[Congressional Bills 113th Congress]
[From the U.S. Government Publishing Office]
[S. 277 Introduced in Senate (IS)]

113th CONGRESS
  1st Session
                                 S. 277

    To replace the Budget Control Act sequester by eliminating tax 
                   loopholes, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                           February 11, 2013

 Mr. Whitehouse (for himself, Mr. Harkin, Mr. Sanders, and Mr. Levin) 
introduced the following bill; which was read twice and referred to the 
                          Committee on Finance

_______________________________________________________________________

                                 A BILL


 
    To replace the Budget Control Act sequester by eliminating tax 
                   loopholes, 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; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Job Preservation 
and Economic Certainty Act of 2013''.
    (b) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; table of contents.
                 TITLE I--ELIMINATION OF SEQUESTRATION

Sec. 101. Discretionary spending limits.
    TITLE II--ELIMINATION OF TAX LOOPHOLES FOR HIGH-INCOME TAXPAYERS

Sec. 201. Minimum tax for high-income earners.
Sec. 202. Requiring high-income professionals to pay their payroll 
                            taxes.
Sec. 203. Elimination of private jet giveaway.
Sec. 204. Limitation on itemized deductions to 28-percent rate bracket.
  TITLE III--ELIMINATION OF TAX LOOPHOLES FOR OFFSHORING MANUFACTURERS

Sec. 301. Ending tax breaks for offshoring manufacturers.
    TITLE IV--ELIMINATION OF TAX LOOPHOLES FOR OIL AND GAS COMPANIES

Sec. 401. Modifications of foreign tax credit rules applicable to major 
                            integrated oil companies which are dual 
                            capacity taxpayers.
Sec. 402. Limitation on section 199 deduction attributable to oil, 
                            natural gas, or primary products thereof.
Sec. 403. Limitation on deduction for intangible drilling and 
                            development costs.
Sec. 404. Limitation on percentage depletion allowance for oil and gas 
                            wells.
Sec. 405. Limitation on deduction for tertiary injectants.
Sec. 406. Repeal of outer Continental Shelf deep water and deep gas 
                            royalty relief.
                TITLE V--ENDING INTERNATIONAL TAX ABUSES

Sec. 501. Allocation of expenses and taxes on basis of repatriation of 
                            foreign income.
Sec. 502. Excess income from transfers of intangibles to low-taxed 
                            affiliates treated as subpart F income.
Sec. 503. Limitations on income shifting through intangible property 
                            transfers.
Sec. 504. Limitation on earnings stripping by expatriated entities.
Sec. 505. Modifications of foreign tax credit rules applicable to dual 
                            capacity taxpayers.
Sec. 506. Separate basket treatment taxes paid on foreign oil and gas 
                            income.
             TITLE VI--FINANCIAL CRISIS RESPONSIBILITY FEE

Sec. 601. Definitions and special rules.
Sec. 602. Financial crisis responsibility fee.
Sec. 603. Other provisions.
                 TITLE VII--TAX ON TRADING TRANSACTIONS

Sec. 701. Transaction tax.
              TITLE VIII--MODIFICATION OF ACCOUNTING RULES

Sec. 801. Repeal of last-in, first-out method of inventory.
Sec. 802. Repeal of lower of cost or market method of inventory.
                  TITLE IX--FAIR TREATMENT OF OPTIONS

Sec. 901. Consistent treatment of stock options by corporations.
Sec. 902. Application of executive pay deduction limit.

                 TITLE I--ELIMINATION OF SEQUESTRATION

SEC. 101. DISCRETIONARY SPENDING LIMITS.

    (a) In General.--Part C of title II of the Balanced Budget and 
Emergency Deficit Control Act of 1985 (2 U.S.C. 900 et seq.) is 
amended--
            (1) by striking section 251(c) (2 U.S.C. 901(c)) and 
        inserting the following:
    ``(c) Discretionary Spending Limit.--As used in this part, the term 
`discretionary spending limit' means--
            ``(1) with respect to fiscal year 2012--
                    ``(A) for the security category, $684,000,000,000 
                in new budget authority; and
                    ``(B) for the nonsecurity category, 
                $359,000,000,000 in new budget authority;
            ``(2) with respect to fiscal year 2013--
                    ``(A) for the security category, $686,000,000,000 
                in new budget authority; and
                    ``(B) for the nonsecurity category, 
                $361,000,000,000 in new budget authority;
            ``(3) with respect to fiscal year 2014, for the 
        discretionary category, $1,066,000,000,000 in new budget 
        authority;
            ``(4) with respect to fiscal year 2015, for the 
        discretionary category, $1,086,000,000,000 in new budget 
        authority;
            ``(5) with respect to fiscal year 2016, for the 
        discretionary category, $1,107,000,000,000 in new budget 
        authority;
            ``(6) with respect to fiscal year 2017, for the 
        discretionary category, $1,131,000,000,000 in new budget 
        authority;
            ``(7) with respect to fiscal year 2018, for the 
        discretionary category, $1,156,000,000,000 in new budget 
        authority;
            ``(8) with respect to fiscal year 2019, for the 
        discretionary category, $1,182,000,000,000 in new budget 
        authority;
            ``(9) with respect to fiscal year 2020, for the 
        discretionary category, $1,208,000,000,000 in new budget 
        authority; and
            ``(10) with respect to fiscal year 2021, for the 
        discretionary category, $1,234,000,000,000 in new budget 
        authority;
as adjusted in strict conformance with subsection (b).'';
            (2) by striking section 251A (2 U.S.C. 901a); and
            (3) in the table of contents set forth in section 250(a), 
        by striking the item relating to section 251A.
    (b) Technical and Conforming Amendment.--Section 901(e) of the 
American Taxpayer Relief Act of 2012 (Public Law 112-240) is repealed.

    TITLE II--ELIMINATION OF TAX LOOPHOLES FOR HIGH-INCOME TAXPAYERS

SEC. 201. MINIMUM TAX FOR HIGH-INCOME EARNERS.

    (a) In General.--Subchapter A of chapter 1 is amended by adding at 
the end the following new part:

          ``PART VIII--FAIR SHARE TAX ON HIGH-INCOME TAXPAYERS

``Sec. 59B. Fair share tax.

``SEC. 59B. FAIR SHARE TAX.

    ``(a) General Rule.--
            ``(1) Phase-in of tax.--In the case of any high-income 
        taxpayer, there is hereby imposed for a taxable year (in 
        addition to any other tax imposed by this subtitle) a tax equal 
        to the product of--
                    ``(A) the amount determined under paragraph (2), 
                and
                    ``(B) a fraction (not to exceed 1)--
                            ``(i) the numerator of which is the excess 
                        of--
                                    ``(I) the taxpayer's adjusted gross 
                                income, over
                                    ``(II) the dollar amount in effect 
                                under subsection (c)(1), and
                            ``(ii) the denominator of which is the 
                        dollar amount in effect under subsection 
                        (c)(1).
            ``(2) Amount of tax.--The amount of tax determined under 
        this paragraph is an amount equal to the excess (if any) of--
                    ``(A) the tentative fair share tax for the taxable 
                year, over
                    ``(B) the excess of--
                            ``(i) the sum of--
                                    ``(I) the regular tax liability (as 
                                defined in section 26(b)) for the 
                                taxable year, determined without regard 
                                to any tax liability determined under 
                                this section,
                                    ``(II) the tax imposed by section 
                                55 for the taxable year, plus
                                    ``(III) the payroll tax for the 
                                taxable year, over
                            ``(ii) the credits allowable under part IV 
                        of subchapter A (other than sections 27(a), 31, 
                        and 34).
    ``(b) Tentative Fair Share Tax.--For purposes of this section--
            ``(1) In general.--The tentative fair share tax for the 
        taxable year is 30 percent of the excess of--
                    ``(A) the adjusted gross income of the taxpayer, 
                over
                    ``(B) the modified charitable contribution 
                deduction for the taxable year.
            ``(2) Modified charitable contribution deduction.--For 
        purposes of paragraph (1)--
                    ``(A) In general.--The modified charitable 
                contribution deduction for any taxable year is an 
                amount equal to the amount which bears the same ratio 
                to the deduction allowable under section 170 (section 
                642(c) in the case of a trust or estate) for such 
                taxable year as--
                            ``(i) the amount of itemized deductions 
                        allowable under the regular tax (as defined in 
                        section 55) for such taxable year, determined 
                        after the application of section 68, bears to
                            ``(ii) such amount, determined before the 
                        application of section 68.
                    ``(B) Taxpayer must itemize.--In the case of any 
                individual who does not elect to itemize deductions for 
                the taxable year, the modified charitable contribution 
                deduction shall be zero.
    ``(c) High-Income Taxpayer.--For purposes of this section--
            ``(1) In general.--The term `high-income taxpayer' means, 
        with respect to any taxable year, any taxpayer (other than a 
        corporation) with an adjusted gross income for such taxable 
        year in excess of $1,000,000 (50 percent of such amount in the 
        case of a married individual who files a separate return).
            ``(2) Inflation adjustment.--
                    ``(A) In general.--In the case of a taxable year 
                beginning after 2013, the $1,000,000 amount under 
                paragraph (1) shall be increased by an amount equal 
                to--
                            ``(i) such dollar amount, multiplied by
                            ``(ii) the cost-of-living adjustment 
                        determined under section 1(f)(3) for the 
                        calendar year in which the taxable year begins, 
                        determined by substituting `calendar year 2012' 
                        for `calendar year 1992' in subparagraph (B) 
                        thereof.
                    ``(B) Rounding.--If any amount as adjusted under 
                subparagraph (A) is not a multiple of $10,000, such 
                amount shall be rounded to the next lowest multiple of 
                $10,000.
    ``(d) Payroll Tax.--For purposes of this section, the payroll tax 
for any taxable year is an amount equal to the excess of--
            ``(1) the taxes imposed on the taxpayer under sections 
        1401, 1411, 3101, 3201, and 3211(a) (to the extent such tax is 
        attributable to the rate of tax in effect under section 3101) 
        with respect to such taxable year or wages or compensation 
        received during such taxable year, over
            ``(2) the deduction allowable under section 164(f) for such 
        taxable year.
    ``(e) Special Rule for Estates and Trusts.--For purposes of this 
section, in the case of an estate or trust, adjusted gross income shall 
be computed in the manner described in section 67(e).
    ``(f) Not Treated as Tax Imposed by This Chapter for Certain 
Purposes.--The tax imposed under this section shall not be treated as 
tax imposed by this chapter for purposes of determining the amount of 
any credit under this chapter (other than the credit allowed under 
section 27(a)) or for purposes of section 55.''.
    (b) Clerical Amendment.--The table of parts for subchapter A of 
chapter 1 is amended by adding at the end the following new item:

        ``Part VIII--Fair Share Tax on High-Income Taxpayers''.

    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2012.

SEC. 202. REQUIRING HIGH-INCOME PROFESSIONALS TO PAY THEIR PAYROLL 
              TAXES.

    (a) In General.--Section 1402 of the Internal Revenue Code of 1986 
is amended by adding at the end the following new subsection:
    ``(m) Special Rules for Professional Service Businesses.--
            ``(1) Shareholders providing services to specified s 
        corporations.--
                    ``(A) In general.--In the case of an applicable 
                shareholder who provides substantial services with 
                respect to a professional service business referred to 
                in subparagraph (C) of a specified S corporation--
                            ``(i) such shareholder shall be treated as 
                        engaged in the trade or business of such 
                        professional service business with respect to 
                        items of income or loss described in section 
                        1366 which are attributable to such business, 
                        and
                            ``(ii) such shareholder's net earnings from 
                        self-employment shall include such 
                        shareholder's pro rata share of such items of 
                        income or loss, except that in computing such 
                        pro rata share of such items the exceptions 
                        provided in subsection (a) shall apply.
                    ``(B) Treatment of family members.--Except as 
                otherwise provided by the Secretary, the applicable 
                shareholder's pro rata share of items referred to in 
                subparagraph (A) shall be increased by the pro rata 
                share of such items of each member of such applicable 
                shareholder's family (within the meaning of section 
                318(a)(1)) who does not provide substantial services 
                with respect to such professional service business.
                    ``(C) Specified s corporation.--For purposes of 
                this subsection, the term `specified S corporation' 
                means--
                            ``(i) any S corporation which is a partner 
                        in a partnership which is engaged in a 
                        professional service business if substantially 
                        all of the activities of such S corporation are 
                        performed in connection with such partnership, 
                        and
                            ``(ii) any other S corporation which is 
                        engaged in a professional service business if 
                        75 percent or more of the gross income of such 
                        business is attributable to service of 3 or 
                        fewer shareholders of such corporation.
                    ``(D) Applicable shareholder.--For purposes of this 
                paragraph, the term `applicable shareholder' means any 
                shareholder whose modified adjusted gross income for 
                the taxable year exceeds--
                            ``(i) in the case of a shareholder making a 
                        joint return under section 6013 or a surviving 
                        spouse (as defined in section 2(a)), $250,000,
                            ``(ii) in the case of a married shareholder 
                        (as defined in section 7703) filing a separate 
                        return, half of the dollar amount determined 
                        under clause (i), and
                            ``(iii) in any other case, $200,000.
            ``(2) Partners.--
                    ``(A) In general.--In the case of any partnership 
                which is engaged in a professional service business, 
                subsection (a)(13) shall not apply to any applicable 
                partner who provides substantial services with respect 
                to such professional service business.
                    ``(B) Applicable partner.--For purposes of this 
                paragraph, the term `applicable partner' means any 
                partner whose modified adjusted gross income for the 
                taxable year exceeds--
                            ``(i) in the case of a partner making a 
                        joint return under section 6013 or a surviving 
                        spouse (as defined in section 2(a)), $250,000,
                            ``(ii) in the case of a married partner (as 
                        defined in section 7703) filing a separate 
                        return, half of the dollar amount determined 
                        under clause (i), and
                            ``(iii) in any other case, $200,000.
            ``(3) Professional service business.--For purposes of this 
        subsection, the term `professional service business' means any 
        trade or business (or portion thereof) providing services in 
        the fields of health, law, lobbying, engineering, architecture, 
        accounting, actuarial science, performing arts, consulting, 
        athletics, investment advice or management, or brokerage 
        services.
            ``(4) Modified adjusted gross income.--For purposes of this 
        subsection, the term `modified adjusted gross income' means 
        adjusted gross income--
                    ``(A) determined without regard to any deduction 
                allowed under section 164(f), and
                    ``(B) increased by the amount excluded from gross 
                income under section 911(a)(1).
            ``(5) Regulations.--The Secretary shall prescribe such 
        regulations as may be necessary or appropriate to carry out the 
        purposes of this subsection, including regulations which 
        prevent the avoidance of the purposes of this subsection 
        through tiered entities or otherwise.
            ``(6) Cross reference.--For employment tax treatment of 
        wages paid to shareholders of S corporations, see subtitle 
        C.''.
    (b) Conforming Amendment.--Section 211 of the Social Security Act 
is amended by adding at the end the following new subsection:
    ``(l) Special Rules for Professional Service Businesses.--
            ``(1) Shareholders providing services to specified s 
        corporations.--
                    ``(A) In general.--In the case of an applicable 
                shareholder who provides substantial services with 
                respect to a professional service business referred to 
                in subparagraph (C) of a specified S corporation--
                            ``(i) such shareholder shall be treated as 
                        engaged in the trade or business of such 
                        professional service business with respect to 
                        items of income or loss described in section 
                        1366 of the Internal Revenue Code of 1986 which 
                        are attributable to such business, and
                            ``(ii) such shareholder's net earnings from 
                        self-employment shall include such 
                        shareholder's pro rata share of such items of 
                        income or loss, except that in computing such 
                        pro rata share of such items the exceptions 
                        provided in subsection (a) shall apply.
                    ``(B) Treatment of family members.--Except as 
                otherwise provided by the Secretary of the Treasury, 
                the applicable shareholder's pro rata share of items 
                referred to in subparagraph (A) shall be increased by 
                the pro rata share of such items of each member of such 
                applicable shareholder's family (within the meaning of 
                section 318(a)(1) of the Internal Revenue Code of 1986) 
                who does not provide substantial services with respect 
                to such professional service business.
                    ``(C) Specified s corporation.--For purposes of 
                this subsection, the term `specified S corporation' 
                means--
                            ``(i) any S corporation (as defined in 
                        section 1361(a) of the Internal Revenue Code of 
                        1986) which is a partner in a partnership which 
                        is engaged in a professional service business 
                        if substantially all of the activities of such 
                        S corporation are performed in connection with 
                        such partnership, and
                            ``(ii) any other S corporation (as so 
                        defined) which is engaged in a professional 
                        service business if 75 percent or more of the 
                        gross income of such business is attributable 
                        to service of 3 or fewer shareholders of such 
                        corporation.
                    ``(D) Applicable shareholder.--For purposes of this 
                paragraph, the term `applicable shareholder' means any 
                shareholder whose modified adjusted gross income for 
                the taxable year exceeds--
                            ``(i) in the case of a shareholder making a 
                        joint return under section 6013 of the Internal 
                        Revenue Code of 1986 or a surviving spouse (as 
                        defined in section 2(a) of such Code), 
                        $250,000,
                            ``(ii) in the case of a married shareholder 
                        (as defined in section 7703 of such Code) 
                        filing a separate return, half of the dollar 
                        amount determined under clause (i), and
                            ``(iii) in any other case, $200,000.
            ``(2) Partners.--
                    ``(A) In general.--In the case of any partnership 
                which is engaged in a professional service business, 
                subsection (a)(12) shall not apply to any applicable 
                partner who provides substantial services with respect 
                to such professional service business.
                    ``(B) Applicable partner.--For purposes of this 
                paragraph, the term `applicable partner' means any 
                partner whose modified adjusted gross income for the 
                taxable year exceeds--
                            ``(i) in the case of a partner making a 
                        joint return under section 6013 of the Internal 
                        Revenue Code of 1986 or a surviving spouse (as 
                        defined in section 2(a) of such Code), 
                        $250,000,
                            ``(ii) in the case of a married partner (as 
                        defined in section 7703 of such Code) filing a 
                        separate return, half of the dollar amount 
                        determined under clause (i), and
                            ``(iii) in any other case, $200,000.
            ``(3) Professional service business.--For purposes of this 
        subsection, the term `professional service business' means any 
        trade or business (or portion thereof) providing services in 
        the fields of health, law, lobbying, engineering, architecture, 
        accounting, actuarial science, performing arts, consulting, 
        athletics, investment advice or management, or brokerage 
        services.
            ``(4) Modified adjusted gross income.--For purposes of this 
        subsection, the term `modified adjusted gross income' means 
        adjusted gross income as determined under section 62 of the 
        Internal Revenue Code of 1986--
                    ``(A) determined without regard to any deduction 
                allowed under section 164(f) of such Code, and
                    ``(B) increased by the amount excluded from gross 
                income under section 911(a)(1) of such Code.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2012.

SEC. 203. ELIMINATION OF PRIVATE JET GIVEAWAY.

    (a) In General.--Subparagraph (C) of section 168(e)(3) of the 
Internal Revenue Code of 1986 is amended by striking ``and'' at the end 
of clause (iv), by redesignating clause (v) as clause (vi), and by 
inserting after clause (iv) the following new clause:
                            ``(v) any general aviation aircraft, and''.
    (b) Class Life.--Paragraph (3) of section 168(g) of the Internal 
Revenue Code of 1986 is amended by inserting after subparagraph (E) the 
following new subparagraph:
                    ``(F) General aviation aircraft.--In the case of 
                any general aviation aircraft, the recovery period used 
                for purposes of paragraph (2) shall be 12 years.''.
    (c) General Aviation Aircraft.--Subsection (i) of section 168 of 
the Internal Revenue Code of 1986 is amended by inserting after 
paragraph (19) the following new paragraph:
            ``(20) General aviation aircraft.--The term `general 
        aviation aircraft' means any airplane or helicopter (including 
        airframes and engines) not used in commercial or contract 
        carrying of passengers or freight, but which primarily engages 
        in the carrying of passengers.''.
    (d) Effective Date.--This section shall be effective for property 
placed in service after December 31, 2012.

SEC. 204. LIMITATION ON ITEMIZED DEDUCTIONS TO 28-PERCENT RATE BRACKET.

    (a) In General.--The Internal Revenue Code of 1986 is amended by 
inserting after section 68 the following new section:

``SEC. 68A. BENEFIT OF ITEMIZED DEDUCTIONS LIMITED TO 28-PERCENT RATE 
              BRACKET.

    ``(a) In General.--In the case of an individual whose adjusted 
gross income exceeds $200,000 ($250,000 in the case of a joint return), 
the amount of the itemized deductions otherwise allowable for the 
taxable year shall be reduced by an amount necessary to increase the 
amount of regular tax liability of the taxpayer to an amount that would 
be imposed if such deductions reduced the regular tax liability by not 
more than the amount such deductions would reduce the tax imposed by 
section 1 on taxable income within the 28-percent bracket amount.
    ``(b) Regular Tax Liability.--For purposes of this section, the 
term `regular tax liability' has the meaning given such term by section 
26(b).
    ``(c) Coordination With Section 68.--This section shall apply after 
the application of section 68.''.
    (b) Alternative Minimum Tax.--
            (1) In general.--Subsection (b) of section 55 is amended by 
        adding at the end the following new paragraph:
            ``(5) Coordination with section 68a.--In the case of an 
        individual, for purposes of paragraph (2), alternative minimum 
        taxable income shall be determined by reducing the amount of 
        any itemized deductions otherwise allowed in determining 
        alternative minimum taxable income by an amount which bears the 
        same ratio to the amount by which the itemized deductions of 
        the taxpayer were reduced for the taxable year under section 
        68A as--
                    ``(A) the amount of itemized deductions otherwise 
                allowed in determining the alternative minimum taxable 
                income for the taxable year, bears to
                    ``(B) the aggregate amount of itemized deductions 
                of the taxpayer for the taxable year (determined 
                without regard to section 68A).''.
            (2) Conforming amendment.--Paragraph (1) of section 56(b) 
        is amended by adding at the end the following new subparagraph:
                    ``(G) Section 68a not applicable.--Section 68A 
                shall not apply.''.
    (c) Clerical Amendment.--The table of sections for part I of 
subchapter B of chapter 1 is amended by adding at the end the following 
new item:

``Sec. 68A. Benefit of itemized deductions limited to 28-percent rate 
                            bracket.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2012.

  TITLE III--ELIMINATION OF TAX LOOPHOLES FOR OFFSHORING MANUFACTURERS

SEC. 301. ENDING TAX BREAKS FOR OFFSHORING MANUFACTURERS.

    (a) General Rule.--Subsection (a) of section 954 of the Internal 
Revenue Code of 1986 is amended by striking the period at the end of 
paragraph (5) and inserting ``, and'', by redesignating paragraph (5) 
as paragraph (4), and by adding at the end the following new paragraph:
            ``(5) imported property income for the taxable year 
        (determined under subsection (j) and reduced as provided in 
        subsection (b)(5)).''.
    (b) Definition of Imported Property Income.--Section 954 of the 
Internal Revenue Code of 1986 is amended by adding at the end the 
following new subsection:
    ``(j) Imported Property Income.--
            ``(1) In general.--For purposes of subsection (a)(5), the 
        term `imported property income' means income (whether in the 
        form of profits, commissions, fees, or otherwise) derived in 
        connection with--
                    ``(A) manufacturing, producing, growing, or 
                extracting imported property;
                    ``(B) the sale, exchange, or other disposition of 
                imported property; or
                    ``(C) the lease, rental, or licensing of imported 
                property.
        Such term shall not include any foreign oil and gas extraction 
        income (within the meaning of section 907(c)) or any foreign 
        oil related income (within the meaning of section 907(c)).
            ``(2) Imported property.--For purposes of this subsection--
                    ``(A) In general.--Except as otherwise provided in 
                this paragraph, the term `imported property' means 
                property which is imported into the United States by 
                the controlled foreign corporation or a related person.
                    ``(B) Imported property includes certain property 
                imported by unrelated persons.--The term `imported 
                property' includes any property imported into the 
                United States by an unrelated person if, when such 
                property was sold to the unrelated person by the 
                controlled foreign corporation (or a related person), 
                it was reasonable to expect that--
                            ``(i) such property would be imported into 
                        the United States; or
                            ``(ii) such property would be used as a 
                        component in other property which would be 
                        imported into the United States.
                    ``(C) Exception for property subsequently 
                exported.--The term `imported property' does not 
                include any property which is imported into the United 
                States and which--
                            ``(i) before substantial use in the United 
                        States, is sold, leased, or rented by the 
                        controlled foreign corporation or a related 
                        person for direct use, consumption, or 
                        disposition outside the United States; or
                            ``(ii) is used by the controlled foreign 
                        corporation or a related person as a component 
                        in other property which is so sold, leased, or 
                        rented.
                    ``(D) Exception for certain agricultural 
                commodities.--The term `imported property' does not 
                include any agricultural commodity which is not grown 
                in the United States in commercially marketable 
                quantities.
            ``(3) Definitions and special rules.--
                    ``(A) Import.--For purposes of this subsection, the 
                term `import' means entering, or withdrawal from 
                warehouse, for consumption or use. Such term includes 
                any grant of the right to use intangible property (as 
                defined in section 936(h)(3)(B)) in the United States.
                    ``(B) United states.--For purposes of this 
                subsection, the term `United States' includes the 
                Commonwealth of Puerto Rico, the Virgin Islands of the 
                United States, Guam, American Samoa, and the 
                Commonwealth of the Northern Mariana Islands.
                    ``(C) Unrelated person.--For purposes of this 
                subsection, the term `unrelated person' means any 
                person who is not a related person with respect to the 
                controlled foreign corporation.
                    ``(D) Coordination with foreign base company sales 
                income.--For purposes of this section, the term 
                `foreign base company sales income' shall not include 
                any imported property income.''.
    (c) Separate Application of Limitations on Foreign Tax Credit for 
Imported Property Income.--
            (1) In general.--Paragraph (1) of section 904(d) of the 
        Internal Revenue Code of 1986 is amended by striking ``and'' at 
        the end of subparagraph (A), by redesignating subparagraph (B) 
        as subparagraph (C), and by inserting after subparagraph (A) 
        the following new subparagraph:
                    ``(B) imported property income, and''.
            (2) Imported property income defined.--Paragraph (2) of 
        section 904(d) of such Code is amended by redesignating 
        subparagraphs (I), (J), and (K) as subparagraphs (J), (K), and 
        (L), respectively, and by inserting after subparagraph (H) the 
        following new subparagraph:
                    ``(I) Imported property income.--The term `imported 
                property income' means any income received or accrued 
                by any person which is of a kind which would be 
                imported property income (as defined in section 
                954(j)).''.
            (3) Conforming amendment.--Clause (ii) of section 
        904(d)(2)(A) of such Code is amended by inserting ``or imported 
        property income'' after ``passive category income''.
    (d) Technical Amendments.--
            (1) Clause (iii) of section 952(c)(1)(B) of the Internal 
        Revenue Code of 1986 is amended--
                    (A) by redesignating subclauses (II), (III), (IV), 
                and (V) as subclauses (III), (IV), (V), and (VI), and
                    (B) by inserting after subclause (I) the following 
                new subclause:
                                    ``(II) imported property income,''.
            (2) The last sentence of paragraph (4) of section 954(b) of 
        such Code is amended by striking ``subsection (a)(5)'' and 
        inserting ``subsection (a)(4)''.
            (3) Paragraph (5) of section 954(b) of such Code is amended 
        by striking ``and the foreign base company oil related income'' 
        and inserting ``the foreign base company oil related income, 
        and the imported property income''.
    (e) Effective Date.--The amendments made by this section shall 
apply to taxable years of foreign corporations beginning after the date 
of the enactment of this Act, and to taxable years of United States 
shareholders within which or with which such taxable years of such 
foreign corporations end.

    TITLE IV--ELIMINATION OF TAX LOOPHOLES FOR OIL AND GAS COMPANIES

SEC. 401. MODIFICATIONS OF FOREIGN TAX CREDIT RULES APPLICABLE TO MAJOR 
              INTEGRATED OIL COMPANIES WHICH ARE DUAL CAPACITY 
              TAXPAYERS.

    (a) In General.--Section 901 of the Internal Revenue Code of 1986 
is amended by redesignating subsection (n) as subsection (o) and by 
inserting after subsection (m) the following new subsection:
    ``(n) Special Rules Relating to Major Integrated Oil Companies 
Which Are Dual Capacity Taxpayers.--
            ``(1) General rule.--Notwithstanding any other provision of 
        this chapter, any amount paid or accrued by a dual capacity 
        taxpayer which is a major integrated oil company (as defined in 
        section 167(h)(5)(B)) to a foreign country or possession of the 
        United States for any period shall not be considered a tax--
                    ``(A) if, for such period, the foreign country or 
                possession does not impose a generally applicable 
                income tax, or
                    ``(B) to the extent such amount exceeds the amount 
                (determined in accordance with regulations) which--
                            ``(i) is paid by such dual capacity 
                        taxpayer pursuant to the generally applicable 
                        income tax imposed by the country or 
                        possession, or
                            ``(ii) would be paid if the generally 
                        applicable income tax imposed by the country or 
                        possession were applicable to such dual 
                        capacity taxpayer.
        Nothing in this paragraph shall be construed to imply the 
        proper treatment of any such amount not in excess of the amount 
        determined under subparagraph (B).
            ``(2) Dual capacity taxpayer.--For purposes of this 
        subsection, the term `dual capacity taxpayer' means, with 
        respect to any foreign country or possession of the United 
        States, a person who--
                    ``(A) is subject to a levy of such country or 
                possession, and
                    ``(B) receives (or will receive) directly or 
                indirectly a specific economic benefit (as determined 
                in accordance with regulations) from such country or 
                possession.
            ``(3) Generally applicable income tax.--For purposes of 
        this subsection--
                    ``(A) In general.--The term `generally applicable 
                income tax' means an income tax (or a series of income 
                taxes) which is generally imposed under the laws of a 
                foreign country or possession on income derived from 
                the conduct of a trade or business within such country 
                or possession.
                    ``(B) Exceptions.--Such term shall not include a 
                tax unless it has substantial application, by its terms 
                and in practice, to--
                            ``(i) persons who are not dual capacity 
                        taxpayers, and
                            ``(ii) persons who are citizens or 
                        residents of the foreign country or 
                        possession.''.
    (b) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to taxes paid or accrued in taxable years beginning after 
        the date of the enactment of this Act.
            (2) Contrary treaty obligations upheld.--The amendments 
        made by this section shall not apply to the extent contrary to 
        any treaty obligation of the United States.

SEC. 402. LIMITATION ON SECTION 199 DEDUCTION ATTRIBUTABLE TO OIL, 
              NATURAL GAS, OR PRIMARY PRODUCTS THEREOF.

    (a) Denial of Deduction.--Paragraph (4) of section 199(c) of the 
Internal Revenue Code of 1986 is amended by adding at the end the 
following new subparagraph:
                    ``(E) Special rule for certain oil and gas 
                income.--In the case of any taxpayer who is a major 
                integrated oil company (as defined in section 
                167(h)(5)(B)) for the taxable year, the term `domestic 
                production gross receipts' shall not include gross 
                receipts from the production, transportation, or 
                distribution of oil, natural gas, or any primary 
                product (within the meaning of subsection (d)(9)) 
                thereof.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2012.

SEC. 403. LIMITATION ON DEDUCTION FOR INTANGIBLE DRILLING AND 
              DEVELOPMENT COSTS.

    (a) In General.--Section 263(c) of the Internal Revenue Code of 
1986 is amended by adding at the end the following new sentence: ``This 
subsection shall not apply to amounts paid or incurred by a taxpayer in 
any taxable year in which such taxpayer is a major integrated oil 
company (as defined in section 167(h)(5)(B)).''.
    (b) Effective Date.--The amendment made by this section shall apply 
to amounts paid or incurred in taxable years beginning after December 
31, 2012.

SEC. 404. LIMITATION ON PERCENTAGE DEPLETION ALLOWANCE FOR OIL AND GAS 
              WELLS.

    (a) In General.--Section 613A of the Internal Revenue Code of 1986 
is amended by adding at the end the following new subsection:
    ``(f) Application With Respect to Major Integrated Oil Companies.--
In the case of any taxable year in which the taxpayer is a major 
integrated oil company (as defined in section 167(h)(5)(B)), the 
allowance for percentage depletion shall be zero.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2012.

SEC. 405. LIMITATION ON DEDUCTION FOR TERTIARY INJECTANTS.

    (a) In General.--Section 193 of the Internal Revenue Code of 1986 
is amended by adding at the end the following new subsection:
    ``(d) Application With Respect to Major Integrated Oil Companies.--
This section shall not apply to amounts paid or incurred by a taxpayer 
in any taxable year in which such taxpayer is a major integrated oil 
company (as defined in section 167(h)(5)(B)).''.
    (b) Effective Date.--The amendment made by this section shall apply 
to amounts paid or incurred in taxable years beginning after December 
31, 2012.

SEC. 406. REPEAL OF OUTER CONTINENTAL SHELF DEEP WATER AND DEEP GAS 
              ROYALTY RELIEF.

    (a) In General.--Sections 344 and 345 of the Energy Policy Act of 
2005 (42 U.S.C. 15904, 15905) are repealed.
    (b) Administration.--The Secretary of the Interior shall not be 
required to provide for royalty relief in the lease sale terms 
beginning with the first lease sale held on or after the date of 
enactment of this Act for which a final notice of sale has not been 
published.

                TITLE V--ENDING INTERNATIONAL TAX ABUSES

SEC. 501. ALLOCATION OF EXPENSES AND TAXES ON BASIS OF REPATRIATION OF 
              FOREIGN INCOME.

    (a) In General.--Part III of subchapter N of chapter 1 of the 
Internal Revenue Code of 1986 is amended by inserting after subpart G 
the following new subpart:

``Subpart H--Special Rules for Allocation of Foreign-Related Deductions 
                        and Foreign Tax Credits

``Sec. 975. Deductions allocated to deferred foreign income may not 
                            offset United States source income.
``Sec. 976. Amount of foreign taxes computed on overall basis.
``Sec. 977. Application of subpart.

``SEC. 975. DEDUCTIONS ALLOCATED TO DEFERRED FOREIGN INCOME MAY NOT 
              OFFSET UNITED STATES SOURCE INCOME.

    ``(a) Current Year Deductions.--For purposes of this chapter, 
foreign-related deductions for any taxable year--
            ``(1) shall be taken into account for such taxable year 
        only to the extent that such deductions are allocable to 
        currently-taxed foreign income, and
            ``(2) to the extent not so allowed, shall be taken into 
        account in subsequent taxable years as provided in subsection 
        (b).
Foreign-related deductions shall be allocated to currently taxed 
foreign income in the same proportion which currently taxed foreign 
income bears to the sum of currently taxed foreign income and deferred 
foreign income.
    ``(b) Deductions Related to Repatriated Deferred Foreign Income.--
            ``(1) In general.--If there is repatriated foreign income 
        for a taxable year, the portion of the previously deferred 
        deductions allocated to the repatriated foreign income shall be 
        taken into account for the taxable year as a deduction 
        allocated to income from sources outside the United States. Any 
        such amount shall not be included in foreign-related deductions 
        for purposes of applying subsection (a) to such taxable year.
            ``(2) Portion of previously deferred deductions.--For 
        purposes of paragraph (1), the portion of the previously 
        deferred deductions allocated to repatriated foreign income 
        is--
                    ``(A) the amount which bears the same proportion to 
                such deductions, as
                    ``(B) the repatriated income bears to the 
                previously deferred foreign income.
    ``(c) Definitions and Special Rule.--For purposes of this section--
            ``(1) Foreign-related deductions.--The term `foreign-
        related deductions' means the total amount of deductions and 
        expenses which would be allocated or apportioned to gross 
        income from sources without the United States for the taxable 
        year if both the currently-taxed foreign income and deferred 
        foreign income were taken into account.
            ``(2) Currently-taxed foreign income.--The term `currently-
        taxed foreign income' means the amount of gross income from 
        sources without the United States for the taxable year 
        (determined without regard to repatriated foreign income for 
        such year).
            ``(3) Deferred foreign income.--The term `deferred foreign 
        income' means the excess of--
                    ``(A) the amount that would be includible in gross 
                income under subpart F of this part for the taxable 
                year if--
                            ``(i) all controlled foreign corporations 
                        were treated as one controlled foreign 
                        corporation, and
                            ``(ii) all earnings and profits of all 
                        controlled foreign corporations were subpart F 
                        income (as defined in section 952), over
                    ``(B) the sum of--
                            ``(i) all dividends received during the 
                        taxable year from controlled foreign 
                        corporations, plus
                            ``(ii) amounts includible in gross income 
                        under section 951(a).
            ``(4) Previously deferred foreign income.--The term 
        `previously deferred foreign income' means the aggregate amount 
        of deferred foreign income for all prior taxable years to which 
        this part applies, determined as of the beginning of the 
        taxable year, reduced by the repatriated foreign income for all 
        such prior taxable years.
            ``(5) Repatriated foreign income.--The term `repatriated 
        foreign income' means the amount included in gross income on 
        account of distributions out of previously deferred foreign 
        income.
            ``(6) Previously deferred deductions.--The term `previously 
        deferred deductions' means the aggregate amount of foreign-
        related deductions not taken into account under subsection (a) 
        for all prior taxable years (determined as of the beginning of 
        the taxable year), reduced by any amounts taken into account 
        under subsection (b) for such prior taxable years.
            ``(7) Treatment of certain foreign taxes.--
                    ``(A) Paid by controlled foreign corporation.--
                Section 78 shall not apply for purposes of determining 
                currently-taxed foreign income and deferred foreign 
                income.
                    ``(B) Paid by taxpayer.--For purposes of 
                determining currently-taxed foreign income, gross 
                income from sources without the United States shall be 
                reduced by the aggregate amount of taxes described in 
                the applicable paragraph of section 901(b) which are 
                paid by the taxpayer (without regard to sections 902 
                and 960) during the taxable year.
            ``(8) Coordination with section 976.--In determining 
        currently-taxed foreign income and deferred foreign income, the 
        amount of deemed foreign tax credits shall be determined with 
        regard to section 976.

``SEC. 976. AMOUNT OF FOREIGN TAXES COMPUTED ON OVERALL BASIS.

    ``(a) Current Year Allowance.--For purposes of this chapter, the 
amount taken into account as foreign income taxes for any taxable year 
shall be an amount which bears the same ratio to the total foreign 
income taxes for that taxable year as--
            ``(1) the currently-taxed foreign income for such taxable 
        year, bears to
            ``(2) the sum of the currently-taxed foreign income and 
        deferred foreign income for such year.
The portion of the total foreign income taxes for any taxable year not 
taken into account under the preceding sentence for a taxable year 
shall only be taken into account as provided in subsection (b) (and 
shall not be taken into account for purposes of applying sections 902 
and 960).
    ``(b) Allowance Related to Repatriated Deferred Foreign Income.--
            ``(1) In general.--If there is repatriated foreign income 
        for any taxable year, the portion of the previously deferred 
        foreign income taxes paid or accrued during such taxable year 
        shall be taken into account for the taxable year as foreign 
        taxes paid or accrued. Any such taxes so taken into account 
        shall not be included in foreign income taxes for purposes of 
        applying subsection (a) to such taxable year.
            ``(2) Portion of previously deferred foreign income 
        taxes.--For purposes of paragraph (1), the portion of the 
        previously deferred foreign income taxes allocated to 
        repatriated deferred foreign income is--
                    ``(A) the amount which bears the same proportion to 
                such taxes, as
                    ``(B) the repatriated deferred income bears to the 
                previously deferred foreign income.
    ``(c) Definitions and Special Rule.--For purposes of this section--
            ``(1) Previously deferred foreign income taxes.--The term 
        `previously deferred foreign income taxes' means the aggregate 
        amount of total foreign income taxes not taken into account 
        under subsection (a) for all prior taxable years (determined as 
        of the beginning of the taxable year), reduced by any amounts 
        taken into account under subsection (b) for such prior taxable 
        years.
            ``(2) Total foreign income taxes.--The term `total foreign 
        income taxes' means the sum of foreign income taxes paid or 
        accrued during the taxable year (determined without regard to 
        section 904(c)) plus the increase in foreign income taxes that 
        would be paid or accrued during the taxable year under sections 
        902 and 960 if--
                    ``(A) all controlled foreign corporations were 
                treated as one controlled foreign corporation, and
                    ``(B) all earnings and profits of all controlled 
                foreign corporations were subpart F income (as defined 
                in section 952).
            ``(3) Foreign income taxes.--The term `foreign income 
        taxes' means any income, war profits, or excess profits taxes 
        paid by the taxpayer to any foreign country or possession of 
        the United States.
            ``(4) Currently-taxed foreign income and deferred foreign 
        income.--The terms `currently-taxed foreign income' and 
        `deferred foreign income' have the meanings given such terms by 
        section 975(c).

``SEC. 977. APPLICATION OF SUBPART.

    ``This subpart--
            ``(1) shall be applied before subpart A, and
            ``(2) shall be applied separately with respect to the 
        categories of income specified in section 904(d)(1).''.
    (b) Clerical Amendment.--The table of subparts for part III of 
subpart N of chapter 1 of such Code is amended by inserting after the 
item relating to subpart G the following new item:

``subpart h. special rules for allocation of foreign-related deductions 
                      and foreign tax credits.''.

    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.

SEC. 502. EXCESS INCOME FROM TRANSFERS OF INTANGIBLES TO LOW-TAXED 
              AFFILIATES TREATED AS SUBPART F INCOME.

    (a) In General.--Subsection (a) of section 954 of the Internal 
Revenue Code of 1986 is amended by inserting after paragraph (3) the 
following new paragraph:
            ``(4) the foreign base company excess intangible income for 
        the taxable year (determined under subsection (f) and reduced 
        as provided in subsection (b)(5)), and''.
    (b) Foreign Base Company Excess Intangible Income.--Section 954 of 
such Code is amended by inserting after subsection (e) the following 
new subsection:
    ``(f) Foreign Base Company Excess Intangible Income.--For purposes 
of subsection (a)(4) and this subsection:
            ``(1) Foreign base company excess intangible income 
        defined.--
                    ``(A) In general.--The term `foreign base company 
                excess intangible income' means, with respect to any 
                covered intangible, the excess of--
                            ``(i) the sum of--
                                    ``(I) gross income from the sale, 
                                lease, license, or other disposition of 
                                property in which such covered 
                                intangible is used directly or 
                                indirectly, and
                                    ``(II) gross income from the 
                                provision of services related to such 
                                covered intangible or in connection 
                                with property in which such covered 
                                intangible is used directly or 
                                indirectly, over
                            ``(ii) 150 percent of the costs properly 
                        allocated and apportioned to the gross income 
                        taken into account under clause (i) other than 
                        expenses for interest and taxes and any 
                        expenses which are not directly allocable to 
                        such gross income.
                    ``(B) Same country income not taken into account.--
                If--
                            ``(i) the sale, lease, license, or other 
                        disposition of the property referred to in 
                        subparagraph (A)(i)(I) is for use, consumption, 
                        or disposition in the country under the laws of 
                        which the controlled foreign corporation is 
                        created or organized, or
                            ``(ii) the services referred to in 
                        subparagraph (A)(i)(II) are performed in such 
                        country,
                the gross income from such sale, lease, license, or 
                other disposition, or provision of services, shall not 
                be taken into account under subparagraph (A)(i).
            ``(2) Exception based on effective foreign income tax 
        rate.--
                    ``(A) In general.--Foreign base company excess 
                intangible income shall not include the applicable 
                percentage of any item of income received by a 
                controlled foreign corporation if the taxpayer 
                establishes to the satisfaction of the Secretary that 
                such income was subject to an effective rate of income 
                tax imposed by a foreign country in excess of 5 
                percent.
                    ``(B) Applicable percentage.--For purposes of 
                subparagraph (A), the term `applicable percentage' 
                means the ratio (expressed as a percentage), not 
                greater than 100 percent, of--
                            ``(i) the number of percentage points by 
                        which the effective rate of income tax referred 
                        to in subparagraph (A) exceeds 5 percentage 
                        points, over
                            ``(ii) 10 percentage points.
                    ``(C) Treatment of losses in determining effective 
                rate of foreign income tax.--For purposes of 
                determining the effective rate of income tax imposed by 
                any foreign country--
                            ``(i) such effective rate shall be 
                        determined without regard to any losses carried 
                        to the relevant taxable year, and
                            ``(ii) to the extent the income with 
                        respect to such intangible reduces losses in 
                        the relevant taxable year, such effective rate 
                        shall be treated as being the effective rate 
                        which would have been imposed on such income 
                        without regard to such losses.
            ``(3) Covered intangible.--The term `covered intangible' 
        means, with respect to any controlled foreign corporation, any 
        intangible property (as defined in section 936(h)(3)(B))--
                    ``(A) which is sold, leased, licensed, or otherwise 
                transferred (directly or indirectly) to such controlled 
                foreign corporation from a related person, or
                    ``(B) with respect to which such controlled foreign 
                corporation and one or more related persons has 
                (directly or indirectly) entered into any shared risk 
                or development agreement (including any cost sharing 
                agreement).
            ``(4) Related person.--The term `related person' has the 
        meaning given such term in subsection (d)(3).''.
    (c) Separate Basket for Foreign Tax Credit.--Subsection (d) of 
section 904 of such Code is amended by redesignating paragraph (7) as 
paragraph (8) and by inserting after paragraph (6) the following new 
paragraph:
            ``(6) Separate application to foreign base company excess 
        intangible income.--
                    ``(A) In general.--Subsections (a), (b), and (c) of 
                this section and sections 902, 907, and 960 shall be 
                applied separately with respect to each item of income 
                which is taken into account under section 954(a)(4) as 
                foreign base company excess intangible income.
                    ``(B) Regulations.--The Secretary may 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 provides that related items of income may be 
                aggregated for purposes of this paragraph.''.
    (d) Conforming Amendments.--
            (1) Paragraph (4) of section 954(b) of such Code is amended 
        by inserting ``foreign base company excess intangible income 
        described in subsection (a)(4) or'' before ``foreign base 
        company oil-related income'' in the last sentence thereof.
            (2) Subsection (b) of section 954 of such Code is amended 
        by adding at the end the following new paragraph:
            ``(7) Foreign base company excess intangible income not 
        treated as another kind of base company income.--Income of a 
        corporation which is foreign base company excess intangible 
        income shall not be considered foreign base company income of 
        such corporation under paragraph (2), (3), or (5) of subsection 
        (a).''.
    (e) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.

SEC. 503. LIMITATIONS ON INCOME SHIFTING THROUGH INTANGIBLE PROPERTY 
              TRANSFERS.

    (a) Clarification of Definition of Intangible Asset.--Clause (vi) 
of section 936(h)(3)(B) of the Internal Revenue Code of 1986 is amended 
by inserting ``(including any section 197 intangible described in 
subparagraph (A), (B), or (C)(i) of subsection (d)(1) of such 
section)'' after ``item''.
    (b) Clarification of Allowable Valuation Methods.--
            (1) Foreign corporations.--Paragraph (2) of section 367(d) 
        of the Internal Revenue Code of 1986 is amended by adding at 
        the end the following new subparagraph:
                    ``(D) Regulatory authority.--For purposes of the 
                last sentence of subparagraph (A), the Secretary may 
                require--
                            ``(i) the valuation of transfers of 
                        intangible property on an aggregate basis, or
                            ``(ii) the valuation of such a transfer on 
                        the basis of the realistic alternatives to such 
                        a transfer,
                in any case in which the Secretary determines that such 
                basis is the most reliable means of valuation of such 
                transfers.''.
            (2) Allocation among taxpayers.--Section 482 of such Code 
        is amended by adding at the end the following: ``For purposes 
        of the preceding sentence, the Secretary may require the 
        valuation of transfers of intangible property on an aggregate 
        basis or the valuation of such a transfer on the basis of the 
        realistic alternatives to such a transfer, in any case in which 
        the Secretary determines that such basis is the most reliable 
        means of valuation of such transfers.''.
    (c) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to transfers in taxable years beginning after the date of 
        the enactment of this Act.
            (2) No inference.--Nothing in the amendment made by 
        subsection (a) shall be construed to create any inference with 
        respect to the application of section 936(h)(3) of the Internal 
        Revenue Code of 1986, or the authority of the Secretary of the 
        Treasury to provide regulations for such application, on or 
        before the date of the enactment of such amendment.

SEC. 504. LIMITATION ON EARNINGS STRIPPING BY EXPATRIATED ENTITIES.

    (a) In General.--Subsection (j) of section 163 of the Internal 
Revenue Code of 1986 is amended--
            (1) by redesignating paragraph (9) as paragraph (10), and
            (2) by inserting after paragraph (8) the following new 
        paragraph:
            ``(9) Special rules for expatriated entities.--
                    ``(A) In general.--In the case of a corporation to 
                which this subsection applies which is an expatriated 
                entity, this subsection shall apply to such corporation 
                with the following modifications:
                            ``(i) Paragraph (2)(A) shall be applied 
                        without regard to clause (ii) thereof.
                            ``(ii) Paragraph (1)(B) shall be applied--
                                    ``(I) without regard to the 
                                parenthetical, and
                                    ``(II) by substituting `in the 1st 
                                succeeding taxable year and in the 2nd 
                                through 10th succeeding taxable years 
                                to the extent not previously taken into 
                                account under this subparagraph' for 
                                `in the succeeding taxable year'.
                            ``(iii) Paragraph (2)(B) shall be applied--
                                    ``(I) without regard to clauses 
                                (ii) and (iii), and
                                    ``(II) by substituting `25 percent 
                                of the adjusted taxable income of the 
                                corporation for such taxable year' for 
                                the matter of clause (i)(II) thereof.
                    ``(B) Expatriated entity.--For purposes of this 
                paragraph--
                            ``(i) In general.--With respect to a 
                        corporation and a taxable year, the term 
                        `expatriated entity' has the meaning given such 
                        term by section 7874(a)(2), determined as if 
                        such section and the regulations under such 
                        section as in effect on the first day of such 
                        taxable year applied to all taxable years of 
                        the corporation beginning after July 10, 1989.
                            ``(ii) Exception for surrogates treated as 
                        a domestic corporation.--The term `expatriated 
                        entity' does not include a surrogate foreign 
                        corporation which is treated as a domestic 
                        corporation by reason of section 7874(b).''.
    (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. 505. MODIFICATIONS OF FOREIGN TAX CREDIT RULES APPLICABLE TO DUAL 
              CAPACITY TAXPAYERS.

    (a) In General.--Section 901 of the Internal Revenue Code of 1986 
is amended by redesignating subsection (n) as subsection (o) and by 
inserting after subsection (m) the following new subsection:
    ``(n) Special Rules Relating to Dual Capacity Taxpayers.--
            ``(1) General rule.--Notwithstanding any other provision of 
        this chapter, any amount paid or accrued by a dual capacity 
        taxpayer or any member of the worldwide affiliated group of 
        which such dual capacity taxpayer is also a member to any 
        foreign country or to any possession of the United States for 
        any period shall not be considered a tax to the extent such 
        amount exceeds the amount (determined in accordance with 
        regulations) which would have been required to be paid if the 
        taxpayer were not a dual capacity taxpayer.
            ``(2) Dual capacity taxpayer.--For purposes of this 
        subsection, the term `dual capacity taxpayer' means, with 
        respect to any foreign country or possession of the United 
        States, a person who--
                    ``(A) is subject to a levy of such country or 
                possession, and
                    ``(B) receives (or will receive) directly or 
                indirectly a specific economic benefit (as determined 
                in accordance with regulations) from such country or 
                possession.
            ``(3) Regulations.--The Secretary may issue such 
        regulations or other guidance as is necessary or appropriate to 
        carry out the purposes of this subsection.''.
    (b) Contrary Treaty Obligations Upheld.--The amendments made by 
this section shall not apply to the extent contrary to any treaty 
obligation of the United States.
    (c) Effective Date.--The amendments made by this section shall 
apply to amounts that, if such amounts were an amount of tax paid or 
accrued, would be considered paid or accrued in taxable years beginning 
after December 31, 2012.

SEC. 506. SEPARATE BASKET TREATMENT TAXES PAID ON FOREIGN OIL AND GAS 
              INCOME.

    (a) Separate Basket for Foreign Tax Credit.--Paragraph (1) of 
section 904(d) of the Internal Revenue Code of 1986 is amended by 
striking ``and'' at the end of subparagraph (A), by striking the period 
at the end of subparagraph (B) and inserting ``, and'', and by adding 
at the end the following:
                    ``(C) combined foreign oil and gas income (as 
                defined in section 907(b)(1)).''.
    (b) Coordination.--Section 904(d)(2) of such Code is amended by 
redesignating subparagraphs (J) and (K) as subparagraphs (K) and (L) 
and by inserting after subparagraph (I) the following:
                    ``(J) Coordination with combined foreign oil and 
                gas income.--For purposes of this section, passive 
                category income and general category income shall not 
                include combined foreign oil and gas income (as defined 
                in section 907(b)(1)).''.
    (c) Conforming Amendments.--
            (1) Section 907(a) of such Code is hereby repealed.
            (2) Section 907(c)(4) of such Code is hereby repealed.
            (3) Section 907(f) of such Code is hereby repealed.
    (d) Effective Dates.--
            (1) In general.--The amendments made by this section shall 
        apply to taxable years beginning after December 31, 2012.
            (2) Transitional rules.--
                    (A) Carryovers.--Any unused foreign oil and gas 
                taxes which under section 907(f) of such Code (as in 
                effect before the amendment made by subsection (c)(3)) 
                would have been allowable as a carryover to the 
                taxpayer's first taxable year beginning after December 
                31, 2012 (without regard to the limitation of paragraph 
                (2) of such section 907(f) for first taxable year) 
                shall be allowed as carryovers under section 904(c) of 
                such Code in the same manner as if such taxes were 
                unused taxes under such section 904(c) with respect to 
                foreign oil and gas extraction income.
                    (B) Losses.--The amendment made by subsection 
                (c)(2) shall not apply to foreign oil and gas 
                extraction losses arising in taxable years beginning on 
                or before the date of the enactment of this Act.

             TITLE VI--FINANCIAL CRISIS RESPONSIBILITY FEE

SEC. 601. DEFINITIONS AND SPECIAL RULES.

    (a) Definitions.--In this title, the following definitions shall 
apply:
            (1) Appropriate federal agency.--The term ``appropriate 
        Federal agency'' means--
                    (A) for a covered firm that is a bank holding 
                company, a savings and loan holding company, any 
                company controlled by a bank holding company or savings 
                and loan institution (other than a depository 
                institution), a state member bank, a branch or agency 
                of a foreign bank, a foreign bank that does not operate 
                an insured branch, an agency or commercial lending 
                company other than a Federal agency or any company that 
                controls a registered broker or dealer but does not 
                also control an insured depository institution, the 
                Board of Governors of the Federal Reserve System;
                    (B) for a covered firm that is a national banking 
                association, a Federal branch or agency of a foreign 
                bank, or a federal savings association, the Office of 
                the Comptroller of the Currency;
                    (C) for a covered firm that is a state nonmember 
                insured bank, a foreign bank that has an insured 
                branch, a state savings association, or a company that 
                controls an insured depository institution and is not 
                regulated as a bank holding company or a savings and 
                loan association holding company, the Federal Deposit 
                Insurance Corporation; and
                    (D) for a covered firm that is a covered broker or 
                dealer, the Securities and Exchange Commission.
            (2) Bank holding company.--The term ``bank holding 
        company'' has the same meaning as in section 3(w)(2) of the 
        Federal Deposit Insurance Act (12 U.S.C. 1813(w)(2)).
            (3) Covered broker or dealer.--The term ``covered broker or 
        dealer'' means a broker or dealer designated by the Board of 
        Governors of the Federal Reserve System or the Federal Reserve 
        Bank of New York as a primary dealer in government debt 
        instruments.
            (4) Covered firm.--The term ``covered firm'' means any 
        corporation or other entity that is organized under the laws of 
        the United States or any state or territory thereof if--
                    (A) as of January 14, 2012, such corporation or 
                other entity was, or is at any time during a the 
                beginning of the fiscal year for which this section is 
                applicable, an insured depository institution, a bank 
                holding company, a savings and loan holding company, a 
                company that directly or indirectly controls an insured 
                depository institution, a covered broker or dealer, or 
                a company that directly or indirectly controls a 
                covered broker or dealer; and
                    (B) has $50,000,000,000 or more in total 
                consolidated balance sheet assets that are associated 
                with activities that are permissible for a bank holding 
                company or a financial holding company under sections 3 
                and 4 of the Bank Holding Company Act of 1956 (12 
                U.S.C. 1842 and 1843) at the beginning of the fiscal 
                year.
            (5) Fee.--The term ``fee'' means the Financial Crisis 
        Responsibility Fee authorized under section 502.
            (6) Financial holding company.--The term ``financial 
        holding company'' has the same meaning as in section 2(p) of 
        the Bank Holding Company Act of 1956, (12 U.S.C. 1841(2)(q)).
            (7) Fiscal year.--The term ``fiscal year'' means the 
        Government's fiscal year beginning on October 1.
            (8) Foreign banking organization.--The term ``foreign 
        banking organization'' means--
                    (A) a foreign bank, as defined in section 1(b)(7) 
                of the International Banking Act of 1978 (12 U.S.C. 
                3101(7)), that--
                            (i) operates a branch, agency, or 
                        commercial lending company subsidiary in the 
                        United States;
                            (ii) controls a bank in the United States; 
                        or
                            (iii) controls an Edge corporation acquired 
                        after March 5, 1987; and
                    (B) any company that directly or indirectly 
                controls the foreign bank.
            (9) Secretary.--The term ``Secretary'' means the Secretary 
        of the Treasury.
            (10) Top-tier covered firm.--The term ``top-tier covered 
        firm'' means a covered firm that controls one or more other 
        covered firms but is not itself directly or indirectly 
        controlled by another covered firm.
            (11) Additional definitions.--For purposes of this chapter, 
        the terms ``insured depository institution'' and ``savings and 
        loan holding company'' shall have the same meanings as in 
        section 3 of the Federal Deposit Insurance Act (12 U.S.C. 
        1813).
    (b) Special Rules.--
            (1) Determination of control.--For purposes of this Act, a 
        person shall be considered to control another person if the 
        first such person directly or indirectly owns (or otherwise has 
        the power to vote) 25 percent or more of any class of voting 
        securities of the second such person.
            (2) Treatment of certain affiliated companies.--For 
        purposes of determining the applicability of this Act and the 
        amount of the Fee payable under section 502, the total 
        consolidated balance sheet assets of any two or more 
        corporations or other entities that are organized under the 
        laws of the United States or any state or territory thereof 
        that each meet any of the criteria described in subsection 
        (a)(4)(A) and that are under common control, directly or 
        indirectly, by the same person but that are not under common 
        control, directly or indirectly, by any top-tier covered firm 
        shall be consolidated together. If, following such 
        consolidation, the amount and other characteristics of the 
        combined balance sheet assets of such firms satisfy the 
        criteria specified in subsection (a)(4)(B), each such firm 
        shall be deemed a covered firm and the resulting amount of fee 
        shall be appropriately apportioned by the Secretary.

SEC. 602. FINANCIAL CRISIS RESPONSIBILITY FEE.

    (a) Amount To Be Collected.--In order to recover the costs to the 
Federal Government of assistance provided through the Troubled Asset 
Relief Program and other Federal programs and activities, the 
Secretary, during the 10-year period beginning in fiscal year 2014 and 
continuing through the end of fiscal year 2023, shall assess a risk-
based Financial Crisis Responsibility Fee that shall collect a total of 
$30,000,000,000, net of any estimated corporate income tax deductions 
attributable to the Fee, during that period.
    (b) Assessment and Schedule.--
            (1) In general.--To collect the fee authorized by this 
        section, the Secretary shall establish, by regulation, an 
        assessment schedule by fiscal year, including assessment base 
        and rates, that--
                    (A) is designed, in the Secretary's judgment, to 
                result in the collection of a total of $30,000,000,000, 
                net of the estimated corporate income tax deduction, by 
                the end of fiscal year 2023; and
                    (B) shall apply to--
                            (i) a top-tiered covered firm, with respect 
                        to the group consisting of such top-tier 
                        covered firm and each other covered firm 
                        controlled by such top-tier covered firm; and
                            (ii) a covered firm, if such covered firm 
                        is not controlled by a top-tier covered firm.
            (2) Phase in.--To promote the full recovery of the economy 
        and financial sector, the Secretary shall phase-in the 
        assessment rate over the 10-year period, in a manner determined 
        by the Secretary.
    (c) Annual Adjustment.--For each fiscal year, starting with fiscal 
year 2015, the Secretary--
            (1) shall apply the fee to--
                    (A) a top-tiered covered firm, with respect to the 
                group consisting of such top-tier covered firm and each 
                other covered firm controlled by such top-tier covered 
                firm; and
                    (B) a covered firm, if such covered firm is not 
                controlled by a top-tier covered firm; and
            (2) shall adjust the rates under this subsection in a 
        manner that is designed, in the judgment of the Secretary, to 
        result in the collection of a total of $30,000,000,000, net of 
        the estimated corporate income tax deduction, by the end of 
        fiscal year 2023.
    (d) Extension of the Financial Crisis Responsibility Fee.--
            (1) In general.--If the estimated cost of the Troubled 
        Asset Relief Program, as projected in the Fiscal Year 2024 
        Budget of the U.S. Government, exceeds the total fee 
        collections received as of the end of Fiscal Year 2023, the 
        Secretary shall extend the operation of the Fee beyond the end 
        of fiscal year 2023 in order to collect such excess amount.
            (2) Assessment schedule under extension.--In order to 
        collect, by the end of fiscal year 2028, the excess amount 
        determined under paragraph (d), the Secretary shall establish, 
        by regulation, an assessment schedule, including assessment 
        base and rates, that--
                    (A) is designed, in the judgment of the Secretary, 
                to result in the collection of such excess amount by 
                the end of fiscal year 2028; and
                    (B) shall apply to--
                            (i) a top-tiered covered firm, with respect 
                        to the group consisting of such top-tier 
                        covered firm and each other covered firm 
                        controlled by such top-tier covered firm; and
                            (ii) a covered firm, if such covered firm 
                        is not controlled by a top-tier covered firm.
            (3) Annual adjustment.--For each fiscal year, starting with 
        fiscal year 2024, the Secretary--
                    (A) shall apply the fee required by this section 
                to--
                            (i) a top-tiered covered firm, with respect 
                        to the group consisting of such top-tier 
                        covered firm and each other covered firm 
                        controlled by such top-tier covered firm; and
                            (ii) a covered firm, if such covered firm 
                        is not controlled by a top-tier covered firm; 
                        and
                    (B) shall adjust the rates under this subsection in 
                a manner that is designed, in the judgment of the 
                Secretary, to result in the collection of such excess 
                amount as may be determined under this section by the 
                end of fiscal year 2028.
    (e) Deposit of Collections.--All amounts collected pursuant to the 
fee, during fiscal year 2014 and each fiscal year thereafter (including 
during the extension period, if applicable)--
            (1) shall be deposited and credited as general revenue of 
        the Treasury for the purposes of deficit reduction; and
            (2) shall not be available for obligation.

SEC. 603. OTHER PROVISIONS.

    (a) Assistance With Assessment and Collection.--The appropriate 
Federal agencies shall respond promptly to any request for information 
or assistance from the Secretary with regard to the determination or 
collection of any Fee to be determined or imposed under this Act.
    (b) Severability; Rule of Construction.--It is the intent of 
Congress that the provisions of this Act be severable, and be construed 
to avoid the constitutional invalidity of any provision of the Act or 
any application of any provision of the Act to any person or 
circumstance. If a provision of this Act is held invalid, all valid 
provisions shall remain in effect. If a provision of this Act is held 
invalid in one or more of its applications to any person or 
circumstance, the Act shall remain in effect in all its valid 
applications. In any challenge to the constitutionality of any 
provision of this Act, a reviewing court shall construe such provision 
as necessary to avoid any constitutional invalidity.

                 TITLE VII--TAX ON TRADING TRANSACTIONS

SEC. 701. TRANSACTION TAX.

    (a) In General.--Chapter 36 of the Internal Revenue Code of 1986 is 
amended by inserting after subchapter B the following new subchapter:

              ``Subchapter C--Tax on Trading Transactions

``Sec. 4475. Tax on trading transactions.

``SEC. 4475. TAX ON TRADING TRANSACTIONS.

    ``(a) Imposition of Tax.--There is hereby imposed a tax on each 
covered transaction with respect to any security.
    ``(b) Rate of Tax.--The tax imposed under subsection (a) with 
respect to any covered transaction shall be 0.03 percent of the 
specified base amount with respect to such covered transaction.
    ``(c) Specified Base Amount.--For purposes of this section, the 
term `specified base amount' means--
            ``(1) except as provided in paragraph (2), the fair market 
        value of the security (determined as of the time of the covered 
        transaction), and
            ``(2) in the case of any payment described in subsection 
        (h), the amount of such payment.
    ``(d) Covered Transaction.--For purposes of this section, the term 
`covered transaction' means--
            ``(1) except as provided in paragraph (2), any purchase 
        if--
                    ``(A) such purchase occurs or is cleared on a 
                facility located in the United States, or
                    ``(B) the purchaser or seller is a United States 
                person, and
            ``(2) any transaction with respect to a security described 
        in subparagraph (D), (E), or (F) of subsection (e)(1), if--
                    ``(A) such security is traded or cleared on a 
                facility located in the United States, or
                    ``(B) any party with rights under such security is 
                a United States person.
    ``(e) Security and Other Definitions.--For purposes of this 
section--
            ``(1) In general.--The term `security' means--
                    ``(A) any share of stock in a corporation,
                    ``(B) any partnership or beneficial ownership 
                interest in a partnership or trust,
                    ``(C) any note, bond, debenture, or other evidence 
                of indebtedness,
                    ``(D) any evidence of an interest in, or a 
                derivative financial instrument with respect to, any 
                security or securities described in subparagraph (A), 
                (B), or (C),
                    ``(E) any derivative financial instrument with 
                respect to any currency or commodity, and
                    ``(F) any notional principal contract.
            ``(2) Derivative financial instrument.--The term 
        `derivative financial instrument' includes any option, forward 
        contract, futures contract, or any similar financial 
        instrument.
            ``(3) Notional principal contract.--Except as otherwise 
        provided by the Secretary, the term `notional principal 
        contract' means any financial instrument which requires two or 
        more payments at specified intervals calculated by reference to 
        a specified index upon one or more notional principal amounts. 
        An amount shall not fail to be treated as a payment described 
        in the preceding sentence merely because such amount is fixed 
        on one date and paid or otherwise taken into account on a 
        different date.
            ``(4) Specified index.--The term `specified index' means 
        any 1 or more of any combination of--
                    ``(A) a fixed rate, price, or amount, or
                    ``(B) a variable rate, price, or amount,   
                    ``(C) any index based on any objectively 
                determinable information (including the occurrence or 
                nonoccurrence of any event) which is not within the 
                control of any of the parties to the instrument and is 
                not unique to any of the parties' circumstances, and
                    ``(D) any other index as the Secretary may 
                prescribe.
            ``(5) Treatment of exchanges.--
                    ``(A) In general.--An exchange shall be treated as 
                the sale of the property transferred and a purchase of 
                the property received by each party to the exchange.
                    ``(B) Certain deemed exchanges.--In the case of a 
                distribution treated as an exchange for stock under 
                section 302 or 331, the corporation making such 
                distribution shall be treated as having purchased such 
                stock for purposes of this section.
    ``(f) Exceptions.--
            ``(1) Exception for initial issues.--No tax shall be 
        imposed under subsection (a) on any covered transaction with 
        respect to the initial issuance of any security described in 
        subparagraph (A), (B), or (C) of subsection (e)(1).
            ``(2) Exception for certain traded short-term 
        indebtedness.--A note, bond, debenture, or other evidence of 
        indebtedness which--
                    ``(A) is traded on a trading facility located in 
                the United States, and
                    ``(B) has a fixed maturity of not more than 100 
                days,
        shall not be treated as described in subsection (e)(1)(C).
            ``(3) Exception for securities lending arrangements.--No 
        tax shall be imposed under subsection (a) on any covered 
        transaction with respect to which gain or loss is not 
        recognized by reason of section 1058.
    ``(g) By Whom Paid.--
            ``(1) In general.--The tax imposed by this section shall be 
        paid by--
                    ``(A) in the case of a transaction which occurs or 
                is cleared on a facility located in the United States, 
                such facility, and
                    ``(B) in the case of a purchase not described in 
                subparagraph (A) which is executed by a broker (as 
                defined in section 6045(c)(1)) which is a United States 
                person, such broker.
            ``(2) Special rules for direct, etc., transactions.--In the 
        case of any transaction to which paragraph (1) does not apply, 
        the tax imposed by this section shall be paid by--
                    ``(A) in the case of a transaction described in 
                subsection (d)(1)--
                            ``(i) the purchaser if the purchaser is a 
                        United States person, and
                            ``(ii) the seller if the purchaser is not a 
                        United States person, and
                    ``(B) in the case of a transaction described in 
                subsection (d)(2)--
                            ``(i) the payor if the payor is a United 
                        States person, and
                            ``(ii) the payee if the payor is not a 
                        United States person.
    ``(h) Certain Payments Treated as Separate Transactions.--Except as 
otherwise provided by the Secretary, any payment with respect to a 
security described in subparagraph (D), (E), or (F) of subsection 
(e)(1) shall be treated as a separate transaction for purposes of this 
section, including--
            ``(1) any net initial payment, net final or terminating 
        payment, or net periodical payment with respect to a notional 
        principal contract (or similar financial instrument),
            ``(2) any payment with respect to any forward contract (or 
        similar financial instrument), and
            ``(3) any premium paid with respect to any option (or 
        similar financial instrument).
    ``(i) Application to Transactions by Controlled Foreign 
Corporations.--
            ``(1) In general.--For purposes of this section, a 
        controlled foreign corporation shall be treated as a United 
        States person.
            ``(2) Special rules for payment of tax on direct, etc., 
        transactions.--In the case of any transaction which is a 
        covered transaction solely by reason of paragraph (1) and which 
        is not described in subsection (g)(1)--
                    ``(A) Payment by united states shareholders.--Any 
                tax which would (but for this paragraph) be payable 
                under subsection (g)(2) by the controlled foreign 
                corporation shall, in lieu thereof, be paid by the 
                United States shareholders of such controlled foreign 
                corporation as provided in subparagraph (B).
                    ``(B) Pro rata shares.--Each such United States 
                shareholder shall pay the same proportion of such tax 
                as--
                            ``(i) the stock which such United States 
                        shareholder owns (within the meaning of section 
                        958(a)) in such controlled foreign corporation, 
                        bears to
                            ``(ii) the stock so owned by all United 
                        States shareholders in such controlled foreign 
                        corporation.
                    ``(C) Definitions.--For purposes of this 
                subsection, the terms `United States shareholder' and 
                `controlled foreign corporation' have the meanings 
                given such terms in sections 951(b) and 957(a), 
                respectively.
    ``(j) Administration.--The Secretary shall carry out this section 
in consultation with the Securities and Exchange Commission and the 
Commodity Futures Trading Commission.
    ``(k) Guidance; Regulations.--The Secretary shall--
            ``(1) provide guidance regarding such information reporting 
        concerning covered transactions as the Secretary deems 
        appropriate, and
            ``(2) prescribe such regulations as are necessary or 
        appropriate to prevent avoidance of the purposes of this 
        section, including the use of non-United States persons in such 
        transactions.''.
    (b) Credit With Respect to Certain Tax-Favored Accounts To Offset 
Transaction Tax.--
            (1) In general.--Subpart C of part IV of subchapter A of 
        chapter 1 of such Code is amended by inserting after section 
        36B the following new section:

``SEC. 36C. OFFSET FOR TRANSACTION TAX WITH RESPECT TO CERTAIN TAX-
              FAVORED ACCOUNTS.

    ``(a) In General.--There shall be allowed as a credit against the 
tax imposed by this subtitle for the taxable year an amount equal to 
0.03 percent of the qualified tax-favored account contributions of the 
taxpayer for the taxable year.
    ``(b) Qualified Tax-Favored Account Contributions.--For purposes of 
this section, the term `qualified tax-favored account contributions' 
means, with respect to any taxable year, the sum of--
            ``(1) with respect to qualified retirement plans (as 
        defined in section 4974(c)) of the taxpayer, the amount 
        contributed to such plans for such taxable year to the extent 
        that such contributions are allowable as a deduction or are 
        excludable from gross income (or, in the case of a Roth IRA (as 
        defined in section 408A(b)), the amount contributed),
            ``(2) with respect to Archer MSAs of the taxpayer, the 
        amount allowed as a deduction under section 220 for such 
        taxable year,
            ``(3) with respect to health savings accounts of the 
        taxpayer, the amount allowed as a deduction under section 223 
        for such taxable year, plus
            ``(4) with respect to qualified tuition programs (as 
        defined in section 529) and Coverdell education savings 
        accounts (as defined in section 530) with respect to which the 
        taxpayer is the designated beneficiary (or, in the case of a 
        designated beneficiary with respect to whom another taxpayer is 
        allowed a deduction under section 151, such other taxpayer in 
        lieu of such designated beneficiary), the amount contributed 
        for such taxable year.''.
            (2) Conforming amendments.--
                    (A) Section 1324(b)(2) of title 31, United States 
                Code, is amended by inserting ``, 36C'' after ``36B''.
                    (B) The table of sections for subpart C of part IV 
                of subchapter A of chapter 1 of the Internal Revenue 
                Code of 1986 is amended by inserting before the item 
                relating to section 37 the following new item:

``Sec. 36C. Offset for transaction tax on contributions to certain tax-
                            favored accounts.''.
    (c) Information Reporting With Respect to Controlled Foreign 
Corporations.--Subparagraph (B) of section 6038(a)(1) is amended by 
inserting ``and transactions which are covered transactions for 
purposes of section 4475 by reason of the application of section 
4475(i)(1) to such corporation'' before the semicolon at the end.
    (d) Clerical Amendment.--The table of subchapters for chapter 36 of 
the Internal Revenue Code of 1986 is amended by inserting after the 
item relating to subchapter B the following new item:

``Subchapter C. Tax on trading transactions.''.
    (e) Effective Date.--The amendments made by this section shall 
apply to transactions after December 31, 2013.

              TITLE VIII--MODIFICATION OF ACCOUNTING RULES

SEC. 801. REPEAL OF LAST-IN, FIRST-OUT METHOD OF INVENTORY.

    (a) In General.--Subpart D of part II of subchapter E of chapter 1 
is amended by striking sections 472 (relating to last-in, first-out 
inventories), 473 (relating to qualified liquidations of LIFO 
inventories), and 474 (relating to simplified dollar-value LIFO method 
for certain small businesses).
    (b) Conforming Amendments.--
            (1)(A) Section 312(n) is amended by striking paragraph (4) 
        and by redesignating paragraphs (5) through (8) as paragraphs 
        (4) through (7), respectively.
            (B) Section 312(n)(7), as redesignated by subparagraph (A), 
        is amended--
                    (i) by striking ``paragraphs (4) and (6)'' in 
                subparagraph (A) and inserting ``paragraph (5)'', and
                    (ii) by striking ``paragraph (5)'' in subparagraph 
                (B) and inserting ``paragraph (4)''.
            (C) Section 56(g)(4)(D) is amended by striking clause (iii) 
        and by redesignating clause (iv) as clause (iii).
            (2) Section 1363 is amended by striking subsection (d).
    (c) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to taxable years beginning after the date of the 
        enactment of this Act.
            (2) Change in method of accounting.--In the case of any 
        taxpayer required by the amendments made by this section to 
        change its method of accounting for its first taxable year 
        beginning after the date of the enactment of this Act--
                    (A) such change shall be treated as initiated by 
                the taxpayer,
                    (B) such change shall be treated as made with the 
                consent of the Secretary of the Treasury, and
                    (C) if the net amount of the adjustments required 
                to be taken into account by the taxpayer under section 
                481 of the Internal Revenue Code of 1986 is positive, 
                such amount shall be taken into account over a period 
                of 8 years beginning with such first taxable year.

SEC. 802. REPEAL OF LOWER OF COST OR MARKET METHOD OF INVENTORY.

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

                  TITLE IX--FAIR TREATMENT OF OPTIONS

SEC. 901. CONSISTENT TREATMENT OF STOCK OPTIONS BY CORPORATIONS.

    (a) Consistent Treatment for Wage Deduction.--
            (1) In general.--Section 83(h) is amended--
                    (A) by striking ``In the case of'' and inserting:
            ``(1) In general.--In the case of'', and
                    (B) by adding at the end the following new 
                paragraph:
            ``(2) Stock options.--In the case of property transferred 
        to a person in connection with a stock option, any deduction 
        related to such stock option shall be allowed only under 
        section 162(q) and paragraph (1) shall not apply.''.
            (2) Treatment of compensation paid with stock options.--
        Section 162 is amended by redesignating subsection (q) as 
        subsection (r) and by inserting after subsection (p) the 
        following new subsection:
    ``(q) Treatment of Compensation Paid With Stock Options.--
            ``(1) In general.--In the case of compensation for personal 
        services that is paid with stock options, the deduction under 
        subsection (a)(1) shall not exceed the amount the taxpayer has 
        treated as compensation cost with respect to such stock options 
        for the purpose of ascertaining income, profit, or loss in a 
        report or statement to shareholders, partners, or other 
        proprietors (or to beneficiaries), and shall be taken into 
        account in the same period that such compensation cost is 
        recognized for such purpose.
            ``(2) Special rules for controlled groups.--The Secretary 
        may prescribe rules for the application of paragraph (1) in 
        cases where the stock option is granted by--
                    ``(A) a parent or subsidiary corporation (within 
                the meaning of section 424) of the taxpayer, or
                    ``(B) another corporation.''.
    (b) Consistent Treatment for Research Tax Credit.--Section 
41(b)(2)(D) is amended by inserting at the end the following new 
clause:
                            ``(iv) Special rule for stock options.--The 
                        amount which may be treated as wages for any 
                        taxable year in connection with the issuance of 
                        a stock option shall not exceed the amount 
                        allowed for such taxable year as a compensation 
                        deduction under section 162(q) with respect to 
                        such stock option.''.
    (c) Application of Amendments.--The amendments made by this section 
shall apply to stock options exercised after the date of the enactment 
of this Act, except that--
            (1) such amendments shall not apply to stock options that 
        were granted before such date and that vested in taxable 
        periods beginning on or before June 15, 2005,
            (2) for stock options that were granted before such date of 
        enactment and vested during taxable periods beginning after 
        June 15, 2005, and ending before such date of enactment, a 
        deduction under section 162(q) of the Internal Revenue Code of 
        1986 (as added by subsection (a)(2)) shall be allowed in the 
        first taxable period of the taxpayer that ends after such date 
        of enactment,
            (3) for public entities reporting as small business issuers 
        and for non-public entities required to file public reports of 
        financial condition, paragraphs (1) and (2) shall be applied by 
        substituting ``December 15, 2005'' for ``June 15, 2005'', and
            (4) no deduction shall be allowed under section 83(h) or 
        section 162(q) of such Code with respect to any stock option 
        the vesting date of which is changed to accelerate the time at 
        which the option may be exercised in order to avoid the 
        applicability of such amendments.

SEC. 902. APPLICATION OF EXECUTIVE PAY DEDUCTION LIMIT.

    (a) In General.--Subparagraph (D) of section 162(m)(4) is amended 
to read as follows:
                    ``(D) Stock option compensation.--The term 
                `applicable employee remuneration' shall include any 
                compensation deducted under subsection (q), and such 
                compensation shall not qualify as performance-based 
                compensation under subparagraph (C).''.
    (b) Effective Date.--The amendment made by this section shall apply 
to stock options exercised or granted after the date of the enactment 
of this Act.
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