 Recovery Zone Bond Limitations Based on 
Unemployment.--
            ``(1) In general.--The Secretary shall allocate the 2010 
        national recovery zone economic development bond limitation and 
        the 2010 national recovery zone facility bond limitation among 
        the States in the proportion that each such State's 2009 
        unemployment number bears to the aggregate of the 2009 
        unemployment numbers for all of the States.
            ``(2) Minimum allocation.--The Secretary shall adjust the 
        allocations under paragraph (1) for each State to the extent 
        necessary to ensure that no State (prior to any reduction under 
        paragraph (3)) receives less than 0.9 percent of the 2010 
        national recovery zone economic development bond limitation and 
        0.9 percent of the 2010 national recovery zone facility bond 
        limitation.
            ``(3) Allocations by states.--
                    ``(A) In general.--Each State with respect to which 
                an allocation is made under paragraph (1) shall 
                reallocate such allocation among the counties and large 
                municipalities (as defined in subsection (a)(3)(B)) in 
                such State in the proportion that each such county's or 
                municipality's 2009 unemployment number bears to the 
                aggregate of the 2009 unemployment numbers for all the 
                counties and large municipalities (as so defined) in 
                such State.
                    ``(B) 2010 allocation reduced by amount of previous 
                allocation.--Each State shall reduce (but not below 
                zero)--
                            ``(i) the amount of the 2010 national 
                        recovery zone economic development bond 
                        limitation allocated to each county or large 
                        municipality (as so defined) in such State by 
                        the amount of the national recovery zone 
                        economic development bond limitation allocated 
                        to such county or large municipality under 
                        subsection (a)(3)(A) (determined without regard 
                        to any waiver thereof), and
                            ``(ii) the amount of the 2010 national 
                        recovery zone facility bond limitation 
                        allocated to each county or large municipality 
                        (as so defined) in such State by the amount of 
                        the national recovery zone facility bond 
                        limitation allocated to such county or large 
                        municipality under subsection (a)(3)(A) 
                        (determined without regard to any waiver 
                        thereof).
                    ``(C) Waiver of suballocations.--A county or 
                municipality may waive any portion of an allocation 
                made under this paragraph. A county or municipality 
                shall be treated as having waived any portion of an 
                allocation made under this paragraph which has not been 
                allocated to a bond issued before May 1, 2011. Any 
                allocation waived (or treated as waived) under this 
                subparagraph may be used or reallocated by the State.
                    ``(D) Special rule for a municipality in a 
                county.--In the case of any large municipality any 
                portion of which is in a county, such portion shall be 
                treated as part of such municipality and not part of 
                such county.
            ``(4) 2009 unemployment number.--For purposes of this 
        subsection, the term `2009 unemployment number' means, with 
        respect to any State, county or municipality, the number of 
        individuals in such State, county, or municipality who were 
        determined to be unemployed by the Bureau of Labor Statistics 
        for December 2009.
            ``(5) 2010 national limitations.--
                    ``(A) Recovery zone economic development bonds.--
                The 2010 national recovery zone economic development 
                bond limitation is $10,000,000,000. Any allocation of 
                such limitation under this subsection shall be treated 
                for purposes of section 1400U-2 in the same manner as 
                an allocation of national recovery zone economic 
                development bond limitation.
                    ``(B) Recovery zone facility bonds.--The 2010 
                national recovery zone facility bond limitation is 
                $15,000,000,000. Any allocation of such limitation 
                under this subsection shall be treated for purposes of 
                section 1400U-3 in the same manner as an allocation of 
                national recovery zone facility bond limitation.''.
    (c) Authority of State To Waive Certain 2009 Allocations.--
Subparagraph (A) of section 1400U-1(a)(3) is amended by adding at the 
end the following: ``A county or municipality shall be treated as 
having waived any portion of an allocation made under this subparagraph 
which has not been allocated to a bond issued before May 1, 2011. Any 
allocation waived (or treated as waived) under this subparagraph may be 
used or reallocated by the State.''.

SEC. 105. ALLOWANCE OF NEW MARKETS TAX CREDIT AGAINST ALTERNATIVE 
              MINIMUM TAX.

    (a) In General.--Subparagraph (B) of section 38(c)(4) is amended by 
redesignating clauses (v) through (ix) as clauses (vi) through (x), 
respectively, and by inserting after clause (iv) the following new 
clause:
                            ``(v) the credit determined under section 
                        45D, but only with respect to credits 
                        determined with respect to qualified equity 
                        investments (as defined in section 45D(b)) 
                        initially made before January 1, 2012,''.
    (b) Effective Date.--The amendments made by this section shall 
apply to credits determined with respect to qualified equity 
investments (as defined in section 45D(b) of the Internal Revenue Code 
of 1986) initially made after March 15, 2010.

SEC. 106. EXTENSION OF TAX-EXEMPT ELIGIBILITY FOR LOANS GUARANTEED BY 
              FEDERAL HOME LOAN BANKS.

    Clause (iv) of section 149(b)(3)(A) is amended by striking 
``December 31, 2010'' and inserting ``December 31, 2011''.

SEC. 107. EXTENSION OF TEMPORARY SMALL ISSUER RULES FOR ALLOCATION OF 
              TAX-EXEMPT INTEREST EXPENSE BY FINANCIAL INSTITUTIONS.

    (a) In General.--Clauses (i), (ii), and (iii) of section 
265(b)(3)(G) are each amended by striking ``or 2010'' and inserting ``, 
2010, or 2011''.
    (b) Conforming Amendment.--Subparagraph (G) of section 265(b)(3) is 
amended by striking ``and 2010'' in the heading and inserting ``, 2010, 
and 2011''.
    (c) Effective Date.--The amendments made by this section shall 
apply to obligations issued after December 31, 2010.

        TITLE II--EMERGENCY FUND FOR JOB CREATION AND ASSISTANCE

SEC. 201. EXTENSION OF THE EMERGENCY FUND FOR JOB CREATION AND 
              ASSISTANCE.

    (a) In General.--Section 403(c) of the Social Security Act (42 
U.S.C. 603(c)) is amended--
            (1) in paragraph (1), by striking ``Emergency Contingency 
        Fund for State Temporary Assistance for Needy Families 
        Programs'' and inserting ``Emergency Fund for Job Creation and 
        Assistance'';
            (2) in paragraph (2)(A), by inserting ``, and for fiscal 
        year 2011, such sums as may be necessary to carry out this 
        subsection'' before ``for payment'';
            (3) by striking paragraph (2)(B) and inserting the 
        following:
                    ``(B) Availability and use of funds.--
                            ``(i) Fiscal years 2009 and 2010.--The 
                        amounts appropriated to the Emergency Fund 
                        under subparagraph (A) for fiscal year 2009 
                        shall remain available through fiscal year 2010 
                        and shall be used to make grants to States in 
                        each of fiscal years 2009 and 2010 in 
                        accordance with paragraph (3), except that the 
                        amounts shall remain available through fiscal 
                        year 2011 to make grants and payments to States 
                        in accordance with paragraph (3)(C) to cover 
                        expenditures to subsidize employment positions 
                        held by individuals placed in the positions 
                        before fiscal year 2011.
                            ``(ii) Fiscal year 2011.--Subject to clause 
                        (iii), the amounts appropriated to the 
                        Emergency Fund under subparagraph (A) for 
                        fiscal year 2011 shall remain available through 
                        fiscal year 2012 and shall be used to make 
                        grants to States based on expenditures in 
                        fiscal year 2011 for benefits and services 
                        provided in fiscal year 2011 in accordance with 
                        the requirements of paragraph (3).
                            ``(iii) Reservation of funds.--Of the 
                        amounts appropriated to the Emergency Fund 
                        under subparagraph (A) for fiscal year 2011, 
                        $500,000 shall be placed in reserve for use in 
                        fiscal year 2012, and shall be used to award 
                        grants for any expenditures described in this 
                        subsection incurred by States after September 
                        30, 2011.'';
            (4) in paragraph (2)(C), by striking ``2010'' and inserting 
        ``2012'';
            (5) in paragraph (3)--
                    (A) in clause (i) of each of subparagraphs (A), 
                (B), and (C), by striking ``year 2009 or 2010'' and 
                inserting ``years 2009 through 2011''; and
                    (B) in subparagraph (C), by adding at the end the 
                following:
                            ``(iv) Limitation on expenditures for 
                        subsidized employment.--An expenditure for 
                        subsidized employment shall be taken into 
                        account under clause (ii) only if the 
                        expenditure is used to subsidize employment 
                        for--
                                    ``(I) a member of a needy family 
                                (without regard to whether the family 
                                is receiving assistance under the State 
                                program funded under this part); or
                                    ``(II) an individual who has 
                                exhausted (or, within 60 days, will 
                                exhaust) all rights to receive 
                                unemployment compensation under Federal 
                                and State law, and who is a member of a 
                                needy family.'';
            (6) by striking paragraph (5) and inserting the following:
            ``(5) Limitations on payments.--
                    ``(A) Fiscal years 2009 and 2010.--The total amount 
                payable to a single State under subsection (b) and this 
                subsection for fiscal years 2009 and 2010 combined 
                shall not exceed 50 percent of the annual State family 
                assistance grant.
                    ``(B) Fiscal year 2011.--The total amount payable 
                to a single State under subsection (b) and this 
                subsection for fiscal year 2011 shall not exceed 30 
                percent of the annual State family assistance grant.''; 
                and
            (7) in paragraph (6), by inserting ``or for expenditures 
        described in paragraph (3)(C)(iv)'' before the period.
    (b) Conforming Amendments.--Section 2101 of division B of the 
American Recovery and Reinvestment Act of 2009 (Public Law 111-5) is 
amended--
            (1) in subsection (a)(2)--
                    (A) by striking ``2010'' and inserting ``2011''; 
                and
                    (B) by striking all that follows ``repealed'' and 
                inserting a period; and
            (2) in subsection (d)(1), by striking ``2010'' and 
        inserting ``2011''.
    (c) Program Guidance.--The Secretary of Health and Human Services 
shall issue program guidance, without regard to the requirements of 
section 553 of title 5, United States Code, which ensures that the 
funds provided under the amendments made by this section to a 
jurisdiction for subsidized employment do not support any subsidized 
employment position the annual salary of which is greater than, at 
State option--
            (1) 200 percent of the poverty line (within the meaning of 
        section 673(2) of the Omnibus Budget Reconciliation Act of 
        1981, including any revision required by such section 673(2)) 
        for a family of 4; or
            (2) the median wage in the jurisdiction.

                     TITLE III--FOREIGN PROVISIONS

SEC. 301. RULES TO PREVENT SPLITTING FOREIGN TAX CREDITS FROM THE 
              INCOME TO WHICH THEY RELATE.

    (a) In General.--Subpart A of part III of subchapter N of chapter 1 
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 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 after December 31, 2010; and
            (2) foreign income taxes (as so defined) paid or accrued by 
        a section 902 corporation (as so defined) 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).

SEC. 302. DENIAL OF FOREIGN TAX CREDIT WITH RESPECT TO FOREIGN INCOME 
              NOT SUBJECT TO UNITED STATES TAXATION BY REASON OF 
              COVERED ASSET ACQUISITIONS.

    (a) In General.--Section 901 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 May 20, 2010, and at all times thereafter,
                    (B) described in a ruling request submitted to the 
                Internal Revenue Service on or before such date; or
                    (C) described on or before such date 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.

SEC. 303. SEPARATE APPLICATION OF FOREIGN TAX CREDIT LIMITATION, ETC., 
              TO ITEMS RESOURCED UNDER TREATIES.

    (a) In General.--Subsection (d) of section 904 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.

SEC. 304. LIMITATION ON THE AMOUNT OF FOREIGN TAXES DEEMED PAID WITH 
              RESPECT TO SECTION 956 INCLUSIONS.

    (a) In General.--Section 960 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.

SEC. 305. SPECIAL RULE WITH RESPECT TO CERTAIN REDEMPTIONS BY FOREIGN 
              SUBSIDIARIES.

    (a) In General.--Paragraph (5) of section 304(b) 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 December 31, 2010.

SEC. 306. MODIFICATION OF AFFILIATION RULES FOR PURPOSES OF RULES 
              ALLOCATING INTEREST EXPENSE.

    (a) In General.--Subparagraph (A) of section 864(e)(5) 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.

SEC. 307. TERMINATION OF SPECIAL RULES FOR INTEREST AND DIVIDENDS 
              RECEIVED FROM PERSONS MEETING THE 80-PERCENT FOREIGN 
              BUSINESS REQUIREMENTS.

    (a) In General.--Paragraph (1) of section 861(a) 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) 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 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 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) 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 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.

SEC. 308. SOURCE RULES FOR INCOME ON GUARANTEES.

    (a) Amounts Sourced Within the United States.--Subsection (a) of 
section 861 is amended by adding at the end the following new 
paragraph:
            ``(9) Guarantees.--Amounts received, directly or 
        indirectly, from--
                    ``(A) a noncorporate resident or domestic 
                corporation for the provision of a guarantee of any 
                indebtedness of such resident or corporation, or
                    ``(B) any foreign person for the provision of a 
                guarantee of any indebtedness of such person, if such 
                amount is connected with income which is effectively 
                connected (or treated as effectively connected) with 
                the conduct of a trade or business in the United 
                States.''.
    (b) Amounts Sourced Without the United States.--Subsection (a) of 
section 862 is amended by striking ``and'' at the end of paragraph (7), 
by striking the period at the end of paragraph (8) and inserting ``; 
and'', and by adding at the end the following new paragraph:
            ``(9) amounts received, directly or indirectly, from a 
        foreign person for the provision of a guarantee of indebtedness 
        of such person other than amounts which are derived from 
        sources within the United States as provided in section 
        861(a)(9).''.
    (c) Conforming Amendment.--Clause (ii) of section 864(c)(4)(B) is 
amended by striking ``dividends or interest'' and inserting 
``dividends, interest, or amounts received for the provision of 
guarantees of indebtedness''.
    (d) Effective Date.--The amendments made by this section shall 
apply to guarantees issued after the date of the enactment of this Act.

SEC. 309. LIMITATION ON EXTENSION OF STATUTE OF LIMITATIONS FOR FAILURE 
              TO NOTIFY SECRETARY OF CERTAIN FOREIGN TRANSFERS.

    (a) In General.--Paragraph (8) of section 6501(c) 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.

                     TITLE IV--BUDGETARY PROVISIONS

SEC. 401. PAYGO COMPLIANCE.

    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, submitted for printing in the Congressional 
Record by the Chairman of the House Budget Committee, provided that 
such statement has been submitted prior to the vote on passage.

SEC. 402. TIME FOR PAYMENT OF CORPORATE ESTIMATED TAXES.

    The percentage under paragraph (2) of section 561 of the Hiring 
Incentives to Restore Employment Act in effect on the date of the 
enactment of this Act is increased by 3 percentage points.
                                 <all>